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GLOBAL INVESTOR 2.07 Switching — 43
One network
for everything
The telecommunications sector is undergoing radical change. Full-scale digitalization of
telecommunications networks and faster data rates for both fixed networks and mobile handsets
are profoundly changing the environment in which telecom companies operate. The distinct markets
served by IT services, telecommunications, Internet and media companies are converging into one.
Uwe Neumann, Equity Sector Analyst
Several telecom companies have announced in recent months that
they are hoping to shut down their aging analog voice networks as
early as 2010 and migrate to completely digital Next Generation
Networks (NGNs), which should cost less and be more reliable and
easier to maintain. Plans to build upgraded Next Generation Mobile
Networks (NGMNs) have also been unveiled. NGMNs could represent
an important breakthrough in providing wireless access to the
Internet, television, and music or video on demand. It appears that
mobile Internet could become a mass-market issue earlier than the
initially projected time frame of 2010 to 2012. At this year’s 3GSM
World Congress in Barcelona, telecom companies left no doubt
that they are hoping to bring mobile Internet services to the mass
market as early as 2009. For example, in his speech at the annual
industry get-together, Vodafone’s Chief Executive Officer (CEO)
Arun Sarin surprisingly urged the Global System for Mobile Communications
(GSM) community to step up the development of Universal
Mobile Telecommunications System (UMTS) technology.
There are several motives for such calls to action. For one, the
telecommunications industry has spent approximately one trillion
euros to build up UMTS networks, and at some point it would like
to see some kind of return on its investment. Apparently, even
Vodafone, the world’s market leader, is getting nervous about the
decline in revenue growth rates for voice services. Another reason
is that now – after years of waiting – mobile broadband is finally
technologically possible thanks to UMTS add-on applications such
as High-Speed Downlink Packet Access (HSDPA), High-Speed
Uplink Packet Access (HSUPA) and Long Term Evolution (LTE; see
Figure 1). To date, the so-called 3G standards such as UMTS have
attracted only about 100 million users, a fraction of the total mobile
handset population of more than 2.5 billion. Having pinned its
hopes on turning mobile TV and mobile Internet services into a massmarket
success, the telecom sector is now challenged to ensure
that the huge amount of data volume this will entail is available efficiently
and at low cost wherever coverage is offered. Telecom
companies worldwide are in the process of upgrading their networks
and switching to completely Internet Protocol-based (IP-based)
architecture in order to meet this challenge.
Productivity gains and cost savings potential
The new generation network brings advantages for more than just
end users. It will allow telecommunications companies to achieve
long-term cost savings and give them greater flexibility in developing
and marketing future products and services. Leaner network
architecture will not only lower hardware costs, but a uniform IT
platform also means only one management system will be required.
Up to now companies have worked with various stand-alone solutions,
pushing up overall operation, maintenance and training costs.
Another advantage the next generation of networks offers telecom-