tsp, the platform of choice? - skolan för datavetenskap ... the platform of choice? - a study of 3g...

TSP, the platform of choice? - A study of 3G market opportunities and operator needs on a platform

Master Thesis at Royal Institute of Technology August 2001 – December 2001

Author: Izabella Choma

Academic Advisor: Stewart Kowalski Corporate Advisor: Michael Gudmandsen

Examiner: Nils Enlund

TSP, THE PLATFORM OF CHOICE? Izabella Choma

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ABSTRACT This thesis is an assignment sponsored by Ericsson Utvecklings AB and aims to describe and

analyse the structural changes in the telecom market in the evolution towards 3G and

investigate Ericsson’s key customer needs for third generation (3G) mobile network

platforms. To collect relevant information on customer needs in person interviews were hold

with key customers and Ericsson staff. The first part of the thesis focuses on network vendors

and their immediate customers i.e. telecom operators. The findings support the claim that the

future telecom market will be a merger between telecom and datacom industry resulting in the

more competitive market situation for Ericsson network platforms. The analysis of the

gathered data indicates that telecom operators see the core value of the platform in the

functionality that enables increased value for end-users i.e. subscribers. In the thesis a number

of platform features are described and identified. Furthermore, the study shows that one of the

Ericsson platforms, namely The Ericsson Server Platform (TSP) is the platform that actually

matches customer needs. However there is a little awareness among telecom operators of the

benefits of TSP. It is suggested by the author that the “Intel Inside” strategy should be adopted

by Ericsson Utvecklings AB to improve the customer awareness.


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Table of Contents 1. Introduction ........................................................................................................................ 4

1.1 Background................................................................................................................. 4 1.2 Purpose ....................................................................................................................... 5 1.3 Delimitations .............................................................................................................. 5 1.4 Definitions .................................................................................................................. 6 1.5 Abbreviations ............................................................................................................. 7

2. Method................................................................................................................................ 9 2.1 Scientific approach..................................................................................................... 9 2.2 Choice of research method ....................................................................................... 10 2.3 Research strategy...................................................................................................... 10 2.4 Data collection.......................................................................................................... 11 2.5 The quality of the research....................................................................................... 14

3. Theoretical framework ..................................................................................................... 16 3.1 Choice of theories ..................................................................................................... 16 3.2 The concept of value chain....................................................................................... 16 3.3 Integrating technological and market change ........................................................... 18 3.4 Identifying customers needs ..................................................................................... 21

4. The status of 3G................................................................................................................ 24 4.1 Impact of technology................................................................................................ 25 4.2 3G networks – the Ericsson solution........................................................................ 27

5. Positioning TSP in 3G Service Network .......................................................................... 31 5.1 TSP – an overview.................................................................................................... 31 5.2 TSP solution for 3G service network ....................................................................... 33

6. Telecom – market in change ............................................................................................. 36 6.1 Telecom vs. Datacom............................................................................................... 36 6.2 Evolution of the value chain..................................................................................... 37 6.3 Market drivers, enabler and barriers......................................................................... 39 6.4 Evolution of the network vendors’ market ............................................................... 41

7. Identifying customer needs - results and analysis ............................................................ 44 7.1 Choice of the cases ................................................................................................... 44 7.2 Identifying customer needs - results ......................................................................... 45 7.3 Analysis .................................................................................................................... 48 Platform that satisfies key customer needs........................................................................... 51

8. Conclusions ...................................................................................................................... 53 8.1 Implication of the changing market.......................................................................... 53 8.2 Is TSP the platform that satisfies customer needs? .................................................. 54 8.3 Suggestions for further research............................................................................... 55

9. Closing reflection ............................................................................................................. 56 10. References .................................................................................................................... 58 Appendix A - Interview guide .................................................................................................. 61 Appendix B – Standardisation Bodies...................................................................................... 62


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1. Introduction

1.1 Background The changes that have taken place in the telecommunications industry during the last decade have had great impact in the industry’s evolution shaping the current market situation. Telecom markets have been deregulated and liberalized, increasing competition and affecting prices. Former monopolies of state owned operators have now started to confront competition, which has required improved efficiency in terms of operations and costs. New companies have entered the market, diversifying from other industries, like utilities (water, electricity), IT and others, forming a new spectrum of actors in the industry that shape a new market dynamics not existing before. These dynamics are even notable among traditional network vendors that are now experience increasing competition from a datacom industry. Technology development is another important factor affecting the changes in the telecommunications market. Improvements in capacity and speed of transmission, emerging technologies like IP switching, voice over IP, computer telephony integration, are just some examples of technology developments and innovations. Today everyone is talking about 3G and its great opportunities, where the merge between telecom and datacom will be even more apparent as well as the increasing overall competition. And even if the future of 3G, and its impact on the market is still mostly insecure the first steps towards it have already been taken. By introduction of GPRS we have crossed the border from traditional circuit-switched telecom networks to the packet-switched, IP-networks. This will be unavoidably followed in the longer term by UMTS/3G.

1.1.1 Ericsson and their immediate customers All the above changes imply significant changes in the marketplace, creating new types of actors and service models. New players enter from a diversity of industries: IT/datacom, utilities, financial institutions, media companies, equipment manufacturers or new built companies. Alliances and merger take place many times in order to better and faster understand market and competitors. This is the new reality in the traditional telecom world that challenges both Ericsson and Ericsson’s customers. Knowing that is a crucial condition for sustaining competitive market position. Inevitably what is happening impacts even the view and demands on the network equipment. Current second generation platforms cannot address the demands of third generation (3G) systems. New platforms are required to address the driving forces behind the evolution towards a new telecom and datacom generation. At the end, what Ericsson is facing is a very dynamic and changing environment, and in answer to the question on what will the future of telecom look like? It would be hard to tell. What does seem clear is that competition will harden, technology developments will go (even) faster and market players will be as diverse as ever.

1.1.2 A development unit’s role within Ericsson Product Development Unit TSP & WPP (PDU TSP & WPP) where the master thesis is done, is a development unit within Ericsson that organizationally is quite distant from end-customers i.e. telecom operators. The Ericsson Server Platform (TSP) that is developed here


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is used by other Ericsson units for developing various applications and then provided to the operators. Consequently the PDU has no direct contact with the operators and all information from them that reaches the unit, comes in form of technical requirements extracted by the units in between. The division for Product Marketing and Strategies, within the PDU, that has initiated this assignment experience that creating a shortcut between the unit and the operators would contribute with the information of great value, giving a picture of what customers really expect from platforms. This could give marketing new, innovative perspectives and help the platform sustain competitive advantage. It is clear that traditional strategies will not work, and in order to maintain competitiveness, players and thereby Ericsson must be prepared to changing decisions and demands from the customers.

1.2 Purpose The purpose of this thesis is to investigate Ericsson’s key customer needs for third generation mobile network platforms. In order to be able to fulfil this purpose I believe that there is a need for a comprehensive description of the current situation in the telecom market. Consequently I will also describe and analyse the structural changes within the market, focusing on the interface between network vendors and their immediate customers i.e. network operators. Research questions:

• What are the technological and structural changes within the mobile telecom industry in the evolution towards 3G?

• Which customer needs of a platform for third generation mobile networks are of the highest importance?

• How well is The Ericsson Server Platform (TSP) positioned due to (1) the changing telecom market and (2) customers needs?

1.3 Delimitations Due to the limited time and resources for conducting this study some delimitations have to be made. First, this thesis is focusing on the more strategic level of the studied objectives, omitting detailed technical aspects. The intention of the technical parts is to explain the advantages and limitations of the technology, not to clarify the complete technical structure. Another delimitation is to focus on Swedish mobile telecom market. Sweden is at the forefront of mobile technology and market leadership, and changes due to the evolution towards 3G are likely to be implacable on the other markets. Furthermore, choosing Sweden gives me opportunity to accomplish personal interviews with the operators, contributing to the deepening understanding of the studied issues. In addition only one well-defined part of the 3G-networks is considered, namely the Service Network. This is the place where, the convergence between telecom and datacom is most clear and already is a fact. Service Network solutions may namely contain virtually any type of services and become the convergence place for services known as “telecom-“, “internet” and “multimedia” services. These can be combined into new hybrid services along with sets


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of services not on the market yet. Consequently, this gives the found information more weight and it is not only about speculations, something that otherwise is quite common in the discussions about 3G.

1.4 Definitions I find it important to introduce the reader to certain concepts that are occurring through the report. Therefore, the section below contains brief explanations of the concepts that may be unclear in the text and need further explanations. All IP network is one where all routing of sessions and calls from terminal to server is done using IP addressing or where addresses are translated in packets to a gateway destination identified by an IP address. An All-IP network allows IP sessions to be established between a terminal and a server transparently to the medium through the communication is established and processed. Common Object Request Broker Architecture (CORBA) is an architecture and specification for creating, distributing, and managing distributed program objects in a network. It allows programs at different locations and developed by different vendors to communicate in a network through an "interface broker." Customer, end-customer both terms relate to telecom operators even called network operators. End-user, subscriber refers to consumers. Intelligent Networks (IN) Products and services used in order to increase the functionality in the operators’ networks. Examples are solutions supplying services such televoting, transfer calls to other numbers or virtual private networks (VPN).

International Telecommunication Union (ITU) is an intergovernmental organisation through which public and private organisations develop telecommunications. The ITU was founded in 1865 and became a United Nations agency in 1947. It is responsible for adopting international treaties, regulations and standards governing telecommunications.

A Platform is any base of technologies on which other technologies or processes are built. In telecom, a platform is an underlying system (consisting of hardware, middleware, software and operating systems) on which application programs can run. Historically, most application programs have had to be written to run on a particular platform. Although these proprietary platforms continue to exist, new open or standards-conforming interfaces now allow many programs to run on different platforms or to interoperate with different platforms through mediating or "broker" programs.

The 3rd Generation Partnership Project (3GPP) is a collaboration agreement that was established in December 1998. The original scope of 3GPP was to produce globally applicable technical specifications and technical reports for a 3rd Generation Mobile System based on evolved GSM core networks and the radio access technologies that they support. The scope was subsequently amended to include the maintenance and development of the GSM including evolved radio access technologies (e.g. GPRS and EDGE).


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1.5 Abbreviations API

Application Programming Interface

Camel

Customised Application for Mobile Enhanced Logic

CDMA

Code Division Multiple Access

CORBA

Common Object Request Broker Architecture.

EDGE

Enhanced data rate for GSM/global evolution

ETSI

European Telecommunications Standards Institute

GPRS

General packet radio service

GSM

Global System for Mobile Communications

HLR

Home Location Register

HSCSD

High-speed circuit-switched data

IDEA

Integrated Distributed Application Environment

IMT

International Mobile Telecommunication

IN

Intelligent Network

IP

Internet Protocol

ISDN

Integrated Services Digital Network

ITU

International Telecommunications Union

OA&M

Operation, Administration and Maintenance

ORB

Object Request Broker

OSA

Open System Architecture

PLMN

Public Land Mobile Network

PSTN

Public Switched Telecommunications Network

RAN

Radio Access Network

SCS

Service Capability Servers


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SDE

Service Development Environment

TCP/IP

Transmission Control Protocol over IP

TSP

The Ericsson Server Platform

UMTS

Universal Mobile Telecom System

UTRAN

UMTS Terrestrial Radio Access Network

VAS

Value Added Services

WCDMA

Wideband Code Division Multiple Access

VHE

Virtual Home Environment

3GPP 3rd Generation Partnership Project


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2. Method This chapter provides an overview of the method used in the study. A general discussion about scientific approach introduces the chapter, followed by description of chosen research method and techniques for collecting data. The concluding section discusses the quality of the investigation.

2.1 Scientific approach In scientific studies it is necessary to define basic concepts and standpoints. Not only are the view of the relation between theory and reality, but even choice of method such fundaments. “Method” is not only the way to the answer (methods means way in Latin), it even comprises the objectives that specifies choice of the way (Lantz, 1993). A fundamental question to answer, while accomplishing a scientific work, is what science is and the relationship between it and reality. Different scientific traditions have different answers to this question, one possible way to do it in is to place science and reality in the context of knowledge. Patel & Davidson (1994) illustrate this with so called knowledge staircase (see Figure below).

Philosophy

Metha science

Science

Reality Incr

easi

ng le

vel o

f kno

wle

dge

Figure 1. The knowledge staircase. Inspired by Patel & Davidson (1994)

On the top of the staircase you will find philosophy that deals with a whole spectrum of truth-seeking subjects, from ethics and moral to questions about the origin of knowledge and its validity. Next under the philosophy, Patel & Davidson (1994) place metha science, which could be described as a theory about theories. On the next knowledge level, nearest to reality, is the science, defined as space for theory creation with the phenomenon from reality as objects. Another way to define science presents by Eriksson & Wiedersheim (1999). According to the authors the definition of science embraces four different criteria:

• Science is an approach, where you always have to in creative and critical way question current “facts”, conceptions and methods.

• The questions of issue have to be placed in right context with the clear explanation of who the questioner is.


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• Knowledge should be presented in such a way, which can be questioned by somebody else. One aspect of this criterion is to design the study in repeatable way, i.e. someone else who uses the same method can achieve the same result.

• Full openness in the description of both results and the used method is required. My intention is to follow above described criteria through my whole study and by these means follow the scientific requirements of the study. How well I have managed to do is an issue discussed in the section about quality of the research.

2.2 Choice of research method Consciousness in the choice of research method and the method application are essential in the efforts towards scientific approach. This holds even for the choice of techniques of data collection. Moreover, it is of great importance to clearly describe the method of choice and its application (Ejvegård, 1996).

2.2.1 Qualitative and quantitative methods A distinction between qualitative and quantitative methods is common way to describe different research methods. These two methods have different purposes and their value has to be discussed with respect to the chosen objectives (Lantz, 1993). Qualitative methods give an opportunity to increase the understanding of studied phenomenon and to describe these in the differentiated way. From the analysis of a single case the possibility to build models is created and the phenomenon can now be illustrated from a new point of view. This even contributes to better understanding of complex contests. However, the qualitative analysis of data cannot be quantified in a meaningful way (Lantz, 1993). Quantitative methods give knowledge about “how much”. They are descended from the natural science where large amount data often are collected in order to describe, with help of statistics, the problem in the objective way (Merriam, 1994). Choosing a quantitative or qualitative method for a certain research assignment should not be decided from what the researcher prefers but from the properties of the assignment. The purpose of this thesis is to increase understanding of Ericsson’s customer needs. This is supposed to be extracted from the information gathered from sources providing various aspects associated with the issue. In other words, the approach is not to quantify but to logically synthesize the results. Consequently, the qualitative method will be the most appropriate.

2.3 Research strategy Yin (1994) identifies five main research strategies; experiment, survey, history, archival analysis and the case study. Each method is a different way of collecting data that follows its own logic. The various research strategies answer different questions they also have different control and time focus and are more or less convenient depending on if the research of qualitative or quantitative nature. As already mentioned I decided to accomplish a qualitative study and consequently sought for an appropriate research strategy. I found that case study would fulfil my goals in the best way.

2.3.1 Case study According to Christensen et al (1998) a case study has a qualitative character where the researcher in dept studies a minority of cases, either at a specific occasion or over time, and


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may be based on both qualitative and quantitative primary and secondary data. This implies that you cannot conduct statistical generalisations since you do not seek statistical representation when you select case; instead you seek for cases rich of information and understanding. On the other hand it is possible to accomplish analytical generalisations. The researcher can from different specific and comprehensive facts bring out general patterns, which enables to create an understanding through explaining complex connections. That is exactly what the purpose of this study is; therefore the case study as a research strategy was an obvious choice. A case study is simply taking a limited part of a bigger whole, few objects that are studied in several respects (Ejvegård, 1996; Eiksson & Wiedersheim 1997). The point is to choose a case or cases that in the best way represent reality and by that build a foundation of generalising. A more detailed description of the case chosen in this study can be found in Chapter 7.1.

2.4 Data collection There are different techniques for collecting data and the choice depends mainly on what seems to give the best answer to the question of issue for the study in relation to the time and the resources that the researcher has to his/her disposal (Patel & Davidson, 1994). One way to categorize different type of data is as secondary data and primary data. Secondary data is the data that previously has been collected by someone else, possibly for some other purpose then the one for the current study. Written sources such as books, articles, reports etc as well as Internet are secondary data sources. Primary data, on the other hand, is the data collected by the researcher for the purpose of the study e.g. observations or interviews. Even some official documents such as Code of Laws are considered as a primary source. Both primary and secondary data have their strengths and weaknesses (see Table 1) and no single source has a complete advantage over the other. In fact, the various sources are highly complementary, and consequently researchers use multiple data sources, combining both secondary and primary data.

Table 1. Strengths and weaknesses of different data sources. Inspired by Yin (1994) Source of data

Strengths Weaknesses

Primary data • Targeted- focuses directly on case study topics

• Insightful – provides perceived causal inferences

• Bias due to poorly constructed questions

• Response bias • Inaccuracies due to poor recall • Reflexivity –interviewee gives what

interviewer wants to hear Secondary data

• Stable- can be reviewed repeatedly

• Unobtrusive- not created as a result of the case study

• Exact – contains exact names, re ferences, and details of an eve

• Broad coverage

• Retrievability – can be low • Biased selectivity, if collection is

incomplete • Reporting bias – reflects (unknown)

bias of author

Following sections gives further description of primary and secondary data, describing choices made for the purpose of this study too.


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2.4.1 Primary data - interviews The interview is one of the most important case study information (Yin, 1994). It is even the main techniques for collecting primary data in the qualitative study. Therefore, the interviews have a very important role throughout this study. Interviews can be characterized in two different dimensions: the extent of standardisation and the extent of structure (Trost, 1997). Standardisation is about the level of similarity of questions and their order between different interview situations. An interview with the high level of standardisation is very similar to a survey; exactly the same questions are always answered in exactly the same order. An interview with the very low level of standardization means, on the other hand, that questions are formulated during the interview. The level of structure determines to what extension the interviewee are able to formulate his/her own answers. Here we can have a whole spectrum of different levels of structure, from the extremely structured design that only gives the possibility to answer yes or no, to the maximal freedom without any limitations. As I consider this, interviews can be described in three different phases: • Preparation • Interview occasion • Supplementary work Preparation A lot of work has to be done before interviewing. Selection of the interviewees is one of the fundamental issues before starting interviewing. The very first step to take is to identify key categories of interviewees, which would ensure to get information and insight about the subject from wide range of perspectives. In my interviews I identified two categories of respondents: (1) Ericsson-people who in different ways work towards operators, supporting them with requested information about platforms and of course (2) customers i.e. operators (see Chapter 7.1.1 for details). Some interviewees were selected on the basis of a “snowball effect”, which means that interviewees recommended other persons with knowledge in the area. Before interviewing every respondent was introduced to the subject of interview with en e-mail containing background information etc. Finally an interview-guide was created that would be used during interviews (see Appendix A). Interview occasion The interview form used in this study can be described as qualitative, semi-standardized and semi-structured. Qualitative, since the aim of the interviews was to increase the understanding of the studied phenomenon and to describe these in the differentiated way. Moreover, I decided to use the open-ended interviews, in which I could ask key respondents for the facts of a matter as well as for the correspondents’ opinions. I chose taking notes as a method of recording the interviews. Supplementary work Directly after the interview I made a clean copy of all the notes, eliminating repetitions and clarifying key information. Since the interviews were conducted in Swedish I had to translate the content into English. This material has been used in the analysis-phase of my study, and now is a part of this report.


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2.4.2 Secondary data The major strength of the case study data collection is the opportunity to use many different sources of evidence (Yin, 1994). It is recommended to start a study with an investigation of what has already been done within same research area. Thus, on the eve of the study, I sought relevant information, which could increase my knowledge and give a deeper understanding of the subjects related to the study. I read articles about industry and reports from research companies, which gave a comprehensive understanding of the situation in the telecom market. An important secondary source has been Ericsson’s intranet and all the “endless” amount of data that can be found there. The process of searching relevant secondary data continued from the beginning to the end of study, even through the type of documents was changing while the study proceeded. The secondary data that have been used consists of articles, Internet sources, analyst-reports books and technical documents in the first stage of study and mainly of the documents from the tender process between Ericsson and telecom operators during the second stage of study. The latter has been a very important data source that has contributed with a lot of essential information (Chapter 7.1.1 presents more details).

2.4.3 Data Analysis Data that form the basis for a qualitative analysis is descriptive, but a qualitative study aims further then a description of what has been examined. The analysis is the differentiation of the globally experienced, a search for what is hidden under the surface. Summarizing what respondents have said respectively what has been found in different documentations does not necessary mean increased understanding for the objects of study (Lantz, 1993). Therefore it is essential to critically view the collected data continuously throughout study and not only by the point final analysis phase. The process of data analysis that I have tried to apply in this study is illustrated in the figure below. It is important to point out, that it is an iterative process that frequently recurred in this study.

Data collectionData collection

Critical examination of drawn conclusionsCritical examination of drawn conclusions

Searching for

the ”pattern”

Searching for

the ”pattern”

Data reductionData reduction

Creating dimensions that correctly reflect the contents

Creating dimensions that correctly reflect the contents

Figure 2. The process of data analysis (Lantz, 1993) According to Lantz (1993) data reduction is actually the very first step in data analysis process. This is the phase where raw data is sorted by means of different level of relevance. Some parts are eliminated, and some other highlighted with respect to the investigated concepts. The following step is to search for the pattern. The objective makes a starting-point for how to arrange the data. The investigator has to find a way to group data that makes it possible to answer the research questions and deepens the understanding of the objectives of


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the study. Finally it is important to critically examine drawn conclusions. A good way to do it is by asking following questions (Lantz, 1993): • Are there any alternative ways of interpreting the data? • If raw data groups differently, will this show different patterns that lead to different

conclusions? • Does the analysis contribute to increased understanding in the studied area?

2.5 The quality of the research A study should be critically judged to determine its quality. A classical way to describe quality is in terms of reliability and validity.

2.5.1 Reliability The reliability of an investigation is about to which extent the result of the research can be repeated. The high level of reliability minimises the number of biases and errors in the study (Yin, 1994). This is a very important aspect in the case of quantitative methods, where the researcher has clear and explicit way to measure that can be re-utilized in other research situation. It is much more difficult to fulfil requirements of reliability in the case of qualitative studies, such as this one. Therefore it could be meaningful trying to define reliability in different way that suits the qualitative study method better. I have chosen a definition suggested by Trost (1997). According to Trost (1997), reliability in qualitative studies can be described with four different criteria: • Congruence, which is about similarity between questions that are intended to measure the

same. • Precision, which in case of interviews is about the interviewer’s method for registration of

the interview. • Objectivity in the processes of collecting and analysing data. • Constancy that considers the aspect of time and presumes that the phenomenon or attitude,

or whatever it is that is objective for the investigation does not change. These four criteria have been my guideline throughout the study. To achieve the congruence I used the interview guide, it might however be hard to fully replicate an in-dept interview, since the interview to some extent is based on an interaction. Taking notes was my method of choice for registration of the interview. However, this is less precise technique then tape-recording and has most likely impact the level of reliability negatively. Objectivity is maybe the most difficult reliability aspect. Despite a consciousness about it there is a huge risk that the degrees of objectivity and the degree of critical thinking decreases when working intensively with a topic during a long period of time.

2.5.2 Validity Validity concerns whether or not the results of measurements really reflect the properties that are intended to be measured. Yin (1994) identified three criteria in judging the validity of the study: construct validity, internal validity and external validity. Construct validity concerns the question on how well a study measures what it is supposed to be measured. According to Yin (1994) construct validity is particularly problematic when a case study is performed. This is due to the fact that it is hard to objectively decide which data should be collected and the set of measures that should be used often is unclear. To increase the construct validity multiple sources of information should be used as well as using a chain


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of evidence. These two tactics have been utilised to that the project permits in terms of time and resources available. In addition, having the results reviewed by key informants can increase construct validity. Unfortunately, I had no opportunity to do that. Internal validity refers to the extent to which it can be inferred that a casual relationship exists between two (or more) variables, distinguishing between dependent and independent variables. Since this study is exclusively of the qualitative nature, I found that talking about internal validity does not make any sense and will therefore omit this aspect. The external validity concerns the question of whether the results of the study findings can be generalized beyond the specific study. I believe that this study can be generalized on other national and international telecom markets, but is not appropriate for generalizing on other industries.


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3. Theoretical framework This chapter will present the theoretical framework that I have chosen for the report. In accordance to the research questions the chapter contains three different parts. The first part, introduces to the concept of value chain. The next section brings up the issue of technological and market changes. Finally, some theories of relevance for the analysis of customer needs are presented.

3.1 Choice of theories The theoretical part of the study comprises a literature analysis that aims to give a comprehensive basis for the rest of the report. The purpose of this part is to increase pre-understanding of the main issues discussed and analysed in the report. However, the reader should be aware that what is presented here is only a limited amount of theories compared to what has been investigated. I have spent a considerable amount of time in searching for theories that I consider would in the best way support answering the research questions and by those means fulfil the purpose of the thesis. The theory section will begin by examining and discussing theories on value creation, which will be used when analysing the structural changes within the telecom industry in the evolution towards 3G. I believe that an analysis of the industry and the structural changes is necessary for a better understanding of the operators’ needs of network equipment, the platform in particular. The second part of the theory section focuses on the concept of technological innovativeness and how it relates to a market in change. This part I believe gives a better understanding of driving as well as restrictive forces in development towards 3G. Final part of the theory section contains some theories I found being of relevance for the analysis of customers’ needs of the platform in third generation networks.

3.2 The concept of value chain The theories in the following section are chosen in order to be used when explaining and analysing the structural changes within the telecom industry and what these phenomena mean for the parties concerned.

3.2.1 Value chain vs. value system Michael Porter (1998) proposed the value chain as a company tool for identifying ways to create more customer value. Every firm is a collection of activities that are performed to design, produce, market, deliver, and support its products. The value chain identifies nine strategically relevant activities that create value and cost. The nine value-creating activities consist of five primary activities and four support activities. The primary activities represent the sequence of bringing materials into the business, operating them, sending them out, marketing them and servicing. The support activities occur throughout all of these primary activities. To make the activities as efficient as possible it is important to build linkages between them, both horizontal linkages between primary activities and vertical connections between primary and the supporting activities (Porter, 1998). For example technology development occurs in every primary activity, not only in the R&D department.


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A company is a part of the bigger whole, cooperating in interplay with other companies and interested parties. Thus, a value analysis may not only be restricted to the company itself, but must also consider suppliers, distributors and customers. Consequently the value chain concept must be extended into the value system. Value system analysis examines how the various value chains in a given industry area arranged vertically between companies. Again, a linear flow is implicit in the definition. An example of such a value system presents by Kotler (1994), a value-delivery system. The idea of a value-delivery system is that producers connect with their suppliers and distributors in the way that enable effective communication between them, a system known as a quick response system (Kotler, 1994). The result of such strategy is that products will be pulled by demand rather then pushed by supply. The concepts of the value chain and the value system are illustrated below.

Figure 3. The value chain and the value system, based on Porter (1998) The value chain and value system analysis are useful for manufacturing industries but difficult to apply to service firms that have significant human assets, firms whose products have high information content and, in particular, to firms that operate entirely or partially in the value system influenced by more intangible values created through new datacom/electronic services. The latter is pretty much the case in telecom industry today, which entails that different approach such as value network theory is an important complement to the theories presented by Porter.

3.2. 2 Value networks Value networks, though bearing much resemblance to the value system concept introduced by Porter, reject the linear structure of the original model. Lately, theses theories have become popular for analysing changes in the Internet related industries. Since changes in the telecom industry are pretty much influenced by Interne t, I found these theories very useful for my report. The following theory section will describe the value network, primarily based on the literature of Parolini (1999). This is followed by explanation of the forces reshaping the value chain (Andrews & Hahn, 1998). Parolini (1999) argues that Porter’s value chain and value system analysis fail to include those activities that contribute towards creation of value for the final purchaser, but are not included in the value system itself. The value network attempts to broaden the strategic perspective and

Inboundlogistics

Oper-ations

Outboundlogistics

Marketing and sales

Service

Human resource management

Firm infrastructure

Procurement

Technology development

Buyer value chain

Buyer value chain

Buyer value chain

Channel value chain

Channelvalue chain

Suppliervalue chain

Suppliervalue chain

Suppliervalue chain

Supporting activities

Primary activities

The value chain and the value system


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to consider links with both upstream and downstream value chains. Furthermore, Parolini (1999) describes the value creation as sets of activities that jointly participate in the creation of value by using sets of tangible, subtle and human resources. These activities are linked to each other by flows of material, information financial resources.

Consumption

Figure 4. The value network. Source: Parolini, 1999

As the figure above illustrates, the activities of the value network can be seen in the form of nodes and the relationships between them in the form of arcs. The nodes represent value creation or consumption activities while the arcs describe the significant ties and relationships between the activities and may represent flows of materials, services or information (Parolini, 1999).

3.2.3 Forces reshaping the value chain Andrews and Hahn (1998) argue in addition to the previous argumentation that there are two main forces reshaping the va lue chain. The first main force being the perpetual changes in the roles of value system members, which subsequently and almost inevitably result in power shifts within the traditional value-system. In addition to the power shifts some nodes in the traditional value system are totally removed while there is an addition of others. The second force being the customer/consumer preferences for personal customisation and quick gratification, encouraging value system members to surround their joint customers in new ways. The change from the value system to the value network is most apparent in industries operating in dynamic and ever-changing environments with a global scope. The value creation within the industries shifting to value networks is usually even more partner-based than self-sustaining (Andrews & Hahn, 1998).

3.3 Integrating technological and market change This part of the theory section focuses on the concept of technological innovativeness and how it relates to a market in change. I believe these theories give a better understanding of driving forces as well as various barriers in the evolution towards 3G.

3.3.1 Managing innovations An innovation refers to any good, service or idea that is perceived as new (Kotler, 1994). Another way to define an innovation is to see it as a change, change in the things (i.e. products/services) which an organization offers or change in the ways in which they are created and delivered (i.e. process) (Tidd et al, 2001). This is exactly what the third generation mobile technology is about – changes, both technological and structural. It is about


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changes that will impact business opportunities in essential way. Therefore I found the approach considering 3G as an innovative evolution as very relevant, which can contribute to the study with a new interesting perspective. It needs to be pointed out that there is an extensive amount of theories about innovation and its different aspects. However innovativeness is not a main issue of the study, only one of the perspective that has been used, and a theories presented here are just of very limited extent. Consequently, the chapter starts with describing some key themes of the innovation, suggested by Tidd at al. (2001) that I considered being of relevance. Key themes of an innovation Continuous and discontinuous change. A discontinuous innovation is fairly radical, and has disruptive impact on established buyer behaviour patterns. These types of products address need that have previously gone unmet (e.g. the first airplane) or change the way in which customers satisfy a need (e.g. e-mail). Dynamically continuous innovations alternatively generally do not alter established way of satisfying a need, but do have some disruptive effects (e.g. mobile phone). Continuous innovations, that are most common, have little or no disruptive effect. Existing products are incrementally improved. New features may be added or quality improved. Building business through innovation. Describing product and processes in terms of “life cycles”, you can consider them going through different phases in their development, from new (either to the world or at least to a particular marketplace), through development and maturity towards a notional end-point where new generation emerges. Different stages in this life cycle imply naturally different emphasis on innovation; the focus changes from rapid changes in the beginning to only incremental changes concerned with cost reduction by the end of the life cycle. The ability to recognize the position of current and potential future generations in terms of such model is potential source of competitive advantage. Architecture and component innovations. Another important concept is the idea of new products as stand-alone elements, or as components in broader systems or architectures. For example a new type of processor represents a product innovation at component level, but it also make a contribution to the larger system of which it is part. Technology fusion. This expression comes in the field where different technological streams converge, such that different products or services that used to have discrete identity begin to merge into new “constellations”. An excellent example here is what is already happening on the telecom market, where the fusion of technologies like computing, media and traditional telecom is enabling a new generation of products and services. Intangible innovation. The last point I will make is that an innovation involves deployment of knowledge, even if this is not always embodied in a physical product. Innovation can be change of less tangible kind, for example in a development of new methods or techniques enabling, for example, time to market deliveries.

3.3.2 The concept of market innovation As Tidd et al. (2001) express it; market innovation includes the identification of market trends and opportunities, the translation of these requirements into products and services, and finally introduction of these products and services on the market. The strategy that best suits the mix of these variables depends on the maturity of the technologies and markets. Figure 5 presents


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a matrix, with technological maturity as one dimension, and market maturity as the other. Each quadrant illustrates different issues and market conditions as follows:

• Differentiated. Both the technologies and markets are mature, and most innovations consist of the improved use of existing technologies to meet a known customers’ need. Product and services are differentiated on the basis of packaging, pricing and support.

• Architectural. Existing technologies are applied or combined to create novel products or services or new applications. Competition is based on serving specific market niches and on close relations with customers. Innovation typically originates or is in collaboration with potential users.

• Technological. Novel technologies are developed which satisfy known customer needs. Such products and services compete on the basis of performance, rather then price and quality. Innovations are mainly driven by developers.

• Complex. Both technologies and markets are novel, and co-evolve. In this case there is no clearly defined use of new technology, but other time developers work with lead users to create new applications. The development of multi-media products and services is a recent example of such a co-evolution of technologies and markets.

Differentiated:compete onquality and

features

Architectural:novel

combinationsof existing

technologies

Complex:technology& marketsco-evolve

Technological:new solutions

to existingproblems

Low High

High

Novelty of

technology

Novelty markets

Figure 5. Market and technological innovativeness. Source: Tidd et al. (2001)

Tidd et al. (2001) identify telecommunications and multimedia as complex markets and presents some interesting aspect to discuss. According to the authors, although the fact that most products consist of a large number of interacting components and subsystems, the value added at the system level is greater then the sum of the value added by the components. There is, however, an important exception to this rule. In case where a particular component or subsystem is significantly superior to competing offerings, unbundling is likely to result in competitive advantage, and even larger market. The latter motivates due to additional customers who want to incorporate one of the components or subsystems in their own systems, choosing product by the “best-of-breed” principle. Another interesting characteristic of a complex market/product that Tidd et al. (2001) point at is a buying process. The buying process for complex products is likely to be lengthy due to the difficulty of evaluating risk and subsequent implementation. Perceived risk is a function of a buyer’s level of uncertainty and seriousness of the consequences of the decision to purchase. Tidd et al. (2001) identify two types of risk; the performance risk, that is the extent to which the purchase meets expectations, and the psychological risk associated with how


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other people in the organization react to the decision. The latter implies that purchasing decision is most likely to be taken as a group-decision, which makes it difficult to target the actual decision maker. That is something I have to have in mind when searching for right people to interview.

3.4 Identifying customers needs In this final part of the theory section I gathered those theories that I believe motivate the necessity of knowing customer needs. Consequently, I present a concept of product as a set of need-satisfying benefits as well as the theory of derived demands.

3.4.1 Product as a set of need-satisfying benefits Understanding the customer is essential to effective marketing decision-making and a vital ingredient in product success (Parkinson & Baker, 1986). This is a basic philosophy that is widely accepted both by consumer and industrial product selling companies. However, there are some aspects that make an important difference between industrial and consumer markets. Industrial market are characterised by supplier chains and so-called derived demands (Rajala, 1997). The first concept has been explained in the previous chapter, the latter will be explained in the following. However their role in the context of identifying costumer needs is that the company has to take into account not only its customers but its customers’ customer as well. In this study it is the core issue to find out the customer’ customer needs, i.e. the telecom operators. In addition, what have been studied is customer needs/expectations on a specific. product, namely a platform for service network in the third generation mobile networks Therefore it is essential to define a product not as a set of physical characteristics, components, dimensions etc but as a concept that comprises the customers’ perspective on the product. Customers do not really purchase physical characteristics or components; they buy need-satisfying benefits (Morris, 1998). They are trying to solve problems, and so a product is a set of problem-solving attributes. Approached in this manner, the product that a customer request or buy can consist of much more then the physical item itself. If two companies are selling identical version of the same product, but one company provides superior service, or some other support activities, then the other company is actually selling a different product. As illustrated in Figure 6, product exists at three levels: the core product, the tangible product and the augmented product (Kotler, 1994). At the core level, the focus is on the key problem the customer is trying to solve. For example, for the purchase of server for use in the company network, the core benefit might be fewer sites that lie down. The core benefit is then transformed into a tangible product. At this level, products are distinguished by quality levels, features, styles, brand names, and packaging. A distinctive feature or brand name can produce, in the customer’s view, an entirely different server.


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Primarybenefit

COREPRODUCT

TANGIBLEPRODUCT

AUGMENTEDPRODUCT

Company and Product

reputation

Packaging

Quality and reliability

Features

Styling

Technical support

Service and

maintenance

Customer trainingDelivery and

installation

Systems

design

Sales terms

& warranty

Figure 6. Augmented, Tangible and Core Product concepts. Source: Kotler (1994) The tangible offering can then be augmented by a variety of services, including installation, delivery, credit, warranties, advice and post-sale servicing. These are not a part of a physical product; however customers often do not see these as distinctively separated.

3.4.2 Concept of derived demand The concept of derived demand argues that the demand for the products sold by commercial enterprises is actually derived from the consumer marketplace (Morris, 1988). In some cases, the linkage is quite clear, such as the impact of car sales on the steel industry. While in other cases industrial products are so far removed from the end-users that the linkage is difficult to see. No matter what, there is a need of awareness of conditions in the company’s own market as well as their indirect markets (Morris, 1988). The concept of derived demands in this study can be related to customers’ customers in two different dimensions:

• To the telecom operators that are indirect customers from a product unit’s point of view

• To the operators customers, i.e. virtual network operators, internet service providers and eventually consumers, seen in the bigger scale, from Ericsson as a company point of view

From the marketing aspect derived demand poses several difficulties. Sales can be dramatically affected by uncontrollable events (for example internal crisis) in the organization from which demand originates. The potential for instability in the demand for industrial products becomes evident particularly in cases when derived demand is considered within the context of the cyclical nature of the economy, with corresponding problems of inflation and stagnation in growth and productivity (Morris, 1988). On the other hand Moore (2000) points out that when end-products reach mass market, the platforms1 can draw a huge advantage of it. That is because they can participate openly in many value chains at the same time being taken up in multiple segments.

1 The platform concept used in this context has a general meaning and refers to a base of any kind of technology.


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As Morris (1988) points out, derived demand has some implications for the development of marketing strategies. For example it may be a main issue to determine if the marketing activities should be focused on the immediate customers or if they should be targeted toward users further down the production chain, maybe even end-users. An excellent example of the latter is Intel’s successful strategy of promoting computer chip to consumer market. Intel was the first chip manufacturer to advertise directly to consumers and the first to give its product a catchy name, Pentium (Brandweek, May 2001). This approach is so called pull strategy unlike push strategy i.e. toward immediate customers. Another implication of derived demand is that vendors may find that they are competing with some of their own customers. Say that a company sells some of its primary products to another company that then works these products up and adds some features and finally sells those products to their own customers. Circumstances such as a business downturn, excess capacity, or product line extensions may lead to a decision of not selling to the intermediate link but going straightway to end-customers. This creates a situation where a company directly compete with its own products (Morris, 1988).


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4. The status of 3G Chapter four provides the reader with basic knowledge about the technological development from today’s second generation (2G) mobile standards towards third generation (3G). The chapter is introduced by a presentation of standardization process for realizing 3G. In the following part, Ericsson solution is illustrated, which ends the chapter. In the late 1980s, the International Telecommunication Union (ITU) had evaluated the requirements for future wireless standards for the delivery of high-speed data and multimedia applications. This third generation standard is called IMT-2000, where IMT stands for International Mobile Telecommunication. The main requirements for that mobile system of the future were (www.itu.org):

• High –speed data applications – up to 144 kbps while on the move and up to 2 Mbps when stationary

• Support for packet (especially IP) as well as circuit switched services • A better voice quality than achieved today in mobile networks • Support of multi media applications • A truly international system, with support for international roaming

Standardization bodies throughout the world (see Appendix B) handed in different proposals how to realize IMT-2000. In Europe UMTS, which stands for Universal Mobile Telecommunication System was proposed by ETSI (European Telecommunication Standards Institute) in June 1998. UMTS consists out of different parts, see Figure below:

• End-user terminals, which will give easy and simple access to any kind of new service and application

• Terrestrial access network called UTRAN (UMTS Terrestrial Radio Access Network) • Core network, which will function as a multi purpose “network of the networks” based

on the future proofed Internet Protocol (IP) • Service and application plane, which will offer a mix of traditional telecom

applications as well as future services and consumer applications

Core NetworkCore NetworkUTRANUTRANTerminalsTerminals

ManagementManagementBillin/accountingprovisioning

Billin/accountingprovisioning

Services & ApplicationsServices & Applications

ISDNISDN

InternetInternet

PSTNPSTN

PLMNPLMN

Figure 7. The parts of a 3rd generation network


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4.1 Impact of technology

4.1.1 2G standards The wireless standard of today is called the second generation - 2G. The need to improve transmission quality, system capacity and coverage drove development of 2G. This was most apparent in Europe where several incompatible first generation (1G) standards were used and only a few roaming agreements existed among operators in different countries. Two standards have dominated the 2G-network world – GSM and CDMAOne. According to Ovum estimations (Ovum, 2001), there will be 634 million GSM subscribers and 365 million “other” subscribers worldwide, at the beginning of 2002. CDMAOne will account for the largest segment of the “other” mobile subscribers by that time. The two other 2G standards are TDMA and PDC. Both of these standards are evolutionary dead ends while investments in TDMA networks (mostly found in North and South America) still continue, the operators of these networks have stated that their migration path is to GSM, GPRS and then WCDMA. PDC is a proprietary standard that was developed by NTT in Japan and will develop towards WCDMA (Ovum, 2001). Current GSM network offers only circuit switched traffic and are theoretically capable of transmitting data up to 14.4 kbps. The standard rate reaches a maximum of only 9.6 kbps. The actual speeds that end-user experience are much lower depending on network implementation and traffic density – these are typically at around 25-30% of the optimal level (Durlacher, 2001). Thus, there is a clear need for the development the existing technology.

4.1.2 Migration from 2G to 3G 3G has been developed to eventually provide a unified mobile technology platform, but the path to it from current differing 2G standards is not clearly defined. However, the move from 2G to 3G can be seen as an evolution that optimizes existing infrastructure, enabling it to co-exist with the new 3G systems. This may be achieved through different evolutionary options that are shown in the figure below.

2G 2G+ 3G

PDC

CDMA

GSM

TDMA

PDC-P

GPRS

HSCSD

EDGE

CDMA20001XEV

WCDMA

CDMA20001X

Figure 8. Paths from 2G to 3G. Inspired by Durlacher (2001)


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HSCSD High-speed circuit-switched data (HSCSD) is a 2G+ standard that uses multiple timeslots and enables data transmission at speeds of up to 64kbps. The advantage of HSCD is that it requires relatively low investment by the network operator. Unfortunately the disadvantages are many. HSCSD requires the user to purchase new terminal, it lacks international roaming or compelling mass-market proposition. Thus HSCSD has been implemented by fewer than 20 operators (Ovum, 2001). GPRS General packet radio service (GPRS) offers packet-based connections, achieving high efficiency for burst data traffic. The change from circuit-switched to packet-based connections alleviates network capacity problems by increasing capacity per time-slot and by improving efficiency by multiplexing connections. The major advantage of GPRS is that it is inherently suited to ‘bursty’ traffic patterns and IP-based applications, such as e-mail and the Internet. In addition to increased data speed, GPRS also offers users the benefits of “always on” connections to the remote service. GPRS is the migration path of choice for GSM and TDMA operators worldwide. Analysts such as Durlacher (Durlacher, 2001) believe that virtually all GSM operators will introduce GPRS, regardless of whether they provide UMTS services. Thus, GPRS will become in the short-term the common mobile data service standard with the widest geographical distribution and it will provide the first real platform for developing of advanced mobile data applications. EDGE Enhanced data rate for GSM/global evolution (EDGE) is a standardized set of improvements to a modulation technique that enhances the GSM radio interface and improves the spectrum efficiency. EDGE can be used in 2G spectrum, and was originally intended for use in 2G networks to achieve higher data speeds (up to 384 kbps). However operators are now also considering using it together with IMT-2000. For example, networks in urban areas could be upgraded to WCDMA, while EDGE is used to provide high-speed services in rural areas. EDGE can actually be considered as 3G standard; nevertheless EDGE does not constitute 3G coverage for licensing purposes. The service capability of EDGE, WCDMA and CDMA2000 (see the section below) are the same, although EDGE delivers lower data rates. EDGE is, however, a considerably cheaper upgrade path. PDC-P The last 2G+ standard that can be found in the figure above is PDC-P. PDC-P is a 2G+ upgrade of PDC, but no 3G equivalent has been proposed, and the next step in the development will be towards WCDMA. However, PDC-P supports the enormously successful I-Mode mobile data service in Japan, which operates at data rates of up to 28.8 kbps. Like GPRS, PDC-P is a packet-switched based technology that offers above described advantages.

4.1.3 3G technology UMTS has been developed as a complex network technology that incorporates several different solutions. There are two main carrier technologies capable of offering high mobility that meet criteria set by ITU for UMTS: wideband CDMA (WCDMA) and CDMA2000. The systems have different operating technologies and initially will not be compatible.

WCDMA Radio Access Network Wideband Code Division Multiple Access Radio Access Network (WCDMA RAN). WCDMA is a new air interface technology for UMTS. WCDMA uses a new way of packing


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information and is optimised to support Internet Protocol (IP) connectivity, offering high-speed Internet access and possibilities for new advanced multimedia applications. Circuit- and packet-switched services can be combined on the same channel, allowing true multimedia service with multiple-packet or circuit connections on a single terminal Logically, the WCDMA RAN resides between the end-user equipment and the Core Network. The connection to the end-user is handled over the air interface. The connection from the WCDMA RAN to the core network is handled via special defined network interfaces.

CDMA2000 CDMA2000 is an evolution of both the air interface and the core network solution. The first step in the evolution to 3G is CDMA2000 1X, which improves packet data transmission capabilities and speeds in the network, as well as improving voice capacity by nearly two times over today's CMDA capacities. 1X means one times 1.25 MHz, the standard bandwidth of a CDMA carrier. In keeping with a standardized bandwidth for CDMA, both infrastructure, and more importantly terminals, can become and remain forwards and backwards compatible. A CDMA2000 network is comprised of 1X air interface components and a Packet Core Network (PCN). The CDMA2000 PCN is equivalent in functionality to a GRPS network, but uses protocols based on Mobile IP. The next step in the evolution of CDMA2000 is labelled CDMA2000 1XEV. CDMA2000 1XEV will be divided into two phases. The first one will bring higher data rates to CDMA users in a separate carrier dedicated to data. The second phase will offer simultaneous support of high speed data and voice on one carrier, and the ability to offer real- time packet data services.

4.2 3G networks – the Ericsson solution Making 3G a reality depends on technology developments in different areas. These include amendments to the radio interface to support wideband communications and in the core network. The previous section provided an overview of some of the main technologies realizing UTRAN requirements, i.e. WCDMA and CDMA2000. This section will present Ericsson’s development of core and service networks, so called layered network architecture.

4.2.1 UMTS Layered architecture The future UMTS will provide a multitude of services that will be accessible over a variety of access technologies (including WCDMA), using a variety of mobile devices. Delivering this capability requires a layered network architecture that separates the creation and definition of services from the physical infrastructure required to deliver them. In this layered architecture (see the Figure below), applications and services reside in what is known as the service layer. The Core Network comprises the two other main functional layers: the connectivity layer (which looks after the physical connections), and the control layer (which handles the set-up and release of calls and session).


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GSMGSM

PSTNPSTN

UMTSUMTS

Service enablersApplication

MSC SGSN HLR SGGMSC/Transit

Media Gateway Media Gateway

Backbone Elements

GGSN

Connectivity

Control

Service

InternetInternet

Figure 9. Layered architecture of 3G networks. Source: Ericsson

The control layer provides control of the call or session and signaling. The control layer incorporates all the functionality that provides seamless, high quality services across different public and private networks. This layer comprises the system logic for GSM, fixed telephony networks and data/IP networks, along with GPRS, EDGE, WCDMA and other multimedia networks. The connectivity layer is a pure transport mechanism that is capable of transporting any type of information - voice, data or multimedia streams. Its backbone architecture incorporates core and edge equipment. The core equipment transports aggregated traffic streams between the different nodes at the edges of the backbone. As a rule, core equipment is a backbone router or backbone switch that handles traffic streams either according to very simple classification princip les, or according to routes that the network operator has predefined by means of traffic engineering. Edge equipment provides the single bit-pipes that guarantee an appropriate quality of service. The edge equipment is usually a Media Gateway (MGW), which operates under the full control of the nodes in the control layer. Within the connectivity layer, all user data is transported, routed and switched. The division between the control and connectivity layers allows flexibility in the selection of transport technologies, such as asynchronous transfer mode (ATM) and Internet protocol (IP). Connected networks, such as Internet, ISDN and PSTN networks and access networks such the GSM base station system and WCDMA RAN, can therefore be based on different transmission and signalling technologies. Media Gateway (MGW) nodes will adapt and link these networks to the backbone network. Fundamental to the development of 3G networks is a move to an all-IP network based on IP version 6. This will provide improved support for “bursty” high-speed applications.

4.2.2 UMTS Service Network – further description The service layer is where the end-user applications reside. In modern networks, applications are implemented in mobile terminals and in dedicated application servers in the network.


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In Ericsson UMTS solution the service network is integrated according to the IDEA principles (Integrated Distributed Application Environment). IDEA is an open architecture and enables third party product to be either loosely or tightly coupled with the service network solutions. Today, the service network architecture is mainly used to implement Virtual Home Environment and Open System Architecture (VHE/OSA), but is not restricted to this. IDEA is equally suitable for all types of services. VHE is a vision of Intelligent Network (IN) that provides personalised service portability across network boundaries and between terminals, and can be described as sets of services included in personalized service portfolios offered to end-users. OSA is, on the other hand, a concept defined in 3GPP and Parlay, which specifies services available to applications and applications servers (see Chapter 5.2 for further description), over standardised programmable interfaces (APIs). The 3rd Generation Partnership Project (3GPP) is a collaboration agreement between numbers of telecommunications standards bodies that states globally applicable technical specifications and technical reports for a 3rd generation mobile system. The Parlay group provides Parlay/OSA specifications. Parlay/OSA is a set of technology- independent specifications that expose the communication of many telecommunications network capabilities to application that reside outside the network domain. How all these standardization concepts are implemented in the networks will be described later on, when dealing with two service network elements: Application Server and Service Capability Server. Service Network architecture Service Network architecture and its different elements can be described as follow:

GSMUMTS

Control

Connectivity

AAA HSS

IP infrastructure(backbone)

MSC

Applications

Service capability Servers

Application Support Servers

Service enablers

ApplicationPSE management

ApplicationManagement

Figure 10. The Service Network architecture and its elements

• Service network access products • IP infrastructure servers


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• Service enablers consisting of Service Capability Servers, Application Support Servers and other gateways

• Service network management • Personal service environment management (PSEM) • Applications • Hardware/Server Platforms for the servers

Two of the Service Network elements, namely Application Server and Service Capability Server, will be described in the following chapter.


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5. Positioning TSP in 3G Service Network Chapter five describes features of The Ericsson Server Platform (TSP). The chapter introduces with a short presentation of the architecture of TSP as well as the platform’s key features. After that, two of TSP based applications are presented. Here, the focus will be on solutions for 3G Service Network.

5.1 TSP – an overview At present there is some uncertainty as regards naming TSP. Jambala is a market name that is still used for marketing purpose towards Ericsson’s customers. At the same time, it has been decided to start using notation TSP, The Ericsson Server Platform by the time of release of JAP /TSP 4.0 i.e. in the beginning of the year 2002. Consequently I will be using TSP in my further description. TSP is designed as an open application platform and it provides basis to meet demands of existing and future networks. TSP provides carrier-class, real-time node performance based on industry-standard hardware and software elements. An essential role in the TSP performance achievement has TelORB - an Ericsson designed operating system. With use of standard management interface (i.e. CORBA), the platform supplies next generation interfaces and capabilities for smooth integration in en existing network.

5.1.1 The architecture of TSP TSP is a carrier class platform that consists of (see Figure 11):

• TelORB and Linux Operating Systems • Hardware • Operation, Administration and Maintenance (OA&M) • Network signalling

Hardware

TelORB/Linux

Network signalling

OA&M

The Ericsson Server Platform (TSP)

Application layer

Figure 11. The structure of The Ericsson Server Platform, TSP

Hardware The architecture of the TSP is modular by design build on off- the-shelf hardware components. Each component in the system can evolve and be independently upgraded


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TelORB & Linux Ericsson has designed the TelORB operating system primarily for those services that need real-time response, high throughput, scalability and zero downtime. It is a distributed operating system. That is, a service run in processes not only on one single processor, but distributed among a number of processors. This distribution is transparent to the services. The TelORB operating system is object oriented. Not only is the operating system itself object oriented, it is designed to run object oriented programs. TelORB includes Object Request Broker (ORB), which can communicate information around the system. Using CORBA, TelORB can even distribute information to other ORBs running on different (and non TelORB) machines across different environment and ne tworks. With introduction of TSP 4.0 Linux will be included in the TSP processor cluster. OA&M The Operation, Administration and Maintenance (OA&M) Framework provides the means to operate and maintain the TSP node. It provides the framework for the design of application specific managed objects and graphical user interfaces (GUIs). In addition it provides generic and ready to use functions and tools. The OA&M framework also defines a managed object model. The managed objects are accessed via CORBA. Applications Current portfolio of TSP based applications includes applications positioned in the control layer as Home Location Register (HLR), Authentication Authorization and Accounting (AAA) Server and Service Capability Point (SCP), in the service layer as Application Server (AS). In addition TSP is used as Service Capability Server (SCS), in between control and service layer. All these applications are based on products and concepts available today, but will be also compatible with the 3G networks. The characteristics of TSP make it possible to position it as a platform for any server applications in the future networks.

5.1.2 TSP key features Above described architecture is to provide the platform key advantages of the TSP i.e.:

• Multi-protocol and multi-application support • Carrier-class characteristics i.e. high redundancy, reliability and availability • Linear scalability • Openness

Multi-protocol and multi-application support The TSP architecture supports a variety of different network protocols and applications running simultaneously on the same node. Hence, TSP will be able to serve any kind of access via fixed, mobile or IP-networks. This principle makes it possible to connect applications, databases and network elements in a modular way, as long as they are compatible with CORBA. Also it means that if some changes need to be done in any application at network element, CORBA will handle the compatibility adjustments that these changes require. The changes that need to be made will not affect each and every other module connected to the platform, but only the interface to CORBA.


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High redundancy, reliability and availability The goal of high redundancy, reliability and availability can be realized by offering features that are described in the section below. TSP provides redundancy on the three different levels: object database redundancy, N+1 traffic processor redundancy and geographic redundancy. Object database redundancy means that all data is kept in two mirrored copies. If one data set is lost or corrupted, the other takes over immediately. Once the processor is rebooted, all the data is re-transferred. In the similar way, N+1 traffic redundancy guarantees that processors will immediately take over tasks of the other one that for some reason becomes unavailable. This can be achieved due to the fact that all processors have a mated pair relationship with other processors. Finally the TSP characterizes by geographic redundancy that among others allows a standby TSP node to be deployed in a different area. The characteristics of high reliability and availability of a TSP node can be achieved thanks to benefits/features described below. The new system can remain online during software update/upgrade operations with no disturbance to the service. Smooth upgrade is the prime method used during a system upgrade for the operating system or application software and means that new version of the software co-exist with the current version during the upgrade. While talking about software it is important not to forget TSP’s automatic software error recovery, a mechanism that ensures that execution failures do not affect the network node operation. This is achieved by killing individual processes rather then letting them hang. Hardware configuration in the TSP node is executed in the adaptive manner. When a processor board is added to the platform, its configuration manager will automatically reallocate its data and processes to the new processor, according to the platform’s configuration data. Hot swap hardware replacement allows for smooth replacement of any hardware component. Hardware can be exchanged without affecting the system and there is no need to power down. Scalability All applications run on the TSP share the pooled resources of the platform. These resources include the memory and processors of each of the TelORB processor modules. Since the architecture of the platform is modular and can be expanded as needs expand, processors can be added to the node if, for example, more memory space is needed to accommodate an expanding subscriber base. As a result capacity will grow linearly as processors are added. Openness TSP offers its services in accordance with 3GPP specifications by opening up the networks via Parlay/OSA or 3GPP APIs. More detailed description about openness can be found later on in the section describing one of the TSP applications, namely Service Capability Server

5.2 TSP solution for 3G service network The services concept in UMTS aims to standardize service capabilities rather than the services themselves. The service capabilities provide the resources needed for the services or applications.


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As mentioned previously, the Service Network architecture is used mainly to implement Virtual Home Environment and Open System Architecture (VHE/OSA). Nevertheless IDEA is equally suitable for all types of services and does not restrict Service Network to this implementation alone. Service Network solution can be described as follow:

• Service network access products • IP infrastructure servers • Service enablers consisting of Service Capability Servers, Application Support Servers

and other gateways • Service network management • Personal service environment management (PSEM) • Applications • Hardware/Server Platforms for the servers

As indicated above, TSP in the Service Network environment, is used as platform for two applications, server enabler i.e. Service Capability Server and server platform i.e. Application Server (see even the Figure below).

TSP as an application platform

Application Server Service CapabilityServer

External Application Server

ServiceDevelopmentEnvironment

Parlay or 3GPP open API over CORBBA

CORBA

Figure 12. TSP solution overview for Service Network

5.2.1 Service Capability Server In order to enable a degree of service differentiation, the standardisation body ETSI has taken the approach to standardise Service Capabilities for UMTS, instead of entire services. The service capabilities are provided through Service Capability Servers, SCSs, and their open Application Programming Interface (APIs). Typical capabilities are call control, positioning and notification information, and access to bearers. The SCSs offers its services in accordance with 3GPP specifications by opening up the networks via Parlay/OSA or 3GPP APIs.

The purpose of the SCP is to: • Raise the abstraction level and simplify application development by offering user-

friendly interfaces. Application development is simplified by having a single generic common open interface regardless of the underlying network functions

TSP


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• Hide network specific protocols and offer connectivity to both circuit switched and packet switched networks. This also allows easy porting of applications to new network technologies as these become available

• Protect Core Network from misuse (as ‘firewalls’) • Act as proxies towards legacy systems

Applications access the service capability of SCS via so called Parlay/OSA Framework. The framework is a stand-alone functional entity. SCS register their capabilities with the framework, after which they can be made available for applications. The framework interfaces provide trust and security management, service discovery, integrity management and fault management. The ways in which capabilities are registered are in a standard-conformant manner. It enables multi-vendorship of SCS’s and allows for extension of an OSA system. New features, even operator specific service capabilities, can be registered to the framework, without the framework having to be aware of the functionality itself. Realization of the Open Service Architecture (OSA) is based on the distributed service architecture, meaning that it is as such based upon distributed object techniques, CORBA. The approach of utilizing CORBA for the open API’s of OSA has the advantage of providing platform and programming independence. The application servers may use one execution environment and programming language, and the SCPs may be implemented according to other choices. They interwork via the CORBA interface. This approach gives the operator the possibility to choose applications designed by Ericsson or any other application developer.

5.2.2 Application Server An Application Server (AS) is defined as the place where application/service logic for end-user application resides and executes. Application Server provides:

• A run-time environment for one or several applications • One or several Service Development Kits for service/application development • Management support

TSP Application Server supports standards that define the OSA interface e.g. Parlay and allows even 3GPP standards to be realised. This allows the AS to interact with the service capability server (SCS) based on the TSP or/and any other SCSs that comply with Parlay or OSA API’s. This even means that new services, created by 3rd parties can easily be added to the application server. In addition, the application server supports the use of JAVA as the programming language for services and CORBA for communication with other network elements. Today TSP application server is used as a part of the Intelligent Network solution but is fully UMTS compliant.


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6. Telecom – market in change In this chapter I will discuss business perspectives of the market evolution towards 3G. I start with a comparison between telecom and datacom and their different values. Then I will continue with a section about evolution of the value chain to 3G value network, followed by a section about market drivers, enabler and barriers. Finally, implications on the network vendors’ market are presented. The evolution towards 3G is not just about technology changes. The dynamics of the telecom market is even about following forces of change: the merger between datacom and telecom, common market trends, market developments and actors, and their relation (Rockström & Zdebel, 1998). The technological aspect has already been discussed in previous chapter, now it is time to talk about business perspectives.

6.1 Telecom vs. Datacom The fact that two industries, the traditional telecom and datacom are merging influences market conditions in essential way. It is a story about two worlds with different strengths and weaknesses, different values meeting on the way towards a “united all-IP world”. However, the merger of datacom and telecom was, to begin with, a consequence of using the same digital technology. If a bit sent via fibre is a part of a telephone conversation or part of a datagram is of no consequence. So telephony and datagrams thrive in the same supporting infrastructure. The table below presents the core concepts of both industries. These concepts have now started converging into a future network that will optimize new conditions

Table 2. Telecom vs. Datacom. Source: Convergence… Datacom Telecom Routing Switching Time-to-market Lon-term planning Best effort Predictable quality of service Flat rate Accounting for billing and

maintenance Major investments in end equipment

Major investments in network

Open standard, third-party services

Infrastructure and services are one

Flat rate Accounting rates (artificially high prices)

Decentralised Centralised Early phase of roll-out, explosive growth of traffic

Worldwide legacy network

Telecom and datacom technology don not compete on equal terms. The industrial cultures are different, again to the advantage camp. Just comparing the different inner clock frequencies. Where telecom actors and their suppliers were used to long-term planning, time-to-market has always been key in the datacom industry.


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The datacom industry is used to stiff competition. Since it is very easy to deploy an application the market is very accessible for a new entrant with the required know-how. This implies that the datacom indus try is used to a much higher tempo. The time to market for the computer industry is extremely short meaning that the crucial part of a business idea is the possibility of fast deployment. This way of thinking is clearly an advantage towards the telecommunications slower approach. The speed gives of course an edge on competition and since the datacom industry and the telecommunications industry are now merging the pressure to change on companies like Ericsson is increasing. Another vital difference between the telecom and datacom is that these technologies are optimised for different types of traffic. The telecom network is great for voice conversations or videoconferencing, while the Internet was developed for asynchronous applications based on a best effort network service. But the reality today is that users are now beginning to have a choice between services and are not interested in barriers between services, created by regulations or technology. They want integration of service requiring that telecom and datacom migrate to integrated service networks. Details about this process are presented in the following sections.

6.2 Evolution of the value chain The telecom industry has for years followed the principles of the value chain (se Chapter 3.2) in more or less linear value creation manner. As the following figure illustrates, the value system on most current mobile networks is a simple one involving the sale of voice “minutes” from a network operator to an end-user, possibly via a service provider. The role of the network vendor is to enable service creation via providing the technical infrastructure.

Network Operator Service ProviderNetwork vendorNetwork vendor End-userEnd-user

Figure 13. The traditional mobile telecom value system. Inspired by Qustus (1999)

What has happened just recently is that new players have entered the market modifying linearity of the value system. This is particularly evident in the link presented as a service provider in the figure above. New players, mainly in the form of virtual operators, are entering the mobile telecom industry. They are buying capacity from the network operators that enables them offering and marketing telecom services to the end-users within their own brand (see Figure 14).

Network Operator

Service Provider

Network vendorNetwork vendor End-userEnd-user

Virtual Operator

Figure 14. The changing mobile telecom value system. Inspired by Qustus (1999)


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Network operators sell network capacity to virtual operators and this is one way of generating revenues. However, virtual operators are also potential competitors to their network capacity suppliers, a phenomenon known as a concept of derived demand (see Chapter 3.4.2). Another aspect of the appearance of the new players in the value system is that the distribution side of the value system characterizes by greater complexity, deviating from the traditional linearity. The accelerating development of Information Technology services beyond pure voice communications both on mobile networks (e.g. fax and SMS based services) and more radically through Internet creates new opportunities in the network vendor stage of the value system too. Datacom vendors enter the telecom market creating stiffing competition. In addition this also impacts the linearity of the value creation. According to the Questus report (1999) the third generation value system will transform to the value network as the figure below shows. The evolution to this structure has already started and will be further driven by the introduction of “intermediate” technologies and associated products and services such as GPRS. As a matter of fact, many of the interviewees stated no difference between service creation in so called 2G + technologies and 3G technologies.

ServiceproviderServiceprovider

ContentContent SoftwaresuppliersSoftwaresuppliers

DistributorDistributor

WholesalerWholesaler

AccessoriesmanufactureAccessoriesmanufacture

TerminalmanufactureTerminal

manufacture

Networkvendor

Networkvendor

Infrastructureoperator

Infrastructureoperator

ContentpackagerContentpackager

Value addedservice providerValue added

service providerNetworkoperatorNetworkoperator

End-userEnd-user

Software

HardwareServices

Virtual networkoperator

Virtual networkoperator

Figure 15. The 3G value network. Source: Questus (199)

As the figure above illustrates the new value network is much more complex and the number of actors is dramatically increasing. The Questus report (1999) states that gaining the basic understanding of the new roles of the value network and deciding in which “boxes” to play is a fundamental strategic issue for all players in the evolving 3G market. It is also of importance to learn how to co-operate and interact with other companies that are coming from different industries, representing different values and business models. In the following table, each “box” of the value network is detailed further with examples of the types of organizations that are/will fulfill these roles.


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Table 3. Players in the 3G value network Role Description Examples Terminal Manufacture Manufactures handsets and

other forms of 3G terminals Ericsson, Sony, Nokia. New entrants likely to emerge from datacom industry

Accessories Manufacture Headsets, PDAs, data cards Allgon Wholesaler Manages distribution of

handsets and accessories Cellstar

Distributor Sells handsets and accessories to end users

OnOff, City Stormarknad

Software Suppliers Programs software for devices and for servers

Microsoft, Lotus, Teligent

Network Manufacture Manufactures network infrastructure

Ericsson, Nokia, Nortel

Infrastructure Operator Someone who operates network infrastructure on behalf of a licensee (may also own and build infrastructure, sites etc)

STOKAB, UMTS Svenska Nät AB

Network Operator Existing first and second generation network operators and a licensed operator of a UMTS network

Telia, Tele2, Hi3G

Service Provider Sells network services on behalf of network operator(s), and collects a margin for doing so. May operate own billing system and customers services.

Debitel

Virtual Network Operator (VNO)

VNOs buy capacity from mobile operators at wholesale prices and market their own services with control of the customer relationship firmly in their domain.

DJuice, Campuz Mobile

Content Provider A provider of basic information Bonnier, BBC Content Packager Provider of menu services,

protocol conversion, etc to enable access to content (equivalent to Internet portals)

Spray, Yahoo!, Palm Reach

Value Added Service Provider Provider of tariffed services to end subscribers. The VASP has a billing relationship with the subscriber, independent of the network operator.

Locust (SMS-to-email service)

6.3 Market drivers, enabler and barriers

6.3.1 Market drivers There is a great interest in knowing what factors and trends are likely to help or hinder reaching a vision of a 3G mobile market. Apart from the common trends on the telecom market there are other drivers worth naming that may have in the first hand, short–term effects. Users’ expectations of service capabilities are building. As use of fixed network


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grows, users will want to use the same applications over wireless link to portable devices. This is particularly evident among corporate users. Many of them are upgrading their networks for multimedia and anticipate being able to use these applications on laptops or portable devices when out of office. In Sweden, consumers are rapidly getting used to using Internet via fast connections, such as ISDN or broadband, which strengthens expectations on fast connections via mobile devices too. The longer-term scenario, says that consumer demand of 3G technology will build with four primary drivers (Ovum, 1999). These drivers result from people growing up with the Internet as a part of their every day life. These are as follow:

• Use of Internet as a social medium • The growing need for multimedia presentation of information • The Internet raises consumer power in decision making • A shift towards more personalisation of portals

6.3.2 Market enablers The key enablers for building a large market for 3G are standards, development in underlying technologies and falling prices for telecom services. In order to make the more advanced applications simple enough for mass market acceptance, standards are needed at all levels from the network up to presentation of the information. And as a matter of fact many standards have already been established such as Parlay enabling communication of many network capabilities to applications, or Mobile Multimedia (MMM) for developing of new applications. Others are still needed, such as some types of information (e.g. maps) and the way information is presented on the screen. There are several technology developments that will help 3G markets be realised. These are in the areas of mobile IP, batteries, displays, middleware, memory, processing, compression and speech recognition. Projecting Moore’s law2 on a few years means that we can expect mobile devices to be as capable as computer processors are today. This means that we can expect multimedia presentation of information to be norm on those devices. The same development will also enable highly capable embedded PCs to connect through embedded mobile service, where the only limitation will be integration of the components. Falling costs of fixed network usage are enabling more people to use the Internet and existing users to use it even more. This is happening anyway, as telecom markets become more competitive, but will occur more quickly if advertising-funded telecom and Internet services become the norm (Questus, 1999).

6.3.3 Market barriers Development of 3G applications will be influenced by a range of factors that can be seen as a barrier for 3G:s advance. These are described in the following section. Starting with the licensing issue. Many governments worldwide are attracted to auction as a way of issuing licences, because of the potential for earning high revenues. However, the high licence costs have shown to have inhibiting effect on the investments in 3G infrastructures. Unlike the second generation systems, the third generation does not have an obvious business

2 Moore’s law describes the prediction that the processing power of computer chip will double approximately every 18 months.


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case that would show reliable way to generate revenue and compensate for the costs of licence. This causes a caution among operators that slow down the pace of investments. In Sweden, the license issuing was realized through so called “beauty contest” with the only small administration fee, the solution that today judges by analytics as a very good one (Industry Standard, 2000). The fact that, in many countries, operators could not use 2G+ services to test the market for 3G before committing to 3G, is another reason for increased caution. Users may be slow to change the way they obtain information because it is a part of established behaviour pattern. Their attitudes to mobile need to change before we will see a large market for the more advanced 3G services. Mobile airtime prices are still high comparing to the telephone prices in fixed network. This perception is even coupled with low data rates and variable network qualities, which creates feeling of bad value-for-money for data applications over mobile. This will be more acute for higher speed applications, where operators will find users unwilling to pay a significant premium for the faster data rates. Finally, while discussing consumer behaviour, it is important not to forget the issue of mobile media competing with other media. Whilst familiarity with the Internet and digital television will be important in increasing awareness of what is possible, if they dominate the perception of the networked data to strongly then mobile will find it difficult to compete on their terms. Another barrier to developing a substantial market for 3G is technology integration. There are many issues to be solved concerning displaying of information on small terminals, combining the IP and telecom worlds and using common applications across operating systems. Quality, reliability and interoperability of networks it is another big unanswered question. It is not yet clear how well enhancements to existing mobile networks will deliver the promise of interoperability.

6.4 Evolution of the network vendors’ market According to Ovum forecasts (Ovum, 2001), investments levels in 2G have passed their peak. This is because the rate at which new 2G licences are being issued has slowed down. In order to continue growing their business, network infrastruc ture vendors need a new wave of network investments. Therefore a technological evolution such as 2G+ or 3G is necessary for initiating new network investments. But this time the telecom market is completely different from the time of 2G’s dawn, this time new opportunities open for players outside the traditional definition of telecom industry. Telecom analysts agree about trends on network vendors’ 3G market (Ovum 1999, Durlacher 2001). Shortly you can say that the future market will:

• Become more competitive • Shift towards software and support services • Give commercialisation of application high importance

The increasing competition in the telecom market has been described in section about the evolution of the value chain. If we look at network vendors exclusively, we can find some interesting trends. The shift to multimedia and e-commerce will attract vendors from other industries, notably IT. The development towards all-IP networks gives a bigger role for traditional datacom vendors such as Cisco. Cisco currently has 60% of market in fixed networks and is looking to achieve a share of the mobile IP world (Ovum, 1999). One possible scenario is that established telecom vendors will buy or merge with IP vendors and Internet software suppliers. Consequently the definition of a network vendor will comprise:


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• Equipment i.e. the traditional definition of a mobile network system such as base stations, platforms, switches etc

• Software such as core network software or specialist platform software • Support services including, pre-deployment, deployment and post-deployment

The operators’ drive to offer more content-based services will lead to higher demand for applications software, as well as underlying technology. Applications that work well will probably be installed in most mobile network quickly, in the same way prepaid mobile has. However, installing an application will not be a one-off event. Operators will look for continual improvement in order to maintain differentiation. Vendors will need to have large development teams working on upgrades to the successful applications. There will also be a parallel growth in the market for system integration and support services. This is mostly because the applications will (1) be bigger and more complex pieces of software and (2) require systems integration across the mobile industry and those industries providing the content, each with their different legacy systems. This is a very important issue for established 2G operators, there new “pieces” of network equipment have to be integrated with exciting solutions. It is a process that takes time and requires involvement from the network vendors. An extreme version of system integration and support that will results from opportunities created by 3G technology is so called commercialisation of applications. This implies that vendor will play an important role in bringing the application to the market and making it available to multiple operators, so that the direct customers can use it both for end-customer use and sell it to other players, such as virtual network operators. Another aspect of this function is most clearly with applications that require the co-operation of two or more industries e.g. integration with credit card companies and financial and transaction information. This may require new alliances, between network vendors and companies from other industries such as software developers etc. The figure below, illustrates the major areas for the evolution of the network vendors’ market, summarizing what has been described in this section.

Value-added platformSystem

s

integration

CommercialisationAllian

ces

InfrastructureDesign, install

,

maintain

ApplicationsDevelopment,

integration

Integration/support

Equipment/software

Figure 16. Major areas for the evolution of the network vendors’ market


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Making the best use of the new areas of the market is about choosing the right strategy. Ovum (1999) suggests five such strategies that can be applied exclusively or in some combinations. These strategies are: Can-do-it-all strategy This means that vendors ideally provide an entire network, all the required software, system integration, support and commercialisation to operators under a turnkey contract. In practice, they will offer a turnkey contract covering a large portion of what is needed and the operator will use other suppliers for the reminder. Today’s market leaders, i.e. Ericsson, Nokia and Motorola are largely forced into adopting this strategy if they want to retain their dominance. Generally, they are well positioned to do it, but some areas will prove challenging, including:

• Integrating IN/HLR/VHE with the 2G networks • Integrating with other vendors’ network management • Integrating with other vendors’ IP architecture • Common billing formats

Specialist equipment strategy Some vendors will focus on providing certain types of equipment, with the aim of being better then generalist and being selected on their own merit or using the major equipment vendors as a sales channel. This will generally apply to suppliers of specialist platforms such as unified messaging, prepaid and platforms for Intelligent Networks (IN). This creates entrance opportunities for players from notably IT- industry. An example is Sun Microsystems that, to an ever increasing extent profiles, it platforms as “enabling the wireless net effect” (www.sun.com), taking advantage of the strong IT-profiled brand. Competitive pricing strategy One possible strategy for some vendors is to radically change the cost structure of the network – by providing some or all of the equipment more cheaply then all other players do. According to the information I have obtained, this is typically the case with new entrants that are trying to take a market share from established vendors. They offer lower price, but often are not able to guarantee the telecom standards. The main risk with this strategy is that this will trigger a price war among vendors. Applications strategy Some vendors will focus on providing for specialist services or support platforms. This is a typical approach for, as an example, smaller billing provider. Companies following this strategy will need to organize support through alliances to guarantee a worldwide presence.

Support strategy Some vendors will focus on providing superior support, generally in the form of systems integration (although it also applies to providing network planning, installation, maintenance, training and so on). This will be a big growth area for 3G because of the greater need for system integration across industries and together with existing 2G systems. This strategy gives new opportunities for positioning, giving customers superior level of service.


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7. Identifying customer needs - results and analysis In this chapter I will take a closer look at customer needs for third generation mobile network platforms. The chapter begins with description of chosen cases. After that, results of the study are presented, continuing with the analysis part. In the analysis part implications on platform properties are synthesized from findings about Service Network and Application Servers. Finally, the picture of a need satisfying platform is presented. Marketing focuses on the needs of the customers and therefore should begin with an analysis of customer requirements, and attempt to create value by providing products and services that satisfy those requirements. (Tidd et al. 2001).

7.1 Choice of the cases As already mentioned in the introducing part of the report, one of the delimitations that has been made in this study, is to consider exclusively Swedish mobile telecom market. The UMTS licenses in Sweden were awarded by The National Post & Telecom Agency in December 2000. Four operators Tele2 (former Netcom), Orange, Hi3G and Europolitan have each got one license. Surprisingly Telia, which was one of the ten applicants was not granted a license. This was despite its status as the country’s leading operator. However, according to the license commitments the operators have to develop 30 percent of the net on their own and are allowed to cooperate about the rest. This was the fact that opened the door to “3G world” also for Telia. What happened was that Telia and Tele2 signed an agreement concerning the creation of a joint venture, under the name “Svenska UMTS-nät AB”. The objective with the new unit, in which each party obtains 50% ownership, is to build and maintain the core and Radio Access Network for the third generation mobile telephony. In this way Swedish network operators market has got its fifth player. From the very beginning I aimed to study all Swedish mobile operators and obtain what I though would be a comprehensive picture of the operators needs on the platform. However I found it very difficult to find relevant information about all operators and eventually I decided to choose only two of them and instead go into depth in every case. Another reason for choosing these two particular operators was the belief that these would be two cases that in the best way represent reality and by that give a good foundation of generalising. I chose them, with respect to the variables that I considered being of greatest importance when talking about 3G-network equipment. Consequently I chose (1) Telia Mobile, an established operator that owns 2G-equipment as well as a broad customer base, and (2) Hi3G, a green fielder and pure 3G operator without any baggage, neither technical nor economical.

7.1.1 About the information sources As mentioned in the chapter describing methods of this study, the choice of techniques for collecting data depends mainly on what seems to give the best answer to the question of issue for the study in relation to the time and the resources that the researcher has to his/her disposal. When decision about case study has been taken, and then eventually a decision to look at two operators I wanted that the picture I would get of these operators would be as complex as possible, involving different, multiple data sources. I sought after both written and oral sources, and this is what I found.


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Written sources The search after relevant written sources started with an idea of a “tender inquiry”, a document that contains input from operators about areas of interests. What I have found were two types of document, Request For Information (RFI) and Request For Quotation (RFQ), official documents that operators send out to different suppliers in the process leading to the purchase. Initially operators send RFI:s to a larger amount different suppliers who are known for being able to deliver whatever is requested. In the next step the answers from suppliers are evaluated and operators proceed with only few, selected suppliers by sending RFQ:s to them. After evaluating the latter, operators make a purchasing choice. Something that should be pointed out is that the purchasing decision is a very complicated and complex issue, and influences by many different factors. However, that is something that ends out of the scope of this study and will not be considered here. In line with the delimitations made for the study, I chose RFI:s and RFQ:s considering UMTS system in general and Service Network in particular. Oral sources Product Development Unit TSP & WPP where I have done my master thesis, is a development unit within Ericsson that organizationally is quite distant from end-customers i.e. telecom operators. The platforms that are developed here are used by other Ericsson units for developing various applications and then sold to the operators. In the case of TSP:s applications for Service Network, it is a core unit, namely Service Network and Application (CSNA), and in particular a Product Development Unit called Network Databases and Value Added Solution (ND&VAS) that is an immediate customer for TSP platform. ND&VAS develops two, previously described TSP based applications, Application Server and Service Capability Server that are sold via a web of different Market Units. Market Unit for Nordic and Baltic has responsibility for customers in Swedish market, being Ericsson’s interface towards them. In my interviews I tried to get in touch with persons at Ericsson who in different ways work towards operators, supporting them with requested information about platforms (in particular TSP). I found these persons very knowledgeable about their areas of responsibility, including the information about market situation and customers. Of course the information of the highest level of relevance is the one received directly from the operators. Here I tried to get a comprehensive coverage of various areas of responsibility that in best way match my questions at issue. Again the focus was on the information on the more strategic level, then purely technical. The results from the data analysis, both the written and oral sources, are presented in the section below. This is done individually for Telia Mobile and Hi3G.

7.2 Identifying customer needs - results

7.2.1 General observations Despite the current economical uncertainty there is no question whether or not introduce 3G services. Operators have clear strategies and are planning for realizing future solutions. In terms of the requirements on the underlying technology, the introduction of GPRS is a huge step towards 3G. It means namely that traditional circuit-switched telecom connection becomes packet-switched, and by these means offer all the advantages associated with IP-


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networks i.e. Internet. This even implies new demands on the enabling technology, which is of relevance for this study. The change from circuit-switched to packet-switched is even about adopting datacom values. This issue was discussed in the more general manner in the Chapter 6.1; here I would like to point out some result from the interviews. Datacom values that are, as I can consider most influential on the telecom operators view on service network equipment are: time-to-market (TTM) and open standards. Both concepts are very important preconditions for a successful positioning in the increasingly competitive market. When a key to leading market position is to introduce an attractive service before the competitors and before the service becomes a part of a base offer, then TTM and open standards are two vital requirements. That is something operators seem to be aware of.

7.2.2 Telia Mobile Service Network and Applications The future UMTS system shall interwork with Telia’s existing GSM systems/networks as seamlessly as possible. It is of utmost importance that UMTS and GSM can together act as one common mobile system. It is of course an issue of utilizing existing resources as well as minimizing expenses for the development of the future network. Telia’s vision is that the Service Network will be characterized by the flexibility to provide organizations and customers with a varie ty of innovative tailor-made services. There will be combinations and options of charging based on different types of media components and quality of service. Customers will have the option of paying for these services in a manner of their choice, whether prepaid or postpaid. Services will be personalized for customers and portable across network boundaries consistently presented with the same individual features, i.e. the Virtual Home Environment-concept (VHE). Telia intends to have a pan-Nordic network for offering of mobile applications/services in Telia's networks in Denmark, Finland, Norway and Sweden. One aim is to be able to deploy applications/services in the service network that can be offered in all the different countries/networks. This requires that same technologies are supported in the different networks, e.g. OSA, even if the core networks may be from different manufacturers. In addition, existing services will still be offered, e.g. standardised supplementary services and non-standardised services like voice mail, fax box service, unified messaging. The majority of these services will still be supported locally in each network. Also some new services may be implemented in each network. Interaction with Core Network It seems to be of high interest to Telia to receive information about the core network solution and how it can support connections to a common Service Network. Interaction provides through Service Capability Servers/OSA in accordance with 3GPP specifications. More specific the OSA interface functionality shall comply with the 3GPP standards Release 99. Telia requests even information about how one application/service in the pan-Nordic Service network can use different manufacturer’s OSA implementations / SCSs towards the Core Network(s) to provide the same service to subscribers in the different Nordic countries. Important is even SCSs functionality in the multi vendor environment i.e. towards core network from another vendor etc.


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Application server An application server defines the place where application/service logic for end-user application resides and executes (see Chapter 5.2.2 for further description). Since many of the future applications have not been developed yet it is important that the server is, as one of the respondents called it, “future proof” and can be used in the line with future development. At the same time Telia has clearly expressed a desire of an application platform delivered together with an applicable end-user service that can generate revenues from the very beginning. Often it is a specific application that associates some demands on a platform. This is one of the most important findings in my study end will be described closer later on, in the analysis section. The fact that Telia owns GSM equipment forces them for both practical and economical reasons to use existing solutions as far it is possible. Therefore any change made, has to be motivated with highly visible increasing consumer-value and supported by business cases. In addition platforms should be multi-accessible, i.e. compatible with existing and future networks. Again concepts mentioned in this section will be explained further in the analysis.

7.2.3 Hi3G Service Network and Applications One, very obvious strategy about the Service Network is that the network is expected to be predominantly IP based technology, and be the foundation of HI3G’s 3G service provider capabilities. The Service Network will be IP based from launch, and will be accessed from the core network via firewalls, i.e. Service Capability Servers (see Chapter 5.2.1 for further description). The Service network will contain some of the service components used in existing 2G GSM networks e.g. pre paid, number portability as well as other personal applications to provide for example Virtual Home Environment. In creating the Service Architecture, Hi3G is seeking an enhancement of the service delivery capabilities provided by current networks. Since Hi3G does not own any of GSM network equipment, that could influence decisions about future architecture the choice will be state-of-the art technology. Hi3G is interested in a new service architecture model that has distinct characteristics for rapid service delivery. Hi3G envisages a service architecture where the Core Network has minimal service switching, and service control capabilities. Hi3G predict that these capabilities will exist at the periphery of the network in application servers and on the terminal. The service srchitecture will need to support a range of services, both purely telecom but also these that will be a hybrid between telecom, datacom and multi-media. Hi3G reserves however that the exact definition of the services will be to carried on “day one” and is not yet clear. To add new applications Hi3G’s 3G ne twork will use some form of distributed computing environment. The intent is to be able to create and add new applications and to provide service without wholesale changes to other service platforms. Hi3G’s 3G service creation will strive to set aggressive new standards for the timing of new service delivery (i.e. weeks /


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months not years). To achieve this Hi3G network will use standard components such as Open Platform Middleware and APIs. Interaction with Core Network None specific information about the interface between service and core network could be found. However Hi3G wishes to derive the benefits by using industry standards (e.g. 3GPP), to drive system functionality and interfaces, together with the innovative use of other systems technology to provide differentiated services. The latter would imply greater flexibility in how the networks interoperate. Like Telia Mobile, Hi3G emphasizes the importance of multi vendor functionality. Application Server It is anticipated that the Service Network will comprise a number of application servers, which will be predominantly IP based. The scalability of these platforms will be a key requirement so that they can grow from small scale to large-scale performance. This growth must be possible through linear growth steps, with corresponding price/performance improvements. The performance of these platforms will be typically characterised by high availability through hardware/software redundancy, and where possible, capable of supporting redundancy or diversity in applications. The Application Servers will need to support industry standard communications interfaces, specifically IT communications interfaces, telecom network interfaces, and system management interfaces. Signalling in the target service architecture will use IP as the transport mechanism, and will be accessed via the Core Network. In order to introduce successfully UMTS networks among existing mobile networks, Hi3G networks will have to provide GSM 2G+ services from the outset. The service architecture will therefore support a mix of 2G and 3G service platforms and components. It is a requirement that any 2G service applications provided at launch will be on an IP based service platform.

7.3 Analysis In this section I will analyse results from the document studies and interviews by means of platform features. It is about interpreting what has been found about future service network, application and platforms and synthesising this into a picture of the actual costumer needs on the platforms. Some times there are very clearly expressed requirements; some times it is necessary to find out what more general visions and strategies imply in terms of platform features. However I hope that this section will conclude in the picture of a platform that is easy to understand.

7.3.1 Platform that enables a vision of service network From what I found about operators visions of the Service Network I could identify some key concepts that will be discussed in this section with respect to platform features. These are presented in the table below, which complements by further explanations of the key concepts.


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Table 4. Service Network properties vs. platform properties Platform properties

Service Network properties

Multi-protocol

Openness

Scalability

Standardised- interfaces

Modua-rity

3rd party

Interoperability X X Flexibility X X X X X

Telia

Multi vendor X X X Timing new services X X IP-based X X

Hi3G

Multi vendor X X X Interoperability is the concept that lies behind operators will to achieve highest positive synergy effect and utilize existing solutions. Interoperability is the ability of a system or a product to work with other systems or products without special effort on the part of the customer. Interoperability becomes a quality of increasing importance for both telecom and information technology products, as the concept that "The network is the computer" (www.sun.com) i.e. distributed systems becomes a reality. A platform achieves interoperability with other network elements using following approaches:

• By adhering standardised interfaces • By making use of a "broker" of services that can convert one product's interface into

another product's interface • Finally by multi-protocol support

A good example of the first approach is the set of standards that have been developed for the Internet purposes such as TCP/IP. The second kind of the interoperability approach is exemplified by the Common Object Request Broker Architecture (CORBA) and its Object Request Broker (ORB). The concept of multi-protocol is on the other hand about supporting a variety of different network protocols and applications running simultaneously on the same node. Hence, a platform will be able to serve any kind of access via traditional circuit-switched or packet-switched IP-networks. The expression “multi-vendor” is operators’ view of the market where network equipment is chosen by the best of breed principle i.e. by using leading vendor in their respective areas as suppliers for different part of the network. The main benefit of using this approach is, according to the interviewees, that only the very best products from a wide spectrum of choices are being deployed to address particular business needs and requirements. A downside to this best of breed approach has been that sometimes the integration and support between vendors is less than optimal. Therefore the interoperability issue becomes very important. To be able to guarantee interoperability in such an environment, different parts have to fulfil common standards as well as a high degree of openness. An example of such a solution could be OSA (see Chapter 5.2) that specifies available services in service networks over standardised programmable interfaces (APIs). The concept of flexibility summarizes requirements associated with innovativeness and future-proof of the Service Network. This contains platform properties such as: scalability, modularity, openness, 3rd party and standardised interfaces.


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Scalability is the property that makes it possible for operators to expand from small systems using the same components and functional units. Scalability allows the system to grow as the business grows, for example when the initial subscriber base increases dramatically. Modularity refers to the design of any system composed of separate components that can be connected together. The advantage of modular architecture is that you can replace or add any one component (module) without affecting the rest of the system. As one of the respondents defined it “as Lego pieces that you can put together into a coherent whole”. A driving force behind the need of modularity is the vision of functions in one part of the systems that are separable and can be used with other services. An example of such a function could be billing. Openness is bound up with 3rd party, which stands for the possibility for the 3rd parties to be involved in the development of new services. When talking about openness, generally product or system is described as open when its workings are exposed to the public and capable of being modified or improved by anyone. This is a definition that, as I can consider, operators have, but differs slightly from what Ericsson means by openness. In all Ericsson product documentation that I have seen throughout this assignment the definition of openness stresses the level of standardisation rather than the openness as the definition above provides. Clearly datacom influenced are the ideas of timing new services and an IP-based service network. Timing new services is pretty much about shortening time for new service delivery to the market. This can be enabled by the standardised, opened platform that allows developing of new attractive solutions that are not limited by the underlying technology. The vision about IP-based network is driven, as I could identify, by Internets two, very important characteristics namely openness and decentralised/distributed architecture.

7.3.2 Platform that enables future application servers Many of the concepts presented in the table below have already been described in the previous section. Therefore, I will only explain these concepts that differ from what already has been said as well as new-occurring notions.

Table 5. Application Server properties vs. platform properties Platform properties

Application server properties

Vertical product

Openness

Scalability

Standardised- interfaces

3rd party

Reliability

Multi - access X X Generating revenues X

Telia

Multi vendor X X Future proof X X X IP-based X X Multi-access X X High availability X

Hi3G

Generating revenues X By using notion “vertical product” I mean a platform that is sold as a specific, packaged solution for a targeted market segment. This visualizes operators’ idea about a platform that


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evidently delivers a value-added solution for end-consumer and by those means also generates revenues. An example of a vertical product could be a platform that provides a specific VHE-service that is customised in order to enable differentiation. The consequence of this view is that demands on the platform will be associated with the specific solution and will be difficult to generalise. As one of the respondents pointed out voice services require different platform properties then data services do. Voice implies to a great extent so called carrier-class characteristics (see Chapter 5.1.2) while data is of natural reasons better supported by IP-technology. High availability (to users) can be realized through a reliable platform. Basically these are two different aspects of the same feature, which defines a platform’s (or any other network component) consistency in its performance. Reliability and availability are considered as two of telecom networks most important core values. In the comparison with Internet, this is the area where the telecom network shows its superiority. For operators, a reliable network is a crucial precondition when selling both network capacity and end-users services. They simply cannot charge for something that does not work. Thus, reliability remains a very important platform feature. Other concepts in this section do not differ from what has been said earlier and what remains now is to summarize all my findings in an easy to grasp picture of a platform.

Platform that satisfies key customer needs In the theory section I stated that the customers do not really purchase physical characteristics of a product, they buy need-satisfying benefits. In case of a platform such as TSP this would mean that telecom operators do not buy a specific box or whatever, but they search for more intangible values. Is this the truth and in such a case what are these need-satisfying benefits? After having interviewed several operator representatives and analyzed the results of my study I venture to assert that that is the case. Operators indeed regard a platform as much more then the physical item itself. So in the line of Kotler’s (1994) theory of the three leveled product I identified (see Figure below):

Primarybenefit

’The core platform’: functionality that enables increased value for end-users

’The tangible platform’:

• Openness

•Scalability

•Multi-protocol

•Standardised interfaces

•Modularity

•3rd Party

•Reliability

Figure 17. Platform that satisfies key customer needs

• On the core level, a platform is expected to increase value for end-users and by those means generate profits. The core value of the platform is in the functionality that enables this.


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• On the tangible level, a platform is expected to fulfill features that enable delivering what is specified on the core level. These features are as described in the two previous chapters

• On the augmented level. In contrast to the model presented by Kotler, a lot of concepts included by him in the augmented product are in the case of a platform a part of the core offering. To name some: installation and technical support. However, these issues are big enough to fill another master thesis and have not been examined in this one.


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8. Conclusions In this chapter I present conclusions I have drawn from my work with aim to fulfil the purpose. This however should not be viewed as a statement of absolute truth from my side but as an attempt to synthesize my findings and as a foundation for further discussions and research.

8.1 Implication of the changing market In the introducing part of this report I stated the need for a comprehensive description of changes that are going on due to the telecom market’s evolution towards 3G. Later on, I described how the evolution in the telecom market due to the increasing datacom influences as well as changing value systems, challenges traditional telecom vendors such as Ericsson. Now I would like to provide some conclusions with the special emphasis on TSP. As stated before the future telecom market will:

• Become more competitive • Shift towards software and support services • Give commercialisation of application high importance

What does it mean to TSP? The increasing competition in telecom market implies several things. The definition of the platform vendor will enlarge to comprise new players, notably from datacom world. They cannot guarantee telecom characteristics such as high availability, but they certainly are faster to the market and cheaper. In addition, many of these players have already established relationship with the operators when selling other datacom equipment. Thus, operators that apply best of breed principle when consider new purchase of a platform for a purely data service may of natural reason choose datacom vendors. Another reason that supports this assertion is the fact that future 3G services will be more content-based that in turn will lead to higher demand on application software, something datacom vendors are undoubtedly best on. It should be pointed out that TSP is sold at present as a part of a bigger network offer and not as a stand-alone product, and does not really compete on the same conditions with datacom products. However, according to Tidd (2001) and his statement about complex market, a particular component or subsystem that is superior to competing offering when detached from a whole system results in a competitive advantage. The only thing that remains is now to show that TSP is such a superior platform and convince customers about that. When talking about service support I think that TSP can draw great advantages from being a part of the Ericsson company. Ericsson as a leading telecom vendor with a long-standing market presence has well developed service support and integration routines. In addition, many parts of existing networks are manufactured by Ericsson and integrating with these should not cause any troubles. However, the increasing complexity of the networks generates some new needs. For TSP this could mean:

• Continuous adjustments to requirements associated with IP-networks • Support in integration TSP with other network elements as well as supporting services

such as billing and management • Keeping in track with new standards


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• Support upgrading new releases of TSP

The last point I will make relates to the high importance to the commercialisation of application. This expresses consequences of movements in the telecom operators’ value chains and changed revenue opportunities. Presence of the new players on the operators market forces them not only to sell applications to end-customer use but also sell those to other players, such as virtual network operators. Of course this implies that vendor will play an important role in bringing the application to the market and making it available to multiple operators and stresses importance of what I previously called vertical products. By delivering a platform with a customised application TSP could create a competitive position and additionally become a part of many value chains. As Moore (2000) points out, this could be very favourable in the case when end products reach mass market.

8.2 Is TSP the platform that satisfies customer needs? All these platform features that customers (i.e. operators) see as important can be synthesized into the picture of a platform that provides basis to meet demands of future networks. That is exactly how TSP is positioned in the networks. Going one step further and comparing the features that operators stress as important (as Figure 17 illustrates) with TSP key features (see Chapter 5.1.2) shows that TSP indeed is the platform that satisfies customer needs.

Unfortunately that is something that customers are unaware about. The main reason for this is Ericsson’s can-do-it-all market strategy (see Chapter 6.4), which means focusing on selling key-turn solutions where a platform is just a part if it. But, as I can consider this, it could be of great value to increase customer-awareness about Ericsson platforms e.g. TSP and even more to build new (platform) brand identification. To motivate my statement I would like to draw a parallel with Intel’s successful strategy to market a microprocessor to consumer-market. The Intel Inside Program represented the first time a PC component manufacturer successfully communicated directly to computer buyers. Key to Intel’s strategy was gaining consumer's confidence in Intel as a brand and demonstrating the value of buying a microprocessor from the industry's leading company, the pioneer of the microprocessor. Intel adopted a new tag line for their advertising: "Intel. The computer inside." Using this helped to position the important role of the processor and at the same time contributed in associating Intel with "safety," "leading technology" and "reliability". Consumer confidence soared, the program was regarded as a success, additionally Intel’s marketing helped broaden awareness of the PC, fuelling consumer demand while prices continued to plunge. The story described above awakes some questions. The first one is if Ericsson could, the same way Intel did it; achieve competitive advantage by communicating the “Ericsson Inside” message. Of course I will not be able to answer this question here and now but I would like to make some interesting points. When Intel lunched its new program there was no brand identification of the microprocessor among end-users. This reminds of the picture operators have of a platform today seeing the only value in its functionality i.e. application. As one of the respondents expressed it when describing the view on a platform “we want to be able to drive a car, we do not care which company that build the engine”. In other words, a platform itself has today no value-adding benefit and to change it requires a deliberate marketing strategy that would create an explicit linkage between platform properties and customers confidence. Just the way Intel did it; it is necessary to invest in new marketing activities that would provide a consistent message to the


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market. However, it is important to remember that the expected effects will not come over one night, that is a process that requires time and a lot of money etc. Another question that has to be asked is who actually is the end-customer and towards whom marketing activities should be directed? Can we go as far as to end-users? Nokia did it, just the opposite way. Today, Nokia is the leading mobile phone supplier and draws gladly advantages from the success on the terminal market when selling network systems solutions. I am not saying that Ericsson could do the opposite; that would be to simplify a little bit too much. However, communicating the message about platform benefits towards end-users could create new linkages between value awareness and the underlying technology.

8.3 Suggestions for further research This chapter presents some suggestions for further research. I think that the issues presented below could be an interesting continuation and widening of topics that are referred in this study. These are: Expand of the studied market To increase universality of the results the study should be continued and expanded to comprise all telecom operators in the Swedish market. Also, due to the fact that many of Ericsson customers are global, studying other market could contribute with new, valuable information. Continue with other marketing activities Even if identifying customer needs is an important issue when defining marketing strategies, it is really only the first step. For example the criteria that the study has revealed could be used to accomplish a competitor study or a benchmarking. Branding My argumentation about “Ericsson Inside” strategy touches an marketing area of branding theories that I have not developed at all. This could be an interested issue, especially due to the current discussions about naming TSP. Study costumers buying behaviour Understanding the customer is essential to effective marketing decision-making and a vital ingredient in marketing success. However, that is a complex concept and comprises among others: environmental changes, purchasing organization, various buying decision models, buying processes etc. These could be areas for further investigation. Is TSP really the platform operators want? That operators and Ericsson talk the same “language” is a vital precondition for a fruitful co-operation. Through my investigation that led me to the conclusion that TSP actually fulfil operators need I tried to take into consideration differences in operators’ and Ericsson’s definitions of studied concepts. However, I think that is an issue that needs to be put under a closer analysis.


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9. Closing reflection Most research work on topics like this particular one could be conducted in several various ways as far as problem definition, method, delimitations and course of action are concerned. It is seldom obvious what choice of factors will turn out to be optimal. I think that awareness of this kind of issues is important in order to obtain a balanced and as far it is possible objective result in the end. Purpose definition and delimitations The chosen definition of the purpose affects the whole problem solving procedure. Choosing the wrong aspects of a problem to solve could make that you approach the problem in less fertile way or lead you to look for the answers to a wrong questions. That is something I was well conscious about, thus I spent considerable amount of time on formulating what I consider would be a well-expressed purpose. The boundaries set can also be discussed. It could for example have been of interest to evaluate foreign mobile telecom market. However due to my limited resources I found choosing Sweden as most reasonable and at the same time giving me a fair picture of both the changing telecom market and operators needs on a platform. In addition Sweden is at the forefront of mobile technology and therefore important to understand before proceeding to other markets. My perspective has been general and I have striven to get a good overview of studied objectives. Another perspective would of course have changed the course of action and hence the results. I am though convinced that to fulfil the purpose of the thesis it is indeed a general, strategic perspective that is most motivated. My work can however be used as a fundament for further deepening investigations. Method and course of action I believe that the chosen method was successful in terms of enhancing my knowledge and at the same time keeping the work on the scientific level. I tried to use multiple data sources and by those means contribute to the highest possible level of trustworthiness. The interviews, as the only primary data source, have a very important role in my investigation. I tried to get in contact with a wide spectrum of people with different competences being of relevance for my study. I managed to do it to a great extent; however it was a really hard work that took a lot of my time and energy. Unfortunately I found it very difficult to reach those I wanted to interview, neither e-mail nor telephone seemed be the optimal way. One of the reasons for this was the exceptional situation at Ericsson. During the fall Ericsson went through a heavy reorganisation that impacted almost everyone, not least those I needed to see. People were changing jobs and areas of responsibility and during a period of time I simply could not find the right persons. This, in turn, resulted in the interview proceeding that lasted for a longer time that I counted with and consequently did not give me an opportunity to follow up. Results and conclusions The result of my work would possibly have differed slightly if other data sources or methods had need used. It is never easy to foresee the optimal way from the objectives to the conclusions, which can guarantee the best possible outcome. That is why it is important


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during the work to slow down the pace, think after and not to be afraid of taking some step backwards. That is what I tried to do in my work from the beginning to the end. Finally I just want to stress that conclusion part is nothing that should be viewed as a statement of absolute truth from my side but as an attempt to synthesize my findings. However, I do hope that I managed to do it in the creative way, contributing with new interesting perspectives.


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10. References Books Christensen et al (1998), “Marknadsundersökning – En handbok”, Studentlitteratur, Lund Ejvegård, Rolf (1996), ”Vetenskaplig metod”, Studentlitteratur, Lund Eriksson, Torsten, L. & Wiedersheim-Paul, Finn, (1999), “Att utreda, forska och rapportera”, Liber Ekonomi, Malmö Kotler, Philip (1994), ”Marketing management: analysis, planning, implementation and control” 8th edition, Prentice-Hall, New Jersey. Lantz, Annika (1993), “Intervjumetodik”, Studentlitteratur, Lund Moore, Geoffrey A. (1999), “Crossing the chasm”, 2nd edition, Capstone Publishing, Oxford Morris, Michael H., (1988), “Industrial and organizational marketing”, Merrill Publishing Company, Ohio Parkinson, Stephen T. & Baker Michael J. (1986), “Organizational buying behaviour”, Macmillan Press, Hong Kong Parolini, Cinzia (1999), “The value net: A Tool for competitive strategy”, John Wiley Books, Chichester Porter, Michael E (1998), “Competitive advantage”, The Free Press, New York. Patel, Runa & Davidson, Bo (1994), “Forskningsmetodikens grunder”, Studentlitteratur, Lund Rajala, Arto, (1997), ”Marketing high technology: organising marketing activities in process automation companies”, Helsinki School of economics and Business Administration, Helsinki Tidd, Joe et al. (2001), ”Managing innovation: integrating technological, market and organizational change”, 2nd edition, John Wiley & Sons, New York Trost, Jan (1997), “Kvalitativa intervjuer”, Studentlitteratur, Lund Yin, Robert K. (1994), “Case study research”, SAGE Publications, California Other written sources Andrews, P., Hahn, J. (1998), “Transforming Supply Chains into Value Webs”, Strategy and Leadership, July/August 1998 Brandweek, “Intel’s inside track”, May 7 2001


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Durlacher Research Ltd (2001), “UMTS Report – an investment perspective” Questus (1999), “Critical Success Factors for a New Entrant UMTS Network in Sweden”, prepared for Post & Telestyrelsen. Ovum Ltd (1999), “Third Generation Mobile: Market Strategies” Ovum Ltd (2001), “3G Survival Strategies: Build, Buy or Share” Product descriptions (Ericsson internal material): Jambala Application Platform 3.0, Jambala Service Capability Server, Jambala Application Server, Service Network Overview, TSP 4.0 Ramaswamy, Venkartam & Gatignon, Hubert (1994) ”Competitive marketing behaviour in industrial markets”, Journal of Marketing, Vol. 58 Issue 2, p45-56 Request For Information (RFIs) & Request For Quotation (RFQs) from Telia and HI3G regarding UMTS Service Network Rockström, Anders & Zdebel, Bengt (1999), ”A network strategy for survival”, XVI World Telecom Congress Proceeding Internet sources Docere Intelligence (2001), “Den svenska 3G- marknaden – redan på G?” www.docere.se, Accessed: October 2001 Industry Standard (2000), “Europe’s 3G euphoria ends with a fizzle” www.thestandard.com, Accessed: 2001-09-10 Stern, Carl (1998), ”The Deconstruction of Value Chain”, The Boston Consulting Group, www.bcg.com/publications Ericsson, www.ericsson.com, official homepage as well as internal web information, Accessed: continuously August –December 2001 European Telecommunication Standards Institute, www.etsi.org, Accessed: 2001-09-20 Hi3G, www.hi3gaccess.se, Accessed 2001-10-17 Intel, www.intel.com, Accessed 2002-01-02 International Telecom Union, www.itu.org, Accessed: 2001-09-20 Sun Microsystems, www.sun.coom, Accessed 2001-10-19 Telia Mobile, www.telia.com, Accessed 2001-10-17 Webopedia Online Computer Dictionary, http://webopedia.internet.com, Accessed: continuously September –December 2001 Whatis?com, www.whatis.com, Accessed: continuously September –December 2001


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Oral sources Aleman, Gabriel Björk, Erik Cederblad, Peter Dirke, Peter Gadhammar, Monika Gudmandsen, Michael Kristersson, Magnus Lindoff, Jan Lundberg, Peter Nilsson, Rikard Nordström, Anna-Lena Schyberg, Katarina Simoes, Jose Strand, Daniel Svartsjö, Christer Wennmyr, Einar Zetterkvist, Peter

Ericsson, PDU ND&VAS Telia Mobile Ericsson, PDU ND&VAS TeliaMobile Ericsson, PDU ND&VAS Ericsson, PDU TSP& WPP Ericsson, PDU Mobile Internet Hi3G Hi3G Ericsson, MU Nordic & Balticum Telia Mobile Ericsson, MU Nordic & Balticum Ericsson, PDU ND&VAS Ericsson, PDU ND&VAS Ericsson, PDU ND&VAS Ericsson, Platform Evolution Telia Mobile

2001-10-16 2001-12-04 2001-10-08 2001-12-11 2001-10-08 Continuously 2002-01-11 2001-11-16 2001-11-16 2001-11-06 2001-11-29 2001-11-05 2001-10-16 2001-10-10 2001-10-12 2001-09-04 2001-12-18


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Appendix A - Interview guide Introduction

1. Presentation of the project, its objectives and myself. Clarify the purpose of the interview. Emphasize importance of the interviewee’s contribution.

2. Presentation of the interviewee

General questions about purchasing strategies What strategies does the company use when choosing conceivable suppliers? RFI -> RFQ, how do you evaluate the answers? General Questions about 3G strategies What are the 3G strategies of today? What are the main drivers, enabler and barriers behind the development of 3G? Innovativeness of 3G, consider both technological and marketing aspects? Questions about Service Network What is the company’s general vision about future Service Network? One of the characteristics of 3G is a merge between Telecom & datacom how does it impact your strategies for SN? What is most important with 3G applications and services (two levels: end-users and operator driven)? Questions about SCS/AS/platforms What is the primary benefit with SCS/AS/platforms? What standards are important to follow? SCS/AS/platforms, what does matter?

• Architecture • Applications • Features

Please explain all the concepts you use! Round up Anything I should have in mind, any recommendations? Confidentiality: the material will be treated with respect to confidentiality requirements. Parts that are not allowed to be shown in public will be attached as appendix. Finally…thank you for contributing….


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Appendix B – Standardisation Bodies The general aim of 3G standards is to enable a worldwide seamless access anytime regardless of local infrastructure. Relevant Standards Development Organizations (SDOs) include:

• European Telecommunication Standardization Institute (ETSI). • Association of Radio Industries and Business (ARIB) and Telecommunication

Technology Committee (TTC) in Japan. • Telecommunication Technology Association (TTA) in South Korea. • China Academy of Telecommunication Technology (CATT). • Standards Committee T1 Telecommunication of the American National Standards

Institute (ANSI T1). • Telecommunication Industry Association (TIA) in America.

IMT-2000 The requirements for 3G standardization have been under discussion since 1992 under the term IMT-2000 (IMT stands for International Mobile Telecommunications). IMT-2000 has been defined by the ITU as an open international standard for a high capacity, high data rate, mobile telecommunications system, incorporating terrestrial and satellite components. IMT-2000 is referred to as the standard for 3G mobile systems.

The name reflects both the spectrum it applies to - 2000 MHz band - and the anticipated year of availability (2000). The realization of worldwide standardization is very time-consuming since it raises political and economic issues along with the broader telecommunications issues. Despite the globalisation tendencies, 3G will not be realized as a unique standard. IMT-2000 has not developed as one coherent standard; it is the umbrella term for a family of standards. The family of standards concept has been adopted to accommodate the differences in existing 2G network standards and to attempt to coordinate developments based on these standards.

tsp, the platform of choice? - skolan för datavetenskap ... the platform of choice? - a study of 3g...

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