Time to deploy all the network skills
Nobody could ever accuse Michael Sabia of understating the importance of the widespread deployment of Internet Protocol networks by the world’s major carriers.
“We’re all trying to find ways of reinventing these businesses. This is not a time for the faint of heart in telecoms and you have to be prepared to do some pretty bold stuff,” says the chief executive of Bell Canada.
“All of these businesses - ours, BT, Deutsche Telekom, SBC - were built to connect to the home, connect to the business. The future of those businesses is not so much connecting to the home or to the business, the future of those businesses is getting in the home and in the business,” he says.
To Mr Sabia, the transformation of the PTTs - the “Post, Telephone and Telegraph” moniker seems more quaint by the day - through the integration of information technology and telecommunications represents both challenge and opportunity in equal parts.
The challenge is one part financial - Bell Canada will have invested more than C$1bn in its IP migration programme by the end of 2006 - one part technological and another part cultural, requiring executives and employees to think about their business and customers in an entirely new way.
It is also competitive. A convergence of technology is accompanied by a convergence in suppliers with carriers expanding from their core voice business into data and video and cable operators attempting to move the other way in pursuit of the same dollars.
But there is also an immediate cost benefit.
“Telecoms has always been about addition and never subtraction. So carriers have built up a lot of networks, a lot of data networks and a lot of systems capability around each one of those networks, all with a lot of cost,” he says.
“In a world when you’re not going to be paid the margins that these businesses got built on and in a world where the growth will be, to use a very broad phrase, in value added services, and where margins are going to be tighter, you’ve got to revamp the cost structure.”
The simplification of Bell Canada’s infrastructure from many networks to one IP-based pipe will take C$1bn - C$1.5bn out of its annual cost base of about C$8bn.
But an equally important prize for Bell Canada is the new package of services it can sell customers.
“IP creates a platform to deliver new services, for instance video into the home, information management tools into the home, different kinds of entertainment into the home other than video. It allows you to do wireless/wireline integration that in a sense takes you beyond the home,” he says.
The attraction of this model to carriers is plain.
With a basic entry level service package Bell Canada can generate average revenues per user of about C$40. But add some more sophisticated services into the mix and that can double to about C$80.
What is happening in the home is happening within the enterprise also, where a new breed of services offered by Bell Canada has cast it into a landscape more usually occupied by systems integration groups, managed services providers and business change
“A carrier starts on the basis of the network and then what we’re trying to do is build up from that, and to move into network management, outsource network management, management of applications that are hosted inside a network.
“And we’re trying to move into areas and types of services that induce businesses to want to move to IP, so be it digital signage, trading systems, different approaches to point of sale - anything that demonstrates to the customer the productivity benefits of moving to a converged network is something that we’re trying to promote,” he says.
Treading so far across turf dominated by the likes of IBM presents a competitive challenge for groups such as Bell Canada, but Mr Sabia believes that the PTT’s expertise in managing networks is a significant boost to their position.
“I think the customer is gonna turn - not exclusively, and I’m not trying to overstate my case here - more and more to the people who customers have trusted to manage complex networks. We see it with large insurance companies, and banks where increasingly the CIO will say, ‘you guys know about networks and voice over IP and the related data capability that can be integrated with voice over IP, that’s all sitting in a network, that’s what you guys do and so I’m gonna go to you to do that,’” he says.
Almost 18 months ago when Bell Canada began the process the corporate response was underwhelming, but Mr Sabia say that his customers are beginning to bite as the group has signed large contracts in the financial services, education and public sectors.
“It’s starting to move and it’s starting to move with increasing velocity and now, by and large, we don’t sign an enterprise contract today that doesn’t have a migration path to IP in it, because we want to move aggressively, we want to be able to shut down other data networks, we want to be able to take out those costs.”
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