S T R AT E G I C W H I T E PA P E R

The Fixed Operator: Moving from Connectivity Provider to Value-added Service Provider

In todays market, the best way forward for incumbent xed line telcos is to move beyond the traditional role of connectivity provider. For the enterprise market, this means moving into managed services; for the consumer market its about offering triple play services. To be successful, telcos must make their networks application-enabled and adopt go-to-market plans that include partners with complementary products, services and channels.

Table of Contents

Traditional Fixed-line Business: Healthy Returns but Limited Growth Potential . . . . . . . . . . . . . . . . . . . . . . . . 1

Fixed-line End-game: Commoditized Utility or Re-invented Business Model? . . . . . . . . . . . . . . . . . . . . . . . 2

Re-inventing the Enterprise Business Model: The Trusted ICT Partner Maximizing Your Network ...................................3 ....................................3

Adding IT Services to the Menu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Bundling to Meet Market Needs ................................4

Whats in a Name? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Shifting Gear in the Residential Broadband Market . . . . . . . . . . . . . 6 Addressing the TV Nation ...................................6

With New Kinds of Attractive Service Bundles . . . . . . . . . . . . . . . . . . . . . . 6 With Content, How Far is Far Enough? Addressing the Opportunity ...........................7

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How Alcatel Can Help

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Real World End-to-end Perspective Solid, Open Platforms

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Value Chain Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 An Integrated Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Conclusion

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The Fixed Operator: Moving from Connectivity Provider to Value-added Service Provider

Traditional Fixed-line Business: Healthy Returns but Limited Growth Potential

Over the last few years, the telecom sector has undergone a major turn-around: non-protable service providers have vanished, while the surviving service providers have focused on successfully executing aggressive operating expenditures (OPEX), capital expenditures (CAPEX) and debt reduction programs to restore their protability. As a result, incumbent service providers can once again present healthy nancial fundamentals, with available cash ow growing on average by 50 percent in 2003 (Source: IDC, 2003). At the same time, the xed-line activities of these service providers remain vulnerable. Despite a wide array of newly launched services, their business success is mainly based on three revenue sources: line rental fees, voice minutes and leased lines. These three services represent more than 80 percent of the traditional xed-line telecom market in France (see Figure 2 on page 2). Unfortunately, these traditional services offer virtually no revenue growth opportunity beyond gross domestic product (GDP) growth. Moreover, they are under major competitive, regulatory and technological pressure (e.g., voice over Internet protocol (VoIP) cannibalization both in enterprise and consumer markets, mobile substitution of xed voice minutes, IP-virtual private networks (VPNs) driving down leased line rental fees, local loop unbundling, carrier pre-select, and so on). As an illustration, Forrester expects that about 45 percent of the xed voice market in Western Europe will be migrated to VoIP by 2010. And, according to a Yankee Group inquiry, about 20 percent of small- and medium-sized enterprises (SMEs) saw a notable reduction in their 2003 xed line bills owing to increased mobile phone usage.

Figure 1 - Available Cash Flow Growth

Q2 2002

Q2 2003

4 76% U.S. Carriers ($ Billions) 17% 3

62% 71%

26%

0 Verizon SBC BellSouth ATT Sprint

Q1 2002

Q1 2003

Europe Carriers ( Billions)

63% 50%

567%

200% 103%

0 France Telecom Telecom Italia Deutsch Telekom BT Tella-Sonera

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The Fixed Operator: Moving from Connectivity Provider to Value-added Service Provider

Obviously, service providers are applying a wide range of strategies and tactics to protect their existing revenue sources: launching commercial bundles with innovative services, adopting new pricing models to shift value from trafc to access, continuing OPEX reductions, and more. Yet the fundamental observation remains the same: massive free cash ows will pile up for a couple of years, but the overall traditional business is declining. As a result, xed-line service providers are confronted with the fundamental strategic question: what business are we in?

Fixed-line End-game: Commoditized Utility or Re-invented Business Model?

One option for xed-line service providers is to retrench to their existing business, and become a commoditized utility provider. Depending on the presence of competitive infrastructure in their home country, they could be faced with one of two scenarios: > A utility provider in a market with limited competitive infrastructure will see attractive returns, but limited growth, creating shareholder value through dividends. These utility providers are constantly exposed to risks from new entrants that build their own infrastructure, and from the regulator. > A utility provider in a market with competitive infrastructure experiences continuous competitive pressure, driving tariffs down to variable cost levels, resulting in shareholder value destruction. A second option for xed-line service providers is to leverage the few remaining years of attractive free cash ow to develop an entirely new business model that will more effectively deal with the reality of the market. As a rst move toward that new business model, a service provider can offer services that enable applications, such as billing and subscription management. They can then move further up the value chain and closer to the ideal business mode by, for example, offering applications and even content. As well see, there is no one-size-ts-all answer once we go beyond the application enabling layer: the optimal business model will differ by type of segment addressed (e.g., enterprise versus consumer) and by type of service (e.g., entertainment versus information). Moreover, the nature of the business model may vary over time. An ideal solution is one that supports service providers in selecting and adjusting the optimal business model, without exponentially increasing investments or operational costs.

Figure 2 - Fixed-line Services in France

CAGR (2003 2008) 20 19% -3%

4% 15 Broadband Internet Euros (Billions)

10

Dial-up Internet -3% Leased lines and other data

5 2%

Voice (including special numbers) Subscriptions/ Line rental

0 1998 2000 2002 2004e 2006e 2008e Figure 3 - Moving the Business Model up the Value Chain

Source: ART, Oddo securities

Connectivity

Application Enabling

Applications

Content (Aggregation)

Current Business Model Future Business Model

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The Fixed Operator: Moving from Connectivity Provider to Value-added Service Provider

Historically, xed-line service providers are accustomed to operating a growth-oriented business, and this is reected in their organization, process, culture, and company valuation. Therefore, it is likely that most service providers will try to re-invent themselves. However, the main challenge is the successful execution of this transformation.

Re-inventing the Enterprise Business Model: The Trusted ICT Partner

A large U.S. long-distance operator typically derives approximately two-thirds of its revenues from enterprise business, and a U.S. regional Bell operating company (RBOC) about 40 percent. These numbers make it obvious that an operator has to protect and grow its enterprise business. Today, the services offered are principally connectivity services with minimal added value content. However, the communications needs of the enterprises are getting more diverse and more sophisticated: > Communications applications are becoming more and more intertwined with business applications (e.g., locationbased services and eld force automation, contact centers and customer relations management, IP-VPN and teleworking, etc.). > The enterprise network (intranet) often includes many sites, home workers, partners (extranet) and customers (Internet), leading to the borderless enterprise. > The need for data and interactive video communication over this borderless world is increasing (e.g., videoconference, e-learning, video on demand, etc.). To solve and manage their complex communications needs, enterprises are looking at outsourcing and the telcos are in the enviable position of being able to help. However, the telcos rst need to remedy a number of issues in order to be successful in the new enterprise market: > Their network is an asset but it has to be adapted/upgraded. > They need to acquire new competencies in the information technology (IT) eld. > They have to reformulate their go-to-market plan, making use of partners and carefully bundling services by market segment as they enter a very competitive market. > They must establish a brand name in the new managed services market.

Maximizing Your Network The telcos are preparing for the new world by migrating their infrastructure to IP-based networks, adding data center capabilities connected to their network and providing ubiquitous broadband access for their customers. If they are to fully succeed in their preparations, the need for and potential benet from a converged IT and Communication service foundation needs to be emphasized and understood. Convergence of the three information and communications technology (ICT) environments communications, business applications and operations support systems (OSS)/business support systems (BSS) towards one framework leads to improved scalability, interoperability and exibility. It also allows the development of pre-integrated end-to-end solutions.

Figure 4 - The ICT Framework

Communications Applications

Common ICT Platforms and Tools

Business and Content Applications

OSS/BSS

ICT Framework - An ICT framework is a grouping of pre-integrated platforms and servers that apply a common mechanism to optimize management, share the user prole database, implement an interworking mechanism between communication and business applications and offer a reusable common set of functions and tools. The ICT framework makes the network platform applicationenabled.

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Adding IT Services to the Menu Business needs and trends such as globalization, real-time enterprise and cost reduction drive IT trends (grid computing, web services, CRM, SCM, etc.). To fulll its purpose, the network and associated services must then support those business needs through, for example, broadband, network intelligence, convergence and so on. Telcos need to approach this path leading with their strength, and that means rst tackling the huge network-centric services market. The world market for hosted VoIP services IP-Centrex or hosted IP-PBX, IP contact centers for multi-channel interaction, IP multimedia conferencing, and IP unied communications for a seamless user experience is forecast to reach between $21.7 B (moderate) and $36.5 B (aggressive) in 2008, according to a recent ABI study (Advanced IP Voice services, Q1, 2003, ABI). The study shows signicant uptake of VoIP services, starting in 2004/5. This is conrmed by our experience with the introduction of VoIP services based on the Alcatel ICT solution by Telenor, the Norwegian incumbent. Since Telenor started from a legacy time division multiplexing (TDM) situation they have chosen to move into the new IP-based services market in a gradual way. They rst launched IP Voice VPN and networkbased call center capabilities in Q1 2004, moving next to offer automatic attendant, hosted IP PBX and interactive voice response (IVR) services, and then moving to presence management, video, and full outsourcing. If conditions are right telco capabilities, the local market conditions, partnering opportunities, and so on telcos can then, on top of the network-centric services, offer IT-oriented services such as web hosting and information security. Each telco will have to decide what applications they want to host and manage and specically decide whether they want to move above the classical communication applications into the IT domain. The border between IT and communication services is blurring and the telcos risk competition with formidable IT services companies who offer both IT and business process outsourcing. Each telco must determine how far they will go into the IT domain, and whether to compete or partner with IT-centric companies.

Figure 5 - The Capabilities Value Chain

Professional Services Hosting Services Apps Integration IT Consulting Web Design

Te Com lco . Co Ap mp ps ete and nc e

Vertical Apps Financial SCM

Managed Services Performance Monitoring

Security
ac e

Sp

New Integration

ERP e-com
ac e

Utility Computing IT Help Desk Back-up

Sp

Solution Design

SI

CC CoCo

AS

IP-VPN
M

Centrex Carrier Space

Whatever the decision, telcos will need to acquire IT competence technical and sales and marketing skills and invest in an application-enabled network that supports the business applications the IT world will offer. Bundling to Meet Market Needs No solution ts all market segments. Telcos need to offer segment-oriented bundles value packages focused on one particular segment and built based on the business needs analysis of that segment that contain communication services, business applications and support services. To bring the total solution for a segment to market will probably require the telco to partner with other companies. In general telcos will have to look for partners and a specic go-tomarket for each separate market segment, taking into account the services that enterprises in that segment value the most. An innovative example of how the go-to-market model and partnering is tailored to a particular segment is the Ready Ofce bundle from Alcatel and HP, which France Telecom is using with great success to engage the SME market.

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SP

Sp

Colo

ac

Telcom Advice

CPE Monitor Security

e

Webhost

Bu an sine d s IT s ap Co pli mp ca ete tion nc s e

The Fixed Operator: Moving from Connectivity Provider to Value-added Service Provider

That the structure of the package illustrated in Figure 6 meets telco needs is supported by the ndings of Forrester Research. In their April 2003 TechStrategy Report, they dene the basic areas a telco should focus on: managed IP VPN, IT security, data storage, web hosting and managed e-mail. This would lead to a European market of about $23 B in 2008, of which half is taken by SMEs. Whats in a Name? Brand recognition is extremely important. The incumbent has a long-established, strong customer proximity advantage and should make sure that its name gets associated with the advanced enterprise services. A recent survey by Yankee shows that enterprises look to telcos rst to outsource network

operations but not for network services (second place behind other service providers) or application outsourcing (third behind other service providers and IT hardware/software vendors) (see Figure 7). Building the right marketing skills (perhaps by learning from marketing in the IT world) and committing to quality (tailoring the right service level agreements [SLAs]) are but two areas on which to focus. Telcos should also make sure that promotion of their brand is included in the go-to-market agreements with partners and may even conclude that the repositioning of the telco justies a signicant re-launch of its brand into the changing enterprise market.

Figure 7 - Preferred Suppliers of Outsourced Network Services

Figure 6 - The Ready Ofce Bundle from Alcatel and HP Drivers Strategy/ Differentiation Productivity/ Process Cost/ Convenience None LARGE Systems Integrator

Applications Services Network Services Network Operations

MEDIUM SMALL Dealers On-line VARs Local SIs SPs SIs Channels

IT Hardware/ Software Vendor

HP Servers and PCs IT support Single contact for support Hosted IT applications

Alcatel IP and TDM PBX Messaging, contact and presence applications Network service platform: routing, rating, charging

Telco Local and long distance Broadband access Web, e-mail hosting

Equipment Vendor

Other Service Provider

Telco

Common End-user and Channel Marketing Channels Provisioning of systems and software Configuration and maintenance Customer training, onsite support Business and vertical applications 0 5 10 15 20 25 30 35 40 Percent of Respondents
Source: The Yankee Group 2003 European Global Network Strategies Survey

Small and Medium Enterprises Proven IT and communication solutions Premise and hosted services

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Shifting Gear in the Residential Broadband Market

There is a consensus in the industry worldwide that broadband will be the access of choice for the residential market, no matter what kind of technology is selected. However, the broadband version of Moores law will increasingly jeopardize the profitability of high speed Internet access: while average revenue per user (ARPU) stays either at (worldwide benchmark is around 30 Euros) or even decreases (because of cable competition, for example), service providers are compelled to double the download capacity of their networks every 24 to 36 months. Two major moves can help telcos increase the residential ARPU: > Address more than the PC in households > Offer new attractive service bundles to consumers Addressing the TV Nation TV sets are the most distributed consumer terminal in the world. Addressing the TV population is an important step to a massive increase of broadband reach. In the U.S., 98 percent of the households have at least 1 TV set, 32 percent have 2 TV sets and 41 percent have 3 or more TV sets (Source: Nielsen Media Research, 2000). However, TV services are already delivered to residential consumers via incumbent video networks (cable, satellite, terrestrial), who are aware of consumer needs and potential competition from other technologies and are offering more and better programs to end users. Given this situation, a me too offer will not be sufcient to attract the mass consumer and, as a result, the real challenge for telcos will be to offer more attractive services and service bundles. With New Kinds of Attractive Service Bundles High speed Internet access ARPU will not increase and will, in fact, decrease over time because pure connectivity in itself is not appealing enough for the largest part of the consumer population. However, they will pay for valuable content and easy to use attractive applications, while faster and faster access becomes the norm.

Communication applications are everything beyond simple voice telephony services. This includes video communication (one-to-one or one-to-many), an emerging segment that is enjoying a strong market push through the availability of affordable cameras in both the PC and the mobile sector, thus lowering the entry barriers for consumers to enrich their communication needs using visual effects. Other communication services include chatting, xed line simple message service (SMS) or peer-to-peer, representing an unexplored potential market for innovative xed/mobile and PC/TV convergent applications. In addition, the TV set seems to emerge as the ideal terminal for family-oriented communication services such as the sharing of private photos or videos, allowing the less techno-savvy part of the population to join the broadband club. Rather than limiting itself to the rather small part of household spending related to communication (telco services in the U.S. account for about 6 percent of the household wallet and this percentage stays stable, according to Stratecast Partners), service providers could try to address the other parts of the wallet as well. The most obvious target is the lucrative content area, which can be addressed either through entertainment services or information services (see Figure 8).
Figure 8 - The Household Wallet

160 140 120 $ Per Month 100 80 60 40 20 0 2004 2005 Consumer Internet Consumer Magazines Consumer Books Newspapers Video Games Recorded Music Home Video Box Office VOD and PPV Premium Cable and Satellite Basic Cable and Satellite

Source: Content Portion of HH Wallet (U.S., Gartner)

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The Fixed Operator: Moving from Connectivity Provider to Value-added Service Provider

Is content king? The changing entertainment landscape

TV-based information services will democratize information access to an extent not imaginable today. There is a vast array of rich media information services, spanning from education, health, e-administration over local news up to targeted telemarketing services. The world of entertainment is on the verge of a new and exciting era, leaving some of its seemingly deathless and well-established business principles behind. Services like video on demand (VoD), personal video recorders (PVR), and time-shifted TV services that allow consumers to decide not only when they watch a show but even at what pace they do it are about to turn the TV world upside down, changing the traditional, advertising-driven TV industry into a more targeted one, driven by the need to attract consumer attention with appealing values. In addition gaming, karaoke, music and other entertainment services will allow new markets and revenue sources to be explored by service providers. Specically, pay TV will play a signicant role in rolling out telco TV services. Although traditional delivery mechanisms such as satellite and cable are well positioned to deliver basic broadcast services, telco networks have a couple of trump cards to play: > Copper networks, which reach virtually every household, cover satellite network white spots (a good example being Paris, where satellite penetration is below 5 percent). > Satellite and cable networks suffer from signicant fraud rates. This is mainly owing to the fact that, from a technical point of view, the consumer is rather anonymous to these network providers. A huge amount of hacked access cards leads to a situation where the actual customer growth of satellite pay TV is driven by fraudulent consumers. The initial successes of broadband (DSL) operators like FastWeb (Italy), who offer 3,500 movie titles and a large amount of mass and niche TV channels, show that actual ARPU can be signicantly increased by entertainment services. FastWeb has publicly stated that their ARPU growth in video services climbed from 78 Euros/year in September 2002 to 272 Euros in September 2003. They have reached this goal by offering a mix of pay channels (149 Euros) and VoD (123 Euros).

With Content, How Far is Far Enough? How far do telcos move up the value chain in the residential market or how far do they push vertical integration when looking at content services? The discussion can easily be based on the value chain shown in Figure 9 (which consolidates the enterprise and consumer case).
Figure 9 - Residential Market Value Chain

Enterprise

Consumer Aggregator CSP

7 >

Content Acquisition

ASP

Value Chain

Business Applications

Communication Applications

Content Applications

Application Enabling Foundation ICT Platform Network Connectivity/ Data Center/Head Ends/CPE

NSP Professional

Hosting Services

Managed

First, telcos will have to prepare their network gear for the delivery of appealing services. This touches on quality of service (showing a real time football match requires QoS similar to that of a lifeline emergency phone line), dynamic allocation of network resources (avoiding network over-design for broadband video services) and downstream bandwidth. Another mandatory requirement is the deployment of application software platforms that allow content service providers (the telco or third parties) to deliver appealing applications to consumers. Such platforms require stability, scalability and openness. That last one, openness, is especially crucial since it will support the ability of developers to create and deploy appealing services. The application platforms will also have to interconnect with any aspects of the OSS/BSS systems with a strong focus on micro-payments.

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Optionally, telcos could offer information and content services themselves, meaning that they move to become content retailers. Using VoD as an example, a telco could be the online counterpart of Blockbuster Video, using its strong consumer brand to resell major studio content. To go even a step further, telcos could consider entering the content aggregation domain. In this case, the supply of rich media content from the production (studio) up to the consumers living room would be vertically integrated allowing telcos to kick-start the market and to maximize their margins. For example, Telecom Italia Media is aggregating content for TI Fixed (ALICE) and TI Mobile (TIM). The latter two options (content supply and content aggregation) will likely require intensive partnering combined with the readiness to work with skilled system integrators, while the first and second (network preparation and application software) are considered to be mandatory and will require the telcos to scale up skills and resources themselves. Addressing the Opportunity The answer may sound over-simplied: simply learn from existing success models and translate them into the xed broadband world. The two most prominent and successful business models that demonstrate telcos successfully selling content online are Frances Minitel and Japans I-mode. Both are so called gated gardens, constituting the optimal middle ground between an entirely open Internet model (public garden) and a totally closed model (walled garden). Translated to xed broadband, telcos would actually build and operate open application platforms on which content providers can run their own applications. This helps to overcome four traditional major inhibitors: > The need to handle the complexity of micro-payment schemes > Each players interest in positioning his consumer brand at the clients premises > A need to offer an easy to use and understandable technology for all society segments, including the less technology-savvy segments > The need to integrate a number of different technologies

In terms of payment methodologies, telcos have the most appropriate and relevant experience. In addition, their actual billing systems are already in place, meaning that the level of investment is by far lower than in the case of a new entrant. The phone bill seems to emerge as the most efcient tool for billing information, communication and entertainment services to consumers. This gives the consumer full visibility and control of his spending, while guaranteeing reliable monetary transactions between the telco and the content provider. Alcatels recommendation to telcos is to clearly position their billing skills and capacity as a key asset when negotiating with content owners. The open platform concept helps both content and telco players to position and market their consumer brands without giving up their proper identity. It is in everyones interest to be present at the consumers home with his own brand. Brand in the TV context is expressed through the interactive user interface on the television screen. Unlike the PC world, where the user interface is very much controlled and customized by the consumer (by choosing a certain operating system, a certain Internet portal and by using the exibility of a PC), the TV world requires a more stringent intervention of the service and content provider. Therefore, telcos should be ready to offer content players (especially the pay TV ones) the ability to customize their applications to meet their own marketing requirements. Ease of use is a key requirement when thinking about residential TV services. As the navigation on a TV screen is mainly done by infrared remote controls (with few buttons), the customization will have to be more in the hands of the platform provider (in this case the telco). This results in our recommendation to telcos to deploy software platforms that allow a exible adaptation of user interfaces, respecting the cultural and demographic specics of their customers. Lastly, telcos have to be aware that there are a couple of things they will most certainly not be able to do when it comes to rolling out entertainment platforms. First of all, there are a number of new technologies, especially in the video space, that traditionally have been outside of a telcos areas of expertise. Similar capability gaps will be discovered when it comes time to negotiate initial agreements with the content-supplying industry. As both topics are quite complex

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The Fixed Operator: Moving from Connectivity Provider to Value-added Service Provider

and require skills and experience, in addition to a lot of manpower, it is recommended to a telco service provider to outsource part of the integration, initial eld deployment and operations to system integrators. In terms of content acquisition, there is an emerging market of specialists who can help telcos to get attractive content, which is an essential brick for building a successful broadband service package. In this context, it is a major advantage to work with integrators who have pre-integrated technologies already, in order to shorten time to market and to reduce deployment risks.

How Alcatel Can Help

Real World End-to-end Perspective Few suppliers address the market from a broad end-to-end perspective as Alcatel does. Alcatels solutions offer the openness to future service and application demands that is essential for the survival of the telco. In the connectivity layer Alcatels end-to-end solutions offer openness to various access technologies, gateways, protocols etc., and add the QoS mechanisms that are crucial to transform best effort (free of charge) services into billable services. Alcatel is not only the worldwide leader in DSL access but also in optical networks. Together the Alcatel 7670 Routing Switch Platform (RSP), the Alcatel 7750 Service Router (SR), the Alcatel 7450 Ethernet Service Switch (ESS) and the Alcatel 5620 Network Manager (NM) have positioned Alcatel in the forefront for service-enabled MPLS networks. The Alcatel 5430 Session Resource Broker (SRB) adds dynamic bandwidth control and the Alcatel 5450 Access Border Gate (ABG) enables service providers to deploy secure voice communications services on next generation IP networks. Alcatel helps telcos take the rst and the most natural step to prepare their network gear in terms of bandwidth capacity, QoS, service exibility, content protection capabilities and dynamic allocation of network resources.

re-used many times for different applications, and interfaces to all types of networks and OSS systems. The strength of the 8690 OSP services is particularly illustrated by the prepaid, postpaid and converged payment packages for which Alcatel has a market-leading position. On top of these capabilities, Alcatel has developed modular packages covering managed communication services for the enterprise market such as Hosted IP-PBX, unied communication or multimedia conferencing. The web integration server links the 8690 OSP with J2EE application servers. Business/consumer applications that run on a J2EE application server can therefore make use of the basic capabilities of the 8690 OSP via Enterprise Java Beans (EJBs). This allows for an efcient integration of communication applications and business applications.

Connectivity

Applications enabling

Applications

Content (Aggregation)

Value Chain Experience To support the entertainment and content part of the triple play for incumbents, Alcatel has invested signicantly into all levels of the value chain. For the second and third layer of the chain (application enabling and applications), Alcatel has expended signicant effort and has acquired some of the most advanced sets of skills from the IP video market (acquiring iMagicTV and the assets of Thirdspace). The combination of both has allowed Alcatel to create the most open and scalable application software platform, while also learning from the most advanced early adopters such as Japans Yahoo BB, Cypruss CYTA, Monaco Telecom and Canadas SaskTel. Alcatel has initiated an intensive dialogue between major players in the content and the telco industries in order to ease business relations and to facilitate the availability of attractive top-class content to consumers over telco platforms. So far, results of this effort include several direct deals between telcos and content providers (e.g., Hollywood studios), as well as the creation of the European branch of the Broadband Content Delivery Forum (www.bcdf.org), which targets the establishment of open and viable standards and business models for the industry. Alcatel has chaired the BCDF since autumn 2003.

Connectivity

Applications enabling

Applications

Content (Aggregation)

Solid, Open Platforms In the application-enabling layer, Alcatels real time communication application platform, the Alcatel 8690 Open Services Platform (OSP), offers bundles of basic capabilities such as rating, statistics etc. that are developed once and can then be

Connectivity

Applications enabling

Applications

Content (Aggregation)

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The Fixed Operator: Moving from Connectivity Provider to Value-added Service Provider

An Integrated Approach In addition, Alcatel is on the way to becoming a leading communication systems integrator, covering every technical and business-related aspect from end to end. In order to reduce deployment risks and to shorten time to market, Alcatel has established a vast ecosystem of industrial leaders, spanning over the whole chain (head ends, servers, set tops, digital rights management (DRM) and conditional access technology, etc.) from around the world. Our partners share the same commitment to supply powerful application-enabling platforms to the telco market, allowing telcos to quickly implement the business models described above.

Conclusion
Alcatels solutions offer the incumbent operators the means to enable their network to run the value-added services that will lead them to revenue-generating growth. For the enterprise market emphasis is on managed communications services, while for the residential broadband market this means mainly triple play consumer services. The Alcatel solutions will further support the telco evolution into new business models by offering integration and professional services, which reduce the risk and shorten the time to market for these protable new services.

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Alcatel and the Alcatel logo are registered trademarks of Alcatel. All other trademarks are the property of their respective owners. Alcatel assumes no responsibility for the accuracy of the information presented, which is subject to change without notice. 04 2004 Alcatel. All rights reserved. 3CL 00469 0568 TQZZA Ed.01 17871