Key Business Challenges in the 3G Network Evolution

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Key Business Challenges in the 3G Network
Evolution

• Gordon Saussy
• President CEO
• Megisto Systems, Inc.

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The 2.5G Network Today
Many Evolution Areas WAP V2.0 WCDMA
Radios All-IP RAN IPv6 Addressing SIP IMS
PSTN
Internet
MMS-C
AAA
WAP
MSC
SCP
GGSN
HLR
SMS-C
IP
GRX
SGSN
FR/ATM
But what are the business drivers? What will fuel
ARPU and revenue growth? What will deliver the
maximum return on capital in the shortest period
of time?
BSC
2G Base Stations
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3G Evolution A Business Thesis

• The business priority is creation of new revenue
  streams not simply reducing OPEX/CAPEX
• New mobile data services must
• Help the Mobile Network Operator (MNO) own the
  subscriber
• Provide the MNO with control of the value chain
• Scale to support rapid growth

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New Revenues Are The Key
Saturation and commoditization have driven voice
ARPU down precipitously in recent years
New service revenues are essential to rebuilding
ARPU top-line revenues cost reductions cant
do this
Source Analysys, March 2002
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New Revenue Streams

• Corporate Customers
• Mobile E-Mail Synch
• Secure Mobile Access to ERP Applications
• Consumer Customers
• Mobile Messaging
• Personalized News Information Delivery
• Games Entertainment
• Enhanced Voice

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Subscriber Ownership

• Well-Established for Voice
• Subscriber identity via SIM
• Subscriber profile in home operator HLR
• Mostly transparent inter-provider roaming
  agreements
• One billing relationship between home operator
  subscriber
• Commoditization churn are major business
  concerns

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Subscriber Ownership in the Wired Internet
Portal-Centric Model Primary billing
relationship with branded portal (e.g. AOL,
MSN) Basic identity apps (e.g. mail, IM) done via
portal IP access local loop are invisible
commodity pipes Portal has partial value chain
participation (via featured sites)
Access-Centric Model Primary billing
relationship with IP access provider (e.g. BT
Openworld) Basic identity apps offered by access
provider Access provider will offer a portal of
its own (via wholesaler), but .. most Internet
content apps are disassociated
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Subscriber Ownership in Mobile Data Networks

• Mobile Network Operators Must Be Perceived as the
  Primary Provider Across All Bearers
• Single billing customer care relationship
• Heterogeneous roaming application delivery
• Provider of basic identity applications
• Provider of sophisticated services
• This Must be a Value-Based, Not Constraint-Based,
  Relationship

CS Voice SMS 2.5/3G IP Data
CS Voice SMS 2.5/3G IP Data WLAN IP Data
2.5/3G IP Data WLAN IP Data
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The Value Chain

• Well-Esablished (Mostly) Working for Mobile
  Telephony
• Usage-based billing for voice and SMS (with
  tiered service plans)
• Usage-based charging supported throughout
  infrastructure
• Reverse charging (1-800) available
• Pre-paid model supported
• Interprovider roaming billing remediation
  mechanisms in place
• Roaming MNO acts as a (mostly) transparent
  traffic pipe

Home MNO
Roaming MNO
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The Value Chain in the Wired Internet
Content Apps

• Aggressively Commoditized, Poorly Organized and
  Incomplete
• Internet provider typically offers flat rate,
  unlimited use monthly plan
• Infrastructure not in place to implement
  usage-based charging on large scale
• Content applications are either free or
  disassociated from the Internet provider
• Portal position advertising are only mechanisms
  for value chain participation
• No pre-paid, no reverse charging capability
• Not the Basis for a Healthy Business Model!

Internet Provider
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The Value Chain for Mobile Data Networks

• The MNO Opportunity
• Subscribers will pay a premium for usable
  useful mobile services
• MNOs can build a value chain that works not
  recreate the Internet
• What This Demands
• Fine-grained differential usage-based charging
  built into the infrastructure
• Sensitive to application, time of day, service
  plan, business partnerships
• Integral support for pre-paid and reverse charging

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What About Scale?

• Mobile Operates on a Massive Scale
• Over 1B mobile subscribers today
• Data penetration still lt10
• Mobile Uptake Can Be Very Rapid
• Subscriber-initiated with no truck roll required
• Potential for significant self-provisioning via
  portal
• Success Target
• 40 data service penetration by end of calendar
  2003

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And So Back To Evolution . . .

• Top Operator Priorities
• Deploy new revenue-generating sticky
  subscriber services
• Offer pre-paid 1-800 models for data services
• Integrate with WLANs for higher capacity
  subscriber ownership
• Explore more sophisticated charging models for
  data traffic
• Insure services can scale rapidly in a success
  scenario

Projects outside the priority areas can be
deferred without putting business fundamentals
and long-term health at risk
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