Migration to new networks a major telco challenge
ConvergenceAsia staff
13/11/2007

Migrating customers from an old technology to new one is one of the biggest challenges an operator can face, according to new research from Ovum. This is especially so in competitive markets where rivals are ready to pounce on any misstep.

“In the consumer market, we have mainly seen this challenge in the mobile market as operators have moved from 2G to 3G technology”, says David Kennedy, Ovum Research Director based in Melbourne. We are also seeing similar problems in the move from analogue to digital television. Looming in the future, especially for fixed incumbents, is a major shift from public switched telephone network (PSTN) to next generation networking (NGN) voice networks.

Kennedy adds, “The migration process is a four-way strategy game between the operator, its rivals, its customers and its regulator. This situation is inevitably risky and unpredictable.”

In its research, Ovum has identified three major issues that operators face when they are moving away from old networks:

-    Customers’ interests and technology timetables are diverse. Customers aren’t always keen to abandon the old network, and this raises the risk of customer dissatisfaction and churn

-    The competitive response of rivals in the marketplace can create major risks. If the migration imposes upfront costs on customers, the bonds of loyalty between customer and operator can break. Competitors will exploit this by trying to capture the operator’s customer base

-    Finally, regulatory requirements to offer particular services or features can make it difficult to switch off old technology, especially in the politically sensitive consumer voice market. The operator faces the risk that they may be left with a subscale and unprofitable network.

“This process can be particularly problematic for incumbents, who benefit from their sunk investment in legacy technology, and must balance a host of considerations when deciding the timing and strategy for shutting down old technologies”, says David Kennedy.

The risks are manageable, though they cannot be eliminated. Ovum has identified a number of strategies operators can employ:

-    Customer education: If reluctance to shut down customer premises equipment (CPE) is due to ignorance of the benefits of a new technology, then customer education can help.

-    Transitional technologies: The provision of transitional technologies such as analogue/digital TV set-top boxes and PBX/IP interface technologies have successfully reduced the impact of imminent network obsolescence on customers.

-    Vendor collaboration: CPE vendors can influence customer decisions and collaborate in customer education efforts and the development of transitional technologies.

-    Regulatory support: This is especially relevant when the technology must meet significant regulatory requirements.

-    New service development: Networks typically offer opportunities for ongoing service development. This is attractive when network obsolescence is distant and new CPE with new capabilities is appearing.

-    CPE leadership: The provision of CPE subsidies can defend against churn and accelerate migration.

These different strategies can be assembled into comprehensive migration strategies to suit different scenarios. These strategies demand strong internal capabilities in operators, and will be more effective when operators are able to:

-   Develop new products to attract customers

-   Target their efforts through customer segmentation, and
 

-   Manage stakeholders within the industry and government.

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