Traditional wholesale was a simple proposition of selling capacity on routes based on rigid contracts. Now providers need to offer a wider portfolio of services, writes George Malim
Wholesale used to be all about cost and location and those factors are still fundamentals of the wholesale market. However, as wholesale operators seek to move up the value chain a far wider range of wholesale propositions are being offered. These range from operator-centric functions such as CRM, billing and next generation network transformation expertise to providing innovative services such as content delivery networking, local caching and assured quality of service for offerings such as video. There’s even the possibility for wholesale providers to deliver specific value-added services such as call recording to vertical markets.
“The pricing game will always be important and a competitive price is always a given but, in the developed world, the market has evolved,” says Allan Chan, executive vice president of mobility services at Tata Communications. “As services become more complex and requirements become more demanding, we’re seeing more emphasis on different levels of quality of service, reach and connectivity.”
“It is very important for carriers in the future to be flexible in their business models,” adds Chan. “It’s not enough to reach from point A to point B but the need is to support connecting point A to point B with a variety of models such as variable bandwidth. This is driven by the applications that the network is running.”
That set of requirements is changing the structure of the wholesale market. “How do we try and segment the wholesale market?” considers Steve Haines, chief operating officer of BT Wholesale. “We’ve developed a set of products and services to address it. For mobile operators, it’s very much about looking at their value chain and we’ve been providing outsourced services to them for the last five years whether that involves moving into their assets or facilities or doing break/fix work on their networks.”
“Demand is going through the roof because of mobile data,” adds Haines. “[Wholesale] customers want more capacity at a better price but they also want the stability of a partner that can work with them to meet the demands of the increase in mobile data usage. The want answers to help them move from a world of wireless telephony to a world of media and IP and to make that move cost effectively. They’re looking to BT because they’re replicating what we’re doing in the fixed world already.”
Chan also sees the mobile opportunity. “For mobile networks we have a rich suite of services,” he says. “That’s really anchored on our IP MPLS backbone that is specified so mobile operators can specify classes of service. They’re asking for flexibility to be able to specify classes of services within a big, fat pipe. They want the ability to be flexible, to be able to price and to choose accordingly.”
“The second trend is the roll out of applications and services,” adds Chan. “They’re looking to create communities of interest and engage in two-sided business models. We can provide the whole value chain.”
Or, at least the whole value chain can be addressed in tandem with partners for specific applications and services. “Two of our applications are currently being marketed and sold via wholesale channels in a hosted environment,” says Susan Terry, vice president of sales and marketing for the Americas at CTI Group. “That’s attractive because wholesalers are able to address specific services without investment.”
In terms of providing specific high-value services such as call recording, Haines is reticent, preferring to leave specialist services to specialist providers. “It depends on where you draw the line,” he says. “A lot of business service providers build that capability themselves because that is their value proposition and they come to us for the connectivity. An area worth exploring where the network will have great value is in content delivery networks where edge caching and surety of delivering content will play a big part.”
Chan at Tata Communications, takes a different, less network-centric view and is targeting the enterprise market. “I think we’re starting to do more with our services on the enterprise side such as with telepresence,” he says. “We have a telepresence exchange in the US along with AT&T, BT and Telefónica and that’s probably the leading telepresence exchange in the market. We’re also offering managed security across our wholesale business.”
Terry, at CTI Group, explains how the delivery of services has changed across the wholesale environment. “The biggest change is moving from a client-based application to a web-based application,” she says. “Smart recording, for example, can be delivered via email, installed, configured and recording within five hours. That’s very different to the physical hardware requirement that would previously have taken days.”
Wholesale providers have still more to offer beyond the network and the two-sided business models of applications, content and services. Selling experience in addition to capacity is an intriguing value proposition and one that Haines sees as a growing market. “There are different business models for operators to contend with,” he says. “That might involve being able to assure certain types of content so the operator can become a premium provider – propositions like that are in the mix of customer requirements.”
For BT, there’s a clear market for the expertise it has assembled during the construction of its 21CN in the UK. The experience it has gathered means it can deliver significant savings and efficiencies to its customers and is attractive to capex constrained operators that want to avoid the investment burden of re-inventing a similar wheel to BT’s. Adding that kind of network consultancy to the wholesale portfolio is a further string to the wholesale provider’s bow.
That is most probably a market that currently has more resonance in the fixed line sector, although as networking sharing and LTE roll-out progress the model is also likely to become applicable in the mobile market.
In the fixed line market, such approached are accelerating the decoupling of the network from the service. Haines cites BT’s recent outsourcing agreement with KCom, the unique incumbent regional operator in the Hull area of the UK. KCom needed to upgrade its network but instead of investing capital for a new build it examined the prospect of taking a wholesale managed service from a wholesale provider. “That transformed KCom from being a network to a services player,” says Haines. “For fixed line operators, it’s about cost transformation and stability again, but from a different perspective to the mobile operators. The fixed line operators are examining why they need to keep building networks and asking whether they should be looking at hosting of services and network sharing. They need to find a way of harnessing and scaling up their network to address IP voice, content delivery, IP delivery, ethernet, MPLS and providing those attributes as locally and as regionally as possible.”
However, wholesale operators are looking to move up the value chain from the straightforward provision of bandwidth by adding additional services to their propositions so pure network management is only a foundation for that. The higher value opportunity lies in services beyond the basic network provision. Retail telecoms services don’t even need to involve telecoms capability, points out Haines. “Where we’ve gone into new retail services, such as the UK Post Office’s consumer [telecoms] proposition, we provide all the customer services and billing as well as the network,” adds Haines. “We do that for a number of customers.”
It is those ‘network plus’ services that Haines advocates, along with the enterprise propositions that Terry and Chan are putting forward, that are changing the shape of wholesale provider’s portfolio. The market is moving away from the commoditised bandwidth business and starting to more closely resemble the retail market in terms of services offered. Wholesalers certainly aren’t aiming to become pure capacity players – no one has put their head above the parapet to say they’re in the dumb pipe business.
“We’ve been providing what we call smart wholesaling for up to seven years and it has really reached a crescendo over the last three years in terms of large, big time contracts being awarded,” says Haines. “Obviously, it’s going to be based on scale and cost but it’s also going to be focused on innovation and new services and the effective, geographical distribution of those things.”
Chan agrees: “Provisioning, network engineering and customer care are the network outsourcing services that wholesale providers are delivering,” he says. “We’re able to package and offer services that operators want to use from the pure pipe, with a 10GB wave that has a ten year indefeasible right of use, to the complete package of telepresence or managed services on their network backed by operational support in addition. At this stage, it’s really about providing choice – the pure pipe or the complete managed service.” GTB