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MINDSPEED: MARKET ANALYSIS

2008-09-01
By Diya Soubra Executive Director of Marketing MINDSPEED TECHNOLOGIES Inc.

A RESIDENTIAL HOME GATEWAY SHOULD GENERATE MORE REVENUE THAN A MOBILE PHONE, WHY ARE THE OPERATORS FAILING TO GET THAT REVENUE?

For many years now, mobile telephone operators have given away very expensive mobile telephones to users world wide for the token price of $1 along with a one or two year subscription plan. This model has worked very well so far. The fixed monthly subscription fees are nearly always exceeded due to users downloading ringtones, exceeding call quota, doing SMS, and MMS messaging, downloading music, etc. The operators keep adding services to increase the revenue stream. More usage of services leads to more revenue.

In most cases, that same mobile telephone operator has a broadband unit that is struggling to keep up with the falling prices for Internet Broadband subscriptions. VoIP was introduced as a pay service at first then had to be rolled in as part of the offer. IPTV was introduced as a pay service then had to be also included in the broadband offer. These days, most Internet Broadband subscription offers are sold as a Triple play service bundle at the same price that internet access was offered a few years ago. The user has a high speed connection with unlimited talk time with VoIP for free or very low rates, unlimited IPTV watching and unlimited internet traffic.

The residential home gateway ends up being a cost center for the operator as opposed to generating increasing monthly revenue like the mobile phone does. To make matters worse, the triple play services drastically increase the support cost since the operator has to support issues on the home LAN but has no access or control of that home LAN.

There are a few reasons why the residential gateway has failed so far to generate increasing revenue including its historical evolution from DSL modems, the spread of the ODM model, and the lack of innovation.

A wake up call is required in the home gateway market. Change always seems to be difficult before it happens. The way out is to first, stop thinking about the home gateway as an extended DSL modem but as a service delivery platform. Second, the focus has to shift from routing technology to pay per use services for revenue generation.

The industry needs to take a hard look at the mobile phone market from both a business model and a technical perspective. Two items stand out in the mobile market on the technical side; one is that the majority of the mobile phones use the ARM core; the second is that most mobile phones also have some sort of embedded JAVA virtual machine for applications. The question is then: why not use the same technical approach for residential gateways? On the business side, the main item that stands out is that services on the phone always generate revenue beyond the fixed monthly calling fee. Why does the same operator offer unlimited music download via the residential gateway for a few dollars a month while charging a fee per song on a mobile phone? Residential home gateways will generate increasing monthly revenue if properly equipped to do that.

 There are many ARM based semiconductor devices on the market today that allow an operator to benefit from and repeat the success in the mobile phone business for residential gateways.

The Comcerto 100 is such an ARM core based device from MINDSPEED TECHNOLOGIES that was designed specifically for service providers. It integrates two ARM cores along with the required interfaces and offers the necessary processor power to run triple play and pay per use services based on JAVA platforms. Service providers must now force the suppliers to reconsider the strategy of incremental software upgrades to an ancient software base inherited form a DSL modem, and to seriously consider major investments in innovation for broadband service deployment to the home.

Time is running out for FTTH, if the operators don’t catch up now and demand innovation then the FTTH home gateways will be simple upgrades of DSL gateways which will lead to a massive investment in fiber with very little possibility of a revenue return from service revenue. A fixed monthly subscription charge for triple play over fiber is not going to generate enough revenue to recover the multi billion dollar investment required for laying out the fiber network.

Diya Soubra is an Executive director of marketing at MINDSPEED TECHNOLOGIES.  He can be reached at diya.soubra@mindspeed.com.

We are delighted to welcome you at our booth A5.507



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