Development Barriers and Cut-in Points of Next Generation Services

The NGN kick-off group of European Telecom Standard Institute (ETSI) suggested in its report that NGN is a concept for defining and deploying networks, which, due to formal separation into different layers and planes and use of open interfaces, offers service providers and operators a platform can evolve in a step-by-step manner to create, deploy and manage innovative services. This definition shows that the key point of NGN is to constantly create, deploy and manage new services. In the NGN Conference of 2002, held in the U.S., the next generation service was an attractive topic along with NGN.

1 Characteristics of Next Generation Services
Two services have been highlighted since the 90s of the last century. They are mobile communications and the Internet, the most prospective services in the world. It is certain that the next generation services will be focused on multimedia, personalized and diversified services.

  The multimedia services provide users with interactive communication and information services, combining audios, videos, pictures and texts. People living in such an information age need to get information anytime and anywhere. The previous point-to-point phone communication is far from the needs. Multimedia, will surely become the most suitable and acceptable media.
Broadband-based multimedia services will become a new sustainable economic growth point, and be widely applied in many fields such as manufacture, management, education, scientific research, medical treatment and entertainment. Moreover, it will certainly become a key characteristic of next generation services.
   Personalization means to provide individuals with personalized services at any time and any place as one likes. The persistent development of PC and handsets has proved that people are naturally pursuing personalized services. In the 21st century, the main driving force of market development is not the existing technologies any more, but the applications and services supported by technologies. In other words, the future telecom market will be full of personalized services. Each user in the network world will become an influencing factor with his own personal features.

  The predictable personalized services include global seamless roaming, 24/7 service offering, getting communications and information anytime and anywhere, providing utmost mobility via users´ personal numbers, and offering interactive and friendly interfaces to realize users´ more participation in control of networks, and choices bandwidth, service items, quality, security and tariff according their need and affordability. It will be the highest level to provide users with personalized services anytime and anywhere as one likes.

  Diversification means to develop various applications on the network platform to meet different needs. The development of multimedia and personalized services will change people´s working and life styles. New working and life styles will then arouse unlimited network applications. Thus, diversification is an inevitable result of multimedia and personalization. Moreover, diversification will surely bring more business opportunities and a bigger market.

2 Barriers of Next  Generation Service
Metcalfe´s Law, reflecting network expansion effects, states that the value of a network grows as approximately the square of the number of its users, and that every new user will bring added value to every other user on the same network. That is, when only a few users share a network or an application service, the total value of the network is very small to a single user. But when many people use it, the value will increase sharply. Thus, if a new service is expected to be generally accepted by users, it must realize the market transition from the initial state (the service has limited value and new users have no interests in it) to a popular state (the service becomes more valuable and attracts more users).

  With no exception, the broadband-based next generation services have to obey Metcalfe´s law. The number of broadband users must be in a certain scale if the next generation services are expected to bring more value to users and benefits to operators. According to experience, broadband services and applications are possible to overpass the barrier and become popular when the penetration of broadband users reaches 15%-20%. Therefore, the popularization of next generation services will be gradually realized through more advanced universal services that provide not only voice services but also more broadband services.

  Another barrier of next generation services is price. Pricing not only is a mechanism to control the supply-and-demand relationship, but also defines the price threshold that customers can afford. One of the goals of universal services is to provide various services to people at reasonable prices, so that people at different levels in society can afford them. It is the same for broadband-based next generation services. Therefore, telecom operators must make clear the prices of next generation services, make sound financial plans, create stable operation and services-offering procedures, and adopt clear and suitable methods for service marketing, positioning and pricing.

3 Cut-in Points of Next  Generation Services
For developing next generation services, it is necessary to find a profitable cut-in point, but it depends on many factors.

  First, it is closely related to the situation of a country. For instance, the service provisioning in a country is usually restricted by its government policies. Also, the deployment of next generation services depends on the economic strength of a country.

  Second, it´s hard to roll out a large-scale application and support wide-range services if there are no matured products with high performance/cost.

  Third, no matter how advanced a network is, the value of a service is eventually determined by human beings´ behavior, such as psychological reaction and common habits. However, people´s behavior is dynamic and changeable, and sometimes needs to be induced and fostered. The Matthews Effect tells us that a new service will not tend to snowball or what it snowballs is not the one in need until a cut-in point is found to meet with people´s behavior.

  According to people´s psychological and behavior factors in the current society, it seems that personal information and entertainment services can easily stir up people´s interests in and enthusiasm for broadband services. The Matthews Effect on short message service (SMS) gives us an inspiration. In December 2001, the number of global short messages sent via GSM handsets reached 30 billion totally. In 2001, only 15.9 billion short messages were sent in China, but the number increased to 90 billion just in the next year.

  In Philippines, nearly 50 million short messages (average 9 messages per person) were sent every day in December 2000, ranking number one in the world.

  Now, a new broadband based non-real-time message service --MMS (Multimedia Messaging Service) appears. It may be thought as the extension of SMS. It is predicted that the snowball effect on SMS will drive the future MMS, making it a new cut-in point of NGN services. Users use MMS, just like SMS, to receive and send more personalized multimedia messages, including texts, pictures, images, audios, videos, animations and music. Just like the transition of PC operation system from DOS to Windows, the transition from SMS to MMS is very important.

  As for entertainment services, so-called 3G (Girls, Games and Gambling) services may become a cut-in point of broadband services in the western countries. According to Cahners-Instat, the newly appearing Internet adult services based on broadband VoD gained USD 460 million on the global market in 2002, far beyond the services on cable VoD in terms of the number of users and revenue. It´s predicted that, among the global users with high-speed access to the Internet, about 40% are going to use VoD services in four years.

  The pornographic service has become an effective business mode in western countries, showing the potential of a mass market. Generally telecom operators only offer technologies and lines to adult service providers, and do not provide contents. Mobile operators are more active than fixed-line operators in cooperating with adult service providers. Therefore, adult services may become a major service on 3G networks.

  Currently the world market of adult services is about USD 39 billion, of which mobile operators share only a little. Mobile operators are considering whether to provide adult movies via handset. In the future, pornographic services may be combined with gambling. Alatto Technologies estimates that 4.5% of mobile users in the world may take part in gambling by using wireless equipment in 2006, bringing a turnover of USD 683 million.

 People are always fond of games. At present, broadband-based online games are changing traditional one-player games into multi-player, interactive and complicated ones. Even thousands of people may be involved into one game at the same time. DFC Intelligence says that each MMPOG (Massive Multiplayer Online Game) may bring USD 300 million revenue, so it is substantially profitable if broadband services and online games are combined together.

  It is predicted that the revenue from online games in the U.S. will rise up to 24% of the total game revenue (USD 10.8 billion) in 2006. This figure was only 7% in 2002. According to the research result from K2 Networks, online games may become a major entertainment suitable for different ages when 20% to 30% of homes start to use broadband networks. A statistic report indicates that behavior of game players will change along with the popularity of broadband services.

  The most convictive example is Korea. In Korea, the broadband access is not a luxury service any longer because its household penetration ratio has reached 60%. Additionally, there are about 26 000 Internet cafes, among which most adopt the high-speed access to meet the needs of Internet games. This situation makes Korea the No. 1 in the world in terms of Internet games (relative to its population).

  Daewoo Securities says, 80% of Korean youth between 8 and 24 play Internet games. They play MMPOG at least once a day. An Internet game called Lineage in Korea has attracted about 15 million users to register since 1998. The success of the game is obvious since it brings nearly USD100 million every year, and makes its distributor be listed on the stock exchange.

  Korea Telecom (KT), the biggest DSL service provider in the world, is expecting to offer Internet games as its DSL value-added services with top priority. Understanding the importance of brand, KT uses "MegaPass" to bind Internet games with DSL services to win the youth. The Internet games are mainly provided by MMPOG developers. In this partnership, KT plays as a middleman and makes full use of people´s high acceptance of this brand. KT charges users a flat minute rate along with ADSL bill. This pay-per-play mode and powerful brand effect create a new distribution channel for game developers and distributors.

  Hanaro Telecom (HT), the No. 2 Internet service provider in Korea, has 2.86 million broadband subscribers. HT deems itself as a DSL service provider and focuses itself on "providing instant services for important players". During professional game competitions, players often designate HanaForce (a DSL service brand of Hanaro) as their preferred connection because of its high speed and high reliability. The unique high-speed and reliability enhances Hanaro´s competence.

  Now, the increase ratio of Internet games in Korea has reached 88.64%. It is reasonable to predict that Internet games will see a bright future with the introduction of broadband intelligent IP networks. The combination of favorite contents and advanced networking will drive the Internet games into a higher level, form a multi-win business mode, and finally win a larger market.

  In the same way, the game market on broadband mobile network is also noticeable. A strategic analysis company says that the number of global handset game players will reach 100 million in 2006. This will make mobile games an important revenue source for mobile business. The mobile game market will reach ￡5 billion within 5 years.
 

4 Conclusion
China´s fixed networks, mobile networks and the Internet are evolving into next generation networks. Obviously the aim of evolution is to provide next generation services. No matter what barriers are, broadband-based next generation services will ultimately find a huge market.

  In China, besides the high-speed Internet access service, the cut-in point of next generation services is estimated to be personal information communication and multimedia entertainment services. Based on the facts that China is the biggest phone market in the world and the Chinese show great enthusiasm for SMS, it is reasonable to say that various value-added multimedia services and video phones will probably become the forerunner of broadband services.

  China has a huge entertainment market, ranking top in terms of the TV, VCR and VCD ownership. Kara OK, originated in Japan, has been widely spread in China. Games have a long history in China and are well accepted by the Chinese. It is said that there are over 100 million Chinese playing games, and that 80% of Chinese youth play video games (only 60% in the U.S.).

  The market of Internet games has taken off in China, and there are 300 thousand new players every month. The market is expanding at an annual growth rate of 225%, and has reached RMB 1 billion in 2003. Therefore, interactive Internet games will probably become a profitable cut-in point of NGN services.

  Meanwhile, people are expecting that personal communication and entertainment services can trigger more value-added services and applications, such as VoD, Internet office, e-government, location-based service, telelearning, telemedical and e-business.

  In conclusion, the prosperity of broadband services needs diversified services, applications and attractive contents, with which people can enjoy studying, working and relaxing better, and with which more value may be created. Consequently, broadband services may become a part of our daily life. Meanwhile, network operators, service providers, content providers, application providers and users may form a new value chain, create a new business mode, and achieve multi-win results, which is a goal that needs worldwide efforts to achieve.

Manuscript received: 2003-11-05