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FMC 2.0: The New Norm in Telco Business Transformation


News provided by

Huawei

12 Oct, 2015, 14:58 GMT

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Commentary from Zha Jun, President of Huawei Fixed Network Product Line

SHENZHEN, China, Oct. 12, 2015 /PRNewswire/ -- Four years ago, international business consultants Roland Berger inventively categorized telecom carriers as Access-, Access+, and OTT Players in Telco 2020 report, and predicted that less than 9 percent of telcos worldwide could transform into OTT Players. Subsequently, heated internal discussions arose within most carriers. They agreed it was high time to transform their business models, yet they were unsure of which direction to proceed. Three years ago, carriers were shocked once again when noticing that Facebook, Amazon, and Netflix were moving quickly to erode their voice, SMS, and PayTV services. Adding to their concern, carriers found that consumers gave high praise to the real-time and on-demand features of OTT services. Carriers then realized that they could no longer delay business transformation. By the end of 2012, faced with carriers' questions on how to handle cross-border competition and how to capture new market opportunities, almost all telecom consulting companies responded with the same answer: service bundling.

It was also between the end of 2012 and the middle of 2014 almost all of the top 50 global telecom operators began to announce business transformation strategies. The tide of transformation started with Telefonica and quickly swept around the world. In Q4 of 2012, Telefonica released the first 5-play Fusion service (fixed voice + fixed broadband + mobile voice + mobile data + video) in Spain. The following year, the services showed impressive business success by not only expanding fixed broadband (FBB) market share and ARPU, but also by posting the best-ever numbers in mobile broadband (MBB). More importantly, Telefonica became fully aware of how video, FBB, and MBB services complement each other, and why it is important to maintain sustainable development of broadband, especially ultra-broadband, services; Video services are no longer just a value-added service for improving customer stickiness, but become another fundamental service, after voice and SMS. So in 2014, Telefonica formally announced its plan to transform into a video service company. The Fusion services offered by Telefonica are a typical example of service bundling strategy. The success of this strategy relies on Telefonica's capability to provide a full range of services: FBB, MBB, and content (video) services.

Telefonica's move to become a full-service provider is not a unique case. After the success of Fusion services became apparent, more and more carriers moved to provide a full complement of services to gain a competitive edge over other carriers or OTT service providers and get ahead of changing government regulations. In 2013, Vodafone, another leading global carrier, launched its Unified Services Strategy. In the past two years, Vodafone has focused on strengthening FBB services and fixed network infrastructure. Subsequently, MTN, the biggest transnational carrier in Africa, and Digicel, a leading mobile carrier in Central America, declared "Fiber+Radio+TV" as their next three-year core strategy, which is exactly the core of full-service strategy. Same story has been repeated in developed telecom markets like Japan and South Korea as well. In South Korea, three mobile carriers and five fixed carriers merged into three full-service carriers, seemingly overnight. After the success of KDDI's "au Smart" convergent services, the Japanese government allowed NTT to bundle fixed and mobile services. Collaborative development of FBB and MBB, and supplementing and strengthening of fixed network infrastructure are not just choices, today that is the core strategy of global carriers. Some carriers in emerging markets have even put forward the notion of "No Fiber, No Future." At the same time, 4K ultra-HD video technology and the rapid growth of 4K ultra-HD video services have also driven and optimized the full-service strategy.

In Q2 of 2014, improvements in related standards, coding technology, and content sources, as well as lower display costs, development of the 4K industry suddenly accelerated. That year several major European carriers in succession announced their intent to use 4K technology in live broadcasts of the Olympic Games and UEFA European Championship in 2016. Netflix then announced that entry-level 4K video services were being made available in North America and Europe. British Telecom (BT) and China Telecom officially publicized their commercial schedule for deploying 4K services. At the Ultra Broadband Forum (UBBF) in 2014, Huawei proposed marking 2014 as the first year of the 4K era. Since then, 4K technology and applications have attracted much attention from across the industry.

Prior to 4K, no service over ultra broadband could both meet end user requirements and also utilize network capabilities while delivering commercial benefits to carriers. 4K turned out to be a perfect match for ultra broadband. The trial use at BT is a good example: The provisioning of HD and 4K ultra-HD BT Sport services offered unprecedented development of super-fast broadband (SFBB) services. The number of broadband subscribers increased rapidly as did revenue from TV and fixed broadband, which was mission impossible for many quarters of operation previously. A senior director from BT had the following to say during a strategic summit:

"4K is the best fresh meat for ultra broadband, and only 4K can bring out the hidden value of ultra-broadband networks."

From the consumer perspective, 4K brings better experience, for which consumers are willing to pay. The combination of 4K and ultra broadband benefits consumers, carriers, and 4K content providers, and helps create a healthy commercial ecosystem and cycle for ultra broadband. At UBBF in 2015, after two days of discussion with global operators, we came to the consensus that ultra broadband networks must be constructed and operated toward providing the best 4K service experience.

Basic 4K video services require 30M to 50M in bandwidth throughput. As the cost of terminals keeps falling and the personalized requirements of users increases, each family is expected to ultimately require multiple 4K terminals. Therefore, 100M or even 1000M will become a basic requirement for residential broadband users in the new era. 4K video services release the real value of ultra broadband, helping find the acting point of user requirements and innovation focus, and also make fixed broadband irreplaceable.

After realizing the importance of video services and witnessing the new opportunities 4K technology brings, more than 60 carriers have announced intent to roll video services into their basic service offerings. No matter the Fiber+Radio+TV infrastructure development strategy or FBB+MBB+4K business development strategy, the essence is collaboration between fixed and mobile networks and regarding video services as fundamental services. With the elements clearly in place, these transformations are cumulatively referred to as the FMC 2.0 strategy (FBB+MBB+Content). The FBB+MBB full-service operation makes fixed broadband/network essential as end users want to move seamlessly across both network types, while 4K content makes the fixed broadband/network irreplaceable. Facing intensifying competition and new challenges while noting the lucrative opportunities, carriers realize FMC 2.0 is not only the crucial strategy in business transformation, but also a prerequisite to implementing digital operations. Based on the development status of telecom carriers around the world, FMC 2.0 is truly becoming the new norm in carrier business transformations.

About Huawei
Huawei is a leading global information and communications technology (ICT) solutions provider. Our aim is to build a better connected world, acting as a responsible corporate citizen, innovative enabler for the information society, and collaborative contributor to the industry. Driven by customer-centric innovation and open partnerships, Huawei has established an end-to-end ICT solutions portfolio that gives customers competitive advantages in telecom and enterprise networks, devices and cloud computing. Huawei's 170,000 employees worldwide are committed to creating maximum value for telecom operators, enterprises and consumers. Our innovative ICT solutions, products and services are used in more than 170 countries and regions, serving over one-third of the world's population. Founded in 1987, Huawei is a private company fully owned by its employees.

For more information, please visit Huawei online at www.huawei.com or follow us on:

http://www.linkedin.com/company/Huawei
http://www.twitter.com/Huawei
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