Fixed-Mobile Convergence: Ready or Not?

Business case remains up in the air Fixed mobile convergence (FMC) may be an idea whose time has finally come. Or not. The benefits to end users seem inarguable. The question is whether operators see benefits. Bell Mobility VP of corporate development Almis Ledas points out that we’ve been talking about FMC – and he would argue, doing it – for more than a decade. Find-me-follow-me services, including Bell’s, provided fixed mobile convergence of a sort starting as early as the mid-1990s, he says. But FMC today goes much further. Unlicensed Mobile Access (UMA), a standards-based technology (now part of the 3GPP standard), allows GSM/GPRS operators to hand off calls between cellular base stations and either Bluetooth or Wi-Fi (802.11) access points, without interrupting them. Calls are carried over the fixed wireless link to a broadband Internet connection and from there by VoIP. Other FMC solutions are available, though none standards-based. One popular "use case" for UMA is the busy executive getting a head start on the day by placing a business call on his mobile phone while sipping his morning coffee at home. As he walks out the door and jumps in his car, the call is handed off to the cellular network. He finishes the call and places another in the car – using a hands-free phone, and only where not prohibited by law, of course. When he arrives at the office, still talking, the call is seamlessly transferred to the office LAN. But the main appeal of UMA is probably to consumers, especially the younger demographic, who are already inclined to use their cell phones to make calls at home just because it’s more convenient. With UMA, they’ll get better quality of service at home and presumably won’t have to pay as much for calls because those calls will now be carried over the Internet rather than the cellular network. FMC will make it easier for mobile customers to jettison their wireline service and enjoy the convenience of one phone that works everywhere – and one phone bill. Far-Reaching ImplicationsAll of this has possibly far-reaching implications not just for mobile operators, but also fixed line service providers, especially VoIP operators such as Vonage Holdings Corp. Of the three national mobile carriers in Canada, Telus Corp. was least guarded on the subject of fixed mobile convergence. "Telus hasn’t made any public announcements," notes Chris Langdon, the company’s VP of wireless solutions. "But obviously we’re quite interested in this space. We already offer fixed wireless services at 1,000 hotspot sites. And we do have a high-speed CDMA network with broadband-like speeds that we launched in six centres last year. We see some real synergies." Rogers Communications Inc., one of the carriers that helped develop the UMA specification, has according to several sources announced a UMA field trial, but the company would not confirm this or provide details. A spokesperson said only that there was "nothing yet in terms of official progress to announce or communicate." Ledas is guarded about Bell’s interest and intentions. He will only say that "Bell aims to meet customer requirements as they evolve" and that it’s "dedicated to staying at the forefront of these solutions." Ledas is also inclined to downplay the importance of FMC. "It represents an incremental improvement over what’s out there now, not a dramatically new market," he argues. Still, some small momentum is gathering around UMA. Recent introductions of UMA-compliant dual-mode cellular/Wi-Fi phones – the Nokia 6136, launched at the 3GSM World Congress 2006 in Barcelona in February, for example – and the ongoing experiment of British Telecom’s UMA-based BT Fusion service have shone a brighter spotlight on FMC recently, and UMA in particular. BT Fusion launched commercially in the fall of 2005. It started off using Bluetooth access points but will reportedly switch later to Wi-Fi. According to UK-based JupiterResearch senior analyst Ian Fogg, Fusion had attracted over 30,000 subscribers by February – not a big number in the larger scheme of things, but an indication of some consumer interest, he says. BT is now beginning to market Fusion to the small-medium enterprise (SME) market. UMA does not play well in the large enterprise space because it cannot be integrated with corporate PBXs and it can’t hand off calls between Wi-Fi access points, the Yankee Group says. But in a November 2005 Decision Note, "Residential Fixed-Mobile Convergence Heats Up But SME Is Next Frontier," the consulting firm argues that in small businesses and small offices, where PBX integration is less important and a single access point may cover the entire office, UMA-style fixed mobile convergence does make sense. France Telecom, meanwhile, was slated to launch a Fusion-like service in 2006 using UMA-compatible Homezone technology jointly developed with Microsoft Corp. Finnish operator Saunalahti announced in February that it was ready to launch a commercial UMA service – as soon as there were enough dual-mode UMA devices available. Swedish operator TeliaSonera has been trialing UMA-based technology since early last summer and is expected to begin a three-year rollout in 2006 that will eventually encompass Nordic countries and Baltic states. In North America, Cingular and, as noted, Rogers have announced trials. But the momentum is small, and however appealing UMA may be to end users, it is by no means clear it will be widely adopted by mobile or fixed operators. "I don’t think UMA is at the forefront of either North American or European mobile operators’ strategies," says Yankee Group’s UK-based senior analyst for mobile wireless, Nick McQuire, a Canadian. "It’s one option they have for going after the fixed line substitution business, but it’s one of many." Adoption BarriersThere are also barriers to adoption, McQuire points out in the Yankee Group Decision Note. For one thing, UMA doesn’t support 3G standards and it’s not based on the IP Multimedia Subsystem (IMS) core networking standards on which most operators – at least in Europe – are basing their migration strategies. Many in fact see UMA as a stop-gap measure at best until they deploy IMS-based systems. This may be less of a concern for some North American operators that do not have as aggressive 3G strategies, McQuire notes. UMA requires operators to deploy customer premises equipment – a network controller that manages signaling and routing – and that could overburden their customer service operations, he speculates. UMA is also almost exclusively a voice technology; it doesn’t enable transfer of multimedia data. Another concern, at least in the short term, as evidenced by the recent Saunalahti announcement, is that UMA-capable handsets are not widely available and there is little selection. "We do not expect to see a mass array of devices being available in the next three, four or even five years," McQuire says. Handset availability, especially in Europe, is a critical factor, he adds. Consumers are very selective and operators offer carefully targeted models to appeal to many different segments. For CDMA operators, who can’t use UMA, there are as yet no immediately deployable standards-based solutions. One barrier, Ledas says, will be just getting dual-mode phone prices down to the current level of mass market single-mode phones. This can only be achieved by first establishing standards, he adds. Getting handset prices down to mass-market levels will likely be a problem for UMA as well given the current dearth of competition. Operators will weigh a number of factors in deciding whether to move ahead with UMA or similar FMC solutions. In North America, where in-building cellular coverage is generally poor, Yankee Group expects that at least some operators will see UMA as a worthwhile investment. It will allow them to provide better indoor coverage in support of consumers interested in fixed wireline substitution. In Europe, on the other hand, where in-building coverage is generally much better, this may be less of an incentive, although McQuire points out in the Yankee Group Decision Note that a Nokia Corp. survey of European end users last year suggested that even they would welcome improved coverage indoors. Bell and Telus both somewhat tentatively express interest in the in-building coverage improvements FMC could deliver. "It will probably give the customer an overall better network experience than using a wireless phone alone," Ledas concedes. Telus’ Langdon says, "Certainly we see as an opportunity to enhance our service, but there are multiple technical challenges associated with it." Chief among them is the fact that operators will not have complete control of their network infrastructure if it involves Wi-Fi routers sitting on a subscriber’s premises, possibly supplied by the customer. That loss of control could increase support and other operational costs, Langdon says. What Do Carriers Get?A more fundamental question for mobile operators is whether they will see a net bottom-line benefit from FMC. JupiterResearch’s Fogg has doubts. "Certainly the received wisdom is that mobile operators have most to gain," he says. "But maybe they’ve actually got more to lose." He notes that it wasn’t a mobile carrier that was first to market with a UMA-based service. It was BT. Although it has a mobile arm, it is primarily a wireline carrier. FMC may help mobile carriers convince subscribers to cut the wire to their wireline providers. And they stand to gain additional revenue and possibly reduce churn as a result, but they may also lose per-minute revenue because subscribers will now be making lower-priced VoIP calls from home and office instead of cell calls. If that isn’t enough to give mobile operators pause, FMC also raises the spectre of subscribers using dual-mode cellular/Wi-Fi phones to place cheaper VoIP calls even when they’re mobile, simply by delaying making calls until they’re within range of a Wi-Fi hotspot or an open Wi-Fi network. Kineto Wireless, a key UMA technology provider, and Boingo Wireless Inc., a Wi-Fi hotspot aggregator, recently announced they will work together to ensure that UMA-enabled Windows Mobile 5-based handsets work at Boingo’s 30,000 Wi-Fi sites. Will mobile operators welcome such developments? UK-based telecom consultant Martin Geddes, director of Telepocalypse Ltd., doesn’t see UMA as a technology with much future, but concedes that operators in less built-up areas in North America may see another benefit. For those operators, backhaul is a significant part of their cost structure. FMC, he points out, means that subscribers in effect volunteer to carry some of the backhaul over their broadband Internet connections. "If you’re paying oodles to Qwest or Tower to carry backhaul and the customer volunteers to carry it for you, you’ll probably say, ‘Yippee!’ It’ll find its niche," Geddes says of UMA. "As long as the operators understand it’s a niche thing, it’s not a strategic salvation." So mobile operators must very carefully analyze a variety of factors – the capital and operational costs of deploying a UMA or similar solution and the very real possibility of revenue erosion, balanced against the benefits of accelerating the trend to fixed wireline substitution and savings on backhaul. And then they have to consider how FMC fits in with near or medium-term plans for upgrading their networks. "It will come down to each different operator benchmarking utility against other available options," McQuire says. One of those options, he notes, is to use a proprietary pico-cell solution such as those from ip.access and UbiquiSys. They allow mobile operators to sell residential or SME customers fairly low-cost (under $400) base stations, possibly bundled with desktop phone sets, that extend cellular network coverage into customer premises. It solves the indoor coverage problem and gives customers the option of switching to wireless only for telephony. As with FMC solutions, operators could still differentiate calls originating on the customer premises and charge for them differently to encourage wireline substitution. Pure fixed wireline operators, perhaps especially VoIP providers such as Vonage, may have the most to lose from FMC. Or, again, maybe not. Some commentators have suggested that UMA services from mobile operators spell ultimate doom for Vonage and even Skype. Why, they argue, would customers stick with Vonage plus a mobile service when they could get both low-cost VoIP calling from home or office and mobile calling – with one phone and one bill, all from a better-established, more trusted brand? Why indeed? Vonage, interestingly, declined to comment on FMC for this article. McQuire and others, however, suggest that broadband VoIP operators could in fact offer FMC services themselves, if they wanted to set up as mobile virtual network operators (MVNOs), reselling capacity leased from licensed carriers. It would be a way for them to defend against integrated operators like Bell and Telus that, even without FMC, can already offer integrated billing for mobile and fixed wireline services. Another OptionBut maybe there’s an easier way. Despite the presumed appeal of being able to continue a call while roaming from one network domain to another – the businessman walking out of his house, getting into the car and keeping the same call going – how crucial, really, is that capability? McQuire believes it’s far from being the most important aspect of FMC. The main appeals of FMC to consumers, he says, are, on the one hand, its simplicity – customers don’t have to think about which domain they’re in – and on the other hand, pricing. "Users are going to BT Fusion because they’re getting very, very cheap minutes in the home at a quality of service they couldn’t get before," McQuire says. If seamless roaming between network domains is not essential, another option is for mobile carriers that don’t have a wireline arm to partner with broadband VoIP providers and offer dual-mode Wi-Fi/cellular phones and unified billing. Some customers might balk at having to fiddle with handsets to switch from Wi-Fi to mobile mode and interrupt calls to do it, McQuire cautions. But this could be an even lower-cost alternative to FMC for mobile operators heading towards IMS-based networks in 10 years. What ultimately will happen? It’s way too early to call. We’re inclined to agree with Bell’s Ledas. "I think FMC will come," he says, "but it’s not going to burst on scene and take the world by storm."

Fixed-Mobile Convergence: Ready or Not?

News | 05/01/2006 4:00 am EDT

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