Telcos Consider New Business Models to Support Network Operations

It’s no surprise that the global economic downturn, coupled with declining revenues, is forcing telecom operators to investigate new business models to better meet subscribers’ needs and strengthen their competitive edge.

 

The options are plentiful, but one clear way for providers to drive revenue is to invest in fiber-to-the-home (FTTH) technologies, allowing them to offer increasingly popular quadruple play services, integrate service offerings, and differentiate their networks and operations in a dynamic and competitive market.

 

Alcatel-Lucent, which has a long heritage of helping fixed-line and mobile carriers and network operators enhance their networks, is focusing heavily on helping providers increase their ability to deliver services quickly and reliably through its Application Enablement program, a combination of solutions, products, and strategies designed to integrate the traditional role of network operators with the increasing speed and reach of the Internet.

 

With so many options, service providers are hard-pressed to settle on just one solution. But one thing is clear:  Providers inevitably will take on new forms, far different than their origins to better position themselves in the ever-changing telecom industry.

 

According to Alcatel-Lucent (News - Alert), operators are turning more to outsourcing arrangements to stay competitive. Such services include taking a build-operate-transfer or build-operate-manage approach to projects, full or partial outsourcing, managed capacity

and managed and hosted applications and content.

 

Outsourcing can improve net income before interest, income taxes, depreciation and amortization, and operating cash flow, according to Andreas Herzog, vice president, network operations for Alcatel-Lucent.

 

Sharing infrastructure is another option. For example, an analysis by Alcatel-Lucent has shown that sharing infrastructure will offer an estimated savings in capital of 10-20 percent and a 20-40 percent savings in operational expenses over a five-year period. What’s more, network infrastructure sharing will improve time-to-revenue by allowing the faster delivery of services to a larger number of subscribers.

 

Yet, while outsourcing and infrastructure sharing can increase a carrier’s cash flow by up to 10 percent, such a move could pit operators and carriers against Internet giant Google and others, Hertzog said.

 

But, network and services separation offers network providers the benefit of being evaluated as a utility instead of as a pure telecom provider, thereby increasing their market value.

 

As the industry keeps evolving, so do operators’ views on network ownership. Ownership of network assets is increasingly becoming a burden to telecom operators, so network sharing will play a more important role in the telecom business. That will include network elements such as core, access, transport and service platforms, the legacy network, and new extensions and technologies.

 

“The fact is that the network is no longer a unique selling point to their customers – rather, it is the services offered over the network that is of primary interest,” wrote Herzog.  “So, the service providers must walk a tightrope of implementing a broad set of technologies in order to offer state-of-the-art services to end-customers, but at the same time being careful not to overload those customers with new offerings and technologies.”

 

What does the future hold? Experts predict that network infrastructure operators will prefer long-term agreements over short-term deals and prices will be determined by global benchmarking trends. But, the end result will yield a better business model.

 

“Tomorrow’s service providers will diversify by offering unique services and content in

combination with attractive pricing,” Hertzog predicted. “They likely will offer these services and content via hosted platforms they do not own, and will bring their products to the end customers via a fully converged shared network infrastructure.”

 

“This new model between vendors and infrastructure operators will have its share of problems, but these will be outweighed by the potential benefits and opportunities,” he concluded.

 

The most recent part of Alcatel-Lucent’s plans to bring the latest communications technologies to its customers is its introduction of the first 100 Gigabit Ethernet service routing interface for the edge of the network. The new service interface uses silicon innovations to deliver massive bandwidth, which can support a variety of end-user services.