Convergence: One handset is better than two

BT and Vodafone are leading the charge when it comes to integrating fixed-line and mobile technology into a single handset

The imminent launch of BT’s Project Bluephone represents the first step in a move towards converged fixed and mobile networks and is meant to act as a stepping stone towards realising the telco's 21st Century Network strategy.

The aim of Project Bluephone is to provide users with a single cordless handset that routes calls and data packets over fixed line networks when the user is in the office or at home and switches seamlessly over to Vodafone's mobile network when they are out and about. Other mobile operators are expected to sign up to the scheme over time.

The idea is that, when customers come into an office using a BT Broadband line and are within 25 metres of a specialised wireless base station, phone calls or data sessions will be transmitted from the base station to the handset.

Such transmissions will initially be undertaken using Bluetooth radio signals as the first Bluephone handsets will be based on Class One Bluetooth chipsets developed by Broadcom. The devices are expected to launch in June and are likely to be aimed predominantly at the consumer market, although BT refuses to discuss any more details at present.

But a second Wi-Fi-based Bluephone is anticipated to ship by the end of this year or by early 2006 and should be more appealing to the business world. A third WiMax-based offering is likewise under development, but all of the handsets will include functions such as an address book, a voice bank, missed call alerts and call divert. Users will also obtain a single bill covering all of their calls no matter what transport mechanism is used.

While BT has to date pitched Bluephone as a means for customers to cut the costs of their voice calls, consolidate their billing mechanisms, and boost productivity, it has also stated that it aims to generate about £1bn in mobility and convergence revenues within five years.

And it is this revenue potential that is one of the key drivers behind the telco's thrust into this emerging market, says Michelle de Lussanet, principal analyst at Forrester Research.

"All of the telcos in Europe woke up in a sweat, realising that their cash cows were shrinking. Any fixed minute growth was mainly down to Internet dialup, but broadband is also causing this to shrink. So they realised something quite serious was happening and this, combined with the wider industry trend towards IT and telecoms convergence, caused them to revisit the situation," she says.

Angal Dobardziev, a senior analyst at Ovum, likewise believes that a prime motivator behind BT's Bluephone initiative is to provide a means for traffic to pass over its network rather than that of the mobile operators. The goal is to try and guard against mobile call substitution by "giving mobility to the fixed line".

"Convergence will lead to more services, and the more services that people have, the less likely they are to churn and the more they'll be tied in. So this is not just about convergent devices — it's also about services," he explains.

Into the future, as IP networks become more widespread, such services could even include interactive TV because yet another goal is "enabling fixed and mobile operators to compete more effectively with cable companies that are starting to go down the broadband and VoIP route", Dobardziev believes.

It is this move to IP in the shape of BT's 10-year long 21st Century Network project that is at the heart of its Bluephone strategy, says Clive Longbottom, a service director at Quocirca "BT has realised that companies want more than just a fixed line voice service and with 21st Century Network coming down the line, it wants to position itself as the connectivity, communication and collaboration partner of choice for the future. So it has to start doing visionary stuff," he explains.

Therefore, as a first step, the telco is trying to persuade customers to move to a single handset for all of their voice communications requirements, with the idea that, in future, they won't have to worry about which transport mechanism is carrying the traffic. Longbottom claims that Bluephone could be seen as simply BT's way of trying to get people on the roadmap to VoIP. "As BT brings in its 21st Century Network, users won't have to know whether they're using fixed, mobile or wireless networks as they'll all be based on IP."

One of the underlying notions here is that the future consolidation of voice and data networks into a single IP infrastructure is also likely to lead to consolidation in the number of network providers that organisations want to deal with for their communications needs — and BT is determined not to be left out in the cold." The more the world moves to IP, the more organisations are going to go to a single network provider to cater to all of their communications needs so if something goes wrong, they know who to point to," says Longbottom.

The challenge for the mobile operators, however, is that, if BT does succeed in pulling more and more consumers and businesses over to its network, they stand to lose as their former ally becomes a potentially dangerous rival. "Because BT no longer has a mobile capability after selling off Cellnet in 2001, it partnered with T-Mobile and is now going with Vodafone. It makes sense for it to co-operate here, but if, in future, it takes its OpenZone Wi-Fi offering to the next level and adds WiMax metropolitan area network support, the question is: why should it hand over calls to mobile operators?" says Longbottom.

So the mobile carriers will have to respond to the challenge, perhaps by wireless-enabling their phones and signing up with Wi-Fi service aggregators such as iPass or Swisscom so that they can "flip the situation on head and... pass landline calls to BT and they get a proportion of our income not the other way around".

Although Vodafone refused to comment, Longbottom says: "There are many different options open to the mobile operators, but they are likely to become less mobile and the fixed operators less fixed. This means that they'll be back where they should be - competing on pretty much the same set of services."

Therefore, while both the mobile carriers and BT will initially need to work together to create the market, "it will eventually boil down to who is fleeter-of-foot".

But, points out Mark Blowers, a senior research analyst at Butler Group, to ensure that the playing field remains level, the regulator, Ofcom, may have to intervene.

"From a regulations standpoint, the danger is that BT will use its strong position with fixed line networks and the last mile so that mobile operators and smaller start-ups find it difficult to compete in providing similar services. So it's important that Ofcom looks into this area because it potentially opens up a can of worms," he says.

One possible solution for the mobile operators could be to partner with other players such as systems integrators and ISPs "that understand internal communications so they can come up with a more integrated solution", says Alex Black, strategy director at network consultancy, Affiniti.

While this will present mobile carriers with organisational and technical challenges, the move to convergence will have similar repercussions on their customers as, in future, they will likewise have to think about their communications infrastructure in a more integrated fashion, adds Black.

"Today, the people in organisations that procure wired and wireless solutions are different to those procuring fixed line telephony, but in future that's going to have to change so how to integrate all these different communications technologies together is going to be a challenge for everyone," he says.

But is there is actually any demand for converged fixed and mobile networks or is this simply another technology-driven initiative that the industry is trying to foist on unsuspecting customers?

Black, for one, believes that there is "a lot of pent-up demand today and companies in which there is high mobility are just waiting for the technology to catch up".

"One of the big issues today is how you allow communications, while keeping costs under control, especially in relation to mobile spend. Another issue is how to make better use of expensive offices and optimise resources. One way to do this is hot-desking, and allowing staff to use their phone of choice whether they're in the office on moving around will help here," he says.

Many companies would like to have a single service provider, especially when it comes to billing. A lot of organisations simply have no handle on how much their communications costs are because they receive one bill for fixed line calls, another for on-campus voice, several for home line usage and "a morass" for mobile calls. This lack of clarity, in turn, prevents them from being able to control costs by negotiating effectively with their providers.

But while one service provider sounds good in theory, some experts claim that end-user organisations are naturally conservative and cautious when it comes to trusting one provider implicitly. "We feel that fear of the unknown would hold many back when it actually came to it. BT already offers full service fixed, mobile and wireless offerings that can be single billed, yet few people have gone for it," argues Longbottom.

One of the factors here appears to be that, for organisations to sign up to such a service, they want more than just voice to be included in the package. "There has to be a data component as well and a strong perceived value — not just the hygiene factor of fewer contracts and bills. Therefore, the vendors need to come up with compelling offerings and drive these through with strong message. Then uptake would be high," says Longbottom.

At the enterprise level, BT may have to find some tame users as guinea pigs and show them that they can’t afford not to be a part of the migration to IP and convergence. It will also need to position Bluephone carefully in relation to its other potentially rival offerings — standard PBXs,VoIP and IP Centrex — to clarify which option is most appropriate in which situation, experts argue.

For example, Longbottom says: "The advance of IP telephony is bringing with it a full range of functionality such as direct conferencing that is dependent on having a fully-functional large desk phone, which could negate the use of a Bluephone device.”

But there are other issues too. One is how seamless the transferral of calls from fixed to mobile networks is likely to be as the technology is not yet proven. Another is costs, which BT has yet to clarify and which if too high, could inhibit the market. This relates not just to the upfront fee for handsets, which are unlikely to be cheap, but also to call charges.

"Call costs should be based on IP call rates, which can be about a penny a minute to anywhere in the world. Doubtless, however, as there will be large proportions of standard mobile transport being used, and the likes of BT will want to milk the market as much as possible, we can expect to see initial call rates to be closer to mobile rates than IP rates,” says Longbottom.

Billing presents yet another challenge. If people do what they’re being encouraged to do and use their phones for value added services such as e-commerce, then billing for third party Internet services is likely to be very complex. And the situation is only set to get worse as Wi-Fi support is added. “There’ll have to be a lot of work with Wi-Fi billing from a voice point of view. With data, you only have to work out the number of data bits going over the network, but it’s harder with voice and this area will present challenges” says Black.

Another challenge with Wi-Fi-based Bluephone devices, meanwhile, is battery life because the wireless technology was designed for laptops rather than mobile phones and is particularly power-hungry.

All these issues combined indicate that there are still a lot of unanswered questions over the future success of Project Bluephone, and fixed mobile convergence in general and adoption is unlikely to be instant.

"There’s probably be lots of initial noise, a few intrepid users, various problems with quality and handsets, wrong billing and poor customer service, followed by a more cut-down realistic service, which will begin to grow and define the market over a five-year period. A typical solutions curve if you like,” says Longbottom.