Many commentators talk about fixed/mobile convergence and ways in which fixed telephony can compete with mobile. However, in a subsequent blog I will show 'the game is lost' and mobile must inevitably dominate and become the default means for voice communication. Although national and international fixed calling rates have fallen, the fixed vs mobile decision process is no longer price sensitive.
Carriers must find that business cases based on Pence per minute revenues are only viable when the volumes are huge and the base costs are minimised. In the near future, the regulated carrier interconnect rates between fixed and mobile are also likely to change, to the detriment of the fixed networks.
BT's 21cn as a Model
BT's 21CN completely dismantles the old historic PSTN topology and delivers a two tier network architecture. A bandwidth efficient core router network, feeding local Multi service, access nodes that support DSL, VoIP. As a consequence, BT strips out its headcount and free's itself from the grip of the traditional telephony suppliers.
This strategy allows BT to operate a competitive retail and wholesale broadband platform and so in accounting terms, POTS can be delivered as a marginally costed service. VoIP-PSTN however is a mainstream product that comes as part of the ISP's bundle.
Analysts and commentators have always underestimated the cost of maintaining or growing copper line plant. But in BT's model this infrastructure, may well be, or possibly has been, outsourced to 'civils' companies such as Telent.
A few years ago, reading between the lines, BT would have preferred to delay the boom in ADSL services until the 21cn platform was in place as it delivers broadband much more cheaply than the current overlay ATM network. Yet in future DSL will have to compete with 3g and maybe wimax as a means of delivering voice and broadband access so it has to be more efficient. Yes, DSL and soon, Fibre to the street cabinet is a much better way of providing 'bigger' bandwidth but in lower socio economic groups a lot incomes will not stretch to duplicated access for fixed internet and fixed voice and nobody will abandon their mobile.
Other Telcos?
BT has been fortunate in being able to get ahead of the game. Many other telco providers, particularly those in developing countries, are not so well placed to break out of the 'old pstn' model. Penetration figures show a significant number have only a small installed base of ADSL, so they don't have access to the pre-pay revenues that Broadband provides. 3G will achieve much higher penetration than the incumbent PSTNs managed in 100 years. What's more, in many developing countries those legacy copper assets are being ripped out of the ground by the bad guys, to feed the black market in scrap metal.
In the UK O2 have led the way with bundling mobile, broadband and fixed telephony. Stand-alone PSTN carriers cannot bundle services to subsidise fixed PSTN by mobile revenues.
Many commentators point out that POTS service is robust and reliable, characteristics not easily matched by wireless or DSL. Such claims are valid, but only when these services can be provided at reasonable cost.
I believe that many countries will soon need to develop new PSTN models that embrace the essential requirements and benefits of a robust PSTN but also deliver broadband services in a competitive niche. 'New',in this sense can be in technology models, e.g networks, OSS/BSS, but also financing, investment, ownership and scale of operation.
We used to have an image of a successful telco based on an intangible thing called 'its network'. In reality, the telco has only two important constituent parts: Its brand in the market, and it's OSS/BSS. The underlying network is subject to constant change and is secondary to the ability to service and bill customers cheaply.
Addendum
BT is probably in good shape to maintain its PSTN services in a competitive form. However many other former state monopolies may not be so well placed. Since drafting this blog I have stumbled on 3 examples of telcos in developing countries that are subject to bids to 'buy them out'.