ACC Roundup: Wholesalers need to 'go retail'

13 Sep 2012

The wholesale sector may be suffering, with prices plummeting and volume growth slowing, but you wouldn't know it by the 1,200 executives who spent the better part of last week in Cebu, Philippines, ironing out bilateral deals with their many partners.

Doy Vea, chief wireless advisor at Smart Communications, set the tone for the wholesale gathering by boldly stating that: "It's the end of the world for old business models". He said that according to Ovum, 75% of voice traffic now is VoIP. Margins are continuously being squeezed and increased volumes can only make up the gap for so long.

Vea said the future is to “go retail,” which was the theme of the eighth Asian Carriers Conference -- “Transferring to a new telecom wholesale-retail ecosystem.”

Telstra Global's Jim Clarke said in his presentation that as the line between wholesale and retail gets blurred the need for quality networks only becomes more important. “Dumb pipes in the future will be very important.”

A common theme among the five plenary speakers was the importance of IPX in enabling wholesale players to move up the value chain. Clarke said IPX will allow mobile operators to offer faster speeds, higher capacity bandwidth and introduced new services and apps.

While IPX is expected to help operators innovate more rapidly, Edwin van Ierland from iBasis pointed out in the panel discussion that it won't slow the decline in prices and by no means will fix telcos' main problems, which will continue into the future.

Epsilon Telecommunications CEO Andreas Hipp said that the rise of global exchanges, such as network hubs, is creating new ways to interconnect, which is driving a move away from the legacy approach. Expanding volumes, lower prices of traditional wholesale services, short lead times and increasing technical complexity, he claims, make it more difficult to manage everything in-house.

“It is difficult to maintain your own infrastructure and interconnect base at the required cost points to remain competitive and flexible due to a lack of scale,” Hipp said. Epsilon's recommendation to the crunch, naturally, is to outsource to reduce the required investment and the risks.

Verizon Enterprises Solutions' Carl Roberts emphasized that telcos' core asset is the network, but "we have to reinvent ourselves". He believes operators are in a position to fundamentally transform the way businesses operate today.

With their global networks and advanced connectivity strategies, Roberts said carriers have the opportunity to improve operational models in industries such as health care and transportation.

Ian Watterson from CSG International - who spoke on “How to swim with the sharks and survive” - said telcos need to learn that they “can't do it all” and need to partner, in relationships where both parties benefit. “In the content supply chain it's all about how to work out equitable revenue sharing deals, which requires treating your partners as customer.”

Given all the talk of the urgency of moving to all-IP networks, it comes as a bit of a surprise that just 61% of telcos say they are already to have live voice traffic on migrated IP interconnections. One in ten say they haven't yet or aren't ready/willing to start a migration project.

In his presentation, Philippe Millet, chairman of the i3fourm, said while 63% have a clear, aggressive IP-migration strategy, 25% don’t really have a migration strategy. These numbers were based on a small survey of done at ITW in May.

A representative for a large US telco told Telecom Asia there's no economic reason for an operator with TDM switches to replace them with IP connections (for fixed voice). He reckons ten years from now, there still will be plenty of TDM switches around.

If it isn't broken, then why fit it?

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