In my last blog, I discussed the history of convergence and how it’s affected the telecom industry. Now, I’d like to talk about the pros and cons of convergence.
Let’s start with the cons. Convergence has come at a cost. There is clearly more complexity with all these networks having to interoperate with each other. As you can see from the picture below, all the different networks have “edges” and there needs to be equipment placed at the “edge” so that the networks can talk and interoperate with each other. A call or text from an NGN network needs to be able to go to a cellular network, which needs to be able to go to an IP or IMS network.
The revenue profile has also changed, as data is “cheaper” than voice and therefore the proliferation of data has caused a revenue profile change for the service provider. There is also more competition now because previously walled-off companies can now compete with each other – the landline cable and DSL guys can add triple play, the wireless guys can offer broadband networks, ISPs turn into ITSPs, and application providers compete for “over the top” on your infrastructure. For instance, in January 2011, the Skype Journal reported that Skype grew to 20% of all international minutes called in 2010, and now we have Google Voice and Facebook Voice in the mix as well.
This convergence, competition and ability for the networks to be capable of more has fundamentally shifted power from the service providers to the consumer. The consumer can decide which apps to run and doesn’t have to depend solely on the service provider to offer them. So whether you want to run mobile radio, ring tones, chat, do mobile banking, social networks or play interactive games, you and your smartphone device now have the power.
But this core network convergence has also brought opportunity. The overall worldwide mobile revenue spend continues to increase, even during the 2009 recession. There are more subscribers now than ever before, and the networks can do more. So there is more opportunity if you look at it with the right lens. Monetization of the mobile networks can occur via mobile value-added services, advertising, tiered pricing, quality of experience or optimization of the network. Mobile value-added service can contribute up to 33% of revenue to a service provider, so providing your subscribers with key applications in location-based services, messaging, entertainment and mobile commerce, with video enablement being key, can provide monetization opportunities.
For instance, let’s take a look at SMS, the most popular mobile VAS. As the networks improve, SMS’ing can get more interesting. You can do voice SMS or video SMS. And you can add advertising to it to enable location-based advertising. And utilize SMS for enhanced enterprise service through proactive texting of your customers. SMS can even be utilized for M2M. The possibilities are endless.
Next week, I’ll explore the effects that convergence may have on the future.