About author

Karsten Lereuth is the BT Global Services President for Global Telecom Markets (GTM). Mr Lereuth has been actively involved in the development of the German Internet economy since the mid-Nineties. Prior to joining BT’s Global Services division, Mr Lereuth worked with Group 3G, the UMTS joint venture between Telefonica and Sonera, in Germany, where he was responsible for marketing, products and services. Previously, at UUNET, the Internet division of WorldCom, as a member of the EMEA management team, he served in several key functions, including managing director. Karsten Lereuth also worked for a Japanese hardware manufacturer as director of sales and marketing in Germany, and was the director of sales at an IT system house. Karsten Lereuth earned his university degree in Engineering.

Article abstract

Asia Pacific’s telcos must change their traditional business model radically and offer an always on, always connected, service that delivers a rich blend of content web access, video, music and voice. Few companies can afford the infrastructure this requires, so one of the most significant pieces of market de-regulation is the current move to have incumbent operators unbundle their access network and infrastructure. Separating the network from service provision puts incumbent operators and innovative new competitors on an equal footing.

Full Article

Telecommunications companies, the telcos, in the Asia Pacific region are facing the most challenging time in their history. Globally, the industry is seeing the end of the traditional industry compromise and faces the reality that all subscribers expect to be always on, and always connected to receive a rich blend of content embracing the web, video, music and, of course, voice. In a number of national instances, the telecom market in Asia leads the world in responding to this challenge and meeting these new expectations. However, those national PTTs, postal, telegraph, and telephone companies, that lag behind put themselves and indeed their own economies in serious danger of becoming uncompetitive. These companies must look to new partners to help meet this demand with something more imaginative than a big, fast, dumb pipe. The history of telecommunications is peppered with compromise. The most notable compromise - one that few consumers ever realised or were impacted by - was that the traditional telephone system was never designed to connect all subscribers at the same time. Statistics showed that only so many subscribers would be trying to make calls, be on calls or ending calls at any one time and the networks were dimensioned to attend the projected usage. At the time, most telephone companies were monopolies and so were at liberty to control the number of subscribers connected in their own market. From time to time, they met their colleagues from other countries to swap data on subscribers and so, in similar fashion, manage capacity on the international networks. The Internet assumes that everyone is permanently connected to everyone. This shifts the point of compromise from connections to bandwidth. To ensure the network had sufficient capacity during the days when the Internet was a layer forced upon the traditional telephone network, service providers limited connectivity by charging for usage time and providing customers with a derisory bandwidth of 56Kbps. In the initial days of the telecom industry, the strategic suppliers were the teams that physically connected the buildings (often part of the monopoly telco itself) and the switch vendors. In the last decade or so the strategic suppliers became the carriers who could provide a big fat dumb IP, Internet Protocol, pipe to connect the telco to the Internet, and the technology suppliers who boosted the bandwidth in the local loop to the multi-megabit levels necessary to deliver an acceptable user experience for voice, video and web applications. Given that broadband connectivity is now almost ubiquitous, especially over wireless networks, the industry is looking for a new type of strategic partner of which, again, there are two types: software companies that will enable service innovation; and consulting and services businesses that have hands-on experience bringing that innovation to life by means of a sustainable business model. The consumer telecom industry is now, more that ever, a software business. Software is used for network operations, business operations (e.g., billing and customer service) and user devices (cell phones, PDAs, laptops). IP has broadened the telco playing field to embrace digital content distribution, such as television. Furthermore, with the appearance of the ‘free’ VoIP suppliers, it has become clear to both consumers and their telco suppliers that the charging model for phone calls on a usage basis is coming to an end. This change applies equally to both fixed and wireless telcos, and offers new opportunity for those that can deliver a truly converged offering. With these new business models comes demand for new software capable of delivering, billing and managing the new applications. The Internet itself spawned the creative energy and ability to share ideas instantly. Coupled with an open software community, the Internet is driving much of the industry’s innovation. The net result is that a business that gains a competitive edge through a new release of software may not hold that advantage for long. In today’s market, it is not uncommon for new technologies to be commoditised before they reach the market. Without a premium for innovation, telcos struggle to find the returns that shareholders have come to expect from this sector. Wireless telcos can no longer rely on adding new subscribers as a means to hold off this threat to their revenues. While we are some way from saturation in the Asia Pacific wireless market, Gartner predicts that the compound annual growth rate, CAGR, for new subscribers in the region will halve from the 30.4 per cent levels between 2000 and 2004 to just under 15 per cent for the remainder of the decade. Meanwhile in the region, voice revenue CAGR will fall from 9.4 per cent to just 3.7 per cent, and data revenue CAGR from 56.4 per cent to 15.1 per cent. While any enterprise cannot fail to be optimistic when operating in a market promising 15 per cent growth and a population penetration of less that 37 per cent by 2009, it cannot rely on the same business models that brought about the original super high growth. Meanwhile, WTO 2006 is set to launch the process to liberalise those fixed line markets in the region that have hitherto enjoyed, or should we say endured, monopoly supply. It is over 20 years since BT was the first privatised national PTT; and its domestic market opened to competition, but market liberalisation remains work in progress. The current moves by incumbent operators to unbundle the access network and infrastructure, is the result of one of the most significant pieces of market de-regulation in the world. With the effective separation of network from service provision, incumbent retail and wholesale units face the domestic market on an equal footing to their competitors. Incumbent PTTs throughout the Asia region must now work towards the day when such an environment exists in their own markets, and look to new markets in which they can sell their products and services effectively. Strategic partner These challenges point toward who, alongside applications software providers, the second strategic supplier might be for the 21st Century Asia Pacific telco. This strategic partner must have the knowledge and capabilities to fast track a telco’s transformation from the traditional model to one that will succeed in the 21st Century. This 21st Century model is flexible, dynamic and opportunistic. These are not attributes readily found in an industry striving to fulfil its primary obligation to deliver a reliable, universal service at a fair price. Indeed this flexibility and dynamism must overlay and not replace the solid foundations of security, reliability, resilience and operational excellence that have been the hallmarks of the telecom industry. This tension between the requirement for flexibility and the necessity for solidity presents perhaps the biggest barrier to the development of the telecom industry in many countries in the Asia Pacific region and so, it can be argued, to their economic development and competitiveness. All things can be fixed given time and money; however, with the liberalisation of markets this year and the general downward trend in revenues across the industry, neither is in great supply. Therefore, telcos need a partner that can accelerate the process of transformation by sharing its knowledge of the new model, or supply tools proven to deliver the required new platform, or by providing operational expertise for driving the new platforms as efficiently as possible, or a combination of all of the above. The tools include platforms that can distribute multi-media content securely and efficiently, industrial strength VoIP platforms that offer a seamless migration path from traditional TDM solutions, and advanced customer service solutions that fully leverage the technology they are trying to support. The new platforms have to be proven to deliver in three areas: security, resilience and scalability. By proven, we mean they have delivered and probably are delivering platforms for today’s successful telco - the telco that has already made the transformation. In terms of penetration and migration to IP, the markets of Western Europe are the most likely source for this expertise. Nevertheless, there are few companies to choose from that have met the challenge of scale such as that confronted by Asian markets. Even fewer companies have put the sharing of their expertise at the heart of their range of propositions for the global market.