The overall impact of FMC on cellular operators depends on proximity to WiFi access, and thecalling patterns of cellular subscribers. In the US, cellular operators face a loss of $3.3 billion a year by 2007 due to FMC. UK cellular operators could lose $1.3 billion a year by 2007 due to FMC.

Sensitivity analysis shows that cellular operators in the US need to gain over 70 percent of the FMC market to balance the loss. The other way to balance the impact is to secure migration from fixed to FMC accounts. In the latter case, US cellular operators would need to own at least 78 percent of such FMC subscriptions.

FMC for cellular operators is somewhat analogous to the opportunities and threats VoIP presented to fixed line operators in the late nineties. Since the dynamics in the market are different now, it remains to be seen what strategy the cellular operators will adopt in order to turn FMC into a net gain scenario.

Fixed-Mobile Convergence is seen as one solution to many problems. It is a potential new market for fixed operators, mobile operators and other hybrid and virtual telephony operators. Over the years there have been many developments that have led to the present FMC services being commercially launched and trailed on a worldwide basis.

There have been very few commercial launches of FMC service. Service providers are mostly still in the stage of evaluation of FMC because the market is still unclear as to what convergence means to the consumer.

Europe has been more active in FMC than other regions. Europe and North America account for nearly 90 percent activity. However, as mentioned, Europe is much more aggressive in FMC, and the US is relatively behind.

Enterprise seems to be a lot more promising because that is where the cost reduction is most probably achievable. The opportunity for incremental revenue in enterprise FMC is probably higher than in consumer market. Consumer market is probably more of a cost reduction initiative than a revenue opportunity, especially for cellular service providers.

There are several flavors of FMC available. One of the ways to categorize them is by considering the types of networks that are brought together from the wireless and wireline sides. On the wireless side there is not much difference. We have GSM, CDMA, and perhaps UMTS. On the wireline side we would have the traditional PSTN or the IP. Furthermore, on the IP side if we look at the end point that gives user access to the broadband IP, you would be looking at WiFi, Bluetooth, Wimax and maybe also the Femtocell now.

Out of the IP access options, the one the industry seems to have standardized around is the WiFi. Therefore the current FMC market is mostly about WiF-Cellular convergence. If we narrow down the definition of FMC to WiFi-Cellular convergence, then there are about a dozen carriers that have put commercial FMC services on offer in the market. Five of the service providers have gone for the UMA option while the others have gone for the Pre-IMS solution based on SIP. It would be fair to mention that UMA based offerings are making more progress.

There are several factors which determine the option implemented by the operators for Fixed-Mobile convergence. These include the existing infrastructure, time factor, long term objectives, CAPEX, services mix, and the target market.

In terms of subscriber numbers, Fixed-Mobile Convergence is still in its infancy. Appreciable subscriber signups are not expected earlier than the second half of 2007. As of end 2006, very few commercial launches had taken place and mostly trials were going on. Around 200 to 300

FMC trials are currently going on and they are each in various stages of development.

Interviews with service providers reveal that they are anticipating between 1 to 5 percent penetration once the service is fully deployed. By the end of 2007 we forecast the total number of FMC users at around 6.5 million worldwide.

This is forecast to grow at a CAGR of 110 percent to 126.4 million subscribers by the year 2011. The present number of FMC subscribers worldwide is estimated at 436,000. Fixed-Mobile convergence has brought in vendors from various backgrounds. The result is a wide variety of FMC solutions available that suit service providers with different network assets. The market could therefore take long to stabilize. There are around 30 known vendors which offer core FMC solution at present. With that number of startups in the market and the legacy vendors showing interest, the market has become very competitive.

Although it would be too early to rank vendors in this space, however there are clear indications as to who is gaining traction in this early adopter phase. Alcatel leads in both the UMA and Pre-IMS/IMS VCC categories. Within UMA, Kineto Wireless follows Alcatel. In the Pre-IMS/IMS VCC category, Alcatel’s lead is followed by NewStep and Convergin at number two and three respectively.

 For the overall FMC deployments, Alcatel leads the market with Kineto Wireless and NewStep at number two and number three respectively. FMC solutions need to evolve beyond just pure voice. Service providers are demanding multimedia session continuity, support for diverse networks including PSTN, better handset availability, and better QoS mechanism among various other requirements.