UMA paves the way for convergence
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1 White Paper September 2005 UMA paves the way for convergence Intense competition increases operators incentives to launch UMA A recent survey indicates that more than 50 percent of the mobile subscribers in Western Europe would likely sign up for an Unlicensed Mobile Access (UMA 1 ) service within the next 12 months, provided that mobile calls in the home were priced the same as fixed line calls 2. At the same time, fixed-mobile convergence (FMC) has re-emerged as one of the hottest topics in the telecommunications industry. Currently, the anticipated way for the industry to offer FMC services is to use outdoor mobile networks in combination with indoor Wireless Local Area Networks (WLAN). UMA is one standardised solution enabling this development. In this report, Northstream explains why FMC is likely to materialise and what benefits it can bring to end users. Further, the paper explores driving forces for operators to implement FMC technologies and puts a timeline on the different potential technologies to use. The paper concludes that UMA technology is not necessarily the optimal solution for all telecom operators, however in a number of specific situations, the technology can prove highly useful. Generally, there are three main drivers for operators to launch UMA: to improve in-home coverage; to take an active part in the fixed-to-mobile substitution trend and to reduce churn through service bundling. Although FMC services are relevant both for enterprises and consumers, this report puts a specific focus on the consumer domain. 1 See UMA fact box on page 3 2 Source: Motorola consumer research, July 2007 About Northstream Northstream provides high-impact strategic technology and business advice to the wireless industry. Northstream has assembled a multinational team with some of the world s best experts and analysts on wireless communication and technology that supports many of the industry s leading companies in their strategic and tactical challenges towards continued growth. Through its parent company, US based incode Wireless, Northstream has a strong global presence and client base. For more information please contact info@northstream.se or visit us at: and
2 UMA paves the way for convergence 2 Contents Re-emergence of fixed-mobile convergence... 2 In-home fixed-mobile convergence brings substantial benefits to end-users... 4 UMA is the FMC technology available today... 5 What drives operators to implement UMA?... 7 Is UMA something for everybody?... 9 Conclusions Re-emergence of fixed-mobile convergence FMC frequently has been discussed in the telecommunications industry, but so far not much has materialised in terms of commercial services. The main reasons have been unavailability of complete end-toend technical solutions and the absence of critical market drivers. Recently, however, the market has seen a re- emergence of FMC services and the above hurdles are diminishing. Typically, FMC refers to the removal of the distinctions between fixed and mobile telecommunication networks that creates seamless services using a combination of mobile macro networks, fixed broadband and wireless local access technologies, e.g. WLAN. FMC can be defined into three subcategories: device, service and network convergence. In this report, the term convergence is referring to device convergence. Northstream definitions of convergence categories Device convergence: a single device supports several access types, e.g. GSM, WCDMA and WLAN. It allows usage of multiple services/applications, reusing the same functions for identification and authentication. Service convergence: the same end user services are provided independent of access technology and device. Network convergence: aiming for operator cost efficiency, one network is used to support several access technologies for the provisioning of end user services. There are several reasons for today s emergence of FMC services. Enablers required to introduce such services are now falling into place. The household broadband penetration is high and growing in many markets, and in-home WLAN access is becoming more common with a penetration of around 20 percent among broadband users in Western European countries 2. Further, most Western European countries, as well as North America, are experiencing a fixedto-mobile substitution trend, with an increasing share of the voice minutes being generated in mobile networks, see Figure 1.
3 UMA paves the way for convergence 3 70% 60% 50% 55% 52% 51% Enablers of fixed-mobile convergence are falling into place % 41% 37% 34% 30% 30% 30% 28% 28% 25% 20% 10% 19% 14% 0% Portugal Finland Austria France Spain Italy USA Netherlands Norway UK Switzerland Sweden Germany Figure 1: Mobile minutes share of total voice minutes 3 So far, it is mainly fixed traffic that is being substituted; however fixed-line substitution is also starting to take place. The increasing fixed-to-mobile substitution creates competitive pressure on many fixed operators. On top of this, a growing broadband penetration opens up for Voice-over-IP (VoIP) telephony usage at home and constitutes a major threat to traditional fixed telephony usage. Thus, depending on the fixed operator situation, the incentives to defend voice revenues can be strong, and FMC services are considered an important customer and traffic retention tool. Fixed-to-mobile substitution categories Fixed-to-mobile line substitution: users replace fixed lines with mobile subscriptions. This can either be a fixed-line subscriber who decides to discontinue his/her fixed-line subscription or a new user who chooses a mobile subscription over a fixed one (out of preference or lack of choice). Fixed-to-mobile traffic substitution: users opt to make calls on their mobile phones rather than on their fixed-line phones. The telecommunication industry s interest in FMC services for consumers is currently centred on mobile and WLAN technologies, where UMA is one possible technology. UMA allows operators to use broadband and WLAN together with a GSM/GPRS core network as an alternative to provide voice and data to the home or office. Unlicensed Mobile Access (UMA) Background The UMA effort was initiated by a number of leading operators and vendors in January 2004, with the purpose of generating a standardised solution for unlicensed mobile access to the GSM core network. Similar concepts had earlier been seen in e.g. Ericsson s Mobile@Home solution, though a wide support was emerging only now. The UMA industry group (sometimes referred to as the UMA consortia ) was founded with participants including Cingular, T-Mobile, BT, Ericsson, Motorola and Nokia. The goal of the UMA industry group was to develop and publish an open set of technical specifications for extending mobile voice and data GSM/GPRS services over unlicensed spectrum technologies (including both Bluetooth and ) and subsequently encourage the specifications to be adopted by a formal global standards organisation. The UMA solution was introduced to the 3GPP Technical Specification Group (TSG) GSM EDGE Radio Access Network (GERAN) in June After a fast process, UMA was standardised by 3GPP under the name Generic Access to A/Gb interface (GAN) and the standard was ready in April The GAN standard is specified in 3GPP TS , and is part of the 3GPP Release 6. Having achieved its objectives, the UMA industry group has been dissolved and the continued work to standardise UMA is done by 3GPP. As mentioned above, the concept has been renamed GAN Generic Access Network in 3GPP. However, in this paper the more widely known UMA terminology is used. 3 Northstream, Regulators and operators in respective country, 2004
4 UMA paves the way for convergence 4 18% 33% 14% 11% A substantial share of mobile minutes are generated in the home 24% 18% 33% 11% 32% At home At work Travelling 14% 39% In-car Other 11% 24% 4% 14% Western Europe 11% USA 32% Figure 2: Distribution of Mobile phone usage, as percentage of total mobile minutes 4 39% In-home fixed-mobile convergence brings substantial benefits to 14% end-users 4% About one third of the mobile voice minutes in Western Europe and the United States are generated when the end user is at home, see Figure 2. This is interesting considering the high penetration of fixed telephony among households in most of these countries. The reasons for using the mobile telephone at home largely relates to convenience, e.g. the access to the mobile phone address book and the mobile nature of the service. The at-home generated mobile voice minutes constitute an important revenue source for the mobile operators and correspondingly they represent a substantial part of the household communications budget. In many operators minds, FMC services mean that at-home voice minutes are provided over a mobile device at price levels competitive to fixed telephony. Results of a survey carried out in July 2005 show that more than 50 percent of the respondents in France, Germany, Italy, Spain, Sweden and the UK would likely sign up for a UMA service within the next 12 months, provided that mobile calls in the home are priced the same as fixed line calls and have a similar voice quality, see Figure 3. Similarly, consumer research conducted between November 2003 and September 2004 covering the U.S. market shows that 27 percent of consumers are extremely or very interested in FMC services 4. According to these results, end users have the following key requirements for such a service: an integrated device that provides fixed style QoS, mobile features everywhere and free minutes in the home. In the United States, but also in many European countries, the indoor mobile coverage is not satisfactory to a significant share of the end users. North American mobile operators state figures in the range of percent when asked how many Americans are dissatisfied with coverage in their homes. FMC services, combining mobile macro networks with in-home WLAN, have the potential to improve the indoor experience for end users. 100% High European consumer interest in UMA type of services 80% 60% 40% 20% 0% UK France Definitely would buy Probably would buy Don t know Germany Figure 3: Consumer propensity to buy an FMC service, provided that at-home voice minutes are charged fixed-line tariffs 2 Italy Spain Sweden Probably would not buy Definitely would not buy 4 Source: Wireless Broadband Analyst, 2005
5 UMA paves the way for convergence 5 FMC services also provide the benefit of having one device, one phone number, one phone book, one bill and one point of contact with the service provider. The user friendliness in terms of services also increases as there will be a single set of applications available independently of the access network used. To summarise, FMC services can provide substantial benefits to end users. The main three benefits are: Cost savings on in-home telephony Improved indoor coverage Improved service usability through device convergence UMA is the FMC technology available today There are several ways for an operator to realise consumer-targeted FMC services, and the most popular one apparently is to combine mobile technology with WLAN. In terms of standardised solutions, which a majority of operators prefer, both UMA and a coming expanded IP Multimedia Subsystem (IMS) architecture can be used, separately or in combination. Even though the IMS standard is starting to materialise, available versions do not support seamless handover of voice calls between mobile networks and WLAN. An improved handover capability, however, is being standardised by 3GPP under the name Voice Call Continuity (VCC) with major U.S. operators in the lead. The standard is scheduled for delivery by mid-2006, which makes it reasonable to assume that the first commercial services based on VCC will be available by mid What is IMS? IMS is a mult-media architecture for mobile and fixed Internet Protocol (IP) services, based on a 3GPP variant of the Session Initiation Protocol (SIP). It is and will be used by telecom operators to offer network controlled multimedia services, e.g. enabling the use of voice and data services simultaneously. IMS is part of Release 5 and 6 of the 3GPP standard. Since IMS is an IP-based service enabling platform identified as a next step in most operators network evolution roadmaps, IMS VCC may be viewed as the preferred long-term choice for many operators to provide FMC services. In the short to medium term, however, the only realistic alternative for a standardised solution is UMA. Q Q Q GPP stage 1 Service requirements 3GPP stage 2 Architecture & principles 3GPP stage 3 Signalling & protocols Q Q Q Q Product development Networks & handsets Conformance, IOT & network implementation By vendor and operator First launch Potential pilot, then commercial launch IP Multimedia Subsystem (IMS) and Voice Call Continuity (VCC) 3GPP is working on an extension to IMS named Voice Call Continuity (VCC). Since 3GPP Release 6 has already been frozen and no dates have been set for Release 7, it is assumed that the VCC work item will be treated as an early implementation, allowing for standardisation between 3GPP Releases 6 and 7. (Source: Northstream, August 2005)
6 UMA paves the way for convergence 6 Node B RNC Mobile operator UTRAN MSC CS core GMSC BTS GERAN BSC SGSN PS core GGSN CSCF IMS AP UNC WLAN Internet Signalling and data transfer Signalling only Figure 4: Introducing UMA and IMS in a GSM/WCDMA network 5 For the operators, adding a UMA access to an existing GSM network is not a major undertaking. UMA constitutes a part of the radio access network and is introduced by adding a UMA Network Controller (UNC) as a link between the WLAN and the GSM core network using standard A and Gb interfaces, see Figure 4. Hence, from the GSM core network s perspective, the UNC is perceived as just another BSC. Some vendors could introduce the UNC functionality into existing Base Station Controller (BSC) infrastructure, thus offloading the core network from signalling and multiple resource handling related to users shifting between WLAN and GERAN in the same area. UMA network equipment is available from several vendors today, see Table 1. However, more critical than network equipment is the availability of a variety of UMA enabled handsets. Operators are not prepared to launch a UMA service unless there is a range of UMA handset models available from more than one of the leading vendors. In addition, the handsets need to be attractive to consumers -the main target segment for UMAmeaning handsets must be available at mid-range and low-end cost levels. Table 2 shows the handset vendors that have launched or announced intention to launch handsets with UMA support. Vendor UMA solution Availability Alcatel Together with Spatial Announced June 2005, potentially available now Ericsson Own UNC Available Kineto Wireless Own UNC Available Motorola Kineto s software, possibly own hardware Available Nokia Resells Kineto s UNC Available Table 1: Announced UMA equipment vendors (Sep 2005) 6 Vendor Model(s) Availability BenQ P Chi Mei UCP-100 No information Motorola V560, Razr, A910 V560 Now Razr 2H 2005 A910 1Q 2006 LG CL400 No detailed information Nokia Handset announced 1H 2006 Samsung Handset announced No detailed information Table 2: Announced handset vendors supporting UMA (Sep 2005) 7 5 Source: incode/ Northstream, Sources: Northstream and Vendors web pages, Sep Sources: Northstream and Vendors web pages, Sep 2005
7 UMA paves the way for convergence 7 In spite of the few available terminals today, a substantial number of vendors promise to deliver UMA handsets to operators. Terminal availability is aligned with operators intentions to launch UMA services during A key question, however, is what type of terminals will be available. Pricing of WLAN circuits and the need to integrate them into common mobile platforms makes it likely that UMA handsets will appear during early 2006 in volume in the high-end and mid-range tiers only, followed by the low-end tier at least a year later. To conclude, UMA is the only realistic solution for implementing a standardised, consumer-oriented FMC service providing seamless handover among mobile and WLAN networks today and in the near future. UMA has an advance of about three years before the emergence of IMS VCC in commercial services, and the emergence of IMS VCC does not mean that UMA is to be viewed as an interim solution, since VCC and UMA can clearly co-exist in a network. It is reasonable to assume that some operators may regard UMA replaceable once equivalent IMS solutions become available. But even in cases with a presumed shorter economical lifetime of the UMA solution a strong case can still be made for investment, and it is important to note that UMA is essentially an access network, through which any and all IMS services can be provided, now and in the future. What drives operators to implement UMA? So far, UK-based operator BT is the only operator that has launched a UMA service (called Fusion), but there is a high interest also among other operators to trial and evaluate UMA. Although the UMA initiative was driven primarily by North American operators, it is European operators that publicly have announced intentions to launch UMA services. Starting in 2006, TeliaSonera intends to launch UMA in the Nordic countries, as well as in the Baltic States, over a period of three years 8. Another operator intending to launch a UMA service in 2006 is France Telecom, which announced its Homezone service to be provided over Windows mobile handsets 9. Also, Finnish MVNO and fixed operator Saunalahti 10 has publicly confirmed that it plans to launch a UMA service. BT and the Fusion service UK based operator BT has been one of the main driving companies behind the UMA technology and announced its intention to launch a UMA-based service, at the time called Bluephone, in May Since then, the launch was postponed several times and the Bluephone project was increasingly questioned. In June 2005, as the first UMA service in the industry, BT finally soft-launched its Fusion service to 400 friendly users. The full commercial launch is scheduled to take place in September 2005, and according to BT 25,000 persons signed up for the service. The main target is BT s broadband customers in the consumer and SOHO segments. Fusion is currently based on a Bluetooth-enabled Motorola V560 handset with UMA software supporting seamless handover between Bluetooth and GSM/GPRS networks. The second handset for the service will be a Motorola RAZR with Bluetooth and UMA, which will be available later this year, according to BT sources. The V560 is free to customers, as is the BT access point, which links into BT s broadband network. When customers are at home, the V560 links via Bluetooth to their hub and onto BT s broadband network and calls are charged at rates similar to BT s fixed-line prices. When customers are outside, the V560 links to Vodafone s GSM/GPRS network and calls are charged at mobile rates. Ericsson, Motorola and Alcatel are the key suppliers for Fusion service. Being a fixed network operator only, BT uses Vodafone s network as an MVNO for mobile access. BT s interest in UMA has been driven by its wish to leverage its investments in broadband access (BT reaches up to 96 percent of UK homes and businesses) as well as the need to defend its fixed traffic and customer base. Although the Fusion service was initially launched with Bluetooth as a bearer for UMA, BT has aligned itself with the rest of the industry and intends to launch the Fusion service with access later this year. BT Fusion 100 costs 10 a month for 100 minutes, and BT Fusion 200 costs 15 a month for 200 minutes. But customers also require a BT fixed-line service ( a month) and BT broadband ( a month), which means that the total monthly subscription costs (fixed line plus broadband plus Fusion) will be (Sources: Northstream; 3G Mobile, 21 June 2005; Wireless Week, 15 July 2005; Unstrung, 31 August 2005) 8 Source: Ny Teknik, 24 August Ny Teknik is a Swedish magazine focusing on technology development ( 9 Source: France Telecom press release, 6 July Saunalahti is a Finnish operator that started as an MVNO and has achieved a 10% market share of the Finnish telecommunications market
8 UMA paves the way for convergence 8 Some North American operators, such as Cingular, T-Mobile USA and Rogers Wireless, have shown a high interest in FMC services and UMA and were heavily involved in the development of the UMA technology. As of today, none of these operators has made any public announcements regarding intentions to launch UMA, but there are several reasons for North American operators to be interested in the service. Poor residential indoor coverage in the United States makes it interesting for the American operators to extend the mobile networks with WLAN. For a mobile-only operator like T-Mobile, UMA provides an opportunity to better address and serve the residential voice market. T-Mobile has also an extensive WLAN hotspot network, increasing synergies with UMA. Cingular, with fixed-line owners Bell- South and SBC, are looking into UMA solutions. It is interesting to note that different types of operators show interest in FMC services and UMA for different reasons, which is further illustrated in Figure 5. Many operators across the globe, both combined fixedmobile and mobile-only ones, see UMA as an opportunity to better address the indoor voice market. Since residential indoor coverage is limited in many markets, the opportunity to use existing WLAN coverage in the home to provide mobile services provides potentially larger revenue streams through increased in-home traffic. Also in markets where mobile indoor coverage is considered reasonably good, operators are interested in offering UMA to compete with the very high quality standards of fixed line telephony. This is seen as a prerequisite to driving fixed-to-mobile line substitution. In addition, increased service quality due to better indoor coverage could contribute to higher customer satisfaction and reduced churn. FMC also means an opportunity to offer bundled services. American operators have experienced a substantially higher customer retention rate in cases where bundled services are offered. A UMA service could, for instance, be bundled together with a broadband subscription and a WLAN access point. Compete for residential voice traffic/drive FMS Improve residential in-home in-home coverage Price and service differentiation opportunity Need to partner with a mobile player to: Take advantage of fixed-to-mobile substitution trend Reduce churn through bundles Fixed/ broadband providers without MVNO arm Mobile-only operators UMA Fixed/ broadband providers with MVNO arm Fixed-mobile operators Defense of fixed traffic & customer base Improve in-home coverage Reduce churn through bundles Price differentiation opportunity Take advantage of fixed-to-mobile substitution trend via MVNO Reduce churn through bundles Figure 5: Benefits of UMA for different operator types Source: incode/ Northstream, August 2005
9 UMA paves the way for convergence 9 HIGH IT MATURITY IN MARKET High broadband penetration, WLAN starting to be used at home LOW MARKET COMPETITION LEVEL Symmetric mobile market, low degree of Triple play, limited FMS HIGH INCENTIVES FOR UMA LAUNCH HIGH MARKET COMPETITION LEVEL Fierce mobile market competition, Triple play* trend, high degree of FMS LOW INCENTIVES FOR UMA LAUNCHES LOW IT MATURITY IN MARKET Low broadband and WLAN in-home penetrations * Triple play: combining Internet, television and phone services into a combined market offering. Fixed, mobile and cable operators are competing for the same customers. Figure 6: Operators interest in UMA depends on the market situation 12 Increasingly, fixed operators with mobile assets (e.g. combined fixed-mobile network operators or fixed operators with MVNO businesses) view FMC services as an important vehicle to keep its customers and traffic within the group. FMC services become even more interesting if the fixed operator is also a broadband provider, enabling full control of the service offering. Fixed/broadband operators without any mobile interests would need to partner with a mobile player or start an MVNO to be able to offer a UMA service. Another driver of FMC services is the possibility for differentiated charging, i.e. fixed-line type of pricing for wireless indoor calls. Such price differentiation is also achievable using mobile networks only (i.e. without UMA). The most well known examples are Vodafone Germany s homezone service (Zuhause) and the Genion service offered by O2, Germany. To conclude, different types of operators are interested in UMA for different reasons. The main drivers for operators to launch UMA are to: Improve in-home coverage Take part in fixed-to-mobile substitution trend (defensive or offensive strategy) Reduce churn through service bundles Is UMA something for everybody? Several operators have decided to implement and launch FMC services using the UMA technology. Still, there is a substantially greater number of operators now in the process of deciding how to relate to FMC and to UMA/IMS. Operators interest in UMA largely depends on the type of market in which the operator is active, see Figure 6. Not all operators will benefit from launching UMA. Some operators are active in markets where the broadband penetration is low and there is a limited availability of in-home WLAN access points. Typically, in such markets, the mobile penetration is still growing and the operators focus more on new customer acquisition rather than churning customers from competitors. 12 Source: incode/ Northstream, August 2005
10 UMA paves the way for convergence 10 Operators active in markets with high competition have stronger incentives to launch UMA than those in less competitive markets. Thus, operators in markets with low to moderate competition, a limited fixed-to-mobile substitution and low threat from VoIP providers might not see any value of introducing UMA in their GSM networks. There are several operators with the ambition to continue to grow their competitiveness by enhancing the GSM/WCDMA service rather than using a WLAN-based solution. For many operators, in particular combined fixedmobile ones, a potential barrier to launch an FMC/ UMA service is the fear of cannibalisation of both inhome mobile voice minutes and of fixed telephony. Still, some have decided to launch UMA more as a defensive move to meet high competitive pressure, arguing that it is better to cannibalise one s own business rather than letting someone else do it (for example a VoIP provider). In addition, some operators perceive it as risky to extend mobile access with a WLAN over which they might not have full control. In case broadband is not provided by the operator in question, the operator will not be able to guarantee end-to-end quality of service to the end user. Moreover, the end user might purchase the access point from a third party, leaving the operator in a difficult position when it comes to service and support. UMA places big requirements on the end user to install and configure the home network (e.g. the broadband modem and the WLAN access point), which can result in a significant increase in customer care calls from users expecting the operator to solve any problem related to the complete UMA solution. Thus, in the end it depends on the unique operator situation whether UMA is a strategic tool required to increase the operator s competitiveness or if it is just another new technology trying to achieve what can already be done using the existing mobile networks. Conclusions Interest in UMA is growing and a significant number of markets will experience launches of UMA-based services. Market research confirms that there is an interest among end users to adopt a UMA service, provided that it offers cost savings compared to the mobile service when the subscriber is at home. The incentives for an operator to launch UMA largely depend on the unique operator situation. Operators in markets with high competition, high availability of broadband and WLAN in homes are the most likely to offer a UMA service. All in all, the main drivers for an operator to launch UMA are: To improve in-home coverage To take part in the fixed-to-mobile substitution trend To reduce churn through service bundles For operators that want to address the FMC opportunities today, UMA is the natural choice. Some operators will adopt IMS VCC as the technology for UMA type of convergence, though this is unlikely to happen before A key question for many is whether there are reasons to migrate from UMA to IMS VCC and if so whether the relative short time gap motivates an investment in UMA. In many cases, the solutions can co-exist for quite some time, and it is important to note that UMA is an access network through which current and future IMS based services can be used hence there are no obvious reasons to replace it at all. In all cases, operators need to assess the unique market situation and pro-actively decide upon a suitable convergence strategy. Contact Northstream/ incode has an in-depth knowledge of fixed-mobile convergence, UMA and IMS, and continuously helps operators to develop and enhance their strategies within these areas. Please contact us if you would like to find out more about this or about our company and the services we provide. us at info@northstream.se or call us at (SE)
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