UK Telecoms for Dummies®, CGI Special Edition

CGI Special Edition

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. UK Telecoms

CGI Special Edition

by Alan Nunn and Andrew Palmer

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. UK Telecoms For Dummies®, CGI Special Edition Published by: John Wiley & Sons, Ltd., The Atrium, Southern Gate Chichester, West Sussex, www.wiley.com © 2017 by John Wiley & Sons, Ltd., Chichester, West Sussex Registered Office John Wiley & Sons, Ltd., The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior written permission of the Publisher. For information about how to apply for permission to reuse the copyright material in this book, please see our website http://www.wiley.com/go/ permissions. Trademarks: Wiley, For Dummies, the Dummies Man logo, The Dummies Way, Dummies.com, Making Everything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. John Wiley & Sons, Ltd., is not associated with any product or vendor mentioned in this book.

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Authors’ Acknowledgments We want to extend our thanks to all those people who have either knowingly or unknowingly contributed to this book by helping to clarify understanding and correct errors. Particular thanks go to Ian Dunbar, Huw Evans, Ben Kirk and John Hicklin for reviewing the drafts diligently and suggesting improvements, for Stefania Bortolotti for keeping us focused, and for Chad Sievers at Wiley for his editorial input and support throughout the process.

K Telecoms For Dummies, CGI Special Edition, is the U11th in a series of guides produced by CGI. It introduces the telecommunications business (telecoms for short) to those readers who are less familiar with it or to those readers who may be focused on a particular part of the business.

It isn’t an in‐depth technical tutorial, but is intended to give a broad understanding of this rapidly changing industry, which delivers services everyone uses daily and probably never thinks about.

Whatever your background and understanding, you should come away with something new, even if it’s just the latest in the CGI series that you have been collecting! About This Book The UK telecoms business is fairly complicated. You probably own a mobile phone or two, and you probably have broadband at home. Have you ever wondered about what goes on behind the scenes when you make a call? Or how businesses provide complex services over the Internet? If you have, this book can help.

UK Telecoms For Dummies, CGI Special Edition, isn’t an in‐ depth guide. In fact, plenty of textbooks cover the area in greater detail. This book is an overview of the UK business – a who’s who of the brands you’re likely to come across and some of the history behind them. It also gives some insight into the current changes and thoughts on how the UK telecoms business should respond.

Our main reason for writing the book is to give you a good understanding of the business and the future direction, so you can make better decisions as a customer or as a decision maker within the business. Use it as a starting point to do more research and ask some deeper questions.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 2 UK Telecoms For Dummies, CGI Special Edition Foolish Assumptions We’ve made a few assumptions while writing this book. They are as follows:

✓✓You’ve a rough idea about UK telecoms as a user, and you’re aware of some of the products the end-users might buy, either at home or in a business context. ✓✓You’re probably working somewhere in the business and want to have a broad appreciation of how the parts of the business fit together. Maybe you’re in a new job and want to grasp how UK telecoms work. ✓✓You’re interested in how the business will develop and want to understand more about some of the technologies, so you can respond to them. You may even be responsible for driving some of the big changes and want some help.

Remember: We use telecoms to refer to the business as a whole, and Telco when we talk about a telecoms company. Icons Used in This Book To make navigating to particular information even easier, these icons highlight key text:

These points are important to keep in mind.

With a tip, you can benefit from the experience of industry experts.

It highlights potential pitfalls to be avoided.

This icon points out technical, nonessential information that the casual reader may want to skip.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Introduction 3 Where to Go from Here This book is intended as a short, sharp intro to the key components of the UK telecoms market and should help you to talk with others in the industry with a new-found confidence. As with all For Dummies books, you can dip in and out as you like or read it from cover to cover.

If you require any more information, visit www.cgi‐group. co.uk/telecommunications‐media and feel free to email us at [email protected].

All For Dummies guides have a shelf life, but that’s particularly true of this fast‐moving industry.

For example, the UK recently voted to leave the EU (known colloquially as Brexit). Until the UK actually leaves, all the current legislation stands. Over time, it’s likely to change. In some cases, it will make sense to continue to operate to EU standards, for example to benefit from scale and consistency of technical interfaces. In other cases, the government of the day may choose to create new UK standards.

By the time you read this book, some of its contents may be outdated. You’ve been warned.

In This Chapter ▶▶Glancing at the industry’s history ▶▶Identifying the different companies involved ▶▶Surveying today’s landscape ▶▶Predicting what will likely happen next

his chapter gives a bit of a history lesson, but please stick Twith it. We weren’t keen on history at school, but later in life we realised how important it is to understand how the telecoms industry got to where it is today.

Seeing how the industry evolved gives you some great hints about how things may change in the future. Read this chapter from your own perspective, and keep your eyes open to the future, because technological change can often be jumpy. In Chapter 8, we talk about what we think will happen next, because it’s helpful to have a view, even if it’s wrong. Otherwise, you’ll just be following what everyone else is doing, which isn’t fun and isn’t always great business.

When you understand how the industry got here and where the industry has been, everyone can be much better prepared for the future. Comprehending what may be possible puts you in a better position to think about where you want to make the future happen. This chapter helps you to be better informed so you can shape your own future.

Telecoms’ changes in the past 30 years Think back over the last three ✓✓ 1980s: Rise of the mobile phone decades. Before the mid 1980s, ✓✓ 1990s: Rise of dial‐up Internet there were no mobile phones and no Internet. Most teenagers today ✓✓ 2000s: Broadband available to struggle with grasping that thought. most of the UK, fueled by a rise The key progress points through the in e‐commerce and social media decades were as follows: ✓✓ 2010s: Superfast broadband, fueled by video and TV

Looking Back to Where UK Telecoms Came from The UK Telecoms industry can be traced back to the mid 1800s, when the Electric Telegraph Company was formed in 1846, exploiting a patent for a telegraph system that had been filed in 1837. It was the first time that people could communicate over long distances without actually moving.

William Fothergill Cooke and Charles Wheatstone created the patent for a system of needles that were moved by electrical signals to indicate letters. The original use was to signal between railway stations. Each of five needles could be in one of three different positions (upright, tilted to the left, or tilted to the right), and the combination of needles used to illustrate a specific letter.

The system used for signalling numbers and letters today is based on a binary code, which enables an eight‐bit binary word to signify one of 256 different characters. This is sufficient to generate numbers, letters and all the other symbols you see on a typical keyboard. The Cooke Wheatstone telegraph can only signal 20 letters, with C, J, Q, U, X and Z being omitted, these being less commonly used in English.

Cooke was the commercial entrepreneur and Wheatstone was the academic who did the technical work. This pairing of skills is often seen in successful businesses.

Over the next 40 years, the technology moved from sending patterns and symbols to sending speech, and by 1911 the National Telephone Company was well enough established that the government took it over as part of the General Post Office (GPO). That organisation survived for about another 70 years until 1981 when the government of the day decided that British Telecom (BT) should be sold into public ownership. This decision was the start of some significant changes.

The government of the day wanted to ensure that the UK had a sound technology footing and recognised that the traditional manufacturing businesses would decline. The big idea was to drive investment in technology and service organisations to fill the gap. Nothing much had changed in the previous 70 years of the telecoms business, apart from exchange automation to take out the manual operators. Significant investment was needed if the UK was to keep up with other leading nations.

To drive this change, the government had two options:

✓✓Raise taxes and control investment in businesses directly ✓✓Open the market to competition and hope that the money would flow in to deliver change faster, as the result of operators competing with each other

The government chose the second option and pushed British Telecom into public ownership.

Before the sale could go ahead, some new legislation was needed to put rules in place to define how competition could happen and how it should work in practice. This legislation defined things like standard network sockets, so that customers could buy phones to plug in, rather than having them hard‐wired. The legislation also created technical specifications to ensure that phones would ring or people could hear what each other were saying without being too loud or too

quiet. The specifications also set safety standards to ensure users wouldn’t electrocuted if lightning struck the overhead cables or power cables touched the phone cables. The UK gets some pretty nasty weather, and this can happen in rural areas where a lot of overhead cables are on poles!

The following sections take you on a quick tour of what happened over the following five years or so after that decision. Telecoms in the UK moved from being a government department to a vibrant market with multiple fixed and mobile operators. Here are some of the key events that made it happen. Mercury Communications To make competition work, more than one person was needed in the game. Enter Mercury Communications, the winged messenger.

Mercury formed in 1981 as a provider of business services. It was the first real competition for BT, starting operations in 1984 initially in London. Using BT landlines for the connection, customers could benefit from lower call charges by prefixing calls with 131 and a customer code, which routed the call on the Mercury network. Later, a simple access code replaced the prefix number. All this extra dialling got a bit messy to use, and smart boxes emerged as the next solution. The user plugged the box in between the phone and master socket, and the box pre‐dialled the necessary numbers. It was all quite cumbersome and a better solution was needed.

Ultimately a new approach called carrier preselect (CPS) was developed to replace the access codes. CPS worked by recording the customer’s call routing preferences in BT’s systems, making the whole process completely transparent to users. Privatisation After a lot of work by the government defining how competition would actually work, British Telecom was privatised in

1984, the first of a series of high profile sales of government assets to the people of the UK. The public was offered shares, as were the big institutions, and investment flowed in, enabling a much needed modernisation programme.

The original name of the privatised organisation was British Telecom. The company rebranded as BT in 1991 after it had expanded beyond the UK and launched more services. BT wanted to make the point that it wasn’t only British and was doing a lot more than telecoms.

Exchanges were made digital, and a new Customer Support System (CSS) was created to take orders, issue contracts and generate bills for services. This massive step automated a lot of previously manual work and enabled the company to operate more efficiently.

The old electromechanical exchanges and manual systems seemed to work well, but they took a lot of effort to maintain and operate. This meant that growth was constrained artifi- cially, and when this constraint was lifted, the business could grow much faster. Often, current practices are so deeply embedded, that seeing how they can be improved isn’t easy. An outside set of eyes can help. The regulator – Oftel Although it was a firm believer in the free market, the government of the day didn’t want to leave it to chance. A new regulator was created, Oftel, to ensure that everyone played fairly in the marketplace. Oftel had the job of setting price constraints on ‘baskets of services’ to ensure that customers didn’t lose out. Oftel also took on central responsibilities like issuing phone number ranges.

The regulator’s role changed a fair bit over the years. We explain those specific changes in Chapter 2. The regulator’s role is much more than a watchdog, because it sets the frameworks for competition, decided which technical standards should be used and served as a champion for the customer.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 10 UK Telecoms For Dummies, CGI Special Edition Going mobile At about the same time, technology had developed phones to be moved out of the house and become mobile. This idea may seem strange to readers under the age of about 30, but phones were once confined to the home or office. In 1985, Oftel issued licences to new companies, Vodafone and Cellnet, to begin operation of mobile (or cellular) services.

The phones then were a little different to the sort of thing you have in your pocket today. In fact, you would need more of a suitcase than a pocket to carry them because they were about the size and weight of a house brick, at around 2kg. They were also expensive and limited to those who really needed to be in touch all the time, initially the financial services industry. Cable TV Since 1984, cities had been experimenting with sending TV signals over cables, rather than over the air as radio waves. Cables are more reliable, don’t need someone to climb on the roof to put up an aerial, and can deliver a more localised service. A lot of cities did this, but the costs were higher than estimated, and most providers went bankrupt fairly quickly.

Bankrupt companies have the advantage to buyers that they have usually done a lot of the hard work, and this was the case with cable TV. Two emerging companies bought up the assets, and NTL (1990) and Telewest (1992) became the two national cable TV players, with a lot of financial backing from the United States. They eventually became Virgin Media in 2006. Virgin Media was acquired by Liberty Global in 2013, but retains the brand in the UK. Glancing at What Today’s Landscape Looks Like The Telecoms business has changed a lot over the years. The change is all about scale, which has driven most of the consolidation, and hasn’t reached an end yet. The industry

is now reaching some stability though, with three to four big players in each segment of the core value chain and lots of smaller players.

In the UK, a few big providers dominate the market. BT, Sky, Talk Talk and Virgin Media are the four main providers of fixed network services. They provide voice, broadband and TV services from their own infrastructure and mobiles in partnership with other operators. More specifically,

✓✓BT acquired EE in early 2016, which makes it the only player with all four parts of the quad play (voice, broadband, mobile and TV content) under its direct control. ✓✓Sky is the biggest content player, having hundreds of TV channels, whereas BT has focused primarily on creating sports content and reselling movies. ✓✓Talk Talk has focused on the value market, pioneering the concept of free broadband for consumers and lower‐cost packages for businesses. ✓✓Virgin Media has been winning the speed race, deploying co‐axial cables that can deliver much higher headline speeds than the copper phone network. This enables them to deliver higher value broadband and TV services to consumers, as well as serve businesses.

The mobile market consists of EE (now part of BT group, but continuing as a separate brand), O2 (part of Telefonica), Three and Vodafone. Vodafone also have extensive fixed network capability following its acquisition of Cable and Wireless Worldwide in 2012. Three and O2 were expected to merge during 2016, but the move was blocked first by the UK’s Competition and Markets Authority, who consulted with Ofcom about the reduction from four to three operators. Ofcom were concerned about the loss of competition with just three operators and in turn advised the European Commission, who blocked the deal.

Virgin Media, part of the Liberty Global International group, exclusively serves the cable TV market. A series of acquisitions and mergers brought together the separate city networks, initially into NTL and Telewest, who merged and formed Virgin Media in 2006.

What happened to all those companies? A lot of changes have happened in ✓✓ 2008: Talk Talk demerged from the UK industry over the past couple Carphone Warehouse. of decades. To illustrate this, here ✓✓ 2002: Bought AOL’s UK Internet are the companies that exist now, business. and some of the companies that formed them: ✓✓ 2002: Bought Opal Telecom. BT – formerly British Telecom Three – owned by Hutchinson Whampoa ✓✓ 2016: Acquired EE. ✓✓ 2016: Attempted merger with O2 ✓✓ 2009: EE formed from the merger was blocked by the European of Orange and T‐Mobile’s UK Commission, amid concern that businesses. reducing the number of competi- ✓✓ 2007: BT acquired Plusnet, an tive mobile operators from four independent ISP. to three would reduce effective competition in the UK. ✓✓ 2000: Orange acquired Freeserve. ✓✓ 2003: Three was formed as a UK subsidiary of Hutchinson ✓✓ 1998: T‐Mobile acquired Mercury Whampoa, and was launched one2one. on March 3, 2003 – 03/03/03 O2 Virgin Media ✓✓ 2013: Sold broadband arm to Sky. ✓✓ 2014: Sold ADSL business to Talk ✓✓ 2005: Bought by Telefonica Talk. group, but retains the O2 brand. ✓✓ 2013: Acquired by Liberty Global, ✓✓ 2001: Floated on stock market but continues to operate as following separation from BT. Virgin Media in the UK. Sky ✓✓ 2006: Formed from the merger of NTL and Telewest, cable compa- ✓✓ 2013: Acquired O2’s broadband nies dating from the early 1990s. customer base. Vodafone ✓✓ 2010: Acquired Easynet, an ISP formed in 1994. ✓✓ 2012: Acquired Cable and Wireless Worldwide. Talk Talk ✓✓ 2008: Cable and Wireless ✓✓ 2014: Purchased ADSL business acquired Thus. from Virgin Media. ✓✓ 2005: Cable and Wireless ✓✓ 2009: Bought Tiscali (ISP). acquired Bulldog.

✓✓ 2005: Cable and Wireless to offer a complete package of acquired Energis. fixed voice, broadband, mobile and TV services. The legacy of these ✓✓ 1998: Thus bought Demon. changes can often be seen within These changes were initially driven the organisations, with internal units by the need to create a larger scale operating along the lines of the units of business as the market expanded. that formed them. Later, they were driven by the need

Looking Further Out – a Taster The telecoms market is pretty tough, with growth largely flat in all sectors, mostly due to the highly competitive environment in the UK. The lack of real revenue growth drives pressure on costs, which in turn drives consolidation – the central business functions can be de‐duplicated to maximise margins. A few small players are left, but many of them may still disappear as pressure on costs continues.

Technology is constantly changing also, with an almost annual refresh of mobile standards forcing network upgrades. Fixed networking technology is evolving to deliver faster access speeds over copper, fibre and cable. This means significant and constant attention to both the networks and the IT systems that look after it all. We talk about this more in Chapter 3, where we look inside the Telco, and in Chapter 8 we look yet at some of the technologies that will impact the next phases of the industry’s development.

In This Chapter ▶▶Grasping what telecoms is really about ▶▶Understanding the value chain ▶▶Scaling and interconnecting businesses – enabling the value to flow ▶▶Keeping it running smoothly – regulation and standards

elecommunications is a complicated business. It includes Teverything from the wires and optical fibres in the ground through the devices you hold in your hands and even the apps that run on them. Gluing this all together is software that makes it all work and enables you to get in touch with your telecoms provider when you need to.

To make it easy to understand, we talk about each part of the value chain in turn, how those parts interwork with each other and how the money flows. In Chapter 4 we introduce some of the suppliers that provide the capabilities, but we don’t go into too much detail, because the names change pretty quickly in the technology world. Defining a Value Chain: A Big‐Picture View A value chain is a way of looking at a business, or part of a business. Each part of the value chain has something going in and something coming out. The thing coming out should be

more valuable than the thing going in, which is how a busi ness makes money.

To help you understand telecoms, we start with the stuff you can see – the infrastructure, which includes the physical ducts, cables, buildings and towers that survive the waves of technology change. The copper network that connects exchanges to homes and businesses started to be built in the early 1900s. Although the cables and the poles used to support them may have been replaced a few times, they still follow the same routes and end up at the same exchange buildings. Over time more cables were placed underground to remove them from sight.

In the early days, cables were dug straight into the ground, but later, particularly in towns and cities, and between exchange buildings (sometimes known as central offices), ducts were used to hold cables. After the duct is in the ground, it’s easier to add new cables when more capacity is needed, because a new cable can be pulled through without digging up the road or pavement and making another big mess.

Mobile masts are more obvious features of the landscape (although some are disguised – we’ve seen one pretending to be a tree). Masts need to be tall and visible, because the radio frequencies used by mobile phones travel best through free space. Buildings and hills reduce or block the signal, as you probably know from travelling through a tunnel while making a phone call. As mobile use has increased, more masts have been built, despite the protests from people not wanting to live next to them.

Mobile phones can adjust their transmit power according to how far away they are from a mobile mast. The closer they are to a mast, the lower the transmission power needed to reach it. If you’re worried about living close to a mobile mast, remember that your phone will be pushing out less radio energy than if you lived farther away.

To connect all the cables together to build services, a lot of equipment is needed. (We discuss this equipment in Chapter 3.) The equipment is usually in exchange buildings or cabinets, but sometimes it’s underground beneath the covers in streets and pavements. At the other end of the cable, when it reaches the home or business, the cables come in to a

master socket, which represents the end of the infrastructure part, or point of handover – a term used to describe the point where the responsibility changes from one part of the value chain to another. This is also known as the network termination point. Naming the Different Parts of the Value Chain The market naturally divides itself into four different func tional areas because the nature of each business is quite dif ferent. The flow of value is referred to in terms of upstream providers (creating a basic capability) and downstream providers (consuming that capability and providing it to end‐users). We discuss the four areas in the following sections. Figure 2‐1 shows these four areas.

Figure 2-1: The telecoms’ value chain.

Some companies operate over more than one area, and larger companies may operate in all four, but it’s still useful to sepa rate the functions of each type. Internal structures of compa nies often mirror the parts of the value chain that they serve. We take a look at each part of the value chain in turn and provide more specifics about what each does. As you can see, the landscape gets pretty complex. We focus on how compa nies use different parts of the value chain to deliver specific services in Chapter 5. Infrastructure The infrastructure part of the value chain is where the basic ‘plumbing’ of the network happens, providing the founda tions for the network to work. Companies building infrastruc ture invest a lot of money over a long period to provide the basic network that others can use to create value further down the chain.

Infrastructure players include Openreach (a BT Group company), Virgin Media, Vodafone (who acquired Cable and Wireless Worldwide) in the UK and Arqiva. Each has built significant infrastructure covering a large amount of the UK. BT’s historic position as the national sole provider of fixed line services gives it a legacy of near universal coverage (except Hull), which means that it’s regulated.

Until 2006, BT’s infrastructure business was mixed in with the residential business, which the regulator decided was a bit unfair to the other retail operators, so Openreach was separated out as a separate division within BT. Openreach is part of the overall BT Group, but it’s an internally separate division with very strict rules on how it works with the rest of BT. The relationship is a bit like divorcees still living under the same roof. It was a big change to make after many years together, but Openreach is now spending a lot of time with other partners.

Some smaller companies have focused on building networks where doing so makes economic sense. They’ll only spend money digging the ground up and laying new infrastructure where it’s likely to generate a cash return over the medium term. The focus is usually on towns and cities, because that’s where there is a higher density of homes and businesses, so it’s more likely that services will sell. Rural areas have fewer people per unit area and are last in the queue for infrastruc ture upgrades because those people can’t generate enough revenue for the companies. Consumers and businesses in rural areas are starting to put more pressure on operators to deliver better services in these areas, and the government has committed to a 10Mbps universal service obligation as a minimum speed for broadband.

Infrastructure companies operate on a long timescale and might run business cases that pay back over 10 or 20 years. Investors are happy with that, because they want the cer tainty of a long‐term return. A lot of pension funds rely on a steady, consistent income from their investments, so they quite like this relatively unexciting type of business where nothing much happens, but the money keeps flowing safely.

The mobile networks rely on the masts and towers that carry their radio equipment. Arqiva provides the majority of them and in turn leases space on masts to the mobile operators. Actually, the process is more complex because the mobile

operators don’t want to deal with the nuts and bolts (liter ally) of fitting new equipment at the top of these structures, and have worked together to create network‐sharing compa nies CTIL (Cornerstone Telecommunications Infrastructure Limited) and MBNL (Mobile Broadband Networks Limited).

✓✓CTIL is a joint team from Vodafone and O2, established in 2009, and shares the mast infrastructure only, with separate radio devices placed by the contributing companies. ✓✓MBNL is a company formed by 3UK and T‐Mobile (now EE) largely to achieve economy of scale by consolidating the radio access networks (RANs) of the two organisations.

These companies manage the physical infrastructure on the masts on behalf of the mobile service providers. By working in these groupings, fewer mast sites are needed, because each mast can be reused. Wholesale Wholesalers are very much the middlemen of the industry. They focus on connecting groups of businesses together with specialist services in a more economical way than the end businesses themselves can. They provide bulk services that others can consume, and they also enable those other players to interact with each other efficiently. These services may be connectivity (for example, wholesale broadband, assembled using connectivity from Openreach into something that can be consumed by a virtual operator) or interconnect – providing connectivity between data or voice operators. More recently, wholesalers have evolved to deliver white‐label services (a generic service on which you can stamp your own brand) to customers. Many of the large UK operators run some form of wholesale business.

Wholesale is a bit like the fruit and vegetable business. Wholesalers buy in bulk and then sell to the smaller players who otherwise would struggle to sell half a ton of carrots. They might also move lorry loads of carrots between the big distribution centres to keep the mid‐sized companies

(who may be too small to sell a whole lorry load of carrots in a week) in business.

Up to the 1980s there were only two operators (British Telecom and Kingston Communications in Hull), so they easily could work out whether to route the call on their own network or to the other operator. When the market opened up and there were more than two operators, this problem became more complex, which in turn kick‐started the whole sale business in the UK.

International traffic had always had the issue of where to route calls, but the international numbering plan made this relatively straightforward. If a number started with 00, it was international. So as soon as 001 was dialed, the equip ment knew it had to route the call to the United States. If the number began with 007, the call should be sent to Russia, not to a fictitious British secret agent by the name of Bond. (Refer to the nearby sidebar for more about the UK numbering plan.)

Routing traffic between Telcos is more complex because the numbers were allocated at a much deeper level – typically five digits may need to be examined before the receiving operator could be identified. As a result, call routing between operators was a valuable function, and so it opened a business opportunity.

Where an opportunity exists, commercial forces step in. BT recognised this, and was also regulated to be the ‘inter connect operator of last resort’. As a result, BT needs to keep track of the complex inter‐operator routing needs and to route calls on behalf of other operators. This approach enables those who didn’t have the scale to connect directly with each other to still offer a complete service, routing calls to anywhere.

As the market has consolidated, a lot of the smaller players have disappeared, leaving more players with enough scale to interconnect directly with each other. As a result of these changes, the market for wholesale has decreased significantly, particularly in mobile, where the operators have increasingly connected to each other and excluded the wholesaler, except for the need to reach beyond the mobile ecosystem – for example, where a mobile calls a fixed number.

The UK numbering plan – simplified

Every time you dial a number, the ✓✓ 05 = Older freephone services: phone system has to work out It’s currently being withdrawn whether you want to go interna- and replaced with 0800. Some tional, national or local. Or maybe VoIP (voice over IP) services you’re dialing a freephone number also used this range (055 and or a premium number. The first two 056) before 03 was available. (or sometimes three) digits dialed tell ✓✓ 07 Mobile and personal you this: = number services ✓✓ 00 International: The next = ✓✓ 080 Freephone digits give the country, for exam- = ple 001 is the United States. ✓✓ 087 = Premium: Charged at local rate. ✓✓ 01 = National: The next 3 digits indicate the locality. ✓✓ 089 = Premium: Charged higher than local rate, sometimes a lot ✓✓ 02 London area: Initially 0207 = higher! (inner London) and 0208 (outer London), with 0203 covering the 04, 06 and 09 aren’t used whole of London as these ranges currently. were exhausted. The UK regulator – Ofcom – issues ✓✓ 03 = National: They had no number ranges in the UK, but they local significance. For instance, can move between operators. This is a number could be anywhere called number portability. in the UK but charged at local rates. Used by businesses and governments typically.

Wholesalers today are successful in providing emerging tech nology to retailers and virtual operators, for example hosted IP (Internet Protocol) voice services, as so-called white label services, which can be branded by the virtual operator who sells them (refer to the later section on virtual operators). They’re also successful in providing broadband and fixed line telephony to smaller providers that don’t have the resources (or desire) to invest in the systems and infrastructure needed to deliver these services directly.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 22 UK Telecoms For Dummies, CGI Special Edition Retail The retail brands are probably the most familiar because they’re the companies who have a direct commercial rela tionship with their customers. In other words, retailers sell services directly to end‐users, buying from wholesalers and adding capability or content to deliver a unique proposition to the market. Until a few years ago, you may have bought your landline, mobile services and pay TV from separate com panies. Nowadays, buying bundles that include fixed phone, broadband, mobile and TV services are more common.

According to Ofcom, the brands in the UK who together occupy around 91 per cent of the fixed broadband market are BT (now including EE), Sky, Talk Talk and Virgin Media.

The mobile operators with their own network infrastructure are EE, O2, Three and Vodafone. Although EE was acquired by BT in early 2016, the brand remains separate at the time of writing. Virtual operators Virtual operators provide services to end‐users by reusing capabilities already developed by wholesalers or retailers. They rely much more heavily on others to do the technical work in the network, while they focus on differentiating them selves in other ways. Some examples of differentiation are as follows:

✓✓Serving a particular market segment: For example, UK customers with overseas family, where they provide packages that are good value for international calling. ✓✓Competing on price: For example, GiffGaff is part of O2, but provides a low‐cost, self‐service offer. ✓✓Bringing a mobile offer in as part of a wider set of services: For instance, Virgin Media has a significant mobile customer base in the UK, without the overhead of running a mobile network. ✓✓Offering convenience to customers: For example, most of the UK supermarket chains offer mobile products with their own network brand.

Mobile virtual network operators (MVNOs for short) may be thin and rely on the underlying mobile network operator (MNO) for the entire service, including the all important SIM card and service centres. The MNO performs limited branding for them (printing the MVNO logo on the SIM card, answer ing service calls with the MVNO identity and so forth). At the other extreme, a thick MVNO is likely to do a lot more work itself. It may even deploy the core customer database into the network to give some control over the routing of calls and the way the data service is handled.

A virtual operator has to work hard to position itself in the market, with the right product mix for the chosen market seg ment and a competitive price. Because everyone has these aims, your company needs to be sufficiently different from the crowd to be successful. You need to do more work your self and rely less on wholesalers, but doing so requires more resources to be invested. You need to think carefully about how you differentiate your products and services. Keeping it Running Smoothly Just as in sport you need a referee to make sure there is fair play, telecoms has a regulator to ensure the rules are defined in technical standards, which are usually created collabora tively by the players – unlike in most sports. These sections examine regulation and also the standards and collaboration in greater depth. Regulation Regulation is all about ensuring that customers are treated fairly. The regulator in the UK, Ofcom, has to work within guidelines set by the EU, and within UK law. The government has delegated to Ofcom key powers and functions, such as managing radio spectrum and monitoring quality and decency in TV content, as well as ensuring the telecoms environment delivers a good deal for customers.

Specifically, Ofcom is responsible for ensuring the UK market operates in the interests of consumers, while taking the views of key stakeholders into account. It covers phones, Internet, TV and radio, and postal services. Stakeholders include govern ment departments, who set policy, and the companies who provide the services.

The nature of regulation changes as the market and technol ogy change. Ofcom generally makes regulation technology neutral, which means that Ofcom regulates to drive market outcomes, not to force a specific technology decision.

One of the main things that Ofcom does is to continually reas sess the market and ensure that if an operator has too much power in the market, that the operator can be reined back, usually by price controls, where Ofcom dictates the price or mandates a percentage reduction in price over time.

Ofcom starts the process of assessing price controls using a market review, which begins with the market being defined. For example call termination is a UK market. Ofcom then reviews the operators in the market to test whether any one of them has significant market power (SMP). This isn’t just a straight percentage, but depends on how the market is oper ating overall. If Ofcom’s analysis shows that the market isn’t working well, it may design an intervention or remedy, which is likely to be a price formula or an absolute price point that must be met. Ofcom can also force one provider to offer a wholesale variant of a product, enabling downstream providers to enter the market and compete.

The call termination operator always has significant market power, because it’s the only operator who can deliver a call to the end customer and make the phone ring. Call termination rates are nearly always regulated by means of a price set by Ofcom.

Ofcom also investigates any breaches of the general conditions, which define some overall rules for UK operators. Ofcom may initiate an investigation in response to a request from customers, other operators or even from Ofcom directly if it suspects that something is operating outside the boundaries.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 2: The Telecoms Ecosystem and Who’s Who 25 Standards and collaboration In a world where many businesses need to connect to each other and offer services that may transit a third business, standards are important. There’s a joke in the standards world, which says ‘The nice thing about standards is that there are so many to choose from’. Of course, the point of a standard is that there should be a limited way of doing things, but over the years, the industry has developed lots of ways to do things. This section talks about some of the more common ones you’ll come across.

The main standards bodies in traditional networking are the International Telecommunications Union (ITU), European Telecommunications Standards Institute (ETSI) and 3rd Generation Partnership Programme (3GPP). They have defined the key functions and interfaces for voice services for decades.

The Internet Engineering Task Force (IETF) largely defines how the Internet works. This group has been in place since 1986 and is more of a virtual working group with a process where requests for change (RFC) are submitted, and may exist as Internet drafts for a number of years. Although it started as a US government‐funded research activity, it’s now a much broader based set of working groups who address specific areas of development.

One of the more light‐hearted RFCs issued on 1 April 1990 entitled ‘A Standard for the Transmission of IP Datagrams on Avian Carriers’ defines how carrier pigeons can be used to carry IP packets. Look at it to understand how an RFC is structured. You will find it here https://tools.ietf.org/ html/rfc1149 .

The mobile folk looked to the ESTI GSM group (Groupe Spécial Mobile Association [GSMA], or more recently Global System for Mobile Communications) for the first two genera tions of mobile technologies. The 3GPP was later created to drive the push for higher data rates, creating standards rati fied by ETSI. The next initiative was 4G or LTE (Long Term Evolution), probably the one most of people are using. 5G is currently being worked on with the aim of delivering even more bandwidth to users, so people can watch videos of cats while on the move or maybe do something productive,

like upload and download technical documents to and from the cloud, collaborating with other team members.

The international collaboration work driven here means that most mobile phones work in most places in the world. The specific customisation for each country is largely the actual spectrum bands that may be used in that territory, because spectrum usage isn’t harmonised globally, and each country has its own regime for managing allocation and use.

Understand the territory in which you’re working, and the standards that apply to the territory. The UK is harmonised, and largely aligned with Europe, but step across continents and things can be very different.

There are far too many other standards bodies to mention, typically focusing on specific areas of the industry and often being adopted by ITU or ETSI after they’re stable.

The technical authoring of standards is a laborious job, and to ensure that things actually work in practice, bake‐offs may be held. They have little to do with cake; they bring multiple equipment suppliers together to prove that their equipment works together according to a defined set of interfaces. As well as standards‐setting bodies that do the technical work, users can collaborate and test how well the standards work in practice and how commercially viable they are.

Organisations like the GSMA work across the industry to ensure that mobile standards move forward globally at a simi lar pace. These standards enable handsets can be produced in sufficient scale to deliver a low price point to users and a reasonable margin for the manufacturer.

In This Chapter ▶▶Responding to customer calls ▶▶Creating and delivering products ▶▶Understanding the processes that keep a Telco running ▶▶Comprehending the systems that support the processes ▶▶Knowing how the business is doing ▶▶Preventing the bad guys from getting in

his chapter takes you on a trip around a fictional Telco Tthat provides the full set of fixed and mobile services end to end. In reality, few if any telecoms companies would have all of these parts; the telecom business is a series of ecosystems that create services by working together. We start by looking at the network.

To put everything in context, Figure 3‐1 shows a diagram loosely based on the work of Tele‐management Forum (TM Forum). This diagram shows the customers at the top, ser- viced by a customer interaction layer. The customer layer in turn provides access to a product layer, which defines how products are ordered, billed and managed in life. The two systems layers, operational support systems (OSS) and business support systems (BSS) are where all the real technical delivery stuff happens, controlling the networks. Around the edge are the cross‐domain and integration functions to glue it all together as well as the central functions such as human resources (HR), finance and supply chain management.

This chapter examines this figure in greater depth, breaking down the different parts of a Telco.

Figure 3-1: An overview of a Telco. Interacting with Customers Customers are a diverse and demanding set of people and organisations. They expect an instant response to anything they do, whether it’s an order, a fault report or a billing enquiry. Keeping customers happy needs a slick set of processes and a lot of automation.

In the olden days, customers would contact their Telecoms provider by letter or phone call. Although some customers still do, they usually only contact their Telco when they’re very unhappy and they want action to resolve their unhappi- ness. People expect to be able to interact online, via a website, chat session or an app on the phone. Business is increasingly being performed this way. Enabling customers to interact how they choose, when they choose, is referred to as omnichannel. Refer to the nearby sidebar for more information.

These sections examine the processes that need to operate to deliver the omnichannel customer experience. Doing so is difficult without understanding a bit about the systems, but it makes most sense to talk about what happens first (the process) and then explain how the systems enable it to happen.

Allowing customers to interact the way they want: Omnichannel Omnichannel is a 21st-century way agents, because much of the infor- of saying that customers should mation the agents need will already be provided with the same experi- have been stored from previous dia- ence regardless of which way they logues. This in turn should deliver engage with the service provider better customer engagement as well and should be able to move seam- as provide strong leads to the busi- lessly between a webpage and a ness. Service providers will use Lead phone call without having to repeat management tools to track the suc- information. Information about the cess or failure of the customer open- customer, address, account, prod- ing a new contract via a particular ucts purchased and recent interest channel. The lead information will be shown should be available across fed back to the Telco’s profiling and the webpage, call centre and shop. segmentation processes, increasing the focus and insight about how the The benefits of the omnichannel market is operating. approach are a seamless journey for customers and simpler workload for

Winning customers The Chief Marketing Office (CMO) is responsible for getting new customers for a service provider. To win customers, you have to understand them and then serve their needs. To do this, you need to invest a lot of time and money in customer research.

The CMO uses this research, together with externally available data, to define and create customer segments, which are groups of customers with similar needs. This segmentation data helps the marketing team to explore how attractive a new service or offer may be to each particular segment and to consider the best way to get the message out to customers.

The complete process of marketing – from initial research to sealing the deal works best when closed‐loop analytics are used to measure the effectiveness of marketing activities. This approach can monitor the actual response rates to specific campaigns and then use this data to fine‐tune future campaigns based on exactly how individuals respond. It also creates data that can be used for future product planning.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 30 UK Telecoms For Dummies, CGI Special Edition Providing the service Those customers who respond to a marketing campaign are more likely to want to buy something from your company. This section describes what should happen next. This process is sometimes referred to as Lead‐to‐Cash (L2C).

Here an order is taken from the customer and the details used to provide the service. This process can be as simple as enabling a telephone line to make calls once more, by a simple configuration change, for example when a customer moves to a house where the physical cables are in place, but there is no service. Consider these points, depending on what services are being provided:

✓✓Broadband: Providing service may involve linking network components and sending the right customer premises equipment. It may take a few days because the network will need to be configured to connect the phone line to the Digital Subscriber Line Access Multiplexer (DSLAM) at the exchange or cabinet. ✓✓Mobile service: Providing a mobile service may involve sending a handset and SIM out to the customer and ensuring the network has the right data loaded to recog- nise them when the phone is switched on. ✓✓Complex business service: The provision process may be a whole project involving multiple activities to bring many sites onto a new network.

Whatever the steps, the process needs to ensure that customers get what they wanted, on time, and that what they wanted works. Getting the bills paid The next stage involves billing customers for their use. Service providers usually present a single bill for all services to their customers, and customers can view, challenge or pay this bill using a variety of methods, thanks to the digital omnichannel approach also applying to billing.

The first step is for the mediation system to collect the various billing records from the network infrastructure, such as

call data records (CDRs) for voice calls and IP data records (IPDR) for any data services. The mediation system pulls these records from the network, merges records relating to the same call and applies a tariff, and forwards the converged billing record to the billing system. This system creates the invoice and notifies customers so they can log on and review the bill. Usage‐based billing is expensive, which is one reason operators are moving to packages with unlimited minutes.

Debt collection and management systems track overdue bills. These systems can be configured to track customer bill payments, raise alerts and produce reports of unpaid bills, and drive automated actions as soon as the bill is overdue.

The Telco needs to decide how to handle debt. The approach may be different, depending on the circumstances. For example:

✓✓For bills that are due to be paid soon, customers with a poor payment history could be sent an advisory message that links to an advice line or support line. ✓✓For overdue bills, the Telco can either contact the customer or escalate the bill to the debt management department. ✓✓A low‐value debt raised by a customer with a poor payment history may eventually lead to the customer’s service being ceased and the debt written off. ✓✓A high‐value debt with a valuable customer may lead to a more personal approach, because more than likely the customer didn’t pay because of an oversight rather than wilful avoidance.

Dedicated debt management tools are becoming essential as the number of high‐value mobile handsets increases. Where these handsets are bought on contract, the debt levels can become significant rather quickly and need to be managed, ideally with automated system support to minimise costs.

Debt management is a complex area with rules set by the financial service industry. The systems and processes must operate within these rules while automating the process as much as possible to keep costs down.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 32 UK Telecoms For Dummies, CGI Special Edition Fixing things when they go wrong If customers experience a fault with their service, they should be able to report the problem via any of the omnichannel routes, although many prefer to make a call because they feel a call will get them more personal attention and lead to a faster fix.

After a customer reports a fault, a service desk representative who will deal with all resolution communications with the customer will log it. The service desk has the following levels that address customer issues:

✓✓Level 1: This service desk representative logs the fault as a trouble ticket, which acts as a unique identifier for diagnosis, escalation, resolution and reporting. If the customer logged the problem online, the trouble ticket creation is automated, usually after some level of validation (such as a line test). At this point, the service level agreement (SLA) clock starts ticking, and the pressure is on to resolve the problem before the customer gets even more unhappy, and penalty payments might need to be made for a business service. If the Level 1 agent is unable to fix the problem, he passes it to a Level 2 service team. ✓✓Level 2: This level of representatives has access to more sophisticated diagnostic tools to resolve the issue. ✓✓Level 3: In a technically complex issue, the fault may be passed to Level 3 support teams who have specialist expertise and more sophisticated tools.

This process is all reactive, waiting until the customer reports a fault. Wouldn’t it be better if the fault was fixed as soon as it was spotted? This is called proactive problem management, where the monitoring and diagnostic tools provide a real‐time view of the network, including faults and performance issues. These issues can be identified to service desk staff members to reduce the amount of diagnostic work that they need to perform. In parallel, repairs can be initiated proactively to reduce downtime.

With enough data and analytics, you can move from pro‐ active monitoring towards autonomics, where fault indicators can be acted upon without any human intervention and the network fixes itself (by reconfiguring the faulty part of the network) before a fault‐causing condition can arise.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 3: Taking a Closer Look inside a Telecoms Company 33 Managing the products and services A modern Telco has literally thousands of product and service variants. These all need to be managed through a natural lifecycle where they’re created and presented to the customer so they can be consumed, managed and monitored, and eventually withdrawn. In the past, this process would have taken significant manual effort, but with modern catalogue‐driven systems, this is just another automated process supported on the systems. Chapter 5 talks more specifically about products and services and how they’re put together. Understanding the Systems behind the Processes The support systems used by service providers can be split into two categories: business support systems (BSS) and operational support systems (OSS).

The BSS face out to customers, enabling them to order things, receive bills and sort problems out. The OSS is closer to the network and manages the detail underneath the services that the customer buys. These sections discuss these two types of systems in greater depth. A good OSS and BSS architecture is able to evolve rapidly to support new services, without having to redevelop the software. In the ideal world, OSS and BSS will be catalogue driven and fully configurable, so new products and services can be adopted almost instantly. Business support systems BSS components deal with the taking of orders, payment issues, revenue and billing, and so on. The four processes supported by BSS are as follows:

✓✓Product management (refer to the earlier, ‘Managing the products and services’ section for more information) ✓✓Order management ✓✓Customer management ✓✓Revenue management

The evolution of support systems In the early days of telecommu- in 1988 to drive automation and nications networks and in some standardisation into the systems and small‐scale operations today, the processes of the Telco. support systems were basic, manu- TM Forum is a global association for ally intensive and disconnected. For digital business, covering communi- example, there would have been no cations, technology, finance, health- link between the order management care, cities and so on. It is a nonprofit system and the provisioning sys- organisation, created to support tem responsible for configuring the collaboration and partnership to exchanges, switches, and so forth co‐operate, prototype, deliver and that deliver the new line and number. monetise digital services. TM Forum In the 1990s Telcos started to has created an overall architecture, realise that a more systematic Frameworx™, which is a suite of way of managing systems was best practices and standards that needed, and the emphasis moved provides the blueprint for effective, to standardisation and more use of efficient business operations and the commercial off‐the‐shelf (COTS) OSS and BSS systems used to sup- software packages to deliver both port them. The architecture includes cost savings and better customer a description of standards covering service. The Tele‐management the areas that we describe in this Forum (TM Forum) was formed chapter and more.

Order management Order management is the business driver for service fulfilment management and order provisioning; it ensures the orders are delivered to the customer successfully.

First, the order is decomposed into the component parts, which can each be executed independently and orchestrated to ensure any dependencies between them are met. For example, a sales order with three services – land line, Internet and wireless – can be broken down into three sub‐orders, one for each component.

Order fallout management is needed when something goes wrong. Problems can occur due to downstream system failure, incorrect or missing data or issues with network connectivity due to an inventory mismatch. Sometimes manual intervention will be needed to fix things, and to help manage this, order status management provides a dashboard. The dashboard

reports the progress of all orders, including those that need fixing, enabling resources to be applied to deal with fallout.

Customer management Service providers require a single view of the customer and regularly need to support complex hierarchies across customer‐facing applications known as customer relationship management (CRM) systems. Customer management also covers requirements for partner management and 24/7 web‐ based customer self‐service. Customer management can also be thought of as the processes around the CRM systems that help customer care agents handle the customers in a better and more informed manner, and make sure that they’re happy at the end of any interaction with your business.

Revenue management Revenue management focuses on billing, charging and settlement. It can handle any combination of OSS services, products and offers, including partner settlement. Billing is an integral function offered by BSS systems and isn’t under the supervision of OSS. Operational support systems OSS components assist the service provider in the management of their networks. Together with BSS components, they’re used to support various end‐to‐end telecommunications services. In general, an OSS provides at least the following functions:

Service delivery A service delivery platform is a set of components that provides service delivery architecture, such as service creation, session control and protocols for the services delivered to a consumer, whether it’s a customer or another system.

Service fulfillment Service fulfillment involves a series of supply chain activities that are responsible for assembling and making services available to the consumer. The following processes are involved in its execution:

✓✓Service design and cataloguing ✓✓Integrated inventory management

✓✓Network configuration and capacity assignment ✓✓Service order entry, decomposition, workflow tracking and fallout resolution ✓✓Service order activation

Service assurance Service assurance involves the application of policies and processes to ensure that the services being offered to consumers meet a predefined service quality level for an optimal consumer experience. As a result, the service provider can identify faults and resolve these issues in a timely manner, so as to minimise the service downtime. Service assurance also includes policies and processes to proactively pinpoint, diagnose and resolve service quality and network degradation issues as well as device failures or malfunctions.

Diagnostic probes are deployed in the network to detect issues such as performance degradation and high traffic levels. The probes provide data to capacity planning tools, so new capacity can be deployed just as it’s needed. These in‐built tools, together with fault and event management systems, enable the service level agreement (SLA) to be delivered to the customer. Clarifying What We Mean by a Network In telecoms, a network is a group or system of interconnected people or things. Most people use telecoms for talking to each other – either with voice, chat, video or other messaging tools. Things such as computers, TVs and data centres communicate over the network. As devices get smaller, more of them want to chat to each other – for example, your fitness wristband will chat with your phone to tell it your current heart rate. Devices talking to each other devices leads to the Internet of Things (IoT), which we talk about more in Chapter 8.

You’ll probably come across different types of networks. For example, a TV network could be a group of broadcasting stations that connect together for the simultaneous broadcasting of a programme. A computer network could mean a number of interconnected computers, machines or operations.

The basic concept of networks and networking for telecommunications is based upon the Open Systems Interconnection (OSI) model, which characterises and standardises the communications functions of a telecommunications (or computing) system, regardless of the underlying internal structures and technologies. This model enables interoperability between communication systems through standard protocols. To achieve this, the OSI model divides the communication system into seven layers. Figure 3‐2 provides a simplified view of the OSI model.

Figure 3-2: The OSI model.

The model’s explanation is too technical for the scope of this book. Just be aware of the layers and some of the protocols used at each layer.

A modern network has two logically distinct parts: the control plane and the data plane. For example, think about a phone call. First, the control plane manages session setup, based on the number dialled. Once the session has been established, the data plane is used to transport the information (speech in this case) end to end. The control plane routes the data by setting up the most efficient path between the two end points (phones).

Know your protocols! The following is a list of the most messages are formatted and common protocols used in today’s transmitted as well as what IP‐dominated communications actions a web server or browser world: can perform. HTTP helps to define Uniform Resource ✓✓ Transmission Control Protocol Identifier (URI) to identify a name (TCP): The basic communica- or a resource on the Internet and tion language or protocol of the Uniform Resource Locator (URL), Internet, it defines how to estab- a subset of the URI that specifies lish and maintain a network con- where the identified resource versation. Sometimes shown as is available and the method for TCP/IP to show that it runs over retrieving it. It can be an HTTP the IP layer. URL (https://), but also other ✓✓ User Datagram Protocol (UDP): methods, such as FTP (ftp://). It’s an alternative communication ✓✓ File Transfer Protocol (FTP): This protocol to TCP, used primarily is a standard network protocol for low latency and loss‐tolerant for the transfer of files between communications. two computers/devices on the ✓✓ Internet Protocol (IP): The Internet; there is also Secure method or protocol by which FTP (SFTP) for moving files with data is sent from one computer/ some level of protection. device on the Internet to another; ✓✓ Simple Mail Transfer Protocol every device on the Internet has (SMTP): It’s used to control the to have an IP address for identi- sending and receiving of email fication purposes. across the Internet. ✓✓ Hyper Text Transfer Protocol (Secure) (HTTPS): This application protocol defines how

Figure 3‐3 shows the sequence of events to set up a telephone call. A webpage lookup is similar, except instead of dialling a number, the URL (www.cgi‐group.co.uk) is sent to the domain name server (DNS) – part of the Internet’s control plane, which converts it to an IP address that the browser can use to access and display the webpage content.

Figure 3-3: Control and data plane. Fixed networks The term fixed refers to the fact that the end‐user is connected to the network by a physical connection rather than a radio link, although in some difficult‐to‐reach areas fixed wireless might be used – point‐to‐point radio. The three main types of connection are copper pairs, co‐axial cables and fibre optical cables. Inside the home or workplace, the very last connection may be Wi‐Fi, but it’s still considered a fixed network.

Wi‐Fi technology allows the end‐user to connect to a wireless LAN (WLAN) network, using a preset radio frequency band. An access point supports the WLAN, which provides connections over a short range, around 20 metres indoors. This access point is then connected back into a standard telecommunications network. In larger areas, networks of access points are combined to deliver near ubiquitous access within offices or in public spaces such as airports or coffee shops.

The copper cables support communication‐enabling services such as asymmetric digital subscriber line (ADSL/ADSL2) or very‐high‐bit‐rate digital subscriber line (VDSL) for home consumers, symmetric digital subscriber line (SDSL) and higher‐ bandwidth services (leased lines) for business users.

The fibre optic cables deliver services such as fibre to the home/fibre to the premises (FTTH/FTTP). Fibre optic cables are also used to provide connections across the core of the network and to deliver backhaul for mobile sites and to the cabinets – in fact anywhere you need really high bandwidths.

Hybrids of fibre and copper technology are being deployed including fibre to the cabinet (FTTC) and G.Fast, where the fibre optic cable terminates in a street cabinet and then a copper cable is used to connect to the premises.

The former cable TV networks use co‐axial cables in the UK (Virgin Media) and use the DOCSIS standards, which is a global standard for the transport of cable TV signals. Mobile networks The term mobile refers to the fact that the end‐user isn’t phys- ically tied to the network; the connection is a radio link.

Mobile (or cellular) networks were built to support communications to mobile handsets from the mid 1980s. These networks are defined and governed by specifications and standards created by the International Telecommunication Union (ITU), European Telecommunications Standards Institute (ETSI) and the Global System for Mobile Communications (GSM). The term cellular refers to the network edge, where the local area is divided into regular cells, each of which has a Radio Base Station (RBS), supporting a number of radio frequencies. Devices connect to the strongest frequency signal that is available in that particular cell, but can then be handed over to another cell as they move around, hence the term mobile.

Mobile technologies are dependent on the characteristics of the radio spectrum available and the number of users sharing the cell at any point in time. That’s why users will rarely experience the theoretical maximum bandwidth – they’re sharing the capacity with anyone else connected to that cell. Recent technology is better at sharing capacity, but there is always likely to be a difference between the theory and practice of mobile throughput.

Wi‐Fi operates in unmanaged spectrum, which makes the signals susceptible to interference from other services, such as video senders, baby monitors and microwave ovens that all operate at around 2.4GHz. Mobile networks operate on managed spectrum, which is regulated and allocated to operators. Each operator pays a licence fee to Ofcom for this privilege, and end‐users get a more consistent service as a result.

Evolution of mobile networks so far The industry generally refers to gen- IP‐based Internet access at erations of technology. In reality, higher data rates. Rates of generations are based on groups of 3Mbps became possible, rising standards, which may be deployed to a theoretical 14Mbps (real life over a period of time. It’s likely to average 3Mbps) with the 3.5G continue for 5G, so there won’t be a technology, high speed packet single point where 5G is deployed; access (HSPA). rather it will be deployed in stages ✓✓ 4G: Introduces LTE, initially as the capability is defined and defined in 3GPP Release 8 in developed. Here is a summary of the 2008, which enables an end‐to‐ mobile generations: end IP network to be deployed. ✓✓ 1G: Analogue technology from Now widely deployed in the UK, 1980s – no longer in use. 4G can deliver true broadband speeds of up to 100Mbps, with ✓✓ 2G: Digital systems from the 10 to 20Mbps being typical in 1990s, mostly using Global urban areas. System Mobile (GSM). Data rate up to 9.6kbps per channel. ✓✓ 5G: Introduces heterogeneous radio interfaces, improved ✓✓ 2.5G: Extending GSM through antenna design and more fre- Enhanced Data for GSM (EDGE) quency bands. Definition began and General Packet Radio in Release 11 in 2012 and will Service (GPRS) – the first practi- continue to the most recently cal data network using Wireless announced Release 15. See Application Protocol (WAP) Chapter 8 for more detail. and delivering up to 144kbps, or 384kbps with EDGE. ✓✓ 3G: Introduces High Speed Packet Access (HSPA), a true

Broadcast networks Broadcast networks are used for TV and radio, where large numbers of channels or stations are broadcast at the same time, with the end device tuning to the desired one. TV and radio are undergoing a transformation, in that the basic services are moving to digital rather than analogue transmis- sions. The TV switchover to Digital Video Broadcasting (DVB) in the UK completed in 2012, with radio slowly moving over to

the Digital Audio Broadcast (DAB) system. The main impact on the end‐user was the need to buy DVB‐ and DAB‐compliant devices.

Broadcast over IP networks is also growing, through the use of multicast, which delivers the same IP packets from the source to multiple endpoints, by replicating them at each point the network forks to multiple users. Multicast enables efficient broadcast delivery over IP networks and is used for delivery of TV channels in the UK by some providers, notably BT. Running the Business – and Knowing How Well It’s Doing This section talks about the information that the management team in a Telco needs to ensure the business is operating well. Information is good as a starting point, but you need insight to enable you to make the right decisions about the future. Data and information The one thing that a telecommunications network isn’t short of is data pertaining to how it’s performing. Even before the advent of data warehousing, business intelligence, big data and analytics, a plethora of log files were being created and recorded across the many devices, systems and software applications that constituted a telecommunications network. The problem is that nobody had time to look at this data.

In recent years, the focus has moved more to the customer experience – measured by the following:

✓✓Quality of Service (QoS): QoS can be derived from measures within the network (uptime, latency, throughput and such). ✓✓Quality of Experience (QoE): QoE needs to be measured closer to customers, taking account of the equipment they’re using and the end‐to‐end experience. For example, to measure video QoE, probes are needed in the set top box to give a true picture of the viewing experience.

As more data has been captured and stored (with storage becoming cheaper over time), it’s become possible to deliver more predictive analytics. Forward‐looking analytics enable a business to work out what trends are operating and make changes to the network to enable QoS and QoE to be maintained. Business intelligence Data warehousing brings the data into one place and makes generating reports much easier. The real value though still needs to be derived by asking the right questions to get the reports that can be used to drive business decisions, which is referred to as business intelligence.

A whole new field of data science has emerged over the past few years to describe the process of gathering and using data to deliver insight. Data science has created methodologies, processes and algorithms required to collate and make sense of large volumes of data from disparate sources and derive insight from it.

The move to the adoption of cloud computing and big data information repositories, with their ability to handle ever‐ larger volumes of data from a myriad of sources, structured and unstructured, has led to the present drive for advanced analytics and insight. Combining the data from within the network and systems in the enterprise with other operational data and external information enables the data scientists to link external indicators, such as the weather, to predict when a network might be about to go faulty due to heavy rain or high ambient temperatures.

This holistic approach to analytics means that predictive maintenance – knowing when a device is likely to fail – is a more precise art than before, but it’s still an art. Similarly, network planners are able to more accurately predict the point at which network expansion is required or what effect a certain mobile charging tariff will have on the network. By investing in tools to support the most advanced analytics methods, today’s telecommunications companies are better able to understand their customers, their networks and their business. This in turn enables them to make the right decisions to optimise the running of the network and to ensure that they can deliver good customer experience even when it rains.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 44 UK Telecoms For Dummies, CGI Special Edition Keeping the Baddies Out Before the Internet, networks didn’t have to consider the levels of security and protection that are required today. Business or enterprise networks, such as banking networks, were generally considered to be private networks, where the company owned the connecting telecommunication equipment and machines and software at either end and the only external elements might be a private circuit purchased from the GPO. There was no sharing of the connection with another enterprise, and sensitive lines were usually encrypted using physical scrambling equipment at either end. Even if someone gained physical access to the point‐to‐point link, it was encrypted and couldn’t be read.

As these companies developed their web presence, anyone on the Internet could gain access, which created potential vulnerabilities. Today systems need more than a username and password to protect all parties – enterprise, service provider and end‐user.

A whole generation has grown up with technology and inquisi- tive minds, and the Internet enables them to access systems remotely from anywhere in the world, which has created the hacker culture. Initially hackers were script kiddies trying to get into systems for the personal kudos it gave them, but over time hacking has developed into a more sinister business motivated by making money from extortion of companies following a form of blackmail where the company’s website may be taken offline by an attack, or their PCs and servers may be encrypted by ransomware.

The modern telecommunications ecosystem is under attack from a variety of angles, for example:

✓✓Internal attacks on a network: A virus can spread fast within an organisation and take a significant time to eliminate. Disgruntled employees may also be a threat. ✓✓External attacks on a network: These attacks come from hackers wanting to access data or to deny access through an attack or by injecting malware that can obtain access to sensitive areas

✓✓Personal attacks: These types of attacks often use social engineering to obtain passwords, or they phish for passwords by luring the user to a cloned site to steal passwords. Ransomware from attachments or links can take over a user’s machine, encrypting files.

The need to provide a more holistic approach to security has led to the coining of the term cybersecurity. This term encom- passes a whole suite of technologies, tools and processes to combat some of the threats that we just listed, because the estimated level of cybercrime is $7.4 billion globally and rising, across both business and personal domains.

Cybersecurity is an area of increasing concern, focus and expenditure for both enterprise and service providers, because the implications of a breach are serious:

✓✓The financial impacts can be huge in terms of lost revenue and the costs to clear up afterwards. ✓✓The damage to reputation can have an impact in terms of lost revenues, shareholder and market faith, and so on. ✓✓The potential fines for breaches that lead to the loss of confidential customer data are substantial – the General Data Protection Regulations (GDPR) that are entering into legislation within the EU can levy a maximum fines of €30m or 4 per cent of global revenues, whichever is higher.

An effective cybersecurity policy focuses on several areas:

✓✓Protection: Tools to keep the cybercriminals out or detect them if they get in; examples include firewalls, access gateways, authentication servers, deep packet inspection tools and so on. ✓✓Prevention: The use of analytics and business intelligence systems to spot erratic behaviour or patterns of activity that could be the start of an attack. User education is a key part of this strategy. ✓✓Maintenance: Regular testing and patching of systems, software and devices, including planned and ad‐hoc pen- etration testing and security auditing.

✓✓Mitigation: What to do when an attack has happened, particularly in these areas: ••Processes to follow ••Paths of escalation ••Resources to deploy ✓✓Operations: The security operations centre (SOC) has the responsibility to ensure that the staff, tools and processes are in place and fully available at all times.

This focus on cybersecurity has also lead to the creation of a new role on the board of companies with sole responsibility for protecting the business, the Chief Information Security Officer (CISO). This person oversees the cybersecurity strategy and maintains it as networks and threats evolve. They can help to manage risk and keep the focus on the assets that matter most to an organisation.

Unfortunately, cybersecurity is an area where your company can’t be 100 per cent safe; you can only manage risks. You’re in an arms race with the cybercriminals, and you need to constantly stay one step ahead of them. New vulnerabilities are being discovered, often from naïve developers who don’t expect the sort of attacks they are subject to. The best protection is a vigilant CISO who has put in place strong procedures to cover all the obvious areas that we discuss and a strong response team to deal with issues when they arise.

In This Chapter ▶▶Understanding who’s who in the supplier world ▶▶Building the network and systems ▶▶Buying parts from other service providers ▶▶Putting it all together – integrators

ou’ll come across many suppliers to the telecoms indus- Ytry. They provide the raw materials to the operators, including network equipment, systems technology, the underlying computing and know-how to bring it all together.

This chapter doesn’t give you a catalogue of suppliers, but it focuses on the types of well‐known suppliers. Telecommunications is a rapidly moving world, and a vibrant community of smaller players serves a specific niche. This chapter discusses only the larger players. Keep your eye on the press to chart the progress of the small players. Network Equipment: The Plumbing You can think about network equipment as the plumbing that carries traffic across the network. It includes everything from the router in your home where you plug the PC in to connect

to the Internet, all the way to the big switches in the middle of the network that join your Internet session with millions of others and connect your PC to the big Internet providers such as Google and YouTube.

Initially, the equipment in the network would have been dedicated physical hardware: telephone exchanges, communications switches and routers, mobile base stations, mobile gateways, mobile switching centre and so forth. In the early days, this equipment would only work with other equipment from the same manufacturer, which was a major barrier to progress, because it limited the scale of operation. As suppliers started to use standard architectures, functions, protocols and interfaces, operators could build multivendor networks and run them efficiently.

The major players in the telecommunications space were companies that had been around since the start of the communications and computing industry. Companies such as IBM, Ericsson, Marconi, AT&T/Bell Labs, NEC, Nortel, Alcatel, Lucent, Nortel and Nokia dominated the pre‐mobile and pre‐ Internet era of telecommunications.

With the development and adoption of IP‐based networking in the early‐to‐mid 1980s, new companies such as Cisco appeared on the scene and started to take the business away from the old guard, especially in the data communications area of the market. They were soon joined by the likes of Juniper and other start‐ups, especially during the Internet boom of the 1990s.

Many of these companies were set up purely to develop innovative software/hardware or other intellectual property before larger companies acquired them. The late ’80s also saw the start of the rise of the Chinese vendors ZTE and Huawei. The 1990s and 2000s are littered with mergers and acquisitions, especially after the great telecommunications bust of 2001–2002, where a great many companies went bankrupt or were acquired for very small outlays by the survivors.

Presently, the Big Six in terms of telecommunications equipment sales are as follows:

✓✓Cisco Systems ✓✓Ericsson

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 4: Looking at Who Supplies the Know‐How to Telecoms Businesses 49

✓✓Huawei Technologies ✓✓Juniper Networks ✓✓Nokia Networks (recently acquired Alcatel‐Lucent) ✓✓ZTE Corporation

The present direction towards converged networks, cloud computing and virtualisation represents a significant challenge to the companies previously listed. Commercial off‐the‐ shelf (COTS) computing equipment is now capable of running software fast enough to replace the bespoke (and expensive) hardware provided by the traditional suppliers. A low cost server is now able to run multiple software applications in a virtualised environment, replacing multiple pieces of dedicated equipment. It’s all about the software now, which is a big change in the market. Support Systems: The Service Wrapping Service providers use two categories of support systems: business support systems (BSS) and operational support systems (OSS), as we discuss in Chapter 3. These enable services to be defined, delivered, looked after and billed.

Service providers are demanding ever more flexibility from their OSS and BSS vendors. This demand is leading to a need for migration towards a different architectural approach. This approach delivers more flexible systems which can be quickly configured to deliver new services, rather than needing software changes. System vendors often complement their solutions with niche features and functionality – such as embedded analytics, business process management software and correlation and workflow capabilities.

The uptake of software‐defined networking (SDN) and network function virtualisation (NFV) enforces the trend towards unified OSS and BSS orchestration infrastructures, because service providers venture into multivendor virtualised and software‐driven networks, as well as hybrid virtualised/ traditional networks, service environments and business models.

The widespread adoption of standardisation methods, such as TM Forum Frameworx and its subcomponents (eTOM, TAM, SID), has led many service providers to consider truly multivendor OSS and BSS stacks in preference to a single vendor stack. This drive to standards has forced systems providers to consider how open (to interact with other systems) their own systems are, which has led to the adoption of stan- dardised interfaces for OSS and BSS systems.

Open interfaces are essential to support interoperability and interconnectivity with other service provider’s networks and support systems, as well as interoperability with other enterprises and their support systems. The use of standard open interfaces means that connecting two systems from separate service providers’ support systems together is a less complex proposition.

This drive for open frameworks and standards has also driven a change in the OSS and BSS space, with even single‐stack vendors adopting open interfaces between their own stack subcomponents. This approach makes it much easier for other vendors to integrate their systems and also reduces the complexity of the integration. The open interface approach has the following benefits for the vendor and the service provider:

✓✓The vendor is less likely to be swapped out if parts of its stack are considered unfit for purpose or obsolete. ✓✓The service provider can adopt a multivendor approach and use best of breed components, or optimise cost. ✓✓Genuine competition exists between vendors, with less road map lock‐in. ✓✓Service providers aren’t locked into specific vendors and systems integrators, so they have more choice as to who can supply their integration needs.

The major vendors in the support systems space have been identified as:

✓✓Amdocs ✓✓Comarch ✓✓Ericsson ✓✓HPE ✓✓Huawei

✓✓IBM ✓✓NEC ✓✓NetCracker Technology ✓✓Nokia (including Alcatel‐Lucent) ✓✓Oracle ✓✓ZTE IT Infrastructure: The Brains behind the Systems Another element to any service provider’s network is the IT infrastructure, which is the combination of computing and storage systems required to support the network’s brains, such as the control plane and OSS and BSS systems.

With some exceptions, mainly in the network’s control plane elements (where everything needs to happen very quickly), the IT infrastructure would consist of the same equipment as you would find in a traditional enterprise data centre. It would have equipment from traditional computing and storage suppliers, such as Dell, EMC, Hitachi Data Systems, HP and IBM. It also would have some networking equipment, such as firewalls, routers and switches from the likes of Brocade, Cisco, F5 and Juniper.

Over time, the need for specific types of hardware to support the control plane elements has reduced, through the ability to support specific functions in software, so that even the same nonspecific computing hardware and storage can support them. The software centric approach led to the adoption of both individual computing servers and blade servers, which consisted of a chassis and individual computing servers. In other words, they basically were a server on a computer board, which could be added to the chassis as required. These blade servers also supported virtualisation, meaning a single chassis could serve multiple functions with functions brought online as required.

The ability to virtualise functions previously implemented in dedicated hardware and the availability of low‐cost, high performance computing equipment has created a new way

to organise resources – the cloud. We discuss the cloud more in Chapter 8, but the main point is that it allows the service provider to cut IT costs and helps the people tasked with keeping the network running efficiently focus on their core business activities instead of having to contend with IT distractions.

Of course, the move to the cloud does have to be justified, from a business and operational basis. Table 4‐1 lists the issues that you should consider and their pros and cons.

As the table mentions, service providers have the potential to create their own cloud, use a public one or run a hybrid model. Refer to Chapter 8 for more on this discussion, but the overall strategy: use the model that best suits your business aims and operational model.

Table 4-1 Pros and Cons to Moving to the Cloud Pros Cons Fast start‐up: The ability to add Bandwidth: The potential new resources in next to no time. increase in computing power in the cloud can lead to a bottleneck if the network bandwidth available doesn’t keep pace. Scalability: The resources Application performance: can be added and removed Network latency issues aside, as required to meet demand. there can also be issues with running too many resources on the hardware available. Improved disaster recovery: Security: The move to a cloud, The cloud should be able to especially one not on premises, better support backup network does mean that an extra layer of paths and data storage security will have to be consid- requirements. ered and managed. Business agility: IT resources Data readiness: The applications can be added or removed to suit and data may not be suited to the business and service needs. a cloud approach, for example customer‐sensitive or secure data. Increased flexibility and col- Too big: Sometimes the best laboration: This is a by‐product approach is to break enterprise of the increased business agility silos down before moving them to previously mentioned. the cloud.

Pros Cons Faster service development: Strategy: The people charged The time to introduce and provi- with moving resources and func- sion new services is reduced tions to the cloud need a clear dramatically. strategy and awareness of the goals. Should it be a private, public or hybrid cloud? Reduced capital expenditure: Cloud computing supports the shift from capital to operational expenditures when faced with an increase to the infrastructure. Integrators: The Glue That Brings It All Together A systems integrator (SI) is the company that specialises in the necessary technical implementation, consulting and systems‐ integration services required to bring together all of the component subsystems, resources and functions that are required to support a new service or ecosystem. In other words, an SI is the ‘glue’ that brings complex solutions together and makes them work.

When considering the role an SI can play for a service provider, look at the potential services that an SI can be asked to provide within the wider IT services landscape. The following is a list of the most common, but not all services that an SI may be asked to provide:

✓✓Application management ✓✓Business consulting services ✓✓Business process as a service ✓✓Business process outsourcing ✓✓Cloud services brokerage ✓✓Content services ✓✓Data centre and infrastructure management ✓✓Education services

✓✓End‐user services ✓✓Hardware and software support ✓✓Infrastructure as a service ✓✓Managed services ✓✓Multivendor systems integration ✓✓Security ✓✓Software as a service ✓✓Systems integration and implementation services ✓✓Testing and verification ✓✓White label engineering services

A combination of services such as those previously listed is quite often bundled together as part of a transformational project. But why do service providers feel the need to employ an SI? Service providers may not have all the skills internally to deliver a significant technology change project. This may be something like transforming a network or service environment, introducing a new service or technology, consolidating existing systems or any one of the services listed previously.

The service provider may want to hand off the responsibility to an SI to deliver what is required on time, on budget and with the minimum of risk of adverse impacts, and without employing specialist staff. The SI, through its use of methodologies, frameworks, processes and expertise reduces the complexity of the overall project solution and therefore its overall costs. An SI should also be considered as a vendor‐neutral choice, meaning it will work with either the service provider’s choice of vendors or help to build a solution using the best‐in‐ class supplier for each component of the solution.

The SI consults with the service provider, in order to ensure that the aims and scope of the required project are clearly articulated and understood. The SI then works with the service provider’s technical and operational teams to ensure that the optimum solution is selected. This solution consists of the best‐in‐class mix of technology, software and services to deliver the best outcomes in terms of technical and operational performance. The SI then constructs the delivery team, consisting of the necessary resources from the service provider, the SI and any third parties that are involved. The SI

acts as the Single Point of Contact (SPoC) for the whole project, providing overall accountability and a single reporting interface to the stakeholders within the service provider.

An important part of the role of the SI is that it’s providing a complete Project Management Office (PMO) to deliver this project. Therefore, the SI is responsible for all of the financial, resource and risk management aspects of the project, including any changes of scope that are required.

The service provider needs to decide whether it wants to run the solution after it has been delivered or whether to ask the SI to continue to operate and maintain it after implementation. The two models for operation are known as:

✓✓Build, operate, transfer: The SI hands over the finished solution to the service provider via a handover process that includes full training on the solution for the service provider’s operations and support teams. ✓✓Build, operate, manage: The SI assumes the operational and support roles for the service provider and runs the solution as a full managed service.

In terms of the systems integrators ready to support the service provider’s solutions and transformations, they can split broadly into three main classifications:

✓✓Hardware and software vendors who have added SI capabilities as part of their portfolio: These will typically optimise the solution around their preferred technology. ✓✓Pure play SI companies, the term signifying that SI is the primary driver for their business: They implement a solution that has already been defined, but they have more limited scope to deliver the consultancy to help you define it. ✓✓Companies that came from a business consulting and IT consulting background and have added SI as a logical extension to these consulting services: They can provide a full portfolio of services, from initial consultation to solution definition, through the design build and operate phases of a project.

In This Chapter ▶▶Knowing your different customers’ needs ▶▶Evolving the services to meet evolving needs

s Chapter 2 explains, the telecoms industry is diverse. AThis chapter looks from the customer perspective and shows how the telecoms companies serve their customers at each point in the value chain. Not all of those customers are end customers; some are suppliers to other parts of the value chain. Also, the picture is constantly changing, because new products emerge and value chains evolve.

Starting with consumer customers is easiest, because most people are familiar with them. We then work back along the supply chain to understand the services that the wholesalers and infrastructure providers deliver to enable the end customers to do the things they want to do.

This chapter helps you see some of the tensions in the industry, because the pace of change is quite different at different parts of the value chain. Everyone in the process wants to get a good deal, putting pressure on the margins available at each part of the chain. This pressure drives innovation, because to get a radically different outcome you need to think differently.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 58 UK Telecoms For Dummies, CGI Special Edition Serving Different Customer Sectors These sections introduce the services bought by consumers (that’s ordinary people buying services to use at home), businesses (large and small) and wholesalers (who are building services to resell to others). We then talk about the infrastructure services that underpin all of these different customer groups. Consumer services These sections examine the different consumer services. A few years back, these services would just have been the landline, whereas now consumers expect the whole package to include mobile, broadband and TV as well.

The consumer base in the UK is large with most households having a phone line installed. The majority of them have broadband as well. Overall, around 80 per cent of UK homes have broadband access. The figures change slightly year by year, but they’ve largely levelled off for the past few years. More than 60 per cent of UK users regularly access the Internet over mobile devices.

Phone and broadband services In the late 1990s, broadband became available at 512kbps. The speed has risen dramatically, and anything up to about 300Mbps – more than 500 times as fast – is available today. This was one of the first consumer‐driven revolutions in the telecoms industry.

Mobile services Mobile services have changed significantly over the past years, driven by a combination of technical changes in both the network and handset technology, and customer demand.

Mobile phones have evolved to become smartphones with a major milestone being the arrival of Apple’s iPhone in 2007. The launch of a handset positioned as a must‐have consumer device tipped the balance from the network provider to the handset provider over the next few years. Now the majority of consumers expect their mobile phone to be a camera, Internet browser, alarm clock, as well as an entertainment device with content and applications.

Keeping tabs on broadband’s growth and availability BT initially was unsure about how fast specification [DOCSIS] standards, broadband would grow and created and copper cable, using ADSL) a scheme for local communities to competed. register an interest in broadband ser- The growth rate of networks and service. This register was then used to vices are closely linked. What use is drive the planning process and even- a connection if there is nothing to tually ended up with most households connect to? (more than 99 per cent) being able to receive a basic broadband service. During this speed growth period, prices actually fell from around £60 The availability of broadband drove per month in 2000 to around £20 per the development of services on month currently. As the technol- the Internet with companies spot- ogy became more broadly adopted, ting that the opportunity to engage pricing became more aggressive as directly with end‐users provided other providers entered the market. an opportunity to sell products and The price per megabit of data has services. One of the first to identify been dropping even faster through the e‐commerce opportunity was a this process, as throughput has risen, small group of people who saw an and it continues to do so. A lot of the opportunity to sell books and post smaller Internet Service Providers them directly to customers, rather who had set up specifically to pro- than from a physical store. Amazon vide connectivity services for users was founded in 1994, listed in 1997 disappeared as the market consoli- and has grown a fair bit since then. dated into a few large players. The cable companies were also Nowadays everyone expects a changing a lot during this time, decent broadband connection realising that the cables used to wherever they are. This demand deliver TV could also deliver broad- puts ever‐increasing pressure on band. A speed race began as two the infrastructure and drives invest- technologies (co‐axial cable, using ment there. the data over cable service interface

Never underestimate the impact of customer pull on a product or service. The iPhone was a massive disruption to the telecoms market as customer affinity moved to the device rather than the network.

Market dynamics – supply and demand Economic theory tells you that supply As the market became saturated, and demand must be in balance. If when nearly everyone had service, there is too much supply, prices will the price fell to something approach- fall, and too much demand will drive ing the underlying cost, leaving little prices higher. Supply and demand is space for profit. When that happens, constantly played out in the telecoms the market tends to change direc- world. When broadband was first tion and do something new and introduced, it wasn’t widely avail- innovative. able and could demand a premium.

Triple play: Phone, broadband and mobile As the market became saturated, pretty much everyone who was going to buy broadband had already bought it. The operators had to find a new way to make money because competition had driven down the price, leaving little space for profit. The new kid on the block in 2005 was Sky, who entered the market by purchasing EasyNet (which it later sold to Interoute in 2015 for roughly double the price it paid).

Sky had been broadcasting TV over satellite for some time, but this market was completely different to telecoms so it had been ignored. That was until Sky launched a free broadband offer. By 2007 the company had a million customers, growing to 4 million in 2012. Sky’s entry to the telecoms market changed the basis of the fight for the customer in the UK and the industry realised that triple play was now the battle- ground. Triple play refers to selling fixed line phone (PSTN), broadband and mobile services as part of an overall bundle. The concept later evolves to quad play (adding a TV service) as we soon discuss. All the large UK Telcos responded when they realize that unless they offered a similar ‘value’ package, they would lose market share.

Quad Play: Adding video services You may wonder how a new entrant to the market like Sky could offer something for free. The answer is simply that the TV business was generating such a large amount of cash that it could be used to cross‐subsidise the broadband market. The offer pushed TV and telecoms into the same marketplace, and technology meant that TV could be delivered over the Internet. After all, YouTube had been successful at delivering short These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 5: Considering the Customer’s View: Products and Services 61

videos, so why not an entire TV schedule! The BBC’s iPlayer was also a driver; users welcomed the ability to catch up on programmes they had missed. Soon all the major UK channels had a catch‐up TV capability served over the Internet.

Video had a pretty significant impact on the bandwidth demands. A webpage may only be a few kilobytes, but video is typically delivered at rates starting at 1Mbps (a reasonable quality TV picture), up to around 14Mbps for high definition TV with fast‐moving action. UHD has an even higher resolution (also known as 4K) and uses 25 to 34Mbps. Users became frustrated with the bandwidth available, so the business case for Superfast broadband was conceived.

Video compression is also clever. A video of a largely static background with someone talking – for instance, a news programme – can be delivered with much less bandwidth than a fast‐action programme such as live TV, where the camera is panning, players are moving, and the ball is pretty critical also.

We have heard an apocryphal story of an overzealous error correction mechanism (which was designed to remove picture noise by correcting the video) successfully eliminating a white spot in a moving image. Sadly the white spot turned out to be the football, which was supposed to be the centre of attention.

BT realised that it would need to drive the demand for higher speeds directly, and coupled with Sky’s success in the market, led to the bold decision to create a TV broadcaster within BT. This decision gave some leverage over Sky on content, as well as giving customers a reason to upgrade to the new superfast broadband. BT offered the standard Sport package for free (to BT broadband customers). This offering was a headline grabber, driving rapid growth to the customer base as well as making the broadband service stickier – helping to retain customers.

The law of supply and demand came into play when rights for top‐level football were auctioned. Sky previously had little competition for the matches until BT entered the market. Content prices had risen from around £191m for the 1992–1997 contract to around £1.7bn for the 2010–13 contract, but leaped to £3.018bn in 2013 when BT entered the market. In 2015 the cost for the 2016–2019 seasons rose again to £5.136bn, with Sky paying £4.2bn of this amount. Customers were unlikely to pay significantly more, so the only option for Sky was to take a lower profit margin.

A combination of consumer demand and technology evolution drove all of these changes. Growth happens when these two drivers are well aligned.

The changes also meant that consumer business units had to purchase higher capacity services from wholesalers. Although broadband access costs didn’t rise, the cost of backhaul was a significant cost, which leads to the wholesale story, which we discuss in the later ‘Wholesale services’ section in this chapter. Business services In the UK, businesses vary in size from extremely small players – so called one-man bands – operating from home or from their mobile workplace, which might be a van for a tradesperson or a coffee shop for an IT worker. These businesses often buy consumer services; however, if they want some guarantee that things will be fixed faster if a problem occurs, they need to buy a specific business service.

The slightly larger players – the small and medium enterprises (SMEs) – employ more people and may run their business from multiple sites. For example, a chain of solicitors or high street stores may have a head office and subsidiary branches that need to communicate. Their needs will typically include voice as well as a secure data network to enable them to exchange information between sites securely, without relying on the Internet.

At the high end, the very largest companies may be multi- national. They’ll have all the requirements of the SMEs, but they’ll also want to have global coverage with a consistent service regardless of distance and geography.

Figure 5‐1 shows a typical network for a fictitious bank. It has branches that need to connect to each other, but also to the central office and the data centres where the virtual money is stored. The call centre is also an important component because a lot of business happens over the phone or online. Both head office and the call centre may have direct links to the data centre to provide a backup, so there’s always more than one way to get to the money. Of course, all this is very secure to ensure only authorised staff and customers can get at their restricted subset of the data.

Figure 5-1: The key parts of a typical business network.

The smaller players decide themselves what to buy and are typically conservative because they don’t have the time and resources to research thoroughly, but do know a bargain when they see one. The larger players have an internal IT function that can make well‐informed purchasing decisions.

A company’s specific needs also depend on the business it is. For example, a small retail outlet may need a voice line to call suppliers and for customers to ring. They may have a website to advertise and have credit card terminals in the store to take payments. Communications for these businesses is mission‐ critical. Losing it could mean no payments by card, which would radically reduce sales and could cause a significant cash flow issue after only a few days. This sort of company places a premium on a high quality service with guaranteed repair times.

On the other hand, a sophisticated financial institution, for example one trading in shares or funds, needs a low latency connection. The impact of a change in share price in the very short time period between the quote and the actual stock order being placed could be significant, which could lose (or win) the institution a lot of money.

Other businesses may rely completely on exchange of information – for example, those selling digital goods or operating their business from the Internet. Reliability of connection and security is critical, because without it, the business would be unable to function. Such digital businesses are increasingly significant in markets, which drives further demands onto the underlying network. In fact, businesses in most sectors have a significant digital element today.

This variety in business has led to a lot of smaller communications companies serving the market, which is much more fragmented than the consumer market. Local players who understand the customers’ needs and ensure they deliver a good service (which may not necessarily mean a cheap service) serve these specific niches well. These niches often buy services from multiple wholesalers to develop a compelling set of services.

Business services – connectivity In any business where there is more than one site, these sites need to be connected to each other, as Figure 5‐1 shows. The connection between sites is known as a Wide Area Network (WAN). Within the site, connectivity is provided by a Local Area Network (LAN). In the past, the WAN connections would have been built with dedicated private circuits between sites. Now Ethernet access links connect the business premises to the core network, which provides connectivity between sites and to other cloud‐based services.

Where the network crosses an international border, providing a consistent end‐to‐end service is more difficult. Each country offers a slightly different set of access products, with different capacity, price, service levels and so on. The end‐to‐end service is based on the weakest link in the chain.

Increasingly, customers are buying more than basic connectivity. They want storage, cloud services and communication products that need minimal equipment on their own premises.

Business services – cloud services Businesses are also looking to buy in IT services that are based in the cloud, to avoid having to worry about managing and configuring software and licences on their own premises. A wide range of cloud services is now available to deliver these needs. Good connectivity is essential for these services to operate well, which places yet more strain on the infrastructure. Customers are likely to consider how well integrated the connectivity is to give them the best access to specific cloud services, which can be a key differentiator for a Telco. The sorts of services available are growing all the time, but we describe here some of the more common ones:

✓✓Cloud compute: This type of service is probably one of the best known, because Amazon and Microsoft both provide services on demand. Amazon Web Services (AWS)

was launched to exploit the massive data centres that the company needs to run its own business, but had more capacity than was needed. Amazon spotted a market and created a product people wanted. Microsoft Azure delivers a similar capability, but is focused on business applications. The advantage of cloud compute is that you can buy CPUs on demand (central processing units – the building blocks of computing power), enabling you to run large infrequent tasks without investing in your own hardware. ✓✓Voice: In the past, every business with more than a few employees would have a private branch exchange (PBX) to route calls from a small number of external lines to phones on every desk. This service is now available from the cloud, with the voice service provided centrally to any number of end‐users whose phones might be on a desk or might be their smartphone or a soft‐phone on a PC (a piece of software pretending to be a phone). As a result, the customer can benefit from up‐to‐date technology (because the provider frequently updates the service in the cloud) and doesn’t have equipment taking up space in the comms room. The business simply pays each month for each user on the service, which makes budgeting easier. ✓✓Software as a Service (SaaS): In the old days, a company had to buy individual DVDs (or CDs, or even floppy disks – if you are as old as us), and would have to use a licence key every time the software was installed on a specific machine. Hence, licences had to be tracked down every time to ensure that they were being used efficiently. Now the service can be provided from the cloud with a monthly fee charged based on the number of users registered and actively using the system (for example, Office 365). As long as you know who is registered (for example, by using data from the HR system), the company only pays for services it needs.

Pretty much any piece of software technology can now be delivered as a service, which is changing the world. Telcos, which previously sold individual hardware (equipment or DVDs with software on), are now facing competition from anyone who can provide software. That makes cloud services inherently global. As soon as software is in the network, it can be purchased and used anywhere in the world, which is a massive change for the industry. Your company is probably impacted by it or may even be driving the changes.

Surely the cloud has to have some real computing somewhere, it can’t all be virtual? Well, yes it does. Cloud providers (like Amazon and Microsoft) actually have massive data centres that house racks of servers and storage that they make available to others. These racks are connected to the Internet with high capacity links, and operators are increasingly deploying dedicated connectivity to the major cloud providers to ensure cloud‐based services work well without latency or speed restrictions getting in the way. These services are known as Infrastructure as a Service (IaaS) or Platform as a Service (PaaS).

Cloud brokers have emerged recently to help ensure that customers don’t get locked into a single cloud provider but can keep their options open and move between providers more easily. They also enable hybrid cloud services, where the cloud may include dedicated equipment located on customer premises, for example to contain sensitive data. Wholesale services Wholesalers are the middlemen, and they provide services to connect bulk users of services together or to provide white‐ label services, where a virtual operator rebrands them.

In this section, we introduce some of the more important interconnect services and then introduce a few of the more common white‐label services.

Interconnect services The interconnect story usually has two parts: how the service is set up and configured and how it is used. These services are all wholesale services that retailers consume:

✓✓Voice‐interconnect service – call routing: Planning and designing the network to route the calls to the correct operators takes a lot of work, but after it’s done, the usage is straightforward because it’s automated. All that is needed is to ensure faults are picked up quickly and fixed, that there is enough capacity, and that bills are created and paid.

✓✓Broadband service: Here the set‐up phase has two separate parts: ••The first establishes the relationship between the retailer and the broadband provider and includes creating network connectivity, configuration and capacity to a specific geographical area served by an exchange. ••The second stage is when an individual customer orders broadband. Information needs to be captured about the customer’s installation address, which must match the infrastructure provider’s database. ✓✓High‐speed connectivity services: These are typically deployed point to point between customer premises or from a customer site to a virtual network linking multiple sites. They’re considered as ‘on‐ramps’ to the VPN or to the Internet itself. They typically run over fibre end to end and provide capacities of more than a gigabyte per second. ✓✓Backhaul services: These services provide the link from a broadband aggregation point, which combines traffic from a number of users – often a digital subscriber line access multiplexer (DSLAM) – or a mobile base station into the core of the network. They’re really a special case of high‐ speed connectivity services, placed deeper into the network, rather than ending up on a customer premise.

Theses services may be unmanaged or managed; the difference is where the responsibility lies for fixing problems.

✓✓An unmanaged service relies on the retailer spotting that something isn’t working and getting the supplier to fix it. ✓✓The provider looks after a managed service, monitors the network and ensures that it’s fixed for the retailer.

Services also allow wholesalers to connect to each other, for example to connect segments of the Internet together. The Internet operates on a peering principle, where pairs of operators, usually roughly the same size, connect with each other. Smaller players aggregate traffic with each other until they reach enough scale or until they pay a premium to connect with peers larger than them. The peering connections then leave the UK via a small number of Internet Exchanges, where high capacity connections carry the traffic all over the world.

Markets change extremely quickly, and what once was a solid business model can change rapidly, so don’t take anything for granted. For example, the interconnect market has shrunk as the larger operators have built more infrastructure and can justify the cost of connecting directly to each other.

White‐label services White‐label services widely available include the following:

✓✓PSTN telephony: PSTN stands for Public Switched Telephone Network – the landline to you and us; this service provided in the UK as a ‘line’ and ‘calls’ package. ✓✓Broadband: Many telecoms providers deliver managed broadband services. ✓✓Mobile: Most mobile operators provide a managed virtual network operator (MVNO) capability.

A pure virtual operator (for example, a supermarket) may use these services or an operator may to complete the triple play set.

TV isn’t generally provided as a white‐label service, because the value is associated with the content (for example, the sports or movies channels) behind the offer, and content owners are very specific about who has the right to see the content they provide and on what devices. Specific content channels are wholesaled to other TV providers, generally on commercial terms rather than under a regulatory obligation.

Metcalfe’s law Metcalfe’s law states that the value to it. This network may be physical or of a telecommunications network virtual – like the social media sites. is proportional to the square of the After all, who would want to join the number of users of the system. Or number two or number three social more simply, the more people using networks when they could join the a network service, the more profit- number one and have access to able it will be, as it draws more users more friends or colleagues?

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 5: Considering the Customer’s View: Products and Services 69 Infrastructure services Infrastructure services are some of the fundamental pieces of the network, buildings, ducts, poles and masts. They’re critical to the business, but not very exciting. Not much technology change is going on around ducts and poles, but investment is needed to increase capacity in ducts because they fill with fibre and copper and to maintain poles that go rotten after a few decades. They need to manage the assets efficiently, investing enough to maintain them, and supporting the long‐term income stream.

Mobile operators usually share the masts where the transmit- ters are placed, and players like Arqiva own and manage a significant portion of the masts. New masts are constantly being put up to increase the coverage of mobile networks.

The business model is quite different for infrastructure operators. For a start, they work on a much longer timeline – maybe taking decades rather than years to get a payback on the investment. Building the whole network from end to end isn’t cost effective with all the links in the chain, so operators have to share. However, only a few players control the investment, so market forces are weak, which usually means regulation is needed to provide the right incentives.

Services that support the core UK telecoms industry include the following:

✓✓Local loop unbundling (LLU): An operator can pay for access to the copper connection between an exchange and the customer premises. Larger retail Telcos exploited this capability by putting their own equipment in to directly deliver broadband (and sometimes voice) services. As a result, a retailer had more control of the network that it was building and didn’t need to rely on BT for the broadband electronics. ✓✓Wholesale line rental: Although we mention this service previously in the ‘Wholesale services’ section, it’s really infrastructure. The retailer rents not just the copper line, but also the line card in the exchange to provide dial tone. ✓✓Sub‐loop unbundling: This service is similar to LLU, but the loop stops at the street cabinet rather than the exchange, which enables higher bandwidth services to be provided.

✓✓Duct and pole access: Ofcom recently directed BT to provide this service, encouraging other wholesale and retail players to build out infrastructure to compete. ✓✓Dark fibre: Starting in late 2017, this service will enable service providers to deliver services over Openreach fibre infrastructure. ✓✓Mobile mast sharing: Most masts have more than one operator’s equipment on them. The operator pays a fee to place it there. ✓✓Mobile network sharing: The operators have grouped themselves into two consortia (MBNL and CITL) to share some of the components on the mast and even the network to provide economies of scale. Evolving the Services Although the traditional value chain is well established, the goalposts keep moving, as the other team (the competition) try and play to their own strengths. New entrants to the market are taking business from the retailers, and retailers are changing the products they provide to consumers and businesses.

Customers also are constantly becoming better informed and feel empowered to make decisions where previously they may have relied on the wisdom of the big telecoms players. Those customers are now doing more for themselves, and the technology is shifting to enable that to happen. Here we explore how value chains are evolving and two significant areas of technology change, which are already starting to make an impact: dark fibre and 5G mobile. Shifting value chains Value chains are constantly shifting as the market demands new things. For example, mobile was about voice, then about SMS (text messages), then about data, and now is increasingly about handsets and apps. That change has happened over the past 20 years, but it’s seen four very different models come and go.

The establishment of cloud models of service and app stores run by the handset providers has moved the value away from the connectivity and into the over‐the‐top (OTT) players. The telecoms industry is constantly looking for new ways to create services that are sticky to customers (making it attractive for customers to keep the services they have, rather than moving to a cheaper operator).

Time will tell where the balance of power will move next. The industry has seen a series of disruptions, and more will come. For example, 5G is likely to see the telecoms market forming solutions for specific industries and using network slicing to ensure the solutions don’t interfere with each other. (Refer to the later ‘Slicing and dicing – 5G’ section in this chapter for more information.) Lighting up dark fibre A recent development in the UK is that Ofcom has directed Openreach to develop a dark fibre product. Although this name may sound sinister, it will enable providers more flexibility with how they create and offer services to their end customers.

Openreach currently is the only provider with a fully national infrastructure enabling the delivery of high bandwidth services, although many other UK providers have a significant level of long‐distance fibre, and some have also deployed into cities and larger towns. Ofcom has decided that end‐users will benefit from Openreach making the underlying fibre directly accessible, rather than them having to buy an end‐to‐end service from Openreach.

Delivering a service over fibre does have some fairly complex issues. It’s all very well when it works, but if a problem occurs, Openreach can’t diagnose it, because it doesn’t own the electronics on the end. Hence, the comms provider buying the fibre service needs to worry about how to do this, as well as all the complexities of ordering product from Openreach, and working with suppliers to deliver the right electronics to the end and managing those components.

At the time of writing, the product isn’t yet fully defined. Openreach released a draft reference offer in Autumn 2016 and has stated a product launch date of October 2017. A lot of work needs to happen before the comms providers will be able to deliver services over dark fibre.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 72 UK Telecoms For Dummies, CGI Special Edition Slicing and dicing – 5G Mobile services have grown beyond recognition over the past three decades, with the focus moving firmly from voice to data over the first four generations. 5G emphasises the need for a more industry focussed approach, exploiting the Internet of Things (IoT) to drive efficiencies in business. The IoT enables devices to communicate directly with each other, and we talk about it in Chapter 8, where we also talk about the technical aspects of 5G.

A key concept in 5G is network slicing – the delivery of service‐ specific capability over physical networks to support specific use cases. The approach starts with the business needs and enables creation of specific service characteristics (such as high data rate for video or low latency for connected cars) that can be deployed over the infrastructure. Each slice has guaranteed resources, so services won’t interact with each other adversely.

The approach uses the principles of software defined networks and network function virtualisation. You can find about this in Chapter 8.

The use cases that are being considered include the following:

✓✓eHealth: Enabling monitoring of a patient’s vital signs remotely or even performing remote interventions such as administration of drugs or other telemedicine ✓✓Connected homes: Enabling a customer to control and optimise heating settings, monitor the alarm system and provide controlled access to visitors via remote control ✓✓Transport: Telematics (reporting problems with vehicles remotely) including automatic calling in an incident that triggers the airbags and autonomous vehicles ✓✓Smart grids: Enabling information to be exchanged securely to enable near‐real‐time decision, making to balance the production and consumption of energy ✓✓Entertainment: Providing more interactive experience at stadia via large-scale Wi‐Fi coverage

Although 5G is still in the early stages, make sure you consider how your business will exploit these new use cases.

In This Chapter ▶▶Tracking the money flow ▶▶Keeping your customers and serving them better ▶▶Making the most of the assets

his chapter looks at how to deliver more value from Tthe business. Here you can find out how you can keep increasing profits year on year when revenues are falling.

Two important factors to an efficient business are as follows:

✓✓How do the customers perceive the business, do you understand their needs, and do you deliver what they actually want, rather than this week’s special offer? ✓✓How efficiently does the business buy and use its input products – the fixed assets it has to deliver value – and does it spend the right amount of money in maintaining them?

If you get these basic things right – and do them better than the competition does – you’re on the right track to having a successful business. Understanding How the Money Flows Before getting into too much detail, you need to understand the main sources of revenue and the costs. We’re engineers,

not accountants, so you can be relieved that this discussion isn’t too detailed. These sections explain in greater depth how money comes in and out. Examining the money trail Having a firm grasp on how money moves around in your business helps you run it more efficiently. Figure 6‐1 gives you a snapshot of how it flows.

Figure 6-1: How money flows in a business.

Here are the main parts of the money trail:

✓✓Revenue: Revenue comes from customers. Customers buy products and services, which they pay for up‐front or they pay a monthly subscription fee or pay for specific usage (such as call minutes, broadband bytes and TV/ film pay‐per‐view). The more customers you have and the greater the average revenue per user (ARPU) each one generates, the more money you have coming into the business. ✓✓Operating costs: These include things like staff costs, payments to other operators, real estate, energy, fuel and so on. Refer to the next section for a discussion of the different types of costs.

Revenue less operating costs is your earnings before interest, taxation, depreciation and amortisation (EBITDA for short). After these things are deducted, you have the operating profit. The business can choose how much of that is reinvested (capital expenditure) and how much is free cash. Free cash is money left over after you have taken all the costs of running the business out of the revenue you’ve earned. It can be held for future investment or paid to shareholders as a dividend. ✓✓Interest, taxation, depreciation and amortisation: Interest is money paid to lenders for the privilege of borrowing from them. Tax is paid to governments. Depreciation is a way of accounting for the cost of an asset over time. If you’re rich enough to buy a car outright (a capital expense) and keep it for ten years, it’s useful to come up with a way to spread the up‐front cost over the car’s lifetime. Accountants deal with this by showing a payment each year, which is an example of depreciation. Amortisation is similar to depreciation but applies to intangible assets like intellectual property (IP) created through the development of software or know‐how. Because a lot of investments in telecoms are long term, they’re usually shown as capital, and there is often a separate breakdown of where the capital has been invested. Software development can be capitalised as long as the work is creating an asset with a reasonably long life. Doing so increases the EBITDA, but the resulting depreciation charge decreases operating profit.

You may think that it’s best to get your customers to pay for their services up‐front. The advantage: you have the money, so there is no debt risk. The disadvantage: you don’t have a revenue stream into the future. Cash flow is critical to a business and can lead to a failure if each month the bills eat into reserve cash. Having a predictable revenue stream makes a business more stable. Looking closer at fixed and variable costs The way you use the building blocks of your company’s cost base to make decisions depends on the sort of business you are in.

Fixed costs are those expenses you have whether you have one customer or one million – for example, your office costs and costs of central functions like HR and finance. In an infrastructure business these costs tend to dominate. They dominate a small business even more, which is why scale is important.

Variable costs are those expenses that depend largely on the number of customers and the level of activity they generate. Examples include the field force you need to deal with customer orders or faults, the installation of new equipment or the maintenance of customer installations. The more customers you have, the bigger those teams will need to be, but you also have more opportunities to share resources between customers and so be more efficient.

If you’re an infrastructure player, your cost base will be dominated by capital expenditure and maintenance, as shown in Figure 6‐2. If the business is growing, then you’ll need to keep investing in new assets to support it (masts, ducts, fibre network and such). The key thing is to understand whether you’re investing at the right time and whether you’re spending enough to maintain that investment. The operating costs will be dominated by maintenance – for example, site visits needed to maintain safety and to deal with any problems as they arise.

Figure 6-2: Fixed and variable costs – infrastructure business.

If you’re a retailer, your cost base is more likely to be dominated by variable operational costs, which scale with the size of the customer base as shown in Figure 6‐3. Virtual operators have relatively low start‐up costs and can scale their variable costs as the customer base grows. This is one reason so many virtual operators have emerged over the past decade or so.

Figure 6-3: Fixed and variable costs – retail business. Transforming your business Business transformation describes the approach of systematically reviewing the activities of a business and creating plans to change the way the people, process and technology work to deliver an outcome that’s completely in line with the goals of the management team. Often the hard parts to change are the people and processes. Technology is often much more predictable than people.

As a business grows, processes that may have been manual initially will benefit from being automated – for example, taking orders from customers. It may be simple to manage with a standalone order management and billing system when volumes are low, but as the customer base grows, automation of order delivery will deliver benefits. This change would need a capital investment, but would have the effect of reducing operational costs.

As the business grows even further, you may need a serious rethink at some point. Ask, ‘Could we re‐engineer the business to run even more efficiently?’ At this point, you’ll probably need external help from someone to analyse a business, define change programmes and work with your business to implement them. Taking costs out Telecommunications is a competitive market in the UK, which puts a lot of pressure on revenues, as competition tends to drive prices down. Stock markets however, expect to see profits growing year on year. If you can’t drive revenues up, you need to drive costs down to deliver profit growth.

You can reduce costs in a number of ways, but all have consequences:

✓✓Reduce waste. This one is obvious if you can find the waste. The waste may come in the form of unneces- sary travel, time wasted in unproductive meetings or activities that don’t directly contribute to the value of the company or help customers. Tools like continuous improvement (CI) can help by engaging the workforce in identifying and eliminating waste, but they take time and effort to roll out. A Telco usually has a lot of legacy to deal with; systematically addressing this can remove waste in processes and is a key part of modernisation. ✓✓Lower the number of staff. Slashing the number of staff isn’t an easy way to reduce costs, because telecoms is a people‐intensive business. But, if people are taken off the team without changing the way the rest of the team works or giving them tools to help, it’s likely to lead to less work being done. That could mean delays in orders or repairs, which will ultimately drive customers away. Telecoms infrastructure businesses are extremely resource intensive, but the move to virtualised networks can remove the need for people to intervene altogether. ✓✓Decrease investment in the network. Parts of the network are less visible – for example, backhaul from broadband DSLAMs or mobile masts. If the investment is reduced, there is less capacity, so at busy times customers won’t receive a good service, which could ultimately lead to customers leaving, so this is a shortsighted thing to do.

✓✓Automate processes. Doing so can be expensive in capital terms, but it can reduce operational costs up to a point. It doesn’t address fundamental inefficiencies though. The use of cloud and virtualised networks enables a lot of automation, which previously wasn’t possible. ✓✓Bring on the robots. Robotic process automation (RPA) is a way to automate screen‐based processes usually carried out by people. It can be a cost‐effective way to deliver automation quickly by taking people out and reducing errors without changing the underlying systems.

Sometimes, what seems like waste may actually have hidden value. Taking cost out in the short term can remove expertise from a business. This isn’t the end of the world, because you can buy expertise as consultancy services when needed. Doing so may seem expensive, but it’s probably cheaper than keeping the expertise in the company just in case you need it. For example, advice on new and emerging technologies can be difficult to justify in a fast‐moving technology environment.

These actions that we discuss will deliver incremental cost savings, maybe 10 per cent annually. More fundamental changes are needed to deliver step changes to the cost base. Many of these changes are driven by mergers and acquisitions, which enable greater economy of scale and elimination of common central costs.

Mergers between fixed and mobile players also lead to other opportunities, such as sharing of core network, order entry systems, field force to repair faults and so forth. They can be very significant, but they often require a change in the operational model of a business.

The Internet has also enabled new ways of doing things, and more services are moving to the cloud, which reduces the direct cost of providing them. Just think about the impact of CDs moving online. Without needing to produce physical media, the cost of delivering music to end users has dropped significantly. The same is true of software products moving to the cloud.

The cloud model also dramatically reduces the amount of capital needed, as products and services are generally bought on a monthly as needed basis, which is very efficient and scalable.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 80 UK Telecoms For Dummies, CGI Special Edition Keeping Customers Happy If customers are happy, you have an easier time getting your revenue numbers to increase. If they’re unhappy, then customers will buy fewer products, some will move to competitors and you’ll lose their business completely.

Understanding how happy your customers are is pretty important. How should you do this? The best way is to ask them. As a customer yourself, you may be put off when asked to do a survey, so keep it simple and painless for your customers. For retail customers, it may mean simply asking at the end of an interaction (a call to take an order or report a fault) whether they’ve been happy with the service they’ve received. If the transaction was online, then you can send a simple survey link after the job is complete.

These sections examine how to measure how happy customers are and how to understand them better so you can provide relevant products and services. Gauging your customers’ satisfaction You can measure customer satisfaction in a number of methods, with one of the common ones used in telecoms being Net Promoter Score (NPS). The NPS is a number between +100 (all your customers recommend buying again from you) to –100 (all your customers would prefer to buy from someone else, anyone else except you). Figure 6‐4 illustrates the NPS.

You want a high number here. A zero simply tells you that you’re treading water and that you’re average compared with your competition. A negative number tells you that something is seriously wrong, and you need to use more research to find out what. Ignoring this kind of score means trouble because you’ll lose customers.

The NPS is just a snapshot view, measured from the most recent interaction with the customer. To use it to drive change in the business, you need to look at the underlying causes of the change. Which transactions are consistently

giving low NPS responses? Are they associated with a particular product or feature? Are they down to a particular call centre or even agent who consistently mishandles calls? You need to not only measure but also act on the feedback you get, constantly. That is what the best organisations do. If you want to be the best, do more of what they do.

Figure 6-4: Net Promoter Score. Retaining customers Keeping customers isn’t easy. The market is competitive so they can take their business to plenty of other places. Attracting a new customer is much more difficult (and costly) than keeping an existing one, so do everything you can to retain customers.

Social media plays a large part in maintaining a good relationship with customers. You can easily tell your friends how you feel about a business, which can influence their buying decisions. Make sure you understand the impacts of social media and manage them accordingly as part of your customer strategy.

Retention tools can help you manage the options to keep customers who might be thinking about leaving. These tools are limited only by the imagination of the marketing team, but they often involve a price reduction. If a customer calls in and says she is leaving, most companies will offer her a better deal. That may do the trick, but it can also lead to resentment as the customer is thinking ‘Why didn’t you offer me that deal earlier rather than waiting until I got to the point of leaving?’

Making this kind of offer is a bit of a last resort and can back- fire if the customer is already unhappy for some other reason (such as faults not being resolved quickly enough or billing errors).

Keep customers happy and do everything you can to ensure that they don’t look at the competition at contract renewal time. By pre‐empting decision to leave with a suitable pro‐ active offer – a better phone, more TV content, loyalty dis- count and so on, you can make customers feel more valued, which will mean that they’re more likely to stay with your business. Dealing with customers who owe you money Keeping a customer may not be the best answer in some cases. For example, a customer owes a lot of money and you have no prospect of getting it back. Writing the debt off may be the best answer.

Handling debt is a complex area, fraught with financial services regulation. You need to follow closely specific processes when pursuing a debt; they can be time consuming for the team with that job. Software tools are available to take a lot of this burden away and manage it more effectively by automating some of the prompts and giving the customers the opportunity to pay up.

Not all customers are equal. Some deliver more value than others, and maybe you should treat them differently. Some are a pain, and maybe you should try and offload them. Segmentation needs a good understanding of the customer, going a lot deeper than the facts you have to hand (monthly spend, products bought), and getting to know what is important to them. Consider these questions: Is it sport? Having the latest smartphone as soon as it is launched? Having a handset the customer can use easily, even if it’s a bit more basic? Does the customer use a lot of broadband? Is she running a business that depends on the Internet? What services does that business need that my business could provide?

Understanding the customer Here are some of the questions you To answer these questions, you need need to answer about your custom- data analytics to combine publicly ers to fully understand them: available data (for example, house- hold income in the area and credit ✓✓ What type of customers are they? worthiness of a business) with data ✓✓ What are their specific needs? held by the Telco. This data gets complex very quickly and needs spe- ✓✓ What is most important to this cialist analytics tools to deal with it. type of customer? Often getting the data is entirely fea- ✓✓ How are they using the services sible, although not straightforward. they buy from you today? The challenge is in using it to help ✓✓ What would you expect a cus- answer the critical business ques- tomer like this to be buying? tions, and deciding what questions to ask is often the most difficult task. If ✓✓ What other products can you sell you aren’t clear on the question that them? you’re asking and the reason you’re ✓✓ Are they unhappy and likely to asking it, you won’t understand the move? answer. ✓✓ Are they a customer you want to keep?

Sweating the Assets A company has many assets, both tangible (part of the infrastructure, network or systems, or people) and intangible (the know‐how). Another way to drive efficiency is to be on top of how these assets are being used and looking for ways to use them more – so‐called sweating the assets.

People are probably the easiest to address; simply giving people more to do and ensuring their working day is filled productively is a great way to ensure they are fully utilised. But people aren’t robots, and they need to have opportunities to learn, interact and help each other.

Network assets are a fixed cost; at least, they are after they’ve been built. Additional customers can be supported until the capacity is used, driving up efficiency. At some

point, you’ll need more capital investment, and managing capacity is important to make the right business decisions. Underinvesting can lead to capacity and performance issues, which are sure to upset customers.

For example, optical fibre was deployed many years ago in the core network, but the boxes at the end have continued to evolve. A fibre that maybe only delivered 155Mbps when installed can be upgraded to deliver 10Gbps or more. Using techniques like wavelength division multiplexing (WDM), enables use of multiple colours of light over the same fibre, typically 40. This can deliver 400Gbps or more in a live service. Terabit services have been demonstrated in a lab environment.

Asset management is a formal discipline, with its own professional body – the Institute of Asset Management. Tools are available to use business objectives to drive investment, tracking and optimisation of assets. For example, you can answer a question about what the right time is to replace telegraph poles or to renew access network cabling.

In This Chapter ▶▶Knowing the data behind your customers ▶▶Paying attention to the data ▶▶Expanding the base ▶▶Boosting the wallet ▶▶Looking at new business models and markets

hapter 6 looks at some of the things you can do to make Csure your company is running smoothly, but to make real progress, you need to grow. One of the barriers to this issue is that most people inside your company will be focused on doing the things that support what the business does today and don’t have time to think differently. To drive growth, you need to make space to think about how to operate in new ways and then do some different things, and that’s what this chapter is about.

So what should you do differently? First, you need to understand your business and market so you can target the growth to exploit your skills and the market opportunities that you choose to go for. You need to think about how you make space in the business to grow – just adding this to the team’s to‐do list probably isn’t going to be enough.

You may need to move fast. If you have spotted an opportunity, then your competitors are almost certainly looking at their options too. How can you become more agile in making decisions and then acting on them before your competitors do?

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 86 UK Telecoms For Dummies, CGI Special Edition Understanding What Makes Your Customers Tick Before you start thinking about growing, you need to understand the people and organisations that buy your products. Understanding why your customers buy your products, how they use them, and what aspects of the product they really value, will help you serve them better. When you understand your customers properly, you can better answer the important question: What are the opportunities you should pursue to give your business the best chance of growing?

Chapter 3 discusses some of the mechanisms around gathering this intelligence, but you need to go a bit deeper to really understand the market you’re going after. The following sections introduce some approaches to help you gather and manage data, and then explain how you can turn that information into insight so you can make better business decisions.

Defining some important terms you need to know Here are some key terms that people ✓✓ Information can be anything – often confuse when dealing with for example, the notes recorded data, information and insight. You from a dialogue with a customer. need to know how to distinguish ✓✓ Insight is actionable data derived these terms so you can use data from data and information. and information to drive business decisions: ✓✓ Data is generally structured and can be readily indexed, aggre- gated and searched.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 7: Growing the Business 87 Getting your data under control The first thing to get straight is data quality. Most businesses have systems that have evolved over time, and most have humans entering and manipulating the data. Humans can be lazy sometimes and may not fully populate data fields or may enter erroneous data like postcodes of the form AA1 1AA, rather than the actual postcode. This kind of error is a night- mare for data quality, and getting the right incentives around accurate data entry is a key first step. If you don’t fix the entry of bad data at source, the problem will never go away.

This sort of problem can be self‐inflicted, by incentivising those individuals taking the calls on the time taken on a call, or not validating data entered by customers on a web page. The less time on a call, the more efficient the business is – except when pressure on time forces laziness and introduces errors.

Another challenge for data quality often results from mergers and acquisitions. They can lead to multiple data sets being merged and potentially to duplication of data (for instance, Mr. J. Smith in one company may be the same person as Mr. John Smith in another). Resolving this issue is often tricky, but some tools can help. Putting the effort in is worth it, because duplicates cost you money not just in storage space, but also more in lost opportunities in cross‐selling products to the fictional Mr. Smith.

Every company should have a clear policy on data standards to ensure that everyone knows what data is important to capture and the value of capturing it accurately. Ideally, staff should be incentivised in a way that reinforces data quality, which is likely to result in data being entered cleanly and maintained accurately. Regular data audits should be used to ensure that the data is maintained to the standards that have been set. Turning data into insight Data is just the raw facts. On its own, it may not help very much to answer the ‘what if’ questions that you’re now asking: ‘What if you launched this new product aimed at this segment of the market? How many of your existing customer base might also be interested?’ To answer these questions, you need to turn the data you have into insight, also referred

to as business intelligence. Doing so is likely to be harder, because the systems that your business uses are unlikely to be flexible enough to answer those kinds of questions. You need to think laterally and create questions that can help.

Start with your billing system, which has usage data that you may be able to cross‐reference with publicly available data to work out where the key users are and potentially what they’re doing. You may be able to link groups of users together to identify communities or usage patterns at times of the day. As long as you keep the data anonymised and don’t use it for personal targeting, it can be gold dust when planning new deployments.

Linking data from multiple sources can also help to uncover the nuggets of intelligence that help you come up with the world‐beating plan. Being Careful with the Data Data is powerful, because it often relates to individuals or sensitive internal company finances. Treat it carefully and with respect.

Data related to individuals is subject to the law, which has changed recently (Spring 2016) in the UK, so make sure that you understand the implications. The General Data Protection Regulation (GDPR) will replace the Data Protection Act, and all EU members must be fully compliant by June 2018, and there will be significant penalties for non‐compliance. (Refer to the nearby sidebar for more information about the GDPR.)

As well as the legal implications, another issue with data is trust. Whenever an individual gives out his mobile number or email address, he has expectations about what you can do with it. I (Alan) certainly wouldn’t want my personal details sold to third parties without my consent for example. These sections look at important issues surrounding protecting data. Ensuring customers know your intentions with data More than likely, you’ve probably signed up to a website only to discover later that your email inbox is filling up faster than

it used to. Data protection rules in the UK now require that a company be explicit about the use it puts your data to, so your inbox shouldn’t fill up with unwanted email. If you’re asking a customer for contact details, make sure that you’re clear on why you need them. The lack of trust built up over years makes gathering customer insight more difficult, but you may be you’re sitting on other data that you can use for product planning purposes.

Having clear and explicit statements at sign‐in pages is a good step. These statements should say exactly why your company needs the data that it’s collecting and what you’ll use it for. Respecting these conditions is important. GDPR is more explicit on how data should be handled than the current UK data protection legislation. Grasping privacy and the law The law has a clear definition of personal data – essentially anything that could be used to identify you personally or that an individual wouldn’t expect to be in the public domain. Personal data needs to be stored securely, which usually means encrypting it. Furthermore, you want to ensure that only individuals in your business who need to access it for operational reasons are able to do so.

Data retention is also a potential issue. Don’t keep data for longer than necessary. In fact, data value can degrade with age. People move home and people’s personal circumstances change. If the data you hold doesn’t reflect the most accurate details, you can make incorrect decisions, or even upset the customer. Ensure that you revalidate customer data on a regular basis and only keep what you need to keep.

Some data needs to be kept for regulatory reasons, such as financial data, which may need to be kept for taxation purposes. The retention period and review process should be stated in the data standards. Managing data is a complex area, so seek expert advice to ensure that you don’t fall foul of the increasing legal complexity. GDPR adds extra responsibilities – for example, right to be forgotten that states individuals have the right to have their data removed from systems.

Eyeing key points with the General Data Protection Regulation The General Data Protection ✓✓ The right to be forgotten lan- Regulation (GDPR) was brought into guage gives individuals the right force in the EU in June 2016. Some to have their data removed from of the key changes from previous UK systems. data protection law are as follows: ✓✓ More rigorous consent require- ✓✓ Penalties for breach can be up ments mean that the data con- to four per cent of a company’s troller must be careful to only global revenue. use data for specifically agreed purposes. ✓✓ The responsibilities extend from data controllers to data proces- ✓✓ Privacy by design means that sors, which is a much broader data processors must demon- scope. strate how the data will be managed through its lifecycle, from ✓✓ Personal data includes location, initial capture through to deletion. IP address, RFID identifiers and medical data.

Increasing the Customer Base Although you can get more people to buy your products without deep insight, you need to spend a lot more on advertising to reach out to a wide pool of customers. Unless you carefully target this wider base, you’ll end up reaching people who won’t want to buy, so you’ll waste time and resources. Use your targeted information to focus in on the right sort of customers.

After you have the data on who really appreciates your products, you can target similar customers to grow your customer base. Using focussed email shots can be very effective, especially if combined with closed‐loop marketing tools, where the response to a specific campaign can be monitored to detect who opens the email, who clicks through to a webpage and who eventually goes on to buy the product. You can use this information to refine your understanding

of your target customer base and be even more focussed in the next campaign. For example, you may think that you’re targeting a particular area, but individuals from another area nearby may respond more positively than you expect. You can then extend the campaign to focus more explicitly on this new area. Upping the Wallet Share The second growth technique is simply to sell more products to existing customers. This technique seems obvious, but companies often don’t do it. In fact, many companies view call centre agents just as a cost, and they’re often incentivised to spend as little time talking to a customer as possible to address the immediate need, but not look for opportunities beyond.

When a customer is making a purchase, that’s an ideal time to up‐sell by offering related products. When moving, the customer may not realise she needs additional Wi‐Fi coverage for example; however, if you offer that service on the call while she’s telling you about her upcoming move, you might make an additional sale.

The key to success here is to predict the most likely products that customers are likely to buy and then offer them the top one or two that are most likely to result in a sale. A tool that can help is white space analysis. This approach considers the complete set of products you offer and identifies the group of products that are most often bought together. Your billing system or inventory system will have this data. By examining the data, you can see that some customers buy maybe two out of four products that usually sell well together. The obvious thing to do is to target those customers who just buy two products (such as voice and broadband), and offer them the other two (such as TV and mobile).

Because a significant number of people already buy all four, you have a high chance of success of upselling them, particularly if you also look at other data related to those customers – for instance, do it by segment not by the overall customer base. Having good analytics capability enables you to do this efficiently.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 92 UK Telecoms For Dummies, CGI Special Edition Moving into New Markets After you have as many customers as you can get and have sold them everything you have in your portfolio, you have exhausted the easy growth. From there, growth gets harder.

For example, if you sell just fixed voice and broadband products, but don’t have a mobile offer, you’re excluding yourself from the part of the market that wants to buy those together. You need to move into mobile.

Chapter 2 discusses virtual operators, including Mobile Virtual Network Operators (MVNOs) and partnering, so you might want to consider them. You can build a capability as an MVNO and extend your portfolio. The main changes will be in your business support systems (BSS), because you’ll have new and different products to support. You may also need a more sophisticated billing system to cope with a wider range of products. Additionally, you may need a more sophisticated debt management capability if you’re going to be selling high‐ value handsets.

The challenge you’ll have is how to differentiate your offer from other companies that already offer these products. Maybe you need to go further and offer something completely new, as long as people are likely to want to buy it. You’ll know that from the insight that you’ve gained earlier.

Whether you decide to create an offer similar to your competitors (a so‐called ‘me too’ offer), or create some new value added capability that nobody else has thought of, you need to evaluate the risk. Is the cost of building the capability higher than the return you’re likely to make? How able are you to create the new capability and then be successful in the market?

How much of the change do you want to make yourself, and how much do you want to work with partners to deliver? Seeking advice is often helpful, because getting it wrong could be very costly in both direct costs and brand damage.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 7: Growing the Business 93 Changing the Business Model Sometimes you need a much more fundamental shift to drive change. Let your imagination run wild and don’t be afraid to go back to basics. Look at an area from the customers’ perspectives and think through what they’re trying to achieve. Then think about the most effective way to meet that need.

Some of the great Internet successes have taken this approach. Radical change has no respect for history; it rips up the rule book and looks for new ways to do things. Think about how Amazon, eBay, Uber and travel‐booking websites have changed the way people do business. The Internet instantly gives unprecedented access to global markets and also enables more players to share in the value chain. Think about how your favourite search engine works. You don’t pay to use it, but you’ll see some adverts and often some sponsored results. That’s where the money comes from. The advertiser can know exactly how long you’ve looked at an advert, whether you clicked through, and whether you bought anything as a result. That information is valuable to the advertiser and is available to companies placing the adverts so they can use it to close the loop on the campaign and refine it more.

Sometimes the change in the value chain can be a natural extension of things happening already, and sometimes it can be a more fundamental shift, which has more impact. Of course, a big change in direction isn’t guaranteed to succeed, so you need to take a good look at the costs, benefits, your own capabilities and the risks associated with success. Only after you have a clear view of how the future might turn out should you make the decision to invest. Relying on web‐based service providers Web‐based providers deliver a comprehensive set of services from the web, or the cloud, such as customer management

systems, office software and even telephony. These services would previously have been provided by software on site. Web‐based services create an attractive model, because the end customer doesn’t have to worry about installing software on PCs, maintaining licence keys and upgrades. They can simply pay a monthly fee and access an ever evolving and expanding capability.

Although using web‐based service providers is attractive for end users, it potentially removes another source of revenue from a Telco wanting to provide business services. The value instead comes from the integration of the cloud‐based software into other capabilities within the client – for example, the client’s inventory or deployment systems to automate the flow from the initial customer contact through order management and into delivery.

Another example closer to the Telco world is RingCentral, who provide a web‐based telephony service. The service requires only broadband connectivity to deliver telephony to multiple users to a site and removes the revenue previously associated with voice services. It’s disruptive, and Telcos are responding with their own cloud‐based voice services.

A similarly disruptive service is Microsoft’s Skype for Business, building on Microsoft’s business messaging service (Microsoft Lync, later rebranded as Microsoft Office Communicator). The application delivers messaging, collaboration, voiceover IP telephony and conference calling, which previously needed a series of separate solutions, each generating a separate revenue stream.

You need to be extremely clear on the how the value chain works and to think through whether to partner or build in house. Is there some advantage from working with an external partner, which will usually be faster to market but deliver a lower share of the profit? Or is it better to build the capability in house and maintain more of the value at a higher initial cost?

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 7: Growing the Business 95 Responding to changes in the value chain Over time, your suppliers and customers will change their position in the value chain, usually by delivering more comprehensive products and services, which potentially threaten your business. You need to stay on top of these changes, respond to them, and ideally pre‐empt the changes so you are not wrong‐footed.

As services move up the value chain, don’t forget that it all runs on a physical infrastructure, which the industry tends to view as a commodity like an electricity or water supply. Monitoring how the infrastructure becomes more capable is a good plan, and then re‐thinking what you hand to others to deliver rather than building it yourself. Ensuring that your services continue to deliver specific value to your chosen customer segment is the most important thing, so focus on that, and let others take care of the basics where the value is lower for your business.

Comparing commodity and value Your business needs to decide your customers a statement along the balance between these two the lines of ‘We are unique in the extremes: commodity versus value. market because we offer [insert whatever makes you unique]’. This The commodity business is all about level of focus makes your offering selling basic products that meet a more compelling to the customer fundamental need. There may not be and enables you to charge a pre- a massive margin in this business, mium price, increasing your margin. but the income is reliable, as the However, you’ll face more competi- need will always be there. A com- tion and probably achieve a smaller modity business can lead to a steady, share of the market over time as long‐term return, which is attractive others enter the market and provide to investors, such as pension provid- similar offers. ers who need to think long term. Delivering a more specific value proposition enables you to offer

Seeing what will come next isn’t always easy, but think of what could happen and have a clear view of the future you want to build for your organisation. That way you can examine each change as it comes along and work out whether your original strategy stands or whether you need to adjust it to respond to the changes. If your strategy is good, it will pre‐empt some of those changes – but there will always be surprises, which is just how the world is. Doing it inorganically Inorganic growth is about the more radical approach of acquiring another company or being acquired into another company.

Not all marriages are a success A lot of mergers and acquisitions content provider) would create have happened in the telecoms immense value together. and IT world. Things don’t always Just two years later, in 2002, the go well, for a number of reasons. If combined AOL‐Time Warner there isn’t a good cultural fit or the reported a loss of $99 billion, two parties aren’t completely hon- and the stock value dropped to est with each other before the deal around $20 billion. Verizon later is done, things can go badly wrong. acquired AOL for $4.4 billion in Here are two examples where things 2015. haven’t gone to plan: ✓✓ HP Autonomy: Autonomy was ✓✓ AOL‐Time Warner: In 2000, + a UK company founded in 1996, during the height of the Internet growing to become a large soft- boom, AOL bought Time Warner ware business. HP acquired it for $164 billion. That’s a lot of in 2011 for $11.7 billion, almost money. It was based on the double the market value at the premise that AOL (an Internet time. Within a year, HP had writ- provider) and Time Warner (a ten off $8.8 billion of value.

For the acquisition to be successful, the two companies’ cultures need to be sufficiently similar to enable them to merge without too much fighting. There must also be a financial benefit beyond simply being bigger. Unless being together provides a sustainable competitive advantage, the two may be better to stay apart and simply carry on working together. This advantage may be that central functions can be combined (sales, marketing, HR, finance and such) or may come from working much closer together, such as having a single network rather than two or a consolidated IT systems stack.

Going this route is a big step and not one to be taken lightly. You really need help from the professionals here. Deciding how to go for growth To answer the questions that we pose in this chapter and many more, you need to use some sort of a decision framework that helps you work through the options and consider the costs, benefits and risks of each. Many tools can help you get the data together, but ultimately you have to make a business decision based on a review of that data.

Every business has a set of governance processes that determine how corporate decisions are made. If yours doesn’t have documented processes, then you need to find out how decisions do get made, and then maybe get some help to document the process. There will usually be a hierarchy, with the really big decisions made at board level, but smaller decisions are made much lower down. If you’re making a small change to a product or changing how it’s marketed, the product team may be able to make the decision. If the decision is whether or not to enter an adjacent market, senior management may need to handle it. If you’re deciding to acquire another company with complementary capabilities, the board probably needs to decide.

Decisions – a balancing act Decisions are better if based on the break‐even point. Generally, evidence. The more you can quantify the sooner you break even, the the factors that impact the outcome better. of the decision, the better the deci- ✓✓ The second balancing act is risk sion will be. Keep the following in versus return. Very few returns mind as you play the balancing act: are certain, and generally the ✓✓ The first thing to balance is cost more risk you take, the larger the and benefit. Assuming you can upside will be. Every company quantify the full cost of taking a has a different attitude to risk; particular path and the money older established companies you’ll make (or save) by taking tend to be extremely conserva- that path, then you can balance tive and only will invest in low‐ the two. The difference between risk projects, whereas newer the benefit and the cost is the start‐ups are much more likely net benefit, and this needs to be to take a risk in their invest- positive. ments. Their personal con- viction and energy can often Choosing the timescale that outstrip the more conservative you’re considering is important. approach. Purchasing managed Very few decisions will show services can share the risk with a positive net benefit immedi- a third‐party provider, potentially ately. Some may do in a matter making this an attractive option. of weeks or months (for example, launching a new retail offer), Don’t forget to consider brand whereas others (such as deploy- impact. If you take a risk and it ing a new broadband or mobile doesn’t pay off, how big a deal is technology) might take years. In that for your company? Could it a multiyear analysis, you need have a big consequence beyond to factor in the cost of capital as the simple finances? This impact well and compare the benefit you could be positive or negative – can expect to receive with the an established company that value you would have achieved does invest in a new area can simply by leaving the money in drive a large increase in corpo- the bank. You may hear the term rate value if successful. On the net present value – the value of other hand, an investment made any investment at a point in time, by a start‐up could literally make taking all this into account. The or break the company. point at which it turns positive is

In This Chapter ▶▶Comprehending why forecasting growth is important ▶▶Taking a closer look at exponential growth ▶▶Noticing that IP is everywhere – and why that’s important ▶▶Moving services to the cloud ▶▶Gauging the changing network ▶▶Grasping the Internet of Things ▶▶Examining big data

he telecomunications industry has always been an area Tof rapid change, particularly over the last three decades. The pace doesn’t seem to slow down, so strap yourself in, because this chapter looks at what’s coming next.

More than likely the next decade will be far from more of the same, because some big changes are already starting to take hold. Don’t expect all these predictions to be right, but do take them seriously. Some of the technologies are already having an impact and will most likely drive some of the trends over the coming decade. Starting with a Crystal Ball View and Why That Helps Predicting the future is a mug’s game, so why are we going to discuss it at all? Having a view helps you to be prepared for the potential outcomes. If you can clearly see what might

happen, you can choose to either drive towards a trend step back from it or wait to see what others do before acting (which may be the right thing to do). No matter what, you need to watch closely in case the situation starts to change and you have to react quickly.

Moving ahead of the trend is likely to be riskier, but can give good rewards. You’ll need investment and the returns are less certain, but the advantage is that you can be first to a new market with a head start over the competition. This assumes that you have backed the right horse. On the other hand, if you wait until the market is established, you may not have a significant opportunity. Markets tend to settle on a few providers in a given niche, so it’s critical that you understand at which niche you’re aiming.

The world is changing around you, and you need to decide how to respond. By being informed and aware of what’s happening and the possibilities that may open, you can make better decisions about the future.

There are many views of how markets will develop, so you need to draw your own conclusions about which are most likely to happen, how they’ll impact your particular business and how you’ll respond. Seeking independent help to review your own business direction and reassess how to respond can be helpful, but only if doing so leads to tangible actions that you’ll take as a result. What’s Driving Growth and How You Can Keep Up Data growth over the past three decades has been massive. These sections examine the factors that have driven the growth.

Each of the following factors has an impact in its own right, but they also drive each other. For example, mobility and apps have driven an appetite for bandwidth, but without good connectivity video isn’t possible at all. All the signs are that each of these factors will continue to drive the pace of change, but some roadblocks could hold up this change.

For instance, Cisco have recently published a forecast of growth on the Internet that confidently predicts that traffic will continue to grow threefold between 2015 and 2020 as more devices connect, and each device consumes more data. In the same period, data consumption is expected to grow three times as fast as fixed traffic and will exceed fixed traffic by 2020. Accessing connectivity – the growth of broadband The Internet is never quite fast enough. People have become more impatient and expect everything online to happen instantly. As they do more, they expect more. This user demand will continue to drive the need for speed. The way to address that drive is to deliver more, and faster, fixed and mobile broadband.

The UK also isn’t a uniform place. Delivering service economically is much easier to areas with a lot of population or business density. Where the population is more spread out, then the cost per user is higher, because many of the fixed costs are the same, but fewer users are served. User demand for uplifts in bandwidth in the more rural areas are likely to get more vocal, and the Telcos will have to respond to this need. Ofcom has recently announced plans for a universal service obligation (USO) for broadband, which would give everyone a minimum speed of 10Mbps. Evolving the fixed network Most broadband in the UK is delivered over the fixed network, which is mostly built from copper cables, so we start by looking at the changes in technology that can give more speed. Over the past decade, the copper network has moved from using ADSL, and later ADSL2+ from the exchange, through VDSL from the cabinet, and G.FAST is currently in trial. Figure 8‐1 shows the trade‐offs this change leads to. ADSL gives a bandwidth of a few Mbps over medium distances (up to a few miles). G.FAST is capable of much higher speeds, but over very short distances.

Figure 8-1: The evolution of copper line performance.

The infrastructure providers in the UK will continue to drive the bandwidth over copper up as high as it can go by upgrad- ing cabinets and in some cases the distribution points beyond them to use G.FAST. Doing so will enable higher bandwidths, but the speed–distance trade‐off will eventually reach a limit, especially in rural areas, which is where fibre really comes into its own.

The laws of physics and the network Delivering broadband over the cop- New green cabinets, contain- per network is limited by a number ing VDSL modems now deliver of factors including: superfast broadband. ✓✓ The quality of the network: In ✓✓ The quality of the endpoints: the 1960s and ’70s the cost of Improving the electronics can copper increased and cables deliver more bandwidth over the were made thinner, or in some same connection. G.FAST has cases replaced with aluminium. used this in addition to higher This is bad news for broadband. frequencies to deliver more bandwidth. Trials have shown ✓✓ The distance between the user that 300Mbps is achievable over and the modem: Broadband distances of around 300 meters, signals run out of energy as roughly the average distance of they travel farther. The solution a customer from the cabinet. is to move the modem in the exchange closer to the user.

A glass fibre network carries light, which is a lot less fussy about travelling long distances in glass than electrons are about travelling in copper. Hence, delivering hundreds of megabits per second, or even gigabits, to the home is entirely feasible over tens of kilometres.

Delivering fibre to the home would deliver a massive bandwidth uplift, but it’s hard to do because the road, pavement, or garden would need to be dug up to lay the fibre. Doing so requires a lot of mess and expense.

Some smaller infrastructure players are working with communities to deliver fibre services by getting people to do a lot of the physical work themselves. However, this isn’t feasible everywhere. The next decade will still use a majority of copper with fibre increasing as customers demand more and regulators intervene to drive universal high‐speed coverage. Evolving the mobile network The mobile world has had 3G and 4G, so moving up to 5G technology seems only natural. 5G is in the very early stages of definition, but you can safely assume that it will give more bandwidth and more reliable connections. Coverage is likely to start with cities and large centres of population. 5G is such a significant change that we talk about it later in this section.

Coverage in rural areas is more costly to provide, because fewer people are around to benefit from the investment needed, making the unit cost higher. Cities have people, which is why they’re first to get the new services. Mobilising the user Today, you expect your services to be mobile. The availability of very capable devices with powerful processors means that you can work effectively whatever device is to hand. You probably use a laptop, tablet and a mobile phone (if not multiple ones if you have a personal phone and a work phone). You just want everything to be connected in the best and most cost‐effective way possible.

If you’re using a laptop or tablet at home or in the office, chances are that you connect using Wi‐Fi. If you’re outdoors, you probably use a cellular mobile connection – probably 4G,

which is rapidly becoming the ubiquitous data connection in the UK. As Wi‐Fi and 4G technologies work seamlessly together, traffic can be offloaded to Wi‐Fi when 4G is congested or has insufficient capacity for the application being used. Going over the top You’ll be aware of over‐the‐top services like Skype (now part of Microsoft) and Whatsapp, which provide services previously delivered by a Telco, but at a much lower cost – often free. Voice over IP (VoIP) has been a big disrupter to traditional telecoms businesses, who previously sold connections and minutes, rented a PBX and phones and provided a maintenance contract. VoIP enables a user to connect to a cloud service using just her PC or mobile, with no further equipment other than a headset with a microphone.

4G enables voice to be delivered over a mobile data connection, and VoLTE (voiceover LTE – Long‐Term Evolution) will start to be used to carry voice traffic, rather than the now ageing 2G circuit switched technology. This will eventually enable the older 2G and 3G networks to be decommissioned and deliver another cost saving for the mobile operators.

Carrying voice on the IP network as just another piece of data could be the end of the concept of charging for call minutes except for premium rate or international calls. Most data bundles now include a large number, or even unlimited minutes, so this isn’t such a big step. Reducing cost Users expect to get more for their money each time they upgrade their technology. If you look back at the cost per bit of data, it has fallen dramatically. Each new wave of technology gives a five to ten times uplift in capability (bandwidth), but maybe only a five to ten per cent increase in cost. For example, BT’s first broadband service (0.5Mbps) would have cost around £50 a month in 2000. Today, superfast broadband (up to 80Mbps) is available at half that cost.

The cost challenge is a problem for Telcos, and for their suppliers, as the demand for lower cost results in their needing to deliver more capable equipment at a much lower unit cost. Fortunately, Moore’s Law helps here. Refer to the nearby sidebar.

Moore’s Law Moore’s Law was coined by Gordon in an integrated circuit doubles Moore, a semiconductor pioneer and approximately every two years. This co‐founder of Intel. He stated that the is a key enabler for fast computing number of transistors in a dense inte- and networking devices, which are grated circuit doubles approximately really specialised computers with every two years. An extrapolation dedicated network interfaces. of this is that the processing power

Working against Moore’s Law is complexity; each new generation of technology is more complex as it packs in more functionality. The additional processing power enables you to solve more complex problems, so there is a net gain, but the additional complexity needs to be managed, which in turn adds to cost.

The real need here is to enable the complexity to grow without driving cost, which is where the cloud can help. Telcos also need to think again about how the support systems are structured, which is typically in a product‐centric manner. Each new product adds to this complexity, which isn’t sustainable.

A new and radical approach is needed where product creation is catalogue based and able to expand in a scalable way by assembling products rather than starting from a blank sheet of paper every time. Operators will have to move away from a product‐centric world to one that serves the customers more effectively – one of the key goals of software‐defined networking (SDN) and network functions virtualisation (NFV). Interacting via applications If you’ve used a smartphone, you’re familiar with the app store – the go‐to place for a dedicated application that lets you do just about anything. The app store has replaced a large amount of web browsing traffic and creates a nice revenue stream for the phone ecosystem – not the Telco.

The IT industry might have been here before. Functionality has had a constant shift from the core (mainframes) using thin clients towards the edge (the first PCs) and now to an even more distributed computing environment enabled by

higher bandwidth connections between users and to the cloud. The trend to smaller service components is set to continue, as applications themselves become an assembly of more granular microservices.

Telcos have been trying for a while to get into the application ecosystem, but doing so is challenging in the consumer business. You, the user, probably have more affinity to your personal device than you do to your telecoms provider. How you see that relationship will dictate how you buy new products and services.

Large corporates have specific needs for high speed, low latency and reliable connectivity between branches, highly resilient data centres and a range of cloud services. Smaller businesses are more likely to buy complete solutions, so they may well come to a service provider to deliver an integrated capability. Service providers aren’t necessarily Telcos. Companies such as Microsoft are now delivering more capability, including voice and video calls, collaboration tools as well as software. The boundaries will continue to blur between Telco and IT services.

This trend is likely to continue, because software companies don’t have the legacy of physical assets that the Telcos do. It’s going to get extremely competitive out there, but with plenty of opportunities to collaborate and add value by working together. Sharing video and watching TV In the early days of the Internet, webpages were text only. As bandwidth grew, graphics started to be used. Now that most people have good connectivity, video is increasingly the way people communicate. Nobody predicted that people would share videos of cats doing cute things just for fun. Smartphones with very capable cameras and social media apps have led to video dominating Internet traffic. Video traffic is costly to carry because it needs a high-bandwidth, high- quality connection to ensure that it doesn’t stutter or pause. As cameras deliver higher quality video, more bandwidth is needed to deliver the traffic.

In the UK, watching linear (broadcast) TV has been dropping, at least among younger viewers. Many use the catch‐up app on their tablet or a dedicated online content channel instead.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 8: Looking into the Future: What’s Coming Ahead 107 Digitalising the business Most companies would claim they have a digital presence, which may just be a website advertising their location and a few basic facts. This example is the tip of the iceberg. Why not make the business fully automated, from the first customer interaction through to the service being provided? This level of automation would enable a massive cost reduction for most telecoms businesses. Internet‐native businesses, such as the well‐known retail and auction sites, have started with the idea that everything is digital and fully automated. Comparing the revenue per employee of these types of businesses with the more traditional software companies and the Telcos is interesting.

You need to understand how digital your business is and what to change to deliver the business outcomes you want to see. Chapter 6 discusses some ways to reduce the reliance on people, but sometimes you need to be more radical and think about re‐engineering your business to be fully automated by design.

The pressures of cost reduction and increased user expectations force all businesses (and governments) to streamline their processes, ideally taking people out altogether. Most retailers have made significant steps to automate the customer journey, but this is harder in the infrastructure parts of the telecoms business, because physical equipment needs to be installed and maintained. This automation and streamlining will continue, using production management processes and continuous improvement as well as fundamental re‐engineering of the business. Those companies who do this fast will be stronger economically and will meet customer needs. Those who don’t change may not survive in the long term. Driving Growth – the Evolution of TV In the UK, the switchover from analogue to digital television broadcast has meant that viewers are now seeing a rapid pace of change in their viewing experience.

Since 2012, the switch‐off of analogue TV, the pace of change has been rapid. Consider these changes that have happened:

✓✓Standard definition television (SDTV): SDTV is considered the basic delivery for DVB and on‐demand services, with a range of display resolutions from 768 × 576 pixels to 872 × 480 pixels, with aspect rations of 4:3 or 16:9. ✓✓High definition television (HDTV): HDTV, also known as 1080p HDTV or Full HD, has a resolution of 1920 × 1080 pixels in an aspect ratio of 16:9. This is the current mainstream HD standard for high quality television broad- casts, although many still use SDTV. ✓✓4K: Also known as 4K UHD (ultra‐high definition), 4K is a resolution of 3840 × 2160 pixels in an aspect ratio of 16:9, giving four times as many pixels as HDTV. Television manufacturers are pushing for 4K to become the new standard for mainstream HD in 2017. At present only BT and Sky in the UK offer 4K channels, and Virgin Media has announced its intent to offer the capability. ✓✓8K: Also known as 8K UHD, 8K refers to the horizontal resolution of 7680 pixels, but the total image dimensions are 7680 × 4320 pixels, meaning it has four times as many pixels as 4K (33.2 megapixels). This is the current azimuth of screen resolution, although availability of content is very limited.

Each of these approaches uses two to four times as much bandwidth as the previous generation, which is expensive to deliver over satellite or terrestrial radio. The use of high speed internet is becoming more cost effective and can drive a virtuous circle where better content forces people to upgrade their Internet connection, which in turn drives more content consumption – unless you live outside a town or city where high speed Internet isn’t available, in which case you’re increasingly cut off from the modern world.

Actually, the solution is more complicated than just throw- ing bandwidth at it. As Internet connectivity becomes more capable, it becomes technically and economically feasible to transmit linear TV over both managed IP networks and the Internet. Over time, the move to IP delivery could see the wholesale decommissioning of the radio transmission network, but only after everybody in the UK has a good enough broadband connection. The UK government announced its intention to develop a broadband universal service obligation

(USO), but it’s not on anyone’s plan to implement at the moment, particularly in the less well populated rural areas.

In addition, the service providers won’t just have to factor the linear TV channels over IP, which means dedicated bandwidth for multicast IP delivery services. They’ll also have to consider the bandwidth needs of the on‐demand unicast traffic as well as new services like Cloud DVR. You have to work out the right balance between multicast (where the same content is streamed to multiple users), unicast (content streamed to a single user) and other services. Of course, some of those other services may also be streaming video – YouTube, Netflix, Hulu and so on; the prediction from the Cisco Visual Networking Index is that IP video traffic will account for 82 per cent of all consumer Internet traffic by 2020. Getting Personal – Device Evolution Since the first PC appeared, devices have continued to shrink, thanks to Moore’s Law, which enables more technology to be packed into smaller spaces. The technology has developed from the days of luggable PCs (good if you’re into weight training) to ultrabooks (very light PCs with solid state disks), tablets, smartphones, phablets (phone/tablet hybrids) and wearables (smartwatches and fitness‐specific devices).

In the home, smart TVs and personal video recorders (PVRs) support browsers and over‐the‐top content. Many hi‐tech homes also have some form of local storage enabling pictures and videos to be stored and shared within the family.

After the false promises of 3D, which didn’t really take off because of lack of content and user reluctance to engage with glasses of some sort, the next step in personal entertainment is likely to be virtual reality (VR). VR will enable a completely immersive gaming and content experience and augmented reality (AR), where players can see virtual objects overlaid over real‐time video on their phone. For example, the craze of Pokémon GO swept through the world during the summer of 2016, overlaying virtual characters onto real‐time video on the user’s phone. AR could be the beginning of a trend to get people off the sofa and into the outside world for their gaming experiences.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 110 UK Telecoms For Dummies, CGI Special Edition Changing the Way You Do Things – the Impact of IP Internet Protocol (IP) is the foundation of the Internet. It’s everywhere, and it enables people and devices to communicate and interact with each other in ways limited only by their imagination and the business need for change. Wi‐Fi and mobile have become increasingly Internet friendly, after some attempts from network providers to lock users into walled gardens (where the network provider controlled the content available). Users rejected this model and the end‐to‐end principle (where the network is fully transparent to the service being delivered) was re‐established. The network shouldn’t get in the way of traffic, but simply get it between two ends as fast and efficiently as possible.

4G is the first mobile technology to deliver end‐to‐end IP capability with latency and bandwidth similar to fixed networks. Most services can now run seamlessly over fixed and mobile networks.

Widespread fixed and mobile network coverage makes it possible for every individual and business to transact directly using data. Most people are used to researching, shopping, banking and socialising online. The strongest innovations challenge current business models and present users with a new way of trans- acting, often by disintermediating a current business model.

Disintermediation is the removal of the middleman. For example, if you wanted to book a holiday pre‐Internet, you have to use a travel agent. Now you can book it directly, using an Internet search engine or an online travel search site. In the same way, over‐the‐top video has had a significant impact on traditional broadcasters. Moving to the Cloud: Everything as a Service Chapter 5 introduces the types of cloud services available today, and more than likely that range will continue to grow. These changes make it possible for Telcos and their customers to move functionality that currently resides on dedicated servers and network hardware into a more cost‐effective cloud environment.

In the future, telecoms customers and Telcos themselves will have to make decisions on whether to continue to maintain dedicated servers, which is only really necessary if there are very specific latency or security requirements, or whether to move towards private, public, community or hybrid cloud.

✓✓Private: The cloud infrastructure is operated solely for a single enterprise, whether managed internally, or by an outside provider and hosted either internally or externally. The infrastructure is available only to that enterprise, which allows the enterprise to maintain close control. This option may be the best for very sensitive data or for high security requirements. ✓✓Public: The cloud delivers the services over a network that is open for public use and an outside provider hosts the infrastructure. Chapter 5 provides some examples of the services available today. Some Telcos are starting to provide dedicated connectivity to specific public clouds to ensure that a high quality of service can be delivered, usually at an additional cost than if the user connected to the cloud over the Internet. ✓✓Community: This model shares infrastructure between several organisations to form a specific community with common concerns, such as security, compliance, juris- diction and so on. The cloud is managed internally or by a third party and is hosted internally or externally, with the costs spread over fewer users than a public cloud. ✓✓Hybrid: As the name suggests, a hybrid clouds is a combination of two or more clouds – be they private, public or community – that remain as distinct entities but are bound together and offer the benefits of multiple deployment models. Different providers can supply the services as well as support the potential to combine existing managed or dedicated services with cloud resources.

One of the objections to the move to cloud is that the user might become locked into one supplier. Telcos are starting to offer cloud‐broker services, which put a layer of protection between the cloud and the customer, to enable the customer to move to a different provider if needed. This approach also lets customers have multiple public and private clouds configured and select which option is used at run‐time, letting them make the choice based on cost, performance, or some other service parameter.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 112 UK Telecoms For Dummies, CGI Special Edition Virtualising the Network Today’s telecommunication networks mostly consist of networking hardware devices, all running on bespoke hardware and running proprietary software applications. The increased processing power of standard computing equipment lets you move some of the functions from dedicated hardware onto a virtualised cloud environment, just as have happened with email and office automation software amongst others.

This virtualisation is NFV (network functions virtualisation) and lets users create virtual routers, switches, firewalls and so forth, which are virtual network functions (VNFs). For example, in 4G networks, the all‐IP ecosystem means that the Evolved Packet Core (EPC), which provides the core of the 4G network, can now be run as a series of VNFs on common‐ off‐the‐shelf (COTS) hardware. When required, new VNFs can be started to handle load or error conditions, making the solution more scalable.

Similarly, in the access network (the final connection to the customer), VNFs can replace hardware such as routers, or at the edge (the part of the network that connects the core to the access network) can replace, switches and firewalls in a virtualised customer premise (vCPE) deployment. You still need a box in the customer premise to terminate the network, but you’ll be able to avoid the stack of boxes found in comms rooms. For example, the DSL modem, router, firewall, WAN acceleration and PBX are probably all separate components in a typical small business comms room. NFV replaces each of them with a piece of software, which enables in‐service upgrades without a further site visit.

The adoption of NFV technologies means that the next step, service‐defined networking (SDN), is a reality. The aim of SDN is that the VNFs are stored in a catalogue, (a list of the functions and their capabilities), along with all of the policies, configuration, and so on that applies to them. A new service infrastructure then be created in near real time by deploying the VNFs and their associated configurations and policies, thereby reducing the lead time to bringing new services online and providing potential new routes to supporting network redundancy.

SDN separates the control of the underlying components from the deployment of those components, so networks can be managed and modified more quickly. This approach will

be key in managing the complexity of a 5G network. The challenge comes with the hugely complex legacy of the operational support systems (OSS) and business support systems (BSS). (Refer to Chapter 3 for more information about OSS and BSS.) They were built around relatively simple services deeply embedded in the network. Exposing the complexity of the network to end‐users to configure is a fundamental change to the OSS and BSS principles. Those systems now need to see the catalogue of (virtual) parts and give options on how they should be assembled to deliver a service.

After you’ve created a virtual network, you then need to worry about how you’re going to fix it when it’s broken. When a customer calls and says, ‘My voice service isn’t working,’ the first thing you need to do is understand exactly what isn’t working and where in the complex blend of software and cloud it has come unstuck. In a physical network the systems can query each box in turn, and determine which component is faulty. Where each physical box has been replaced by multiple pieces of software, sharing a cloud, fault diagnosis becomes trickier.

An emerging approach is to use analytics of trends in the information created by the software functions and from the cloud to detect when things aren’t working well. You can then correct them by allocating more resources or by restarting software components. However, in a highly configurable environment the combinations of what can go wrong are massive. Think how often your PC or phone slows down and doesn’t quite behave as you expect, which is irritating, but if your whole network does, then it’s a problem on a different scale!

The promises of SDN and NFV will only be delivered with some pretty complex changes to the OSS, BSS and analytics tools with some software robotics technology to automate key fix scenarios. Working with the Internet of Things This section focuses on what the Internet of Things (IoT) means to telecommunications providers, but feel free to con- sult our sister publication, Internet of Things For Dummies, CGI Special Edition if you really want to understand the IoT in greater depth.

IoT connectivity has continued to evolve with various fla- vours of Low Power Wide Area (LPWA) technologies being deployed, but IoT is really about getting value from the data. IoT deployment is now about securely collecting data from millions of endpoints and integrating information from multiple sources. This aggregation of data enables complex data processing algorithms and solutions to derive insight and therefore value from diverse datasets and meet the many needs of individual enterprises and organisations as well as servicing multiple sectors from a single platform.

Telcos are under increasing pressure to provide reliable connectivity to growing number of devices with decreasing value associated with the resulting revenues. The adoption of technologies such as LTE/4G, increasing deployment of Wi‐Fi, ever‐ increasing broadband speeds and the appearance of 5G on the horizon means increased investments, but in a context where connectivity is becoming a commodity – with it being simply a question of what speed and payload you can have at what price.

To stay relevant and not just play a connectivity role, Telcos have to be innovative with the systems and platforms that they provide. Here are some ideas as to how they can achieve this:

✓✓Value‐added services: Like the ‘powered by Intel’ logo seen on many computers – to enhance the role of the communications network. These services could be as simple as securing the end‐to‐end communications between the IoT platform and devices, or more complex offerings to ensure low latency and high reliability. They can also be offered as part of a platform, so that prospec- tive customers can pick and choose which value‐added services to include. ✓✓Data: Successful Telcos will evolve from pure connectivity providers (the M2M world) into IoT enablers, by delivering additional value such as the creation of value‐ added enablers, including data management, integration and security tools. ✓✓More innovation: Telcos have to be more innovative in the actual communications that are offered, the most obvious being the ability to offer a managed hybrid communications service – mobile, Wi‐Fi, broadband, and so on – to ensure all end devices are always fully connected and part of the IoT ecosystem. The most efficient communications delivery service will be selected for the end device and the specific use case of that device.

✓✓Narrow‐band IoT (NB‐IoT): Other new technologies are emerging, such as SigFox and LoRA, but NB‐IoT works on existing 4G networks and introduces the possibility to offer even cheaper smart devices, possibly based upon SIM‐lite/eSIM/SoftSIM, which eliminate the physical SIM and replace it with software certificates. There is the potential for the IoT service providers to supply enor- mous numbers of devices that will connect across the 4G network and drive large amounts of data through it, but the 4G network owner may only receive a small revenue because the device is only roaming on its network as part of a larger communications aggregation. ✓✓5G: With 5G comes the concept of network slicing, where the communications network can be divided, through the use of NFV/SDN, into horizontal service layers dedicated to a specific service or customer. IoT service providers will expect to have access to their own slices, again in the form of the end devices roaming onto and off the network as required. This could potentially remove wholesale or bulk data services from the market, because the IoT service providers or enterprises seek greater service differentiation from the available networks. ✓✓Aggregators: More and more aggregators are now able to supply the SIM/connection device, using software‐based SIMs, removing the need to provision physical SIMs and making roaming even easier to support. The aggregators can strengthen their position as the connection brokers for the IoT players as well as increasing their ability to play in the B2B data brokerage and monetization space between IoT enterprises, again at the expense of the communications service providers. Moving beyond 4G to 5G Chapter 3 discusses how the UK mobile networks have evolved to 4G, which is now well established in the UK with good coverage, at least in the urban areas. Chapter 5 talks about how future mobile services will better support specific industry segments. This section focuses on the move to 5G, which introduces some fundamental changes, including the following:

✓✓Higher data rates and lower latency, to deliver an even better user experience.

✓✓The use of multiple radio technologies simultaneously to deliver more data capacity. ✓✓Increased coverage through more, smaller cells, enabling the use of higher frequency spectrum to deliver better coverage and higher capacity. ✓✓Extensive reliance on virtualisation to deliver scalability and support the expected explosive growth. ✓✓Support for the IoT, and other specific industry use cases.

The 5G Manifesto The 5G Private Partnership economy, providing connectivity for Programme is leading the definition a range of applications in specific of the technology changes needed to industry verticals including health- deliver the vision of 5G. The EU will care, media, energy, smart cities and make spectrum available to support transport. It goes on to encourage additional capacity, and the UK will dialogue between these verticals benefit from the economies of scale to ensure their needs are met. The from using the same radio spectrum manifesto proposes a trial roadmap bands in network equipment and with the following milestones: handsets. An investment of around ✓✓ Before 2018: Technology trials €3 billion backs this work. The 5G will demonstrate and validate Manifesto was created to provide new 5G capabilities as well as momentum behind the move to this foster an ecosystem around new new technology. 5G capabilities with the involve- A group of 17 European telecoms ment of vertical industries. operators first published this mani- ✓✓ Around 2018: When the first festo in July 2016. Its intent is to release of standards is expected ‘foster effective interactions and col- to be close to finalization, laboration with industry verticals, the operators should agree on trial formation of ecosystems as a result specifications including use of large‐scale demonstrators and, cases, scenarios and interfaces last but not least, an investment‐ enabling cross‐network dem- centric policy framework – bringing onstration of capabilities. This together the key levers to ensure will enable pan‐European and European digital leadership in 5G pan‐industry trials to be run in and beyond.’ Europe. It positions 5G as a key enabler for the digitalisation of the European

Together, they enable the industry to respond to traffic growth in a cost‐effective way, as well as to support the new business cases, which are emerging from the IoT. Heterogeneous network One of the main technology features of 5G is likely to be that it’s a heterogeneous network – or het‐net for short. This means that rather than using a single frequency band for a given connection, it will use multiple bands simultaneously. Doing so enables multiple base stations to work together to give the best for the user. For example, a local campus network may be used alongside a national macro network to give more bandwidth in an office environment. Virtualisation 5G deployments will rely heavily on virtualisation of the network, enabling dynamic changes as bandwidth requirements evolve rapidly through service deployment. Network suppliers are already demonstrating the capabilities necessary to deliver this. The packet core, radio area network and edge computing have all been demonstrated as virtualised entities. Timescales This topic may sound very complicated, and it is. A lot of work is going on to specify and define 5G, but it should result in a much better end‐user experience by around 2020 when it’s expected to start to be deployed. As with previous generations, there will be a phased deployment, likely to continue well beyond 2020.

The first phase will be defined in Release 15 (3GPP R15) of the standards. The plan is to complete reports on the radio requirements by September 2016 and start architecture work at the end of the year.

The evolution of 5G is as much about business changes as technology. The industry needs to position itself to respond to the business model changes, enabling them to develop in parallel with the deployment of new technologies. These changes are likely to lead to some more fundamental shifts in

the industry with the more agile players being better placed to respond than those players who rely on traditional business models focused solely on connectivity. Getting Value from Big Data Big data is a phrase that generally means a volume of data that isn’t only larger than can realistically exist in a traditional relational database, but is also unstructured. It can include raw text, images, videos as well as structured data.

Increased computational power resulting from Moore’s Law has made analysing such data efficiently more possible by using techniques invented in the Internet search world, such as Hadoop and MapReduce. Hadoop enables data to be managed efficiently and processed in parallel, making it easier to exploit low‐cost processing and storage. MapReduce is a technique that splits the data (the map part) and enables the computation to run in parallel (the reduce part) to generate the answer. The end result is that complex structured and unstructured data can be analysed and can deliver useful insight faster, and more cost effectively.

Tools have emerged to enable the data to be visualised and manipulated and to find hidden connections between apparently unrelated data items – the proverbial needle in a haystack.

Data science, the discipline around big data, combines the scientific approach of creating hypotheses and testing them against observation (in the data) with the technical ability to use the tools effectively.

Having a powerful tool is one thing; knowing how to use it effectively is something else. To do so, start with the business challenges that you’re trying to solve and then use the data to identify potential pointers to a solution. For example, gaining information on which customer groups purchase a combination of products. Big data holds a lot of promises, but be careful you don’t drown in the data lake. Be clear on what questions you’re asking of the data, and you’ll be able to keep swimming.

In This Chapter ▶▶Understanding where you are now and where you want to be ▶▶Including flexibility ▶▶Considering a partner ▶▶Knowing where to go for help

he future is unpredictable. The telecoms industry has Ttaken many twists and turns to get to where it is today. A lot of what has happened hasn’t turned out in the way it was predicted, but the industry is still here and flourishing.

A lot of the material in this chapter applies to all business and is generally accepted business practice. Telecoms is a complex and fast‐paced industry that relies a lot on technology, which introduces further complexities that need to be managed.

This chapter explores some of the tools you should have in your armoury and gives you ideas on how you can be well prepared for the future, however uncertain it may be.

Refer to Figure 9‐1 as you read this chapter. We work through how you can create, review and assess options to deliver specific goals.

Figure 9-1: Creating and assessing options.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 120 UK Telecoms For Dummies, CGI Special Edition Knowing Where You Are Now When you begin a journey, you need to know your starting point. It’s not much help if you ask someone for directions and she replies, ‘If I were you, I wouldn’t start from here’. You need to be realistic and understand your business before you can start to prepare yourself for a change in direction.

What sorts of things do you need to understand? Here are a few questions to ask:

✓✓Who is buying your product, and who is not, and why? You need to know your customer base. (Refer to Chapters 6 and 7 for more about how you can figure out these questions.) ✓✓What do you have that is unique that you can build on? Without a unique selling point (USP), you’re the same as everyone else, and unlikely to stand out in the market. ✓✓What skills and experience do you have in the business, and how are you using these to deliver your products and services today? Some sort of maturity model can help. A maturity model gives you an objective view of your company’s strengths and weaknesses. ✓✓What capacity do you have to expand? It may be network capacity, storage, premises, geographic coverage, sales teams, development teams and so forth. ✓✓How easy is it to change your core technology? How much of that can you do within your organisation? Do you need help from others to make changes? ✓✓How strong is your business financially? What resources could you use to fund a change? Sweat the assets.

Record any significant gaps you have at this point. What key markets are you unable to access at the moment because of a specific barrier? For example, if all your offices are in the South East of England, then you may struggle to serve the market in the North West. What skills do you lack? It may be sales, technical, delivery. Listing the gaps helps you focus when planning ahead, because you either need to overcome constraints or avoid destinations that rely on overcoming them.

Answering these questions honestly is a critical first step to any planning process. Most corporates have a formal planning process, usually annually, which force this information (and much more) to be recorded in a structured way. This record provides a baseline for your plan – a snapshot in time – and enables you to measure progress against the ambitions that you’re about to set.

The general public doesn’t always take up new products, so look closely at who will buy new technology. Just because the idea is good doesn’t mean that it will be an instant success.

Where a new product is software, your market can be much wider than if selling network services, which need physical resources, because software can be distributed widely at very low cost. Deciding Where You Want to Go After you have a baseline, decide where you want to take the business. At this stage, don’t think about how practical it is to get there; just dream some dreams and imagine yourself and the company where you want to be at some point in the future. Decide a timescale – do you want to think about just one year out, or five, or ten? Looking longer out gives you a bigger vision, but it means that you have more work to do to get there. If you do decide to take a longer‐term view, think about some interim milestones along the way. You’re going to need a roadmap to help you ‘eat the elephant’ or maybe a menu!

The next sections help you through the process of setting the direction for your business, keeping you focused on the end goal and helping you to find ways to get there. Keeping an eye on the destination At this stage, focus on the destination, not the route. Is your ambition to get a certain market share – maybe double what you have today? Is it to dominate a region or to focus on a particular industry? What are your financial goals (revenue, cost or margin)? Do you have the balance right between the reality today and your ambition – how realistic is your vision?

A number of tools can help you think through the options. The best tool to begin with is a spreadsheet where you can track the options. Start with a list of possibilities, which you can create in a number of ways. However, the best way to do it is in a multi‐skilled team taking inputs from all disciplines, including commercial, technology and customer‐facing service personnel, who will each bring a different perspective. You can do the following:

✓✓Invite your staff to come up with ideas, through a structured idea capture programme. ✓✓Get the executive or management team to brainstorm ideas in an open meeting or individually. ✓✓Review your competitors to understand what they’re doing and have a guess at what they might do next. ✓✓Review analyst input to gain a view of how the market is expected to develop. ✓✓Put yourselves in your competitors’ shoes. What would they do to win against you? How would you respond?

Doing these things is likely to give you a long list of possibilities. Some may be small and easy to implement, some may be more ambitious and some may seem wildly insane. Just don’t make a judgement at this stage, simply record them. The nature of your business and appetite for risk taking will determine the one best for you.

You now have a long list of potential places to go. Decide which of them you’ll aim for. The future you set out may include a mix of short‐ and long‐term goals, which is fine as long as they’re consistent, with the short‐term goals taking you towards a long‐term destination. If they take you in an opposite direction, achieving both short‐ and long‐term goals will be difficult. Setting some success criteria The next step is to set some success criteria – how will you decide which are the right options for you? One way to do this is to list the factors that are most important to your business: Know what you want to achieve and use them. You should also use the barriers list so you know what ideas are going to require more effort. Use current business performance data to keep this objective.

Recording the ideas in a spreadsheet and then adding columns where you mark each against the success criteria is often helpful. You may have a column that measures how close to the end goal the idea takes you, where you score the ideas that take you closer more highly than those that only take you a little way. Another column may measure difficulty, where you give the easiest ideas to implement a high score. Another column may be your view on your organisation’s skills to execute the task, and so on. Adding the scores and ranking the goals will give you a more objective view of what the most attractive options are.

After you have the data, agree how many of the goals you can realistically pursue in the time frame that you’ve chosen. Selecting fewer requires focus, which is risky because you need to be successful with all the goals to deliver your business plan. Choosing more runs the risk of your effort being diluted, but it may be the right thing to do if you have the capacity to take multiple actions. In the end, an executive decision needs to be taken and agreed on, understanding the risks and implications of that decision.

You’ll end up with a list of goals, but you should also record key constraints, issues and assumptions you’ve made so far, so you can check and address them as you move forward. Getting there With your goals in hand, you’re ready to make a plan to get to reach your goals. This plan starts as a list of actions you need to take to deliver each goal that you’ve chosen.

The list could be quite long, and the tasks will have some dependencies – such as you’ll need to do some before others can begin. Think through the steps logically and make sure that you don’t miss anything. Review everything thoroughly, ideally bringing back the experts who helped you create the original list, because finding out later that you’ve missed an important step can be a bit of a disaster (refer to the nearby sidebar about reviewing your plan). Figure 9‐2 summarises how you can turn this list into a proper plan to deliver results.

Figure 9-2: From a plan to execution.

Reviewing the plan There is a theory that a plan should but if you ensure the plan addresses be put together by using an optimist each of these potential problems, and a pessimist. The optimist focuses then you’re more likely to complete on the end point and tries and puts a it. If you’re estimating the time taken, plan together that reaches that end then add the estimate from the opti- point as fast as possible. The pessimist and the pessimist; they both mist thinks of all the things that could bring important knowledge and expe- go wrong. This sounds a bit negative, rience that you need to consider.

After you have the outline plan, you need to work out what resources – people, technology, skills, access to markets, physical locations and so on – that you need to deliver it. Writing everything down is one step, but the hard bit is getting management commitment to enable you to provide those resources, which usually means hard cash.

To access investment funding, you need some form of business case that sets out the costs, benefits and overall return on the investment. You need a strong financial view in the business case. Any change project will probably have goals, including increased revenue and reduced costs, because goals are what make your business more competitive than your competition. Your question is how are you going to do it. Are you going to try to enter new markets with your existing customers by developing new products? Are you going to seek new customers to buy the products you have? Are you going to take costs out?

Your company will have a formal mechanism for getting investment funding, but you need to come up with the facts and figures, supported by research and evidence to input to the process. Assume that you have the money; you now need to find the resources and create the team that can deliver the outcomes, which creates the next dilemma: Do you use your key experts who are already delivering valuable work for your customers (generating revenue), or do you employ new people who don’t know the work area so well, but wouldn’t disrupt customer delivery?

Another way to deliver significant change projects is to seek outside help, so your key people can carry on to keep the business working. Often an external approach will be most appropriate, because the project may only run for a short time. To resource a short‐term change project with employed staff will be disruptive, using external staff less so.

If you do use external help, ensure that the external team members can get access to your experts and the knowledge that they represent. The right level of access is critical to a successful project using external resources; it may include business, operational and technical consultants who each bring specific expertise. Building In Flexibility As you start to deliver the projects, make sure that you keep a lookout for changes. Many things can change in the life of a project, including the economy, the market, the technology, or even the management team who initiated the change. These changes can all have a big impact on a project, so manage them carefully.

You need a formal change control process to manage changes in the project, and decide whether each change impacts the project at all. If it does, the impact needs to be understood and made fully visible. Very few changes have no impact at all, but the scale of the impact can vary significantly.

For example, assume that you’re developing a new product that you know will be unique in the market and deliver massive revenue. What if halfway through the project a competitor launches something with the feature that you thought would make your product unique? Do you continue with the project, knowing that you won’t be alone in the marketplace? Do you stop the project? Or do you make a change to the delivery to add some other value that enables you to remain unique? Answering all these types of questions is risk management, and for every risk, you need a mitigation strategy (a plan that minimises the impact of the change).

In a real scenario, any one of these actions might be the right one. Go back to the original plan and rework the business case to determine operational, business and technical

impacts. In this example, rather than getting 100 per cent market share, you may now only get 40 per cent, because your competitor will have the advantage of launching first and will gain a greater market share. Does the business case still deliver a good outcome? If not, what will you change? Or is it too late? If so, you have to consider whether making the tough call and stopping the project is the best move.

A better way is to ensure you think about some of the things that might change, and build your solution in a way that accommodates these changes. For example, how sensitive is your business case to volume? Can you simply scale back the cost and still deliver a good margin? Involving the technology experts early can help make the right decisions and map out options not previously considered. You’ll need a strong project management office and business analysts to work through each change and ensure the impact on the project is managed. Making flexible technology choices Technology can often help to provide this flexibility. A cloud‐ based service is designed to scale up from a very small start to a much bigger capacity, but it can be done on demand as the customer base grows. Similarly, hosted software that is paid for per transaction rather than an up‐front licence cost can help to maintain financial flexibility.

Making the solution configurable is also important. Configurable software can be changed much more quickly and requires less expertise. Think of the difference between using a spreadsheet to make a series of calculations rather than writing a specific programme to do so. Most commercial software available today is highly configurable, and a key choice to make is whether to go with a commercial‐off‐the‐shelf (COTS) product or develop from scratch. Developing your own system may get you closer to the stated requirements, but it could take longer and is likely to be less flexible than using a COTS package.

A typical communications business will have a lot of complexity. The OSS and BSS used to operate the business, and the underlying networks can each be enablers for flexibility or blockers. Ideally, each change goes some way to removing the barriers and makes the systems and organisation more flexible. Having a clear architecture and road map is important.

The architecture will provide a set of guidelines that helps you be clear about the function of each component in the business. Tool support is available to discover and document the components and help you understand the interactions between them. The best tools also enable you to record the cost of each operation and the status of individual software subcomponents, operating systems in use, patch levels, and security patches. Recording all of this information in a single application management framework makes it much easier to understand the impact of change and make better decisions on how and where to implement change as a result.

At the network level, approaches like SDN and NFV introduce new areas of flexibility, providing a catalogue of components and orchestration tools to fully define the operation of the network. These tools and components promise a much more flexible approach to delivering network services, because an instruction to the orchestration tool can drive change deep into the network and cloud infrastructure to deliver new services. Check out Chapter 8 for more discussion on this approach. To exploit this capability, the OSS and BSS must be equally flexible and integrated.

A road map is a tool where you can record the steps that you intend to take as you develop systems that deliver the required capability. Doing so helps to phase a complex development, where multiple iterations of software may be needed to deliver the required capability, especially where agile approaches are used. The road map may be as simple as a timeline against which each significant piece of functionality is recorded. When linked to the business case, it can be useful to make decisions about the sequence that gives the best return on investment.

A programme is a series of projects that work together to manage the execution of road maps to deliver a business outcome.

What system architecture is If you think about a building, the usage changes, but the number overall architecture is like the super- of floors and external walls stay structure. It defines the outside constant. walls and number of floors. A flexible Systems architecture is similar. It building enables you to change the defines what is fixed and what can layout of the internal walls to cre- be changed flexibly, as well as things ate more, smaller rooms, or fewer, you shouldn’t do, because the whole larger rooms. The configuration of edifice might come crashing down. the building can be changed as the

When things change, you should assess the impact on the architecture and road map. A good architecture should toler- ate changes in the individual functions without it impacting the architecture itself. A road map may need to be changed more significantly. Refer to the nearby sidebar for more discussion on how an architecture can be helpful. Building the solution in a flexible way How you go about building the new capability is also important, whether you’re building from scratch or configuring a COTS package. In the past, the approach to software development was often a long period of capturing requirements, followed by another long period of design, development and test. This is the so‐called waterfall model where the process flows in one direction, towards the end goal. The challenge is that a significant change of requirement can have a massive ripple effect and result in delays and cost overruns. Because the project may be running over one to two years or more, the impact of these changes can be very significant financially; millions of pounds of development may need to be written off if the project can’t be turned around.

More common today is the use of an agile approach, which operates on a shorter timescale and makes frequent deliveries of capability that gives the business some sort of value, even if only a little. This approach enables benefits to be delivered

incrementally with a smaller investment, a faster turnaround and less risk of failure. To enable this approach, a greater degree of user involvement is needed at all stages. The end user is actively involved in working with the design and delivery teams to ensure that their requirements are fully understood and then delivered. The delivery may take place over several delivery sprints (short periods of activity focused on specific goals), but each one builds on the previous and gives confidence that the project will be successfully completed.

Devops is an approach that takes this a stage further still by bringing the operational teams into the mix. Traditionally, after software had been developed, it would be handed over to an in‐life or operations team to deploy and maintain onward. This approach created a somewhat artificial barrier between the initial creation and the onward evolution of software. Devops blurs this boundary and enables users and operations teams to remain in close communication throughout the deployment and in‐life phases of the project. It brings in tools from the manufacturing world, like continuous improvement, which encourages everyone on the team to be looking for small changes that could together make a large difference. Flexing your business to deliver value The previous sections help you build a great deal of flexibility into your business. This flexibility enables you to act quickly and make changes as the market evolves around you.

Value chains in the telecoms world are changing rapidly. The move away from equipment based on customer premises towards cloud‐based capabilities seems unstoppable. New niche players are providing over‐the‐top (OTT) applications each day. Flexibility to adapt to this rapidly changing environment is critical to the future success of a business. Competitors who are more able to keep up with the pace of change will overtake those companies that don’t adapt.

Building this flexibility into the business will enable telecoms to fully embrace new commercial opportunities resulting from the development of 5G mobile and the exploitation of Internet of Things (IoT).

The flexibility can also help deal with smaller changes, for example changes in the volumes of services being sold. The right insight is critical to deciding how and when such changes should be made. Partnering Strategies: Can You Do It Alone? When a business is making complex changes, it needs to fully understand the impact that these changes could have. This understanding often comes from the experience of defining, managing and delivering such changes multiple times. Having the full range of economic, commercial, technical, and change management skills is rare. That’s why in these circumstances you need to understand when you need help and what type of help you should seek.

You may decide that you need a partner to deliver the solution. For example, if you’re a retailer and need a partner to deliver the wholesale network or MVNO enabler, you need to go through the same process of considering options, estab- lishing commercial terms and creating a delivery plan.

You may have the IT and people skills within your organisation to deliver significant change, or you may need to seek outside help. Often an external partner can bring additional skills to help you make a significant change, leaving your IT department free to continue with smaller change projects. If you move everyone in your IT department to a big transformation project, your day‐to‐day business could suffer.

If you do have all the skills because you have done this many times over, that’s fine. If not, you may need to seek help. This help comes in many forms, including:

✓✓Consultancy services to assist in considering and evalu- ating the options for change and then planning for them. ✓✓System integrators who provide capability to build solutions from off‐the‐shelf components. ✓✓Software suppliers who offer configurable packages.

✓✓Network equipment suppliers who deliver expertise on building capability into the network. ✓✓Business change experts experienced in the softer skills – making significant change often means big changes for the individuals working in a company at all levels.

Picking a partner isn’t easy. Here are some of the questions you can ask yourself when choosing a partner to work with on a project:

✓✓Can you get along together? ✓✓Do you speak the same business and technology language? ✓✓Is this a short‐term or a long‐term relationship? ✓✓What do you both want to get out of the relationship?

As you explore different companies, you’ll find that each has a different way of working, and you need to be as comfortable with the culture of the company you select as with the company’s ways of working and technical skills. Cost will also come into the equation, but don’t confuse cost with value. A small quantity of high‐cost days can deliver more value to your business as a lot of low‐cost days. You may decide that you need more than one partner to cover the breadth of expertise you need.

It’s critically important that you understand the final product that an external partner will deliver and that you know the next steps you’ll take when you have that product. Will it be absorbed into your own company, or handed to another contractor? You will need good acceptance criteria and a plan for a smooth handover. Will the relationship with the original contractor continue? If so, do the people involved need to change as the project moves to the next stage? Think about these things in advance, and be open with your selected partners to give more chance of the best results.

After you know what you want to deliver and have an agreed scope, statement of work, specifications and so on, consider these other questions:

✓✓Will the technical capability you purchase tie you to that supplier in the long term?

✓✓What are the arrangements for ongoing maintenance and future changes? ✓✓How many versions of the software and hardware are supported simultaneously and are you forced to take an upgrade each time the version changes? ✓✓Will the company still be around in the future if you need help? ✓✓How might you move the business to an alternate supplier if things don’t work out?

One of the potential risks of buying off‐the‐shelf software is being locked in to one supplier that you have to use. Although going to a single supplier can be attractive, because the supplier will deal with all the issues, there could be reasons why you would want to move in the future, such as cost, the level of support, the functionality, or your business might outgrow the solution. You need to consider the likelihood of this happening and the ease of contracting with an alternate supplier. If you do change suppliers, chances are you’ll need to rework adaptors, interfaces and so on to suit the bespoke functionality of that supplier.

Technical standards make it easier to move suppliers, because components are more likely to be plug and play (compatible, through the use of standards). This is fine as long as you haven’t used some of the unique features that only exist in one supplier’s product. If you want to choose an alternative, you may not have many options.

Open source is another option, which is an approach where source code is developed in an open community and then shared. It can be at a lower cost, because the software is often free to use. However, to turn open‐source code into a deployable and operable solution isn’t easy, and you should consider using a supplier who fully understands the licenc- ing constraints and has experience of working with the open‐source community. Crucially, you need someone to go if things go wrong. If the system fails in the middle of the night, posting a request to an open‐source forum asking for help is unlikely to be the quickest way for a resolution. Open source requires a new model for ongoing support.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. Chapter 9: Planning For the Future 133 Getting the Right Help from the Right Places If you decide you do need help, you should do some thorough research before you go with the first partner who knocks on the door. Be clear about these few key questions before you go shopping:

✓✓What do you want to achieve? ✓✓How you want to work together? ✓✓What help do you need – initial consulting, design, build and integration, or full service operation? ✓✓What level of flexibility do you need from this supplier? ✓✓Do you want a single supplier to be accountable for a complete package of work, or do you want to engage multiple suppliers and retain the responsibility for integrating the solutions they come up with?

When you’re clear with the answers to these questions, you’re well placed to start talking to some potential partners to see who best fits the bill.

To help the discussion be specific, you can use a request for proposal (RFP), which is an open‐ended set of questions that can help you in the early stages of selection. If you’re clear on the scope of the work that you’re asking to be delivered, you can use a request for information (RFI) or request for quota- tion (RFQ) to gather formal responses on the specific areas where you need help.

Whatever your decision about partners, make sure you fully consider the range of commercial and technical aspects of the change programme. Ensure that all the risks and issues you identified when you started to plan will be addressed. Most importantly, be confident that the people you’re going to be working with are people you can trust to deliver what you need.

In This Chapter ▶▶Keeping current with changes in the industry ▶▶Planning for the future

n this chapter, we provide ten things you need to think Iabout to make your telecoms business successful. You may have already thought about some of these tips, but having them as a reference should help you avoid pitfalls that others have fallen into. Recognising That Value Chains Can Change Quickly Telecoms is a fast moving world. Keep an eye on how the businesses around you are changing. You may be able to acquire one of your competitors, or you may be ready to be acquired, which would give you access to a wider set of resources and help you grow faster. Few companies can afford to be in every part of the value chain, and those that think they are could be blind to the next change. For most businesses, focus on a few parts of the value chain and be excellent in each of them.

Businesses have driven operational costs down and increased efficiency, but in the future you need to look more widely across the ecosystem. Who has the buying power? How is that going to change over time? How can you use that information to make better investment decisions?

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 136 UK Telecoms For Dummies, CGI Special Edition Staying on the Right Side of the Regulator and the Law The regulator is acting on behalf of your customers, so by keeping on the right side of Ofcom and others who define the business rules, you’re more likely to be keeping your customers happy. Ensure that you’re aware of what is going on in Ofcom, and follow changes in the law so you understand how your business may be impacted. Use experts to help you stay in touch if necessary, particularly in specialist areas like cybersecurity and data protection. Keeping Up with the Changes in Technology If you’re a technologist, this tip is obvious, but if you’re more focused on the market or the business or are in front of customers a lot, you need to have a good idea about what is changing.

This industry is full of technology and complexity. If you get behind, you may well miss out on the next big thing and lose business to your competitors rapidly. For example, technologies like Cloud, 5G and the Internet of Things (IoT) are likely to drive significant changes in the near future. How will each of these affect your business? Refer to Chapter 8 for more discussion about them. Understanding Your Customers and What They Need from You This tip may seem obvious. You have a customer list and have customers segmented into maybe five or ten distinct buck- ets. That amount isn’t going to be enough in the future; deep analytics to drive insight to enable micro‐segmentation and customer profiling will be essential.

This approach ensures that you can offer each customer what looks like a personalised experience. To do that, you

need a lot of flexibility in your network and your systems. (Flip to Chapter 9 for what we have to say about flexibility.) Measuring the quality of experience and engagement levels is critical to provide closed‐loop feedback. Remembering the Power of the Network Metcalfe’s law introduces the idea that the more people you connect to, the more valuable the business is. Think about how you can work with your customers and partners to drive more value by connecting them to each other in new ways and creating new value chains. Bringing content and cloud services to this network is one way to drive volume and scale. Knowing What You’re Selling: Commodities or High Value? The business models for what you’re selling, whether it be commodities or value‐added propositions, are very different. Selling commodities is all about being cost‐efficient and meeting everyone’s needs with the minimum product set. If you’re delivering value‐added propositions, you want to stand out from the crowd and deliver something that customers will pay a premium for. Working Together – the Cloud and Network Drive Growth The access network is evolving to give ever more bandwidth, whether through upgrades to the DOCSIS cable standards, new technologies for copper networks, or the evolution to 5G. This additional bandwidth enables new cloud‐based services to grow, because people can take connectivity for granted. When you can rely on good connectivity wherever you are, you can discover how to rely more on cloud‐based services and store less data locally. This is a virtuous circle.

These materials are © 2017 John Wiley & Sons, Ltd. Any dissemination, distribution, or unauthorized use is strictly prohibited. 138 UK Telecoms For Dummies, CGI Special Edition Virtualising Everything is the Future, Even in the Network Network function virtualisation (NFV) is now proven technology, and it will grow in scope and scale to deliver the promises of a software‐defined network (SDN). The flexibility delivered by this approach will enable companies to be much more responsive to customer needs and changes in the business models. New ecosystems will emerge, just as the rise of apps for smartphones has expanded into a massive range of tools that Telcos or handset vendors alone wouldn’t have had the imagination to create. Having a Cunning Plan Just as Baldrick always had a cunning plan, you also need to have a plan. It may not involve turnips, but it should involve a realistic view of the marketplace and your company’s skills and positioning to exploit the emerging opportunities. The telecoms world is changing very fast, and nobody knows for sure what will happen next, but you can take some well‐informed bets and create a plan that helps you react to those changes.

If the plan doesn’t work out the way you expected, that’s not a problem. What’s important is that you’re looking beyond today’s business and into the future far enough that you can predict some of the possible changes and be in a strong position to react to them. Keep the plan updated as the market changes, and monitor your investments carefully. Being Open to Help Very few companies have all the skills in‐house to cope with the pace of change going on. A limited number of companies (consultancies or system integrators) have the right breadth of skills. You’re probably going to need a mix of external teams to help you think through the challenges that you’re facing and work with you to come up with the right solutions. These teams may include specialist technology suppliers to deliver know‐how or products. The teams may also include partners to develop, run and operate those solutions on an ongoing basis.

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