Fixed-mobile convergence: boon or bane for carriers?

The convergence between fixed and mobile telecom services begins to pick up steam as network equipment vendors start showing off technology that lets mobile phone users jump from cell phone networks to Wi-Fi networks and vice-versa. Industry observers say the advancement could affect the way mobile service providers go about their business. Avaya Inc., Cisco Systems Inc., Motorola Inc., Nokia Corp. and UTStarcom Inc. are among the equipment makers working on the technology. Sometimes called fixed-mobile convergence (FMC), it brings local wireless and wide-area wireless systems closer together than they have ever been. Avaya demonstrated the technology at its analyst conference last fall. The user could continue a conversation on the supplied Motorola CN620 handset even as he moved out of Wi-Fi range and onto the cellular network. Cisco also demonstrated the technology at its analyst conference in December, using a Hewlett-Packard Co. handset sporting technology from Ottawa’s SIPquest Inc. But the handoff was not seamless. Nonetheless, these early examples point to a shift in wireless networking. The Yankee Group predicts that FMC developments over the next year or two will help integrate wireless into business communication systems. "Forces will encourage FMC in the large enterprise segment in the next five years, creating new service models around high-value managed telephony services," the IT advisory firm said in December. Some businesses are looking forward to FMC. Kia Canada, for instance, could use the technology to support users who rely on their cell phones heavily. Donald Knowles, the car manufacturer’s MIS manager, said executives from Korea often discover that their handsets simply can’t connect to the cell network when they’re inside Kia’s Mississauga ON office building. A supplemental Wi-Fi link to take over where the cell network doesn’t reach would satisfy the visitors’ need for connectivity. "If we could combine the two technologies, it would save a lot of aggravation," Knowles said. Fritz Ollom, Avaya’s senior marketing manager, explained how his company’s FMC implementation works. Its main components are the handset, the Wi-Fi connection, a GSM network, a PBX, and software that brings them all together. The handset and the software construct a kind of conference call between the various components. As the phone moves to the edge of Wi-Fi range, it sends a message to the PBX, informing the central unit that local connectivity is about to run out. Then the PBX places a call to the phone’s cell radio, linking to the handset’s wide-area side. Finally the PBX conferences the cell call with the local call and drops the Wi-Fi connection in time for the handset, and the conversation occurring on it, to continue over the cell network. Brian Sharwood, a telecom industry analyst at the SeaBoard Group in Toronto, says the FMC iterations he has witnessed are far from perfect. Handoffs are clunky, and the systems only provide genuine two-way jumps (Wi-Fi to cell as well as cell to Wi-Fi) when carriers get involved. But there are no guarantees that service providers will want to play a part in the FMC game. Other industry observers say wireless carriers might lose valuable airtime revenues if users employ Wi-Fi instead of cell links for communication. And still others say wireless providers won’t be the first to sell FMC at all. Wireline providers will start the race: FMC sold to businesses could mitigate the persistent loss of legacy voice revenue that wireline carriers face these days. But Sharwood questions the argument that wireless carriers might lose airtime revenue. "Why would you have to change your per-minute billing?" he asks, pointing out that wireless carriers could use FMC as a cost-cutting measure. Customers could be moved onto the fixed, less-expensive Wi-Fi network, saving the carriers money in mobile network operating costs. Many FMC developments focus on GSM networks. As Rogers Communications Inc. is Canada’s only national GSM service provider, all eyes are on this company for FMC’s first steps here. Rogers’ FMC expert could not be reached for comment before publication. The company is at the forefront of this convergence effort, however, as it is one of the founding members of the Fixed-Mobile Convergence Alliance (FMCA; RoW, Aug. 24/05). Formed about 18 months ago by Swisscom, Brazil Telecom, British Telecom, Korea Telecom, Japan’s NTT Communications and Rogers, the group aims to make it easier for equipment vendors and service providers to work together on convergence. Since its inception in June 2004, membership has grown to nearly two dozen companies. Bell Canada’s representatives won’t discuss potential future technology endeavours so close to the firm’s next financial statement for investors, scheduled for February 1. Telus’ representatives say the firm has nothing to add to the FMC debate just now. FMC might not be ready for prime time. It has trouble ensuring text messages follow the user across the network connections. Handoffs are not smooth. The phones require fat, powerful batteries to juice up the on-board Wi-Fi radios, and that spells heavy handsets. But as network vendors continue their R&D efforts and business telecom buyers hear more about the technology, it seems FMC will affect carriers and their customers down the road. Despite the nascent stage of FMC, growth will come, both in terms of users and revenue, according to IDC. A November 2005 white paper, done for the FMCA, notes that there will be a considerable number of users generating substantial revenue by 2010. At the end of last year, the research firm projected that there would be approximately 204,000 users, but that would jump to more than 45 million in the next five years (see chart on page below for more details.

Fixed-mobile convergence: boon or bane for carriers?

News | January 25, 2006

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