Executive Thought Leadership

From Commodity to Customer Experience

Service providers are building networks that engage customers, not just to move traffic.

Service providers are victims of their own success. Over the years, providers have done a remarkable job of building reliable and scalable voice and data networks. As a result, consumers, and—to a lesser extent—businesses, have come to view these high-speed pipelines as commodities.

The challenge for services providers (SPs) today is developing new value-added services, pricing models, and partnerships that will help them grow revenue through premium offerings and enhanced customer interactions.

We're now seeing the results of earlier efforts paying off in the consumer sector; Comcast, among others, is enjoying tremendous success with its "triple play" pricing package that offers consumers one low price for voice, high-speed Internet, and cable television service. Sprint has pioneered an innovative mobile telephone pricing program that lowers monthly charges when families agree to receive advertisements delivered to selected mobile phones. And AT&T is launching a service that alerts mobile telephone or computer users when a remote home-security monitor is activated.

These types of services will lift SPs out of the challenge of being just "pipe providers" and into the customer experience business. All of these services can be paid for by the consumer or co-funded by online advertisers.

Next-Generation Networks

There's much work to be done before the transformation is complete. The most pressing effort ahead involves enhancements to the platform; for years, multiple service-specific networks have burdened SPs. These are costly to operate, difficult to integrate, and inflexible in the face of changing consumer demands. That’s why many SPs today are moving to a single network infrastructure capable of handling voice, data, and video traffic, either wired or wirelessly.

As SPs deploy these Internet Protocol Next-Generation Networks, or IP NGNs, they can do something they couldn't before: use deep packet inspection of Internet traffic and usage patterns to—with the customer’s permission—intelligently gather, monitor, and process personal information and preferences. Armed with this knowledge, SPs can deliver many customer-pleasing, and revenue-enhancing, services not previously available to a broad range of devices over multiple channels. In the home, you'll soon see consumers remotely control various house systems, such as heating and air conditioning. Service technicians will use the power of the network to remotely diagnose "smart" appliances and upload software fixes. On the road, mobile phone users will use GPS technology to locate nearby restaurants and make reservations.

In the workplace, employees will find desktop videoconferencing commonplace. And application portability will allow workers to switch effortlessly from one device to another with little or no effect on their voice, data, or video sessions.

At the store, consumers will carry their personal preferences through the door on mobile devices, and shop owners will target advertisements specifically to customer interests on network-based displays. And in the doctor’s office, physicians will have real-time access to patient information even if they, or patients, are in transit.

Video Changes Everything

Without question, the service that is destined to change the Internet experience most drastically is video: downloaded video, streaming video, videoconferencing, HDTV, IPTV, video to the big screen, and video to the mobile phone. Video adds levels of complexity—and requires levels of scalability—never before imagined. As a result, it requires networks with much more bandwidth, increased reliability, and higher performance standards.

Ultimately, video is expected to send IP traffic soaring. IP traffic increased 52 percent between 2005 and 2006, and the rate of increase for IP traffic is expected to stay the same or increase through 2010, according to estimates from Gartner, IDC, and other firms. By 2010, just three years away, North American IP traffic is forecast to top six exabytes per month. Placing this figure into perspective, consider that one exabyte is five times greater than all the printed matter in the world.

At the end of the decade, the average American home will stream approximately 1.1 terabytes of video, data, and voice traffic per month. At this rate, a typical neighborhood of 20 homes will generate more traffic than the amount that traveled across the entire Internet backbone in 1995.

While overall SP capital expenses are expected to remain flat next year, SP expenditures specifically for IP investments will increase an estimated 17 percent, according to Synergy. And not surprisingly, that capital is going toward deployment of IP NGNs and intelligent services and applications, moves that will put SPs in a far better position to seize new market opportunities and increase profitability.

Consumers Fuel the Market

There's still uncharted territory ahead, but this much is clear: there is seemingly no limit to the consumer's appetite for bandwidth, and for new and exciting IP-based services.

The SP industry can control what role it plays in this, thanks to its relative financial and market strength. But tomorrow's pipeline of profitability will come not by protecting legacy networks, but by leveraging the value of today’s advanced networks, adding in intelligence for Quality of Service and personalization and forging new relationships with content owners and consumers alike.