The hard reality behind 3G services

Software executive Mark Fowlie examines the chances for making money given the incredible costs associated with installing these next-generation networks.

4 min read
The telecommunications industry is dominated today by talk and speculation surrounding next-generation services for mobile networks.

Mobile operators are confident in that future, while investors and analysts aren't as sure. One thing that is indisputable: The manner in which we use mobile devices today will dramatically change in the next several years. Who will emerge victorious and who will go belly up will be determined during this time as well.

First, let's define next-generation mobile services, or what is known as 3G. In this world, subscribers will have the ability to send and receive e-mail, download songs or movie trailers, send a picture to a friend's mobile device, or purchase goods and services over a mobile phone.

It all sounds great--but there are a number of skeptics who wonder about the reality of 3G services and the ability for carriers to make money given the incredible costs associated with installing these new networks.

From the sheer amount of cash invested, it is somewhat understandable that investors would be skeptical of the carriers' ability to recoup the billions of dollars that have already been spent on spectrum and the development of new mobile networks. Operators that are working on trials of 3G networks do not anticipate seeing any profits for several years.

A carrier will most efficiently and quickly begin to realize revenue from next-generation networks and services by investing in their business support systems (BSS). The collection of back-office BSS systems is a critical component to launching services over next-generation mobile networks. Without it, carriers would not be able to offer 3G or even 2.5G (interim network technology on the road to 3G) services to their subscribers.

It's the money, stupid
Why is the BSS so crucial? Among other things, it allows a carrier to bill for all these new services and collect revenue. But its importance extends beyond a simple bill. BSS allows the carrier to manage relationships between subscribers and content providers.

For example, when a subscriber uses a phone to obtain a stock quote, the carrier likely has to contact an outside content provider to deliver the service. The content provider will be looking for revenue in exchange for providing the content. The mobile operator will want to capture revenue for this service in addition to any revenue it would capture for network access. In this way, the mobile operator is not simply a transporter of services--it can collect revenue from the actual content and commerce services as well.

Another major issue carriers need to address in the world of next-generation mobile networks and services is customer relationship management (CRM). As data services become more popular, subscriber requests and questions will also become more complex and intricate. A robust system that allows a mobile operator to know and understand each customer from top to bottom is crucial to providing competitive customer service.

What can carriers do to minimize their next-generation costs and maximize return on investment? Some operators are sharing the cost of building 3G networks. Some service providers are operating as mobile virtual network operators; they do not operate their own 3G network, but rather offer next-generation services under their brand name through an operator that does have a 3G network.

A mobile operator's existing billing system is designed to handle provisioning, rating, billing, and so on, for voice calls. For success with next-generation mobile services a mobile operator needs a BSS that will support both voice and data services in an integrated environment. The end result for the mobile operator will be a single view of a subscriber for all services and a common bill for the subscriber.

There are three paths to implement BSS support for next-generation services: Operators can (1) upgrade their existing system, (2) install parallel BSS components, or (3) replace their existing environment with a convergent system. The path of choice will be determined by the operators' existing environment as well as a variety of other preferences.

Other critical factors to success include variables that are less in the control of the mobile operator, such as geography and demographics. Japan, for example, has exhibited a high demand for mobile data services. Europeans also have a high affinity for mobile services, and their willingness to embrace new mobile devices puts operators in a good position to succeed. In North America there has been historically less demand for mobile devices. However, Internet usage is very high.

In the end, the move to next-generation networks and services is a journey for mobile carriers, and preparations must be made today. And while upgrading and building networks and acquiring spectrum licenses capture a lot of attention, just as important are the back-office systems that enable the cost-effective, rapid introduction of next-generation services with support for subscribers and partners.

Business support systems will serve as a source of principal revenue and will help the mobile operator satisfy their subscriber base in what is becoming a most complex telecommunications environment in the journey to 3G.