Is time running out for FMC voice?

Angel Dobardziev, Senior Analyst and Service Manager

We attended an FMC conference in Amsterdam in March 2006. If the number and profile of attendees at this event are anything to go by, interest in FMC, far from waning, is actually growing. We heard from senior speakers from BT, Vodafone, Deutsche Telekom, Telecom Italia and KT, but also from vendors such as Cisco and Lucent on how they saw themselves remaining relevant in what is a fluid market.

There was real pragmatism among the operators in terms of both fixed-mobile convergence (FMC) and fixed-to-mobile substitution (FMS). Operators are keen to deploy solutions that will meet the challenges and opportunities posed by their current market position, and maximise value today - be it in growing revenues or reducing costs.

Deutsche Telekom is a case in point: at this event it confirmed that it is launching a SIP-based WiFi/cellular phone in the summer. The phone and the WiFi access point will work via both its PSTN/ISDN and ADSL lines, so Deutsche Telekom can target both broadband and voice-only users. It is also pressing ahead with a homezone service via its T-Mobile subsidiary; this matches similar offerings from O2 and Vodafone (Genion and Zuhause, respectively). Operating in a unique environment, Deutsche Telekom feels, unlike any other incumbent, that it has to drive both FMS and FMC at the same time, despite being aware that FMS means a net loss for the group. While being a painful route to take, this strikes us as a sensible approach: if cannibalisation of the PSTN is to happen anyway, you might as well be part of it.

BT is another interesting case: while it is the leading proponent of FMC with its BT Fusion service, it is also keen to make money out of FMS-based offerings. It is O2 and Vodafone's partner for the fixed number redirection service (for incoming calls to Genion and Zuhause customers' fixed numbers, respectively), but is also keen to expand this wholesale service to other mobile operators in other markets keen to launch homezone services.

Perhaps the most interesting insights came from Telecom Italia. Telecom Italia has a clear vision of its convergent service roadmap, which will have a UMA-based device first, and a SIP WiFi/cellular device later. It has also thought carefully about how and when it is going to achieve it. Under its 'One Company' model Telecom Italia will integrate its sales and customer-service operations, but it has also prepared a roadmap for the integration of its fixed and mobile networks. It plans to waste no time in doing this: by the end of 2008 it aims to have an integrated network with an IMS service core and IP transport layer connected to multiple access networks. Add to this its estimate that this will provide savings of 30-35% of its current opex, and one could be forgiven for thinking that this sounds slightly ambitious. However, having watched Telecom Italia innovate to deliver one of the best performances among European incumbents over the past few years, it is placed better than anyone to deliver on such ambitious plans.

We get the impression that the FMC market is still moving at a slow pace. Lack of WiFi/cellular devices is still holding back operators. With a lack of standardised SIP solutions for FMC, which many fixed-led players would dearly love to deploy, they are forced to take UMA as 'with shortcomings, but ready now'. The marketing and the positioning of the services is yet to be worked out for many players, while the focus is only slowly moving from voice to multi-access data services.

In light of its painfully slow development, and taking into account the rampant FMS in many markets, is the window of opportunity closing for FMC, particularly for multi-access voice? Consider this: Vodafone Germany managed to sign up 250,000 Zuhause customers in three months, while it took KT over 18 months to reach 187,000 users of its OnePhone service. Could it be that by the time the right FMC devices hit the market in volumes at the right price with the right marketing, most consumers (albeit not enterprise users) will have decided that cellular is all they need?

Angel Dobardziev is a Senior Analyst and the Service Manager of Ovum's Wireline Strategy advisory service. Angel leads a team of analysts providing strategic advice to vendors and operators, which includes some of the largest players in the world. The service provides strategic analysis of industry and product trends, evaluations of the corporate strategy of major players around the world, and reports with advice on making the most of emerging opportunities.