Can FMC unite the diverse carrier drivers?

The RBOCs' profit reports for the last quarter show some common trends in their revenues: legacy services and public switched telephone network lines are down, while mobile wireless and consumer broadband are up. Having two market areas up and only one down isn't bad, but if the RBOCs have to invest big bucks in both wireless and consumer broadband, it could crimp their profits. If they have to make a choice, some of our assumptions about the future will not come true. But maybe they don't have to choose - and maybe they can't.

FMC's money-saving mission is linked to the propping up of wireline revenues by linking wireline VoIP to wireless. Few players can offer both, so the competition that could reduce VoIP pricing to near-zero levels is sharply reduced. But the amount of infrastructure required for voice convergence like this is peanuts in an RBOC capital budget of billions and does nothing to converge spending from the fixed and mobile sides.

For that, video may be needed. While many think of video as being delivered to the home TV, the new-age IP video has done better delivered to mobile phones or portable appliances. Part of the reason is because the smaller screen size makes bandwidth requirements lower and the low-quality images pose less copyright risk, but also because at-home video behavior is locked in by habit. If you want to sell them something new, you have to grab them on the move.

A dual-mode handset that speaks Wi-Fi at home and 3G on the road is ideal for this. Such a device lets users sample video in the home without airtime charges and take it on the road when they are ready. One person I talked to recently said he was a cellular video prospect every time his child's soccer game coincided with the local ballgame, but these coincidences won't pay for a lot of service. If the handset could be used in the home, yard or for other video uses, it would be easier to get the soccer dad to take it to a game and time-share between the Red Sox and the Matawan Soccer Eagles.

This kind of new video experience would go a long way toward opening doors for the RBOCs. There is no regulatory barrier to this kind of video, no franchising. The revenue stream it creates is separate from that of standard IPTV, so it wouldn't impact a drive to offer traditional home video. It creates an incremental market for video, not a tap on the cable or satellite market, so it dodges competition and builds overall revenue.

Most significantly, this would subsidize the process of creating a new converged network to deliver video flexibly to both the home via DSL and Wi-Fi, and the road via 3G. The cost of technologies such as IMS could be recovered faster from this kind of video convergence than from voice convergence, and video backhaul for cellular sites is a larger issue than backhaul of voice, which we're already doing fairly well.

A focus on video doesn't mean that voice convergence will be ignored. The fact that the cable guys are offering voice services means the RBOCs eventually would have to respond, and FMC voice features such as call handoff to DSL while in the home are valuable to users. However, they sap revenue for the RBOC, which would otherwise sell more mobile minutes to these users. What would be a positive is that FMC voice might induce more users to use mobile phones by letting a wireless home phone become a standard cell phone outside the home.

Video and broadband have always represented the opportunity choice for improved profitability, and FMC the cost management choice. A focus on video services in FMC applications would let providers make an opportunity out of both.

Copyright © 2006 IDG Communications, Inc.

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