Issue: 37/08

User Views

September 24, 2008

One of the interesting topics of discussion at ATUG inaugural Annual Enterprise User conference held in conjunction with EVUA, a user group for Multi National corporations with global network interests, was the changing nature of business’ telecommunications needs. INTUG and member organisations like CMA have formal processes for updating end user priorities. Both reports were discussed at the conference:

Communications Managers Association – UK

Key Results – 2007 Communications Survey of 300 Enterprise members:

•	More than half say spending is going up on IP, Mobile and Applications
•	Convergence is well underway especially in larger organisations
•	Workforce mobility is an established and growing trend
•	Integrating and upgrading communications is the single biggest challenge for enterprise communications & networks functions
•	Customer satisfaction remains an issue as overall levels of satisfaction decline for ‘value for money’
•	Unified communications is being deployed and conferencing is one of the main elements
•	Fixed-mobile convergence is being addressed although cautiously
•	Next generation network services see slow uptake with BT regarded as the most important company in this space
•	Almost all say Ethernet services are a viable alternative to leased lines
•	Sustainability and environmental focus is on reducing power consumption and making the best use of technology

INTUG - The Telecommunications needs of Businesses

The business world has changed dramatically in the last ten years. This has changed the business priorities for international communications services. In addition to expanding geographic reach through globalisation, there has been consolidation within companies, within industries, and within regions, Acquisitions have led to larger multinational companies (MNCs), inheriting legacy communications infrastructure built nationally and needing integration of different software architectures and different communications technologies. Consolidation has led to outsourcing and off-shoring of financial processing, HR, ICT and other support functions. Telecommunication support has been beyond the resource capabilities of many large MNCs, who have chosen to outsource their entire telecommunications activities. How can outsourcers integrate these inherited jigsaws of networks efficiently and effectively in the current environment, and provide quality MNC services at competitive cost?

Businesses converge, collaborate, go on-line and fast connect

Companies in many industries, like finance and engineering, have introduced on-line in-plants within their customer and supplier locations, requiring access to corporate applications and data bases.

Often these are required at short notice for short duration, but with equally demanding bandwidth requirements. Lead times impossible ten years ago are demanded, and if not available result in wireless access, despite the higher cost. None of these applications and options for connectivity would be possible with monopoly one-size-fits-all state funded telecommunications.

The Internet became a serious business tool for many MNCs ten years ago, as this offered a new channel for business growth. In the so-called “dot.com boom”, businesses “went on-line”, linking their customer-facing applications to the Internet, and diverting a growing proportion of advertising revenues to web businesses, using communications providers they had not considered before.

Fast Moving Consumer Goods companies established web communities around leading brands. Supermarket retailers offered on-line shopping. Banks introduced more accounts that were only available on-line.

Explosion of the use of applications like eBay, with supporting payment mechanisms like Pay Pal, have involved individuals and businesses in transactions that are dependent on the Internet and high speed access.

Ticket sales for most public events have migrated to the Internet. The BBC iPlayer in the UK, social networking sites like Facebook, and virtual worlds like Second Life, all drove up demand for bandwidth, and not just for residential consumers. Business use of these tools has begun to grow, for example in recruiting, and business grade communications are needed. These would not have appeared without the stimulus given to the market by open competition.

Business needs and residential consumer needs are not the same

But MNCs’ telecommunications do differ from those of residential consumers.
Most obviously, their needs are transnational, not just national and need to be
interoperable, not standalone. Their traffic on the access circuit is symmetric and asymmetric (in both directions). Businesses need flexibility between fixed and mobile/wireless for voice, video and data access. Locations include City Business Districts, rural, urban and suburban sites. Pricing needs to be constructed in a way which reflects business volume not packets or bytes.

Businesses need to be able to integrate requirements horizontally, to leverage economy of scale across multiple connections, and vertically to include added value services and content. Quality of service and resilience requirements are much more demanding for business critical services. Access to content, services and applications must be network neutral. Contract value needs to be transferable between different countries, locations and services.

One car manufacturer, needing to be able to adjust communications volumes to relocation of dealerships on an international basis throughout the EU, as national markets prosper or decline at different rates, currently has over 800 telecommunications contracts to meet its needs. Why is this? What has happened to the vision of a single telecommunications market?

Traffic patterns and message sizes vary widely, often associated with the inclusion of very high volume, very small messages for machine-to-machine applications, which will grow with the many extra addresses enabled by IPv6.

These can use wireless communications, including via text messages, but only if tariffs are appropriate. RFID applications have the potential to produce enormous volumes of small messages, but will only occur if unrestricted by inappropriate and/or inflexible tariff structures. Live video feedback is now a widespread technology, including for workplace “presence” collaboration. As can be seen, business user needs differ materially from end consumers.

The Internet replaces “Private Networks”

In the late 1990s, Internet Service Providers (ISPs) began to be legitimate telecommunications suppliers, as businesses replaced international leased line networks with IP tunnelling in global VPNs. Access circuits, however, were often provided on the same asymmetric basis as for domestic residential consumers, with a higher speed downstream link and a much slower uplink. Contention ratios varied. This is not necessarily appropriate for business use.

Security was a concern, and quality of service became more of an issue, but by paying for a local link to an ISP at each of the main corporate locations, a global VPN could be built at much lower cost than leased line networks, or packet switching and frame relay networks, which had been built on them.
For some really big volume business critical international applications and for those centred in metropolitan areas, MPLS private networks are still used.

So applications that ran over Internet-based networks tended to exclude some mainstream transaction processing systems, which drove the core business.
The Internet did, however, cover office applications, email, collaboration tools and intranets. This meant real competition for international service providers.
Businesses also converged their voice and data networks and international VPNs replaced private international and domestic voice networks. This would only have been possible with the 1998 liberalisation, which was a key step.

Infrastructure-based competition and service-based competition

The new competitive regime has also helped encourage new entrants to invest in fibre infrastructure, and to construct network offerings based on use of incumbent infrastructure for the last mile access.

Providers owning infrastructure in multiple metropolitan areas have been able to link these to offer European networks to customers. Civil engineering work continues to remind us of “what lies beneath” in terms of competition.

System and network integrators have managed to construct contracts where individual network links are bid for competitively by incumbents, and by other infrastructure providers, and sometimes rebid as frequently every two years.

One key step to success lay in obtaining access services equivalent to those previously provided to the customer by the local incumbent. The introduction of Local Loop Unbundling (LLU) was a key regulatory step in enabling this. But the basis on which unbundled local loops is offered is not equivalent to that provided by incumbents to their own wholesale and retail operations, and to customers. Prices are higher, lead times longer, quality of service inferior, and management and billing information cannot be integrated as effectively.
This created tension within the MNC organisations, whose local operations observed a decline in service quality at apparently higher cost. Some sites could not obtain access from the outsourcer, leading to fragmented business processes, in which the legacy arrangement continued for some sites, whilst the remainder migrated to the new process. The two environments had to be linked, making transaction and information consolidation more difficult.

MNCs increasingly connect to industry networks serving many companies in the same line of business. MNCs need on-line communication access to their suppliers and customers. Interoperability between international networks used by different companies becomes a basic entry qualification for business in such industries. Cost penalties from use of multiple suppliers become a hurdle to trade in products and services. And yet, this basic requirement for interoperability between international network operators remains an area of market failure today, despite the opening up of the EU market in 1998.


Work in Progress

International Roaming Charges

One contentious aspect of the regulatory environment in Europe throughout the first ten years of deregulation has been international roaming charges. Since market analysis to discover significant market power is confined to national markets, this has not been able to deal with lack of competition in international roaming - for voice, text and data.

INTUG’s campaign on behalf of business users began in 1998, by exposing the huge differentials and inconsistencies between tariffs for national mobile calls and roaming charges. This tax on international business continued for voice until 2007, when the European Commission finally introduced regulation forcing prices down. There are now good prospects for similar action on text and data roaming, and on Mobile Termination Rates which also distort logic for economics, and inhibit business applications over mobile.

Seamless networking or a fragment patchwork of national networks?

2008 sees the start of the second decade of supposedly full competition for telecommunications services in Europe. It is appropriate that the Regulatory Framework is reviewed at this point to see what more needs to be done to build on the progress and the many successes of the first decade. This must respond to growing demands from business users and residential consumers for ever-increasing fixed and wireless bandwidth.

Next Generation Access

The review comes as most Member State incumbents begin to introduce Next Generation Networks (NGNs) and Next Generation Access (NGAs). These leverage legacy copper investment and introduce fibre-based infrastructure.
Sometimes this has radically different topology, that could disconnect the LLU connectivity of competitive operators. It is essential that alternative means of sharing infrastructure are made available, such as Ethernet or Bitstream.

It is critical that the roll out of NGN/NGA does not destroy the competition and choice, which has brought material benefits. Consistent regulation is vital, which avoids foreclosure of competition and encourages efficient investment. Technology-specific regulation, or solutions like duct sharing and geographic segmentation, must not be seen as panacea solutions.

Management of spectrum to balance efficiency with service neutrality, and competition with innovation is a challenge for regulators in the wireless world. Management of access to encourage a thriving combination of service-based and infrastructure-based competition is a challenge in fixed communications. Doing this within principles of service neutrality, content neutrality, network neutrality and technology neutrality makes both challenges even greater.

The bigger picture is the enabling power of telecommunications

But the prize for getting it right is, perhaps, even greater than the prize which the 1998 decision sought to achieve. Enabling the business community, whose supply chain represents 35% of the EU economy, to generate growth and improved productivity, through innovation and greater efficiency in business processes, must be a priority goal of telecommunications regulation.The goal is not to optimise the telecommunications industry alone, or even a subset of it, but to enable optimisation of the Single European Market.