CIOL:FMC to cost cellular operators dearly

FMC to cost cellular operators dearly

US operators to lose $3.3 billion, while UK cellular operators stand to lose $1.3 billion a year by 2011 due to Fixed Mobile Convergence

Wednesday, February 14, 2007

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BANGALORE: US cellular operators are headed toward a loss of $3.3 billion a year by 2011 due to Fixed Mobile Convergence (FMC), says a report published by iLocus, research from dedicated to VoIP industry .

FMC being trailed by over 250 service providers worldwide, has so far been handled with caution by the cellular operators who are not certain whether FMC will have a positive or a negative impact on them in the long run.

iLocus report “The Impact of FMC on World Telecommunications Markets” offers the first firm estimates of revenue losses/gain for cellular operators due to FMC.

Sensitivity analysis shows that cellular operators in the US need to gain a market share of 61% in FMC by the year 2011 in order to balance the impact of FMC on their revenue streams i.e. revenue loss offset in same magnitude by revenue gain due to FMC.
UK cellular operators will have to gain a market share of 63% by the year 2011 in order to balance the impact of FMC on their revenue streams, according to the report.

In a similar analysis for the UK, cellular operators there stand to lose $1.3 billion a year by 2011 due to FMC. The report analysis the impact of FMC in 12 countries.

Cellular operators gain revenue from FMC in several ways. They can potentially gain new subscribers, substitute fixed minutes, and stimulate a higher call volume. But they also lose a healthy margin on minutes that are transported over WiFi due a large price differential between a Voice-over-WiFi call and a cellular call.

The main source for revenue gain is the monthly FMC account fee. These are some of the sources of revenue gain and revenue loss for cellular operators. iLocus report lists a variety of sources through which revenue can be lost and gained.

The report then estimates the overall impact on the cellular operator revenues in 12 different countries. The overall impact of FMC on cellular operators depends, among a dozen different factors, on the FMC market share, WiFi access spot penetration, and the calling patterns of cellular subscribers in each country.

According to the report, 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.

The report puts the estimated number of FMC subscribers at 436,000 as of the end of 2006. Among the vendors, Alcatel is ranked as number 1 in UMA as well as VCC/Pre-IMS deployments. In the UMA category, Kineto Wireless follows Alcatel at number 2, with Ericsson at number 3. In the VCC/Pre-IMS category, Alcatel’s lead is followed by NewStep Networks at number 2 and Convergin at number 3.

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