Emerging Opportunities for Global Carriers in Wholesale Markets

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The communications industry today finds itself at a critical yet defining moment. Recent developments in new technology and the changing economics that underpin the industry have brought about a wealth of opportunity for growth and development. But these opportunities have also opened up the market to new risks including threats from new entrants and players from other industries. For many international telecoms carriers, the future is far from certain. Already under pressure to squeeze margins on traditional revenues to maintain market share, they now face challenges of a different kind. They are recognising the need to meet the massive consumer demand for more innovative, converged communications products and confront the competition from converged communications suppliers and are contemplating the need to evolve and move from pure network provision to offering intelligent networks and information and communications technology (ICT) services.

Tremors in the carrier market

The communications industry is one of the most volatile and competitive in the world. The advent of convergence – both of fixed and mobile technologies - and of voice, data and video has accentuated competition within the market like never before. Indeed convergence of technology has led to the convergence of industries. Mobile operators now compete with fixed and cable operators and internet service providers for share of the voice and data – and multimedia - market. The distinction between fixed and mobile worlds has blurred and the division between IT and the network is rapidly eroding. Not only that, but traditional barriers of geography have begun to fade away. Open standards and international networks have lead to increased competition from both local markets and global players. The race is on to win market share – and to keep hold of it.

As a consequence carriers now face heightened competition from all angles and yet still remain obliged to continue to reduce margins on network provision in order to stay afloat. Regulatory and competitive pressures are forcing operators around the world to make significant margin and revenue reductions. Within BT Wholesale alone, we are being forced to cut prices by £250 million each year. [Do we have any industry stats?]

Whilst the pressure is on to achieve significant revenue growth or massive cost reductions to stay in the market, pressure is also being placed on carriers to offer broadband services and IP networks that will support advanced, next-generation communications. These ‘new wave' services have smaller margins than traditional business and more importantly, necessitate large-scale investment in new infrastructure and present significant financial, technical and operational challenges to implement. So how can carriers, in the current climate, afford to embrace this new emerging market?

Standing still is not an option

But the question should be how can they afford not to find a way to embrace the potential that this new era of communications promises? Global telecoms providers are faced with two options: either they strip back investments and focus on gaining revenues purely through ‘pipe supply', a strategy that prohibits long term growth, or they choose to innovate and change their business models. We believe that it is essential for providers to continue to drive change in our business both for our own companies' interests and for the benefit of the industry. Standing still is not an option; look at the plights of AT&T and MCI – two giants of the industry that have been subject to take over bids because they failed to adapt.

The very real demand for new communications platforms

The fact is that despite these challenges, there are real and very significant growth opportunities in the industry, which need to be tapped in to and driven by carriers. Broadband, IT networked services, mobility and convergence are all core technologies that new services and products depend upon and which are all supported by the network. Convergence is gaining momentum, and customers are lookng for products that can send communications from any device to any device.

Take the example of Instant Messenger, BlackBerry handsets and the interest in new location-based services. There is a very real demand from end-users for new services that will improve quality of life, services that will make their professional and personal lives easier and more productive.

Society and indeed the economy is becoming more connected and irreversibly dependent upon the network. Global carriers are in a unique position to supply the infrastructure that will support and deliver these new services – and to offer application and service providers the means to deliver their products.

New players are entering the communications market everyday with niche network centric services such as Skype and iTunes which depend upon flexible IP platforms. While it is true that carriers and network providers face greater competition that ever before, they also have a greater and more diverse array of potential customers than ever before.

21CN - leading the way

BT firmly believes that there is huge revenue and growth potential to be gained from empowering new forms of communications and information services through new wave technologies. For this reason it has embarked upon the most radical next generation network transformation programme in the world today, its 21 st Century Network (21CN) . The end-to-end Internet Protocol (IP) based network will replace complex network and systems infrastructure and allow BT, and all other UK providers using its platform, to deliver the next generation of converged services faster, more efficiently and more cost-effectively than ever before.

BT's 21CN vision will allow future products and services to be built using common, reusable capabilities. The lead-time for new and innovative services will be reduced by at least two thirds, making it significantly quicker and cheaper to bring new and exciting services to market – and in this fast moving world, speed to market is key to success. It will enhance the customer experience, by underpinning the delivery of the newest communications services – from high-speed broadband to mobility solutions of a sophistication and power as yet unimagined. And because the network will be based on open standards, it will be accessible to all, not merely the traditional players.

21CN is the enabling infrastructure for growth both for BT, for its UK wholesale customers and for partners around the globe. Its impact will be radical. Imagine having a single a transportation system that offered passengers the opportunity to travel anywhere to any destination and by any means - by car, by foot, by train or by aeroplane. The trip would be simpler, faster and the experience infinitely better with customers empowered to make their own choices. 21CN promises to offer a similarly groundbreaking platform and comparable service to the communications industry.

Rolling out the new network is an immense technical and operational challenge and will take several years to complete. The human challenge is massive too. BT is undertaking another world's first with its Consult 21 programme where it has been working with key stakeholders within the UK 's telecommunications industry in defining and agreeing the plans for the switch over.

We are excited to be leading the world in revolutionising the industry and creating a backbone that will shape the future of communications for years to come, and hope to encourage other operators and other industry players - including regulatory regimes - to follow our lead. If other network providers opt to invest in next generation networks and make them interoperable and compatible, this will ensure that all can benefit from the power of next generation IP-based networks. They will support new and exciting converged services that BT believes will benefit society, contribute to the growth of the whole communications industry, and in turn, the world economy.

The brave new world of next generation communications

Global carriers must accept the fact that the industry they once entered has metamorphosized. They now have two choices – to ignore the burgeoning customer demand for new converged and ICT technologies and run the risk of simply providing commoditised transport services, or to face these threats together with the very real and exciting opportunities the new world of communications offers them.

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