for Africa (TAF) (TAF) for Africa Midrand, South Africa, June - - PowerPoint PPT Presentation

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for Africa (TAF) (TAF) for Africa Midrand, South Africa, June - - PowerPoint PPT Presentation

Dec 06, 2023 112 likes •571 views

ITU/BDT Regional ITU/BDT Regional Seminar Seminar on on Costs and Tariffs for Member Countries of the Tariff Group Costs and Tariffs for Member Countries of the Tariff Group for Africa (TAF) (TAF) for Africa Midrand, South Africa, June

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June 2005

ITU/BDT NGN services and business planning - O.G.S.

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ITU/BDT ITU/BDT Regional Regional Seminar Seminar on

  • n

Costs and Tariffs for Member Countries of the Tariff Group Costs and Tariffs for Member Countries of the Tariff Group for Africa for Africa (TAF)

(TAF)

Midrand Midrand, South Africa, June 2005 , South Africa, June 2005

NGN services and business planning

Oscar González Soto ITU Consultant Expert Strategic Planning and Assessment

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NGN services and business planning Content

  • NGN driving services
  • Services motivation and market issues
  • Key economical factors and Convergence
  • Cost factors and economies of scale
  • Convergence
  • Tariff structures and revenue trends
  • Business modeling and evaluations
  • Support to Business and Design
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NGN services and business planning Driving Services for Residential

  • VoIP
  • Content delivery
  • Video on demand

NGN Enabler for multiservice Convergence

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NGN services and business planning VoIP

  • Context

– Access to plain telephone services with different levels of quality

  • f service from a data line (e.g. DSL or Wireless) and reduced

pricing – Computer to computer/ user to computer / user to user

  • Interested customer segments

– Corporate: based on VPN VoIP – SME / SOHO / homeworkers: based on IP Centrex – Residentials: Secondary line – Residential: Primary line

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NGN services and business planning VoIP

  • Motivation

– End-user

  • Access to different tariff schemes and cost saving
  • Enabler for IP services (CTI) => e.g. IP Centrex, Browse and Talk

– Operator

  • Add value to BB delivery for emerging operators
  • Defensive position for incumbent operators

– Operator concerns

  • Cannibalization (incumbent)
  • “Free services”
  • Interconnection
  • QoS and regulatory obligations (e.g. for primary line: power feeding,

emergency service, localization,... )

  • End to end quality supervision
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NGN services and business planning Content Delivery

  • Context

– Access to paid content with different quality levels

  • Music: (> 25% of total market) Exploit Win-Win legal solutions
  • Games: (> 50 million users) Need for BB and quick reaction time
  • Gambling: Need for BB and short delay
  • Motivation

– End-users

  • Trusted relation with operators
  • Integrated contract

– Operators

  • Capitalize on their access to users with increase of revenues through

marginal investments

  • Get share of e-commerce and increase business chain

– Content providers

  • Ease of use for distribution channel;
  • Operators as trusted party
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NGN services and business planning Video on demand

  • Context

– Access to movies on a per-demand basis (from DSL line or Wireless) (VoD, NVOD, iTV)

  • Motivation

– End-users

  • Accessibility/Control / personalization of video content

– Operators

  • Capture a part of entertainment value chain
  • Uplifts DSL demand
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NGN services and business planning Video on Demand drivers and issues

  • Revenue Drivers

– Share of revenue depending on value chain – Possible payment intermediation

  • Market

– Fundamental service for the triple play operation – High interest and fastest growing market – Candidate for convergence in broadband – Willingness to pay per movie, per subscription and per time unit

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NGN services and business planning Driving Services for Business

  • VPN
  • IP Centrex
  • Multimedia Conferencing
  • Unified messaging
  • ASP

NGN Enabler for Multiservice Convergence

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NGN services and business planning Virtual Private Network - VPN

  • Context

– Set of communication capabilities provided over a private network using a common telecom infrastructure shared by several companies

  • Motivation

– More efficient and customized operation – Homogeneous solutions for all company – Private numbering plan – Services integration – Security management

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NGN services and business planning Virtual Private Network - VPN

  • Market issues

– Cost benefits: Balance between tariff levels for competing services

(PSTN & leased line services)

– CAPEX versus OPEX expenses over a period of time

– Need for skilled telecom staff

– Provision of VPN features – Billing and Management – Service Delivery Process Planning

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NGN services and business planning IP Centrex

  • Context
  • Provides PBX-like voice / CTI services to enterprises
  • Main targets: SOHO/SME and teleworkers
  • Motivation to users
  • No CAPEX investment from non-core business (telecom)
  • No operation staff to be trained and employed
  • Deployment follows company's pace (growth or reduction)
  • Easier cost management (against move, obsolescence, traffic

patterns)

  • Multi-site converged service (e.g. for homeworkers)
  • Willingness to pay: 8-15 Euros per month
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NGN services and business planning IP Centrex

  • Motivation to Operators
  • Offer voice services on top of (deployed) data-VPN,
  • Move up the value chain providing core-business (voice) services
  • Reduce churn to in-house solutions and competitors
  • Possible bulding block for an SME bundle
  • Associate to Voice and Data VPN for full Virtual Company

solution (Phones, PBX, Mobiles)

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NGN services and business planning Multimedia Conferencing

  • Market Issues

– Threat of "free" web conference? – Cannibalization of ISDN visioconf (leased lines; BRA)? – Willingness to pay: 0.5 to 0.7 $ /min per user

  • Context

– Multi-party room-based or PC-based multiservice conference (with document sharing, Instant Messaging facilities,...) – Non-IP users allowed in voice – Room-based quality with "NetMeeting - like" ease of use and services

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NGN services and business planning Multimedia Conferencing

  • Motivation

– For End User

  • Teleconf. shares time and costs and improves efficiency.
  • Intermediate step between phone call and face to face visit
  • Lower cost / better user friendliness than ISDN room-based visioconf.

– For Operator

  • Incremental value on data/voice
  • Brick for package to business segment or vertical service (distance

learning; home working…)

  • Lower cost to operate Visioconf. helpdesk
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NGN services and business planning Unified Messaging

  • Context

Retrieve from anywhere any message from any device: e-mail, voice mail, SMS, MMS, Fax

  • Motivation

– To End-User

  • Main target: Businesses,Teleworkers
  • Productivity gain, ease of use, time-critical information

management – To Operator

  • Move up value chain in Business segment (competes with

enterprise-related EVS/Messaging)

  • Leverage Mobile services
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NGN services and business planning Unified Messaging

  • Market Issues

– Service partly offered by advanced IP-PBX systems – Benchmark with Mobile penetration – Check competitive positioning vs. Mobile operator – Interest to be a component for a bundle in the business segment – Willingness to pay around 1 to 3 $/employee/month

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NGN services and business planning ASP

  • Context
  • ASPs provide a contractual service offering to deploy, host, and manage

access to an application residing in a facility other than the customer’s site.

  • Motivation

– To en user

  • Solution to lack of internal IT resources
  • Potential cost savings and better cost control
  • Easier and faster software implementation
  • Gives access to otherwise unaffordable applications (SMEs)
  • Access to latest technology and superior connectivity

– To operator

  • Enlarge value chain business to the applications and
  • Empower attractive bundling for business customers
  • Increases participation in e-business
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NGN services and business planning ASP

  • Market Issues

– Customer acceptance culture due to external control – Availability of network performance, reliability and robustness – Enhancement of applications towards web-enabling capabilities – Some services partly offered by advanced IP-PBX systems

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NGN services and business planning ASP

VALUE ADD SERVICES

Low High

MONTHLY RECURRING REVENUE

Low High

Shared Web Hosting

$30 - $100 / month

Dedicated Web Hosting Co-location Web Hosting Web Hosting Basic Enterprise Applications

(email, groupware, collaboration, etc.)

Back-end Enterprise Applications

(ERP, payroll / HR)

Extended Enterprise Applications

(e-commerce, CRM, CTI, etc.)

$400 to $900 per month $15,000 per month $5,000 to $15,000 per month $15,000to $40,000 per month $40,000+ per month

Application Hosting

Source: Cherry Tree & Co

Main applications and projected value/revenue added

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NGN services and business planning Content

  • NGN driving services
  • Services motivation and market issues
  • Key economical factors and Convergence
  • Cost factors and economies of scale
  • Convergence
  • Tariff structures and revenue trends
  • Business modeling and evaluations
  • Support to Business and Design
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– High cost impact of network infrastructure layer: > 60% in Greenfield areas of which > 70% in access segment. – Dimensioning and cost evolving in 3 phases through time:

– A) Accessibility due to Geo coverage either physical or radio

– B) Equipment in Ports/users as customers grow – C) Capacity in Traffic due to increase of multiservice applications

– Significant savings by resources and equipment sharing within an operator due to convergence at network layers : i.e.: 30% – Additional savings inter-operators due to cost sharing of non- core equipment (buildings, towers, etc.) > 20%

NGN services and business planning Key Key Factors Factors: : Cost Cost structure structure and and savings savings

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Economies of scale are an inherent characteristic to the telecom technologies that impacts on solutions, evolution and also now survivability in competition – The five dimensions of the economy of scale:

  • By Size of the systems Larger systems cheaper per unit
  • By Technology capabilities New technologies with higher capacity
  • By Traffic efficiency with the occupancy Higher utilization for a given

GoS when more servers

  • By customers Density Quadratic increase with coverage radio
  • By Volume of purchasing Discount per volume in log scale

NGN services and business planning Key Key Factors Factors: : Economies Economies of

  • f scale

scale

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0.1 1 10 100 1000 1975 1980 1985 1990 1995 2000 45 Mb/s

Cost index for Transmission unit (b/s/km) Source: AT&T data reproduced by Word Bank and TeleGeography Inc.

( log. scale) 0.01 90-135 Mb/s 400 Mb/s 1.2-1.7 Gb/s 2.5 Gb/s 10 Gb/s 40 Gb/s Transmission capacities

NGN services and business planning

Key Key Factors Factors: : Economies Economies of

  • f scale

scale by by technology technology

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0.1 0.2 0.3

0.4

0.5 0.6 0.7 0.8 0.9

10

Resource Efficiency

5 15 20 25 30 35 40

P = 0.02

Offered Traffic (Erlangs)

Impact on efficiency increase for a given quality with traffic and group size (non-linear effect)

NGN services and business planning

Key Key Factors Factors: : Economies Economies of

  • f scale

scale by by traffic traffic efficiency efficiency

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Metropolitan and suburban scenarios

High impact of customer density in cost per line and higher impact on Rural (up to 20 to 1)

Density (subscribers per KM²)

Cost per line ( Monetary units)

50 100 150 200 250 300 529 651 774 894 1 016 1 139 1 259 1 381 1 504 1 625 1 747 1 870 1 990 2 112 2 235 2 355 2 477

Metropolitan total

  • Metrop. infrastructure

Suburban total

  • Sub. infrastructure

NGN services and business planning

Key Key Factors Factors: : Economies Economies of

  • f scale

scale by by density density

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– L1) Monopoly for all geographical areas, customer classes and service types – L2) Limited monopoly per area and/or service types while free

  • peration for niche operators

– L3) Moderate competition for all network segments and services – L4) High competition for high revenue customers and services – L5) Aggressive competition for all areas, customers and services

NGN services and business planning Key Factors: Competition level

Different Levels of Competition

“Efficient telecom implies different competition levels as a function of country size and development status”

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NGN services and business planning

Key Key Factors Factors: : Competition Competition level level

Business feasibility space as a function of volume and ARPU

Revenues per customer/year (ARPU) Volume of Customers/type

r2 $ n2

Non feasible by lack of payment capability, churn or regulation constraints

ARPU is limited by the economical development level and fixed costs

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NGN services and business planning

Key Key Factors Factors: : Competition Competition level level

Business feasibility space as a function of volume and ARPU

Revenues per customer/year (ARPU) Volume of Customers/type

Non feasible by low NPV and IRR

r2 $ n1 r1 $ Business feasibility limitted by positive NPV

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NGN services and business planning

Key Key Factors Factors: : Competition Competition level level

Business feasibility space as a function of volume and ARPU

Revenues per customer/yea (ARPU) Volume of Customers/type

Non feasible by low NPV and IRR Feasibility area: tariff range Non feasible by lack of payment capability, churn or regulation constraints Feasibility area: users range

r2 $ n1 n2 r1 $ Feasibility space highly dependent on country size and economical level

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NGN NGN Network Network Architecture Architecture Cost drivers in NGN Cost drivers in NGN

  • Volume of customers per category
  • Bandwidth demand per origin/destination
  • Packet processing rates for control related functions
  • Variety of applications/services and related platforms
  • Content storage and location within the network
  • Leasing of physical or communication resources

Backward evaluation of contribution to services cost is essential to calculate cost dependent tariffs, cash-flows and IRR

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NGN services and business planning Combined fixed and traffic dependent rates

10 20 30 40 50 60 70 80 90 30 60 90 120 150 180 210

  • Sub. 1
  • Sub. 2
  • Sub. 3
  • Sub. 4

1 2 3 4

Combined fixed and variable tariffs has best flexibility for customers, operators and business

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NGN services and business planning Illustration for tariffs strategy in DSL

End user tariff Usage DSL subscription fee ISP service fee Voice calls Voice service subscription Usage End user tariff DSL & voice subscription fee ISP service fee Voice calls Cap monthly download Bandwidth On demand

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NGN services and business planning Revenue chain with multiple business players

global subscription applications access wholesales

  • f services

End User Access Provider Connectivity Provider Retailer Service Provider ( open) Service Provider ( retail)

Increase of players for multiservice business specialization

Network usage

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NGN services and business planning

Universal Telcos converge in order to increase value chain

+ e-applications and Hosting Conventional voice and data services + Services of IN, VPN and Mobile + Internet and video distribution (triple play) Extension for new services domains Extension for new customer types Classic Telcos ISPs ASPs New Universal Telcos

+ Customers for end applications + Customers for new services Customers for connectivity

Extended Telcos Upgraded Telcos

Specific migration and timeframe to be optimized for the country context and regulatory conditions

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NGN services and business planning Migration steps

Evolution of revenues with major service domains

+ e-applications and Hosting

Convergence strategy is fundamental to ensure business feasibility

Conventional voice and data services + Services of IN, VPN and Mobile + Internet and video distribution (triple play) Time and Extension for new services domains Revenue level (ARPU)

voice revenues

IN and data Video and multiservice ASP

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– Push for new services – Imaginative pricing strategies and bundles – Actions for market share capture and better take-up rate – Actions do minimize churn – Actions to decrease Cost of Ownership and share common resources – Business profitability positive and within or better than indicators benchmark

NGN services and business planning

Key factors for survivability in competition

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NGN services and business planning Content

  • NGN driving services
  • Services motivation and market issues
  • Key economical factors and Convergence
  • Cost factors and economies of scale
  • Convergence
  • Tariff structures and revenue trends
  • Business modeling and evaluations
  • Support to Business and Design
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NGN services and business planning Support tools: Business Support tools: Business

  • Required functionality for Business tools
  • Service Demand Projection
  • Dynamic modeling for technology substitution and migration rates
  • Dimensioning multiple flows (circuit and packet modes)
  • Evaluation of network resources and associated investment

(CAPEX)

  • Evaluation of revenues for given tariffs and installation rate
  • Modeling multiple resource lifetimes
  • Modeling of demand elasticity to tariffs
  • Interrelation between network growth and operational cost (OPEX)
  • Cost assignment as a function of utilization rates
  • Generation of standard financial results like Cash Flow, Profit &

Loss, Balance Sheet, NPV, IRR, etc.

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Activity Flow in STEM to evaluate migration alternatives:

NGN services and business planning Support tools: Business Support tools: Business

Incremental Demand for service Total Incremental Demand for Resources Incremental Resource Supply Production & Costing

  • f Resources

Resource Depreciation & Decommissioning Tariff and Revenue Service costs & charges Other costs (Admin/mkt) Tariff Policy Demand Parameters Replacement Of Resources Resources Costs (And trends) Input data Phase of calculation

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Type of STEM tool results

NGN services and business planning Support tools: Business Support tools: Business

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Type of STEM tool results

NGN services and business planning Support tools: Business Support tools: Business

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NGN services and business planning Support tools: Business Support tools: Business

2004 2006 2008 2010 2012

Year

400.000 800.000 1.200.000 1.600.000 2.000.000 2.400.000 2.800.000 3.200.000

Mbit/s

Bandwidth per service class of business customers

Data bandwidth Voice bandwidth

Example of multi-service bandwidth evolution in 3G

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Example of multi-service revenue evolution in 3G

NGN services and business planning Support tools: Business Support tools: Business

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Year

0e+07 4e+07 8e+07 12e+07 16e+07 20e+07 24e+07 28e+07

US$

Revenue per service type for consumer customers

Data services UMTS voice GSM voice

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NGN services and business planning Summary of Key Factors

  • Plan business and services first, later the network with

proven solutions.

  • Analyze new business chain from content to delivery
  • Take advantage from all economies of scale
  • Design financial performance with best business

practices: compare and optimise NPV.