Carriers' evolution to integrated service providers

Sep 24, 2004 12:00 PM, by Goli Ameri

Wireless service providers do not have the expertise to transform themselves overnight into an integrated service provider or a data company, and maybe it is as a result of this fear that they believe they need to control the entire value chain and not open up their networks. Wireless carriers have not let go of the walled garden approach in their cellular services since they are not ready for the software explosion that will ensue once they open the floodgates.

However, full access to the Internet through Wi-Fi will open these gates whether carriers are ready or not. Wireless carriers have tremendous skill in network operations, but the transformation of what Nortel dubs a "voice-utility"™ to an integrated service provider involves developing the necessary expertise in offering data services to the enterprise as well as developing interesting content for consumers and establishing partnerships and business relationships with third party developers and integrators who can provide access to these new markets and new subscribers.

A year-end 2002 research by IBM found that carriers have to abandon the idea that they can be the sole provider of data services to businesses. Sixty percent of IT and telecom directors maintained that they would look to IT companies to deliver enterprise mobile data services, whereas only 10% indicated that they would look to mobile operators. Of course, part of IBM’s study is self-serving since its Global Services subsidiary is a huge moneymaking engine for the company. Nevertheless, mobile carriers require partnerships and joint ventures to be able to deliver data services both to enterprises and to consumers.

If wireless carriers do not offer these services, then others are lining up to conquer the wireless data value chain. After conducting global primary research which showed that there is pent-up demand in enterprises for secure wireless data access and the willingness to pay for such services, Lucent announced its Secure Mobile Data Services for Enterprises initiative along with Proxim, HP, iPass, ipUnplugged and Sierra Wireless. The group plans on offering VPNs for 3G networks as well as 3G/Wi-Fi integration.

Microsoft is also turning out to be a formidable competitor to the wireless carriers, despite the myriad of partnerships and alliances it has announced with wireless carriers. Microsoft has indicated that that it “fully expects phones to overtake PCs as the way users will access the Internet,” and if that is indeed the case, the company’s entry into the wireless arena would be a natural step and in line with its historical modus operandi. Microsoft has already purchased a 5% stake in Korea Telecom (which might be increased to 10%), and is thus gaining experience with both state-of-the-art cellular and Wi-Fi services.

In an effort to capture the wireless enterprise market, Microsoft has formed partnerships with systems integrators such as HP Services, Accenture, Cap Gemini Ernst & Young and others, in an initiative known as Microsoft Mobility Workplace. The partnership involves jointly developing and marketing mobile deployments to businesses to simplify the complicated process of implementing wireless technologies from various vendors across businesses, bringing together planning, deployment, security, device choice, and customer service.

The first product issued under the “Mobility Workplace” brand is a Windows-based messaging service called Mobile Messaging, which will run over Microsoft-built Pocket PCs and Smartphones. In late 2002, the company also acquired location-based services company Vicinity to provide location technology to a variety of products and it owns high-value content in the format of MS-NBC, MSN and WebTV. So in effect, Microsoft has slowly evolved into an integrated service provider to the enterprise market and all it needs to do now is establish a relationship with a wireless wholesaler, become an MVNO and offer cellular services.

Telecom providers have historically had a difficult time offering corporate IT services mainly due to the differences in business models between the two sectors. Qwest who was one of the most aggressive carriers in this area and made a huge splash in offering ASP services, collocation and other type of Internet services recently sold its ASP business to Corio. The global PTTs as well as the major U.S. wireless carriers are the offspring of the old-line fixed line service providers—AT&T Wireless, Cingular (SBC & BellSouth), Verizon Wireless, Sprint PCS—all having a laser-sharp focus on the network and bound to the “values” of “the mother ship”: sanctity of their brand name tied to the delivery of high QoS and 99.999% network availability. The risk of sullying the brand name with sub-par service is also one of the reasons why it took the RBOCs so long to become an ISP and offer Internet access.

IT organizations on the other hand are seasoned entities that learned a long time ago that flawless service availability is not a practical or feasible notion in the IT world. To become Integrated Service Providers, and to play effectively in the corporate IT space while maintaining their high standards, wireless carriers need to take two steps simultaneously:

1. Partner with companies who have expertise in dealing with the IT environment, like the larger systems integrators who have a good understanding of IT security needs and corporate mobility, or with their old-time telecom vendors who have experience building high-availability applications.

2. Distance themselves from the Five Nines mentality of their parent companies and face the reality that the 99.999% availability became a non-issue with the advent of their own cellular service and dropped calls and low service quality. Users have become sufficiently mature to understand that wireless by nature is unpredictable and they will accept the service as long as it works most of the time.

For more information on other areas of the WLAN market, please refer to eTinium’s study Seamless Mobility: The Marriage of 3G and Wi-Fi.

Goli Ameri is the President of eTinium, Inc., a telecom consulting and market research company specializing in wireless and switching technologies.  She can be reached at gameri@etinium.net or (503) 968-8437