Intelligence to the core: 4G evolution to bring new opportunities, challenges to mobile space

Editor’s Note: This is an article from our September Special Edition, Behind the Scenes: A focus on integrated subscriber and network management systems. During the next few weeks, RCR Wireless News will be posting a variety of articles addressing the OSS/BSS space.
The mobile telecommunications industry for years has been an evolving ecosystem in search of the latest “G.” That “G” was typically tied to a number and in the case of the current evolution means 4G.
The current evolution may be the most dramatic, with carriers deploying wireless networks that rely on an all-Internet Protocol core to transmit information in the form of data traffic as opposed to legacy systems that relied on circuit-switch technology.
From a marketing perspective, this evolution is from 3G networks to 4G networks, but the true transformative nature of the change deserves a more dramatic numerical increase. This change is being taken by and forced upon the mobile industry due to the current and forecast increase in network traffic expected to flood mobile networks in the coming years.
An often-cited report released by Cisco Systems Inc. last year predicts mobile data traffic in North America will double every year and reach 66 times the levels seen in 2008 by 2013, doubling in growth year-after-year into 2015. Scary stuff.
Along with the network infrastructure that is required to handle this explosion, carriers have to look at evolving their core equipment to handle the different challenges presented by IP traffic. While more efficient in terms of the transmission of information, IP networks require carriers to reconfigure how they manage, bill and account for that traffic moving over their networks.
Vast opportunity
According to a recent report from Informa Telecoms & Media, mobile operators are expected to increase spending by 127% by 2014 to $29 billion on managed services and outsourcing. The firm noted the drivers for the increased spending will include continued convergence of fixed and mobile networks, the world economic slowdown and increasingly competitive developed markets. “Mobile operators are forced to concentrate on their core skill sets, assets and expertise in order to survive and are following the wider global trend toward outsourcing,” the firm noted in its report.
Paul Merry, senior analyst at Informa and lead analyst of the company’s managed services research, noted: “The ongoing development of mobile services combined with the development of convergent telecommunications will see an increase in opportunities for managed service providers. Specifically there will be immense prospects in delivering multiplatform mobile services and advising on developments in the telecommunications space.”
In regional terms, Informa said the majority of revenues today are generated in Western Europe, and this trend is expected to continue, with 33% of managed services revenue generated in this region by 2014. “However, there will be strong growth in developing markets including Africa, the Middle East and Latin America as these markets strive to mature as quickly as possible,” the firm noted.
In North America, Informa noted that revenues have “broadly caught up with Europe in terms of mobile use. Mobile managed services remain underpenetrated in the region partly due to the historical antipathy shown to outsourcing due to U.S. protectionism. Professional service provisioning and BSS/OSS outsourcing including consultancy have been adopted in the region, but managed network service contracts remain uncommon.”
According to Informa, the Asia Pacific region “exhibits a strong predilection toward managed services albeit in the more developed countries, delivering 24% of total mobile managed service revenues by 2014. A key reason for adoption in this region will be network expansion and upgrade to provide for expected mobile broadband take-up with managed capacity, network sharing and the ability to manage multi-vendor, multi-technology networks becoming highly attractive.”
The challenge for carriers
While vendors are expected to profit handsomely from the increased need for network management, wireless carriers have to face an unfamiliar future. Following years of industry consolidation, carriers have been accustomed to reconfiguring their back-end systems in an attempt to simplify their operations and gain those “operational efficiencies” many touted as one of the benefits of consolidation.
“The move to an all-IP network is the major change for carriers going from 3G to 4G,” noted Peter Briscoe, executive director innovation strategy office at Telcordia Technologies Inc. “The wireless standards change provides for a lot more capacity to do more things. But, it also provides more challenges in providing a single level of quality out to the handset.”
For most operators their network assets are their lifeblood and they have a history of wanting to maintain control of those operations.
“Carriers still want to own the OSS,” Briscoe continued. “They want that flexibility to swap out suppliers if needed;
they want to own the platform. A few have made the move to outsourcing that control, but not all have taken that step.”
Another reason carriers are looking to maintain control of these valuable network assets is so that they can maintain their position as the focus point for the growth of financial transactions taking place over their networks and not become
the dreaded “dumb pipe.”
“The worst-case scenario for carriers is to be left as a dumb pipe, being left out of the revenue stream,” noted Nexius
Solutions Inc.’s Executive Chairman and co-founder Ned Taleb. Nexius provides intelligent network solutions for
the communications industry and counts AT&T Inc., Verizon Communications Inc., Sprint Nextel Corp. and T-Mobile
USA Inc. as clients.
Never too late
While legacy operators appear to have their work cut out for them, those working with carriers on the evolution of their
core operations note that some of the newer operators could have an advantage as they don’t have to worry about
integrating legacy systems.
New operators definitely have an advantage for efficiency,” Taleb explained. “They just have a simpler back-office
environment.”
Those “new” operators include the likes of Clearwire Corp. and many of the smaller players deploying WiMAX technology as well as those like Harbinger Capital Partners L.P.’s LightSquared, which recently announced plans to begin deploying an LTE network. These technologies were designed from the beginning with an all-IP core, which should make management easier. Despite that potential advantage, those operators still have a lot of work ahead of them.
“For some it’s more clear cut than others,” Taleb said. “Everyone seems to think that LTE is an easy deployment with a
self-optimizing network, but with new devices and the different business models being discussed it will be difficult. Operators are going to be in the same situation they are in now in trying to not become just a dumb pipe. And most importantly, they are going to have to figure out how to get a return on their investment. They don’t want to follow the 3G model.”
Others agreed, noting that while 4G in and of itself is not the answer, the transition to the new technology can provide
carriers with tools they can use to make their operations more efficient.
“4G does not make it easier for carriers to increase revenues or to mellow out the traffic spike on their networks,” explained Andy Capener, director in Cisco’s mobility division. “But, IP does. Having an intelligent IP infrastructure makes all of these possibilities easier to
attain.”
Billing challenges
One way OSS/BSS ven
dors are looking to help carriers speed up their ROI is by providing a more in-depth look into
what a carrier’s customers are doing on the network. This allows carriers to tailor billing practices to a specific customer’s
activities instead of blanketing all of their customers with a single rate plan.
This real-time or near-real-time capability is becoming more important as the market is moving away from contract-
based postpaid models to prepaid options that require carriers to manage billing.
One example of these changes is the recent launch of a prepaid offering by Clearwire. The service, dubbed “Rover,” allows for potential customers to sign up for the carrier’s mobile broadband offering for a day, week or month, at price points of $5, $20 and $50, with all taxes and fees included. Initial devices for the offering will include a USB modem priced at $100, or a “Puck” that will enable up to eight Wi-Fi-enabled devices to connect to the carrier’s network for $150.
To facilitate this prepaid option, analysts noted that Clearwire had to work with its billing partner, Amdocs Ltd., to provide enhancements that would allow for self-activation on the customer’s behalf.
“Clearwire would need to make changes to its customer provisioning and activation tools,” noted Dan Hays, partner at global management consulting firm PRTM. “This would allow for automatic activation. … Clearwire would also need devices that supported this self activation and fulfillment.”
The billing issue has always been a challenge for carriers and is expected to remain so until the industry can transition consumers from the per-minute model most people are used to and is easy to understand to a per-megabyte model that would allow for more specialized billing models.
“Mobile does have a head start in that people are still used to paying for what they use,” noted Jonathon Gordon, director of marketing for Allot Communications’ Bandwidth Management Solutions. “It will just be a matter of explaining what megabytes are.”