Ž .Computer Standards & Interfaces 20 1998 135–139

MoU success stories: interoperability in telecommunicationswithin a competitive, multiprovider, multicultural environment

Jerker Torngren )

( )European Public Telecommunications Network Operators’ Association ETNO , BouleÕard Bischoffsheim 33, 1000 Brussels, Belgium

Abstract

Early elaboration and adoption of standards is an important prerequisite for interoperability of telecommunicationnetworks, services and applications. Recognised worldwide and regional standardisation organisations, as well as a fastgrowing number of fora, are working towards this objective. But even more important are the mechanisms, by which theusers—that means those, who might be the customers of standardised products—become convinced and decide to invest inthose products, which allow seamless interconnection of networks, proper interworking of services and terminals andinteroperability of applications. In Europe, where in parallel with the ongoing liberalisation of the telecommunicationsmarket, traditional regulatory instruments like public type approval requirements have become outdated, public networkoperators have developed a successful instrument for the coordinated introduction of networks and services: the so-called

Ž .memoranda of understanding MoUs . Most prominent examples for such MoUs are the memorandum of understanding onthe development and coordinated implementation of a second generation mobile communication system—today well-knownunder the shortname GSM-MoU—and the memorandum of understanding for the coordinated introduction of ISDN. Themain advantages and results of those MoUs are outlined in this paper. Based on these positive experiences—and of coursetaking into account the changing regulatory environment in the European Union and its member states, as well as theglobalisation and convergence of the telecommunication and information processing market—telecommunications operators

Ž .in ETNO European Telecommunications Public Network Operators’ Association have now started the drafting of a newmemorandum of understanding on an interoperability platform for broadband telecommunications services, based on

Ž . Ž .asynchronous transfer mode ATM -technology ATM-MoU , which is envisaged to be open for signature by anyorganisation lawfully able to provide public telecommunications networks andror services from early 1998. q 1998Published by Elsevier Science B.V. All rights reserved.

Keywords: MoU; Interoperability; Telecommunications

1. The need for collaboration in telecoms

The most sophisticated telecommunications termi-nal in the world is of little use to anyone if it cannotbe linked to a similar terminal. On the other hand,

) Tel.: q32-2-219-32-42; Fax: q32-2-219-64-12; E-mail:torngren@etno.be

the value of a telecommunications network increasesexponentially in relation to the number of connectedusers. For these reasons, among others, we used tothink of the telecommunications industry as a ‘natu-ral monopoly’. But even the reach of the oldmonopolies extended no further than the borders oftheir respective countries. A considerable coordina-tion effort was therefore required to ensure the inter-

0920-5489r98r$ - see front matter q 1998 Published by Elsevier Science B.V. All rights reserved.Ž .PII: S0920-5489 98 00048-8

( )J. TorngrenrComputer Standards & Interfaces 20 1998 135–139136

operability of telecommunications services at theinternational level.

The seamless international interconnection ofPlain Old Telephone Services has been a fact of lifefor so many years now that it is easy to forget what aformidable achievement this represents. When I liftthe handset in my home or office I take it for grantedthat, within a few seconds, I can be linked withanother person in virtually any other country on thesurface of the planet. Nevertheless, when theEconomist magazine recently picked its Seven Won-ders of the Modern World, the international tele-phone network was one of the triumphs of technol-ogy and human cooperation that it celebrated.

2. The growing difficulty of collaboration

Since comprehensive international interconnectionwas first implemented, the telecommunications in-dustry has undergone many changes and the type ofcoordination that made this achievement possible isnow much more difficult to achieve. There are anumber of reasons for this.

The first is technological progress. Interconnec-tion is no longer simply a matter of splicing copperwires.

The second is privatisation. The mechanismsneeded to facilitate basic voice communication acrossthe globe were established in a framework of collab-oration between governments and government-ownedoperators for whom return on investment was often asecondary consideration. In the new telecoms envi-ronment, the only projects to be considered aboveand beyond universal service requirements will bethose that offer a clear payback.

The third reason is market liberalisation. Thedifficulties of pan-industry coordination clearly in-crease in line with the number of actors involved.

Do not think, by the way, that this speech isintended as a lament for the cosy world of monopolywhere telecom operators worked hand-in-hand witheach other and their respective governments. Thebenefits of market liberalisation as a spur to innova-tion and efficiency far outweigh the inconveniences Ihave identified. Nevertheless, the fact remains. Thetask of ensuring interoperability between networks isundoubtedly more complex than it once was.

3. The growing importance of collaboration

In Europe, these difficulties have emerged just asthe possibilities for seamless communication acrossthe continent have grown in importance. For over 10years now the European Union has been seeking tostimulate European competitiveness through a deter-mined effort to build a genuine common marketwithin its borders. The aim has been to create anenvironment in which enterprises—small- andmedium-sized firms as well as multinational corpora-tions—can trade and invest across the continentwithout regard for national frontiers. This effort hasmet with considerable success but, as the emphasisof economic activity shifts towards the processingand transfer of information, this success risks beingundermined if European businesses and private citi-zens do not have access to a seamless pan-Europeantelecommunications infrastructure.

4. MoUs as a solution

To sum up my argument so far: industry coordina-tion has become more difficult at the very moment ithas become most important. Fortunately, a solutionis at hand in the shape of industry-led memoranda ofunderstanding. The type of arrangement I have inmind does not create any legal obligations for itssignatories. It is rather a voluntary agreement basedon a public commitment by its signatories to respectcertain principles, and to work towards a consensuson certain specified goals. In the remainder of mypresentation I would like to describe two successfulexamples of such agreements before going on tooutline the work which ETNO is currently undertak-ing in relation to ATM networks.

5. Two MoU success stories

The first precedent I would like to quote relates tothe GSM mobile telephone system. The success ofGSM is well known but how was this achieved? Infact the story goes back to September 1987 when allthe public network operators from westernEurope—most of them potential GSM operators—met in Copenhagen to sign an MoU based on

( )J. TorngrenrComputer Standards & Interfaces 20 1998 135–139 137

preparatory work by a smaller group of interestedoperators. The agreement covered such areas as timescales for development of standards and service im-plementation, compatibility of numbering and rout-ing plans, and a common understanding on the re-quirements for roaming between networks. The workcarried out under the MoU resulted in the successfulfinalisation of the GSM specification in 1993—at7000 pages the most voluminous standard ever pre-pared by ETSI.

It was this MoU that laid the foundation for thedevelopment of GSM into the most successful mo-bile telephone technology in the world providing thebasis for over 200 networks in live commercialoperation, and accounting for over 44 million sub-scribers which together represent 28% of the worldwireless market. From the users’ viewpoint, theframework established by the MoU ensures that thehandset I am carrying in my briefcase today canmake and receive calls anywhere in Europe, as wellas many other countries across the world. Further-more, the standards established by the MoU providea basis for competition between networks resultingin ever-falling prices for consumers.

The second MoU success story I want to relateconcerns EURO-ISDN. As we all know, ISDN tech-nology has been available for many years now, butcustomer take-up was at first extremely slow. Nodoubt poor marketing must take part of the blame forthis state of affairs. However, account must also betaken of the fact that most European operators ini-tially opted to pursue their own idiosyncratic imple-mentations of ISDN. This left end-users doubly dis-advantaged. They were unable to use the service forinternational communications, and they had no ac-cess to low-cost terminals since manufacturers hesi-tated to start mass production. This situation was notremedied until 1989 when 31 public operators from24 European countries signed an MoU regardingimplementation of a set of core services conformingto ETSI standards. These standards were elaboratedby ETSI by the end of 1992. Since this date, otherfactors such as the need for fast internet access haveintervened to boost the demand for ISDN services.However, the pan-European interoperability estab-lished by the MoU has undoubtedly also contributedto the rapid growth in ISDN subscriptions which theindustry has seen in recent years.

What lessons can be drawn from these examples?The first is the importance of ensuring an appropriatecritical mass of signatories. A dilemma inherent to astandards-based network industry such as telecom-munications is that innovative companies may oftenfind themselves punished rather than rewarded forbeing first-movers in the implementation of a newtechnology. The timely availability of standards isnot alone sufficient. What is also required is somecommitment by all related parties to apply the stan-dards and to use them—to a large extent—in thesame way. By ensuring broad support from actorsacross the region, the two MoUs I have describedwere able to build confidence among operators andmanufacturers that their investments would not bewasted. We can note that, once critical mass isachieved, the process acquires its own momentum,and that both MoUs subsequently acquired a numberof signatories also from outside Europe.

The second lesson is that—in addition to a morereliable climate for investment—both MoUs createdstrong economic incentives for their signatories. Pro-duction on the basis of a single standard for thewhole European market allowed manufacturers toachieve economies of scale which could be passedon to network operators and end-users in the form oflower prices. Furthermore, the existence of a singlestandard created a highly competitive environmentfor terminal and network equipment since operatorsand end-users were not tied to a single manufacturer.By ensuring a proper balance between cooperationand competition, the MoUs established a win–winsituation for all parties—including consumers.

The third lesson is the importance of focusing oncustomer needs. Too often in the past, telecom oper-ators have concentrated on providing services thatthey believed their customers ought to want. How-ever, in the new competitive environment for Euro-pean telecommunications operators will focus oncollaborative efforts which allow them to offer ser-vices which respond to a genuine demand.

Finally, I should like to highlight the contributionof public authorities. Although both MoUs wereindustry-led initiatives, the public support of theEuropean Commission and national governmentsplayed an important role in helping to build thecritical mass of signatories needed for their success-ful launch. Public authorities were also helpful in

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other specific ways. For example, GSM could nothave succeeded without the willingness of nationalgovernments and the European Commission to coop-erate in the allocation of appropriate frequencies.

6. ETNO and the origins of the ATM MoU

It is with these lessons in mind that ETNO hasembarked on the elaboration of an MoU designed tofacilitate the introduction of interoperable ATM ser-vices. ETNO, I should explain, is the EuropeanPublic Telecommunications Network Operators’ As-sociation. The organisation is the principal tradeassociation for European telecom operators, repre-senting 37 companies from 32 countries. Full mem-bership is open to all providers of public voicetelephony. Associate membership is open to otherproviders of public telecommunications networks andservices. A number of new entrants to Europeantelecom markets have already joined and we areactively seeking to attract more.

Since 1995 ETNO has been participating in theHigh Level Strategy Group on ICT standardisation.ETNO’s partners in this undertaking are ECTEL,representing European telecom manufacturers, EU-ROBIT, representing the IT industry, and EACEM,representing consumer electronics manufacturers.The group was set up with encouragement from theEuropean Commission in order to help identify ob-stacles to the development of the European Informa-tion Society, and one of its first reports concerned‘Barriers to Broadband Networking’. The report in-cluded the recommendation that establishment of anMoU should be undertaken in order to enable inter-operable European ATM services by defined dates,and to commission the required technical standardsfrom the appropriate standards bodies. The recom-mendation was addressed to ETNO as the organisa-tion best-placed to undertake this effort and, towardsthe end of last year, the Association responded posi-tively to the challenge by setting up a working groupcharged with this task.

7. The need for an ATM MoU

Why has ETNO chosen this course? After all, thepotential benefits that ATM technology can bring to

end-users are widely recognised, and considerableefforts by European and international organisationshave already been undertaken with a view to earlyimplementation of a seamless web of high bitratenetworks, services and applications. For example,wide ranging pre-competitive collaborative experi-mental work has been carried out within EU-RESCOM, the European ATM Pilot, the G7 Inter-working Broadband Networks project, and EU-sponsored research projects such as JAMES. In addi-tion, international standards for ATM orientedtelecommunications are being developed by ETSIand ITU. ETSI’s adoption of recommendations for aEuropean Backbone Telecommunications Networkbased on ATM and supporting IP protocols andservices is particularly noteworthy. Publicly avail-able specifications are also being developed in anumber of other frameworks such as the ATM Fo-rum.

It is clear from these examples that Europeanoperators have already invested considerable effortin both R and D and preliminary trials. However,some standards are still missing and only now isATM technology becoming sufficiently mature topermit its generalised application in the publictelecommunications market. This leaves the Euro-pean industry facing a Catch 22 situation of the typeI have already discussed. On the one hand, networkoperators need to see a demand for new broadbandservices before investing heavily in new network andservices infrastructure. Manufacturers of network andterminal equipment also need to be sure of concreterequirements from their customers before investingin high volumes of production. On the other hand,end-users are reluctant to subscribe to ATM servicesunless pan-European interoperability can be assured.This is exactly the sort of vicious circle that an MoUcan serve to break.

8. Scope of the MoU

We envisage that the MoU now under elaborationwill provide a framework for development of recom-mendations and specifications using open standardswherever possible. Two areas will be covered: firstlythe network capabilities domain related to intercon-nectivity, transfer capabilities and network manage-

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ment functions, and secondly the services capabili-ties domain related to the interworking of differentnetworks, to services management and to servicefunctions. It is not intended to deal with the applica-tions capability domain, but input from manufactur-ers and service providers will be needed in order toensure that the necessary functions are supported bythe relevant network interfaces.

The end result of this work will be a set ofstandards, specifications and technical informationwhich will provide a basis for any-to any communi-cation for certain services among the multiple possi-bilities offered by ATM.

The achievement of these objectives will requirecollaboration with a wide range of organisationsoutside ETNO. In this context, I am pleased to notethat ETSI has already reacted by establishing a newproject for interoperable ATM services with the in-tention of responding to the standardisation needsarising from the MoU.

ETNO is of course sensitive to the implications ofthis work in the context of European competitionlaw. Cooperation in the interests of consumers mustnot be allowed to slide into anti-competitive collu-sion and, with this point in mind, I would like toemphasise a number of points.

Firstly, although ETNO is taking a lead role in thelaunching of the MoU, the final agreement will beopen for signature by any organisation lawfully ableto provide public telecommunications networksandror services—whether or not they are membersof ETNO. It makes sense for ETNO to take thesteering wheel at the start since the ready-madecoordination framework provided by the Associationcan help the MoU to achieve the critical mass which

I identified as so important. However, once the MoUis signed, it is logical for ETNO to move into theback seat. In the meantime, we are actively seekingto identify more operators—new entrants in particu-lar—who are keen to participate in the elaboration ofthe MoU.

Secondly, we envisage that use of the specifica-tions defined through the MoU process will be purelyvoluntary. Signatories will remain free to divergefrom the agreed standards or to make or market otherservices or products which do not conform to thesestandards.

Thirdly, the specifications will be publicly avail-able, and any public or non-public operator—whetheror not a signatory of the MoU—will be free toimplement them.

Taking all these points into consideration, I amconfident that the MoU will be anything but anti-competitive in its impact. We shall instead lay thefoundation for seamless interworking of existing andfuture broadband networks by providing an ATMbased platform and related management functionsenabling the provision of a wide range of highbandwidth services. Operators will be enabled tobroaden their range of service offerings to the ulti-mate benefit of customers across the continent, andcompetition in the liberalised European market willbe stimulated rather than stifled.

September, 1997

Mr. Jerker Torngren became ETNO’s first Director on 1 March1997. Mr. Torngren has worked in the Swedish National Post andTelecommunications Agency as Principal Lawyer, EU Affairs. Hehas also been the Swedish delegate to various international work-ing parties in telecommunications and chairman of the OECDworking group on telecommunications and information policy.