The many stages of FMC

21 Jun 2006

By David Kennedy

Fixed-mobile convergence (FMC) has been a hot topic in the Asia-Pacific region for several years. It has been described as a key defensive strategy for fixed incumbents, and a threat to mobile-only operators. But what exactly is FMC, and how will it penetrate the market‾

Fixed-mobile convergence is the merging of mobile and fixed-line functionality into a single integrated service, allowing the customer to exploit the best features of each. But this sophisticated form of convergence is not reached immediately. There are three stages of FMC, ranging from simple to sophisticated.

Bundling. Fixed and mobile can be bundled as a package and offered either with or without single billing. The customer appeal is either a simpler relationship with the provider, or a price discount. However, there is no shared functionality. The customer still has a fixed phone and a separate mobile phone, and uses separate numbers and separate voicemail. Bundling is increasingly common across the Asia-Pacific region.

Service integration. Integrated services generally offer the benefits of bundling, but also offer a level of shared functionality. This functionality can include a single number or a single voicemail service. These applications are accessible from either handset.

Device convergence. It is possible to offer both fixed and mobile services through a single handset, generally over an IP connection. These services can include both voice and content-based services. Convergent devices (and their associated network infrastructure) typically also support service integration and bundling.

Incumbent operators in many parts of the world have seen declines in PSTN revenues in recent years. These declines are almost universally attributed to fixed-mobile substitution (FMS). Mobile operators have successfully captured call revenue and have even convinced some customers to disconnect their fixed PSTN services altogether. Many incumbent operators are looking to FMC strategies as a way of slowing the decline, or even recovering lost revenue.

The competition between mobile operators (promoting FMS) and incumbent operators (promoting FMC) is not primarily based on price. Each offers a different kind of value to the customer.

FMS requires customers to regard fixed and mobile services as substitutes for each other. This is much more likely when mobile prices have fallen close to fixed price levels. Then customers achieve better value for money by abandoning their fixed service and relying completely on mobile.

In contrast, FMC appeals to customers who value both fixed and mobile communications, but value them differently, and want a package that integrates the best of each. In a market with a high mobile premium, this might mean the opportunity to connect to the low-cost fixed network when at home or at the office, while still being able to connect to the mobile network otherwise.

It's important to remember that having a FMC strategy requires more than having some FMC products. An FMC strategy is a subset of a wider convergence strategy. The basic idea behind incumbent convergence strategies is to integrate and leverage the incumbent's fixed and mobile infrastructures to provide shared functionality to customers. Mobile operators cannot easily copy this multi-platform offering, although 3G technology will allow them to reproduce some of it.

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