Getting wired for multimedia

New, upcoming multimedia markets are setting a demanding service agenda that could make or break telcos.

For carriers, the future is bright; and the future is multimedia. That is the gospel that the industry is swearing by. The myriad trials of broadband access systems, gigabit switches and high-spec terminal equipment over the past two years seem to be teasing previews of the grand spectacle to come.

But what can markets realistically expect of the multimedia future? Given the build-up and technology trials, multimedia is a hugely attractive prospect for telecoms operators and it seems to provide a number of opportunities to create new revenue and markets.

Capitalising on opportunities is, however, another matter; in many ways the multimedia market will be an entirely novel hunting ground for many telcos. The infrastructure and service platforms that are being put in place will push telecoms operators ever closer to broadcast service operators and content providers. As a consequence, the multimedia content and telecoms service markets will themselves tend to become seamless and to succeed in such a marketplace operators will have to resort to greater and more careful segmentation than they have been used to.

For instance, a broadband multimedia service could feature end-user terminals that are personal computers (PCs), network computers or devices, including a telephone and a television, connected to set-top boxes. Each of these access devices leads to potentially huge markets, but each has several service aspects that are alien to telecoms operators. Faced with such a scenario, operators - and before them, carriers - have a cultural and service shift waiting for them.

CARRYING THE PACKET

Telecommunications International asked leading carriers and operators to define their service strategies and reveal how they would focus on the multimedia market. Needless to say, the specifics of the strategies vary greatly from operator to operator as does the perception of what multimedia is. Some commonalities that do emerge in the various definitions: a multimedia service that conveys several types of information into one pipe, and more significantly, it is information with which users can interact and manipulate. This definition brings together the three industries of entertainment (content providers), telecoms operators (providing a medium for delivery) and IT professionals (who facilitate the creation, manipulation and storage of content). According to the UK-based consulting firm, Analysys, the estimated value of these converged markets in Western Europe alone is more than US$ 800 million.*

In the telco world, providing a medium of delivery is more than just laying down infrastructure; it also involves describing the technology used to distribute the content. Jos Gerrese, director of Internet-based services at AT&T / Unisource said: "If we take multimedia services to be Internet/intranet IP services, then this is clearly an important focus for our market at the moment."

Until about one year ago, telcos were expected to lead the deployment of multimedia services using their conventional wireline networks. Multimedia, it was thought, was an opportunity for telcos to offset large investments in digital infrastructure. Furthermore, it was felt that technologies like ADSL (asynchronous digital subscriber line) would allow monopoly operators to prolong the life of their widespread copper access networks. But the explosion of the market for Internet services has offered a radically different and versatile platform for multimedia applications and altered the way multimedia services have been perceived.

As Gerrese said, the IP-based service market is one of growing interest for telcos. But the presence of telcos in the Internet arena presents a dilemma: on the one hand, it represents an opportunity to deliver multimedia services over their networks; but services such as voiceover-IP represent a perceived threat to their revenues. So far, Internet distribution has not required any major technical improvement to the existing PSTNs and therefore, telcos have not been able to demand new revenues. Technologies, such as ADSL, are meant to exploit this weakness and provide high-speed Internet access services, but telcos have been slow in testing and deploying such services - the first ADSL-based Internet services are slated to become available over the next six weeks. Meanwhile, Internet service providers and content owners, who appreciate the significance of the market better, are seizing the initiative. Therefore, in promoting the Internet, monopoly operators could, in fact, be hastening a radically different multimedia market model. "Voice over the Internet, for instance, is mostly all hype and expectation at the moment," Gerrese said, "but it will grow."

Concurrently, there is also a strong interest from large corporations - of which there are 370,000 in the northern hemisphere alone, and which have their own networks accounting for about 30 per cent or more of telco revenues - in multimedia services. "What we're seeing at the moment is a careful start to multimedia applications within large corporates," Gerrese said. Voice and data integration and collaborative working applications are expected to grow.

"From the carrier perspective, the primary challenge is the deployment of the network to assure access and global availability for both voice and data services," said Bill Comerford, director of product development at Global One. "As user demand for value-added multimedia services grows along with the maturity of the networks, these services will play an increasingly important role in the production portfolio and revenue streams. Unisource and Global One, which addresses the business, operator and consumer market place, are among the largest carriers of Internet traffic in the world.

THE PLAYING FIELD

The market focus, even within the Internet, varies from carrier to carrier and is defined in the first instance by the carrier's own strengths and weaknesses and secondly by the process of market segmentation. Selling multimedia successfully demands a clear understanding of what benefits it offers to users, and this in turn requires careful segmentation of both consumers and applications. Users in the business and consumer markets, for instance, display unequal willingness to adopt new services. Whereas business users are able to evaluate a service on the basis of its affects on productivity, benefits of multimedia services to residential customers are mostly intangible and include lifestyle improvements. Early growth, therefore, will be confined to the large corporate sector, suggesting that content of services will have, or need to have a higher role than telcos have planned for Telcos have traditionally earned their profits by providing connectivity. The anticipated nature of the new multimedia structure means that just carrying traffic from users to service and content providers and back again will only be a part of a possible telco function. Maximising revenues will require some way of tapping the value of content -- either by participation in the creation itself or by adding value. But perceptions in the operator world vary, "Generally, the challenge to accommodate the demand for multimedia services internationally has more to do with guaranteeing the network, quality of service parameters and capabilities, security and reliability (particularly of Internet-based multimedia services), than with carriers creating multimedia products that might find commercial audience," said Global One's Comerford.

So what are carriers and operators doing to ensure network resilience? Hardware platforms will be the main expenditure in the early stages of the multimedia revolution, accounting for in excess of 70 per cent of the expected revenue. Two problems could dog international telcos in this initial phase:

congestion resulting from booming traffic and the consequent problems in switching, routing and transmitting an unpredictable mixture of voice, data, audio and video in real time;

unacceptable time-lag as a result of carrying timecritical voice, video and other data across several network architectures, not all of which have the same levels of QoS and resilience.

New, ATM-equipped networks may be the answer. "As far as the core backbone is concerned, we are focused on ATM as the way forward. If you are going to have a decent mix of traffic involving different protocol types, ATM does pay off," said Gerrese. "Our partner company, Unisource Carrier Services, has a divergent mix of traffic passing across the backbone - the biggest in Europe at the moment - and they find that ATM is the viable technology."

Part of AT&T-Unisource's IP services will run over an ATM platform. But the service scenario is a little complicated when it comes to delivering IP services. The goal is to be able to deliver premium access services at a time when there is a consensus that public Internet services will remain unable to support high-bandwidth applications and acceptable QoS levels. "We are very interested in evaluating the various IP switching technologies, such as Ipsilon's IP Switching and Cisco's tag switching solutions, as these may well give us a better way of delivering our IPbased services," Gerrese said. The reality is that IP traffic has become much more important than the industry thought originally. "If we all started from scratch we may well look at a different sort of solution not involving ATM - perhaps some sort of IP over SDH," Gerrese conjectured.

Global One is also currently deploying ATM in its backbone architecture. "The purpose of this is two-fold," said Comerford. "Firstly, to take advantage of ATM technology to carry data and voice traffic internationally in a more efficient and cost-effective manner and secondly, to provide the basis for our next generation of ATM services which will be made available commercially in 1998. This infrastructure will be used to support a wide variety of international multimedia services and ultimately this will be the core network for all Global One services.

THE ACCESS CONUNDRUM

There is, however, considerable debate on how multimedia will be accessed and which standards or technology will dominate (Figure 1). The most pressing task for telcos is to upgrade their local access networks to make it suitable for a wide range of services in order to maximise connectivity. The Internet offers a good service paradigm: one of the main reasons behind its success is the way in which available technology and networks have been used to maximise its reach. Choice of such open service platforms will help telcos; in contrast, broadcast operators, even though they are collectively moving towards digital formats, still seem to prefer proprietary methods of access. The number of options and the lack of de facto standards for many components of the infrastructure mean that, increasingly, some operators are facing a choice of committing themselves to a particular solution, or spreading their investment across several solutions in the expectation that one of them will prove successful.

Until recently, the choice of an operator would have been strongly weighted by its current infrastructure, as in the case of ADSL, which is tending to become the default choice of those that have extensive copper-based access networks. In the residential and SOHO markets today, it is likely that the `default choice' would be one among a mix of access technologies that would be available. For instance, cable operators are expected to provide both cable modem and ISDN access. In the business services market, access services and technologies are likely to be tailored to the user.

"If you look at multinationals, it depends on the sort of traffic they have, in which case the access solution could be either leased lines, frame relay or ISDN," said Gerrese. "We do not have a standard approach." Access via satellite is an area that seems to be changing quite fast. Six months ago, nobody would mention satellites for Internet access - now they do.

Hughes-Olivetti Telecom (HOT), launched in 1994 as a joint venture between Hughes Network Systems Inc. and Olivetti Telemedia, is already providing Internet access providing about 4000 European customers with download datarates of 400 kbps or more via satellite. The company is predicting rapid growth and expects to double its size in 1997. HOT's turnover was more than US$ 24 million and has seen an increase in its orders on hand with a range of contracts from the automotive and government sectors. The VSAT market, long a popular option among corporates that handle large volumes of data daily, is also one sector that HOT is active in. It is now the largest player in the interactive VSAT market in Europe, having achieved a 35 per cent market share.

In the residential market, most major operators launched ambitious ADSL trials hoping to extend the life of their copper for many more years. But a number of issues, such as the adaptability of existing copper to high datarates, which have caused telcos to treat ADSL with some caution are at last being addressed. Internet access has also breathed new life into ISDN, a 10-year-old technology. The standardisation of ISDN-PRI now provides 30 multiplexed channels resulting in a 2 Mbps bandwidth, making it a promising access technology for the future as well. This has already made ISDN the preferred technology in the audio, data and videoconferencing markets. The widespread standardisation of ISDN - unlike in the case of either ADSL or cable modems - is expected to ensure that ISDN will be an active technology for several years to come carrying a variety of multimedia services.

While residential markets are a must-have for most operators, carriers are likely to concentrate on serving the corporate sector. Global One recently conducted an international multimedia service trial which has been developed and integrated by Sprint and other Global One partners into a value-added multimedia service for the entertainment sector and for pre- and post-production of content. This allows real-time collaboration on editing and design of films, commercial advertisements, print media and so on. "This utilisation of multimedia services, combined with domestic and international transport, is a model for how corporate communities can use electronic collaboration and multimedia to `work with the sun' and produce goods and services around the world," predicted Comerford of Global One.

"The main chunk of our revenues at present are in the ISP market," said Gerrese. "For the future, intranet services will be where the action is, both for our 'upstream' service provider customers and our corporate users." There is now a large-scale move from the so-called 'legacy' services -- which currently make up about 90 per cent of current revenues of carriers such as AT&T-Unisource to IP and Web-based technologies, and the service demand will reflect that shift. Service integration and a host of new multimedia applications will stem from this shift.

As the whole world moves into the IP arena, competition among small ISPs, who merely provide dial-up access and have little or no control over content, will be fierce. The larger ISPs of the world who host a significant amount of Internet content are expected to have the upper hand. "If you are big you're beautiful and we are the biggest Internet access provider in Europe at the moment and that makes us attractive to partners in the US," Gerrese claimed. "From their point of view we can provide the best peering arrangement because a high proportion of the content their end-users will be accessing will be on servers attached to our customers networks." In comparison, operators who are merely passing most traffic off to other networks and do not store or control content, will be at a disadvantage. The biggest challenge for the industry as a whole will be to match the network capability with the current growth of the Internet and its content. In the converged multimedia marketplace, success will depend on two factors: owning content and owning customers.