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How traditional telecoms are managing the
change
David
Axam, BT
According to Joel, it is all doom and gloom for the incumbent telco. Fortunately, I have a different view that I would like to share with you. Is VoIP for an incumbent an opportunity or a threat? I would like to show you how it represents a real opportunity for incumbents. Integration is important. VoIP is not all about cheap phone calls. It is a technology that opens up a voice market
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The purchase of Skype by eBay has very little to do with their earning multiples from their voice services and much more to do with the value they see in integrating that voice application into their transaction business. Integration is a real opportunity for everyone in this space. I would like to use directories as an example of this.
How do you manage this change? I will talk a little about what BT is doing both in its traditional network and new services to manage change. The important thing about VoIP as a technological change is that it is not a question of if the change will happen but when. BT is making quite a large bet on this. We will have transformed our entire traditional PSTN network to a wholly VoIP by 2010. This is a massive undertaking for any incumbent telco. 30 million customers will have to be moved to a new network. This is being done because BT sees a real opportunity.
a. The status quo
In the incumbent telco world, the voice application that our customers use is embedded inside the network. It has limited scope for enhancement and is tied to a set of devices that are inhibited in the kinds of services they can provide.
b. Breaking the shackles
What does VoIP do for us? It breaks the shackles of traditional networks. Voice becomes an application and is allowed to live in an environment with other applications, for example communications applications or eBay. It needs a network to deliver the application to customers. This is a great advantage for a fixed line operator that has such things as WiFi, 3G and a prevalence of IP-based networks that voice applications and other communication services can run over in the future. If you combine this to the amount of devices that allow people to use these services, a world of massive opportunity and innovation emerges. We have done instant messaging and broadband voice services and understand their pros and cons. We will continue to offer these services, but we also have to have a vision about where we will take them. VoIP is an enabler of convergent communications.
c. Integration
To achieve the convergence of communications, you have to integrate services. Take sign on, for example. People need to know that their service is secure and that they can give authority to others to use them. They want to be able to use the services on many devices and have the same services on many devices. Currently, directory information, personal and public, is held in different sources. Unifying this information within the network and making it available to many devices is key. Once this is achieved several questions arise for the user: what is my profile? How do I want people to contact me when I am on a particular device or in a particular place? This is about understanding my preferences and allowing me to choose how I want to be contacted. Part of this is presence information, online, mobile and telephony. Once you know this information, you can create collaboration environments in which you allow people who happen to be in the right places to add new rich features to their communications and collaborate more effectively. With collaboration comes the ability to pull messaging from any source and in any way and the ability to manage it in the way that the user wants.
This brings us into the world of other applications. Skype and eBay is a fantastic example of this. Another example is Microsoft and LCS. Now, if you type the name of someone you know or the name of someone in a directory you subscribe to in a Word document, that name can be enabled as a web link does in a document now. You can click on that name and communicate with that person. One of the applications here is VoIP. This enables one voice market. It converges the world of VoIP online to fixed telephony and mobile telephony.
a. What the customer wants
Customers want to communicate with someone. They will use a directory to find out the options available to communicate with that person. Here, we could add more options, such as the Skype number, IM, PDA, video device, desk phone or mobile phone. The burden of choosing the communication is placed with the person searching. They do not know how the person who they want to communicate with wants to be communicated with. It is a very blind environment. They choose an option and the result could be an engaged tone or voicemail. It is very unpredictable.
b. A fundamental change
In the future, with the device you choose to use you can search the online directory, which is in turn enabled to tell you not only the status of the person you want to call but perhaps what their preference for communication is. In fact, it does not have to tell you. You just have to ask to communicate and it can manage the rest. This reduces it to one identity in the network. This is a fundamental change to your directories business that you need to embrace. Every change is a threat if you do not embrace it and an opportunity if you do. This change will come. Directories will start to live within the network.
a. VoIP as a tariff bypass
Broadband is a big enabler for VoIP. There is massive adoption of VoIP in Japan. However, there is no carrier pre-selection in that market. This is used for tariff in an environment where there is no other tariff option. VoIP is a technology being used for tariff bypass. In the UK, the tariffing is national. We do not have local or national calling but one flat tariff for the entire country. Secondly, there are 500 competitors attacking the voice market with carrier pre-selection. These competitors offer very low rates, which has led to an optimisation of our rates. You can now talk to anyone in the UK for €0.08 an hour. Why use Skype unless it is convenient for you?
b. Managing customers
As a traditional communications operator BT knows that you have to manage your customers and provide service to them. Our 21st century network allows us to change all of our operational support systems. We have an awful lot of legacy. 100 years of building creates a mess. We will completely transform our operational and service wrap into a much slicker, smoother operational service system.
c. VoIP as an application
Secondly, BT recognises that voice becomes an application. The secret here is integration. This means we have focused a huge amount of energy in providing an applications environment. When someone comes up with the latest greatest application, we want to be able to exploit it cost effectively and quickly. This requires an architecture that allows you to quickly drop in communications applications that integrate with everything else. Session Initiation Protocol (SIP) is wonderful at doing this. It enables you to drop application servers and add new functionality not just to your one product stove pipe but to every device that uses it.
d. The IP network
The network has to be IP. IP is the enabler. It may not be the best protocol but it is the one that everyone uses. Network inter-operation, the ability to communicate through any network in a standard, common, quality, secure manner, is key.
e. Devices
It is essential to ensure that devices can have your application loaded on them or that you can sell services as a device‑led sale run on your network. For example, for mobile operators, device is key to the expansion of their services. How many times do you change your mobile phone? In the UK, every year you get offered a new phone with new capabilities. The device leads the sale. In the future in other sectors, the device will come back into prominence as a way of driving sale.
VoIP is a technology. It is not just about cheap telephone calls. It is about the way that people choose to communicate in the future.
From the Floor
I see a correlation here with what happened with Napster and the music industry. Napster offered free music and now the revenue of iTunes is building from downloading music. Is there a correlation here with Skype? Will more revenue be eventually generated by this type of service?
David AXAM
150 million downloads is not 150 million customers. We run similar client services. Some people just download the service. Customers who choose to pay for a service tend to be a much smaller number than the number of people who download. You then have to generate in an increase in ARPU among those customers that do pay. That requires building richer and richer services that customers choose to use. The value for eBay cannot be earning multiples. It must be the value of integrating it into their commerce application. I think there is real value in doing this.