Incumbents have very few effective means with which to defend their legacy revenue – and their PSTN voice business, in particular – against competition from mobile. The battle for voice is asymmetrical because aggressive price-cutting tactics on the part of wireline operators are apt to be self-defeating, as they tend to release surplus consumer cash to be spent on mobile. Even though incumbents still have some levers they can pull to maintain margins on legacy networks, a simple truth remains: the basic overheads of running TDM networks depend more on the age and quality of the plant than on the volume of traffic the networks carry. At best, the cost of running a PSTN is flat, and it will tend to increase as an operator’s inventory of spare parts runs low, equipment becomes obsolete and spares are more difficult to source. If revenue from legacy services declines as quickly as Analysys Research predicts, and broadband saturates quickly, then the attractive margins on wireline now generally enjoyed by incumbents will rapidly be eroded. Hence the tactics incumbents use to defend revenue from and margins on legacy must be part of a longer-term strategy of managed decline and business transformation.
The pertinent question about NGN transformation should be “How?”, not “Why?”, and operators urgently need a clear view of migration that takes into account long-term changes in their business environments. The soft landing that legacy services require is, therefore, largely a matter of speed and polished execution, rather than of strategy or tactics. Compatibility, resilience and security of the all-IP network are obvious prime concerns. Many of the individual issues, although challenging from a technical, planning or organisational point of view, are strategically simple: get x, y and z right, otherwise you will lose your customers.
Nevertheless, some general strategic points about the competing demands of long-term visions and short-term needs can be drawn out.
- The external telecoms world will move faster and in a more radical way than operators expect. The incumbent’s fixed network will not play the same role in the telecoms environment for ever. Incumbent operators need to be the drivers of this change, not bystanders or, even worse, victims. Voice is by far the largest part of legacy. It is critical that operators transform voice into a smaller, leaner business. The imperative is to manage this decline – and redirect energies – rather than to resist it. Just as the separate TDM voice network, with its limited service set, is subsumed into a service layer on a unified network, so should the idea of a voice business be subsumed into an IP service set.
- Any NGN transformation process will be slower than operators think. By the time the process is complete, it will have taken directions different from those originally envisaged, due to the emergence of new carrier-network solutions and the identification of architectural problems in the original plans. Next-generation transformation is not a once-and-for-ever conversion; it is part of an evolutionary process and should be treated and communicated as such. Hence it is important that operators do not get caught up in the defensive, shorter-term concerns of customers, especially those of other telcos, and, as a result, over-commit themselves to expenses that may turn out to be unnecessary in the longer term. Incumbent operators need to be able to look beyond the current concerns of other interconnecting operators to an environment that is not dominated by the demands of emulating a legacy service set. Nor should incumbents become fixated on ‘the plan’: although processes need to be robust in order to achieve long-term goals, they also need to be flexible and responsive, and therefore subjected to regular reviews and re-assessments.
A new report from Analysys Research, Legacy Matters: ensuring a soft landing for TDM services, examines where and why legacy services figure on the roadmap to a next-generation world. The report focuses on the following key decisions that operators have to make in the run-up and transition to all-IP networks: whether to defend or manage the decline of core legacy revenue; how and when to switch off legacy services that are in terminal decline; how and when to migrate valuable services to next-generation platforms; how to ensure continuity and security of service during switchover; and how to ensure business continuity in regulated wholesale service markets.
