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Tue 17 Nov 2009 04:00 AM

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Next generation trends

With next generation national broadband networks (NGNBNs) promising a sea change in the way people perceive telecom services, Hadi Raad, senior associate at Booz and Co’s communication and technology practice, tells CommsMEA about the type of services that could emerge and how operators can capitalise on them.

Next generation trends
RAAD: Operators will need to take a slice of the services market.
Next generation trends

With next generation national broadband networks (NGNBNs) promising a sea change in the way people perceive telecom services, Hadi Raad, senior associate at Booz and Co’s communication and technology practice, tells CommsMEA about the type of services that could emerge and how operators can capitalise on them.What type of services do you think will be used on NGNBNs?The NGN network and the NGN broadband network is going to enable seamless communication, ubiquitous access, and will introduce intelligence into service offerings, as well as bringing an expanded range of satisfaction through the high bandwidth that it will enable.

Certainly, faster information exchange, real-time collaboration and virtualisation are shaping the applications landscape leading to rise of next-generation broadband applications, characterised by high interactivity and bandwidth intensity.

New generation broadband access will provide a range of enhanced services to both households and enterprises. All these applications are increasingly further distinguished by their near symmetrical upload and download requirements.

If we think of what are the key applications and solutions that NGNs are going to provide, there are many applications, starting from basic digital telephony to streaming videos, HD IPTV, more advanced high resolution video conferencing and high definition TV, all the way to advanced applications such as telepresence and 3D television.

The first service that is being planned at this stage I would say is IPTV. There are always lots of talks about online games, however the games that have spread require limited bandwidth. The first real application that is coming up that will require significant bandwidth particularly on the access side is the IPTV.

IPTV could be an imminent NGN broadband application: Forecasts indicate around 10% of broadband subscribers will have IPTV in the next few years. IPTV household penetration in France, for example, has already exceeded 20%.

First we will see lots of applications that are also bandwidth demanding and bandwidth intensive over the IPTV itself, other than the regular pay TV and video on demand, we could see also gaming over IPTV, teleshopping and 3D video. And music could also be a big are of potential, moving forward.

Telepresence, telemedicine, virtual presence are of course applications in the pipeline. I do not see them as the immediate parts of the applications kicking in, but definitely they have kicked in elsewhere in the world where there are significant revenue potential in these services. For example there are some forecasts that indicate the market for telemedicine could be worth around EUR20 billion ($29 billion) in Europe by 2012. Telemedicine is definitely coming our way.

Online gaming is also coming, we are going to see more and more users playing online games and virtual games and virtual sports, games communities – that is something coming and it could be a big market. Online gaming in Europe and the Middle East for example could reach around $5 billion by 2012. How are operators getting involved in NGNBNs?

We are seeing lots of NGN investments by the incumbents, and we are seeing lots of investments on the access side whether they are being subsidised or are being driven by competitive pressures. We are seeing higher speeds and higher bandwidth being offered here in the region. The price is probably still high and that could be either driven by network constraints not to drive demand beyond the current capability, but prices are being revised and dropped continuously.

With NGN broadband applications, operators are transforming their traditional communication business into multi-media providers serving digital homes. Home services mainly include IPTV, high definition video conferencing, online gaming, VoIP, as well as advanced applications such as tele-working, e-learning, telemedicine, and remote surveillance. Telemedicine is one example of an application that requires around 10Mbps on both the upload and download streams.

How might NGNBNs affect the wider economy?

By bringing broadband to almost all households, and by offering the applications, NGNs will definitely enable the economy. Telecoms is a sector that can enable other sectors, whether you are talking about e-medicine, e-learning, or virtual education.

Broadband and next generation services will also definitely impact the overall economies in emerging markets. Video conferencing could cut costs for enterprises. These are types of applications that can drive efficiencies.

There are numerous applications that enterprises will be using and on the back of next generation broadband access networks. On the enterprise front, businesses will find it more cost-effective to access next-generation services such as cloud computing, software-as-a-service and remote back-up. They will start replacing capital expenditure on software and equipment with operating expenses to service providers. Enterprises will increasingly benefit from remote collaboration, improved productivity, reduced travel costs and also from faster time-to-market.

We were going to see on the enterprise side lots of tailored solutions to meet the enterprises needs. We are going to see more and more tailored solutions for specific enterprises, to provide services over the broadband network remotely, whether to schools, healthcare, financial services. This will enable tailored solutions which will be available across all sectors.

We could see different business models. We could see operators sharing the revenues with the service providers, we could see operators selling the bit pipe alone, or selling content themselves. All the business models are open. But recent examples show us that not expanding or moving up the value chain could be costly for telecom operators. Lots of business models could emerge and I would expect to see partnerships between the operators and service providers or even operators acquiring service providers and providing these solutions themselves. How do you think operators will respond to this scenario? Do you expect them to take a slice of the services market?

Prices of broadband access are likely to decline further. Operators are expected to compensate for the declining access ARPUs by introducing broadband applications and content. In Europe, for example, non-voice broadband applications generate around 20% of broadband revenues in 2009. This same ratio could increase to as much as 40% by 2012.

Classical fixed operators might be satisfied with the “bit - pipe” offering. However, advanced and innovative operators will make use of their investments to generate more revenues and follow and end-to-end one-stop-shop strategy that will create value and enhance customer retention. These operators will partner with content and applications service providers based on revenue-sharing models, invest in forming new ventures, acquire existing players to provide the end-to-end service themselves. Of course, market conditions will dictate the right strategy.

The effect of NGN broadband applications on the wider economy is definite. ICT contributes to every sector of the economy through productivity gains. Investments in broadband networks and applications will have spill-over effects across the economy. This is even more vivid in developing economies. A recent World Bank study indicates that for every 10% point increase in penetration of broadband services, there is an increase in economic growth of 1.3%. Broadband services will gain from the “Network effect”. Developing countries haven’t yet reached the critical mass in broadband penetration. A marginal increase in these countries will have a multiplier effect.

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