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PolIcy everywhere:
A STRATEGIC IMPERATIVE FOR DIGITAL LIFESTYLE PROVIDERS

taBle oF contentS
Introduction ................................................................................................2 Changing Revenue Streams ........................................................................2 Shift in the Competitive Landscape .............................................................3 Value Chain ................................................................................................4 The Future is Now .......................................................................................4 Business Transformation Starts with the Network ........................................4 Policy Everywhere .......................................................................................5 Key Policy Considerations............................................................................7 Tekelecs Policy Everywhere Framework ......................................................8 Conclusion .................................................................................................10

IntroductIon
A perfect storm the convergence of universal broadband access, virtually unlimited content and smart mobile devices has permanently altered the telecommunications market. The introduction of the first iPhone was clearly the tipping point. In the ensuing five years, virtually every aspect of the industry has been radically transformed revenue streams, business models, and value chains. To remain relevant in this rapidly changing environment, operators must address critical challenges to create new business models and reinvent themselves as digital lifestyle providers.

Given the impending decline in voice and messaging revenues and downward pressure on access profits, operators need to develop plans now to stake out new revenue streams.

changIng revenue StreamS

Voice has long been the cash cow for global operators, but it has peaked in many developed markets. Revenues are declining and predicted to drop below the 60 percent mark globally by 2013.1 Messaging, which has been a revenue engine for the last decade or more, is expected to increase globally at a compound annual growth rate of three percent over the next five years.2 Short message service (SMS) remains the king of messaging; however, it has evolved little over the last several decades. New IP message services like iMessage and WhatsApp are beginning to attract consumers attention, particularly those with smartphones. As the IP messaging phenomena takes off, SMS messaging revenues will decline. Data access is still a growth engine for operators and is helping compensate for the decline in voice and messaging revenues. In major markets, data demand is doubling each year, but margin pressure is intense. The expense of building network capacity to handle the increasing load threatens to offset revenue growth driven by data access. And, at best, operators will only have three to five years to capitalize on data access before it too reaches its peak, and overall operator revenue curves begin to decline.3 Given the impending decline in voice and messaging revenues and downward pressure on access profits, operators need to be developing plans now to stake out new revenue streams. Analysys Mason predicts that mobile operators in developed countries could run out of profit in the next two to four years if they dont change their business models.4 Clearly, traditional telecom services enabling conversation and messaging and moving bits from one point to another will not sustain long-term growth.

1 2

Chetan Sharma, Operators Dilemma (and Opportunity): The 4th Wave, 2012. Informa Telecoms & Media, Press release: SMS will remain more popular than mobile messaging apps over next five years, May 29, 2012. Chetan Sharma, Operators Dilemma (and Opportunity): The 4th Wave, 2012. Tellabs/Analysis Mason, End of Profit, February, 2011.

3 4

Access Revenue Growth Curves

Net Revenue

UK Japan
Sweden

US

0-25%

Netherlands

Germany

Finland

Greece Indonesia Mexico Austria Italy India Russia

Spain France China

25-70%

70-90%

90%+

Chetan Sharma Consulting, Operators Dilemma (and Opportunity): The 4th Wave," 2012.

Subscriber Penetration
Figure 1. Mobile Access Revenue Growth Curves

ShIFt In the comPetItIve landScaPe

Competition in voice, messaging and access has been largely limited to telecom incumbents because of the tremendous investment required to build and operate the network infrastructure. The pre-iPhone telecom industry was a rigid, vertical structure suited to a relatively monopolistic market. Operators controlled the services, applications and even devices that rode their networks. However, the walled gardens in which operators have operated for decades are crumbling. The shift to mobile broadband networks has opened the door to a legion of new competitors device makers, media, social networks, and application providers all from outside the traditional telecom space. Unlike telecom operators, these nontraditional competitors arent burdened by maintaining a massive network infrastructure to support established service offerings. They can shift their strategy at will to adjust to market dynamics. From a consumer perspective, the advent of fresh competition has opened up new, third-party communication channels like Skype, Joyn and FaceTime, especially for smartphone users. Global smartphone penetration is expected to reach 39 percent by 2016, which means that over one-third of mobile users will have access to over-the-top (OTT) services.5

mobileSQUARED, Over-the-Top (OTT) Services: How Operators Can Overcome the Fragmentation of Communication, August 2012. 3

value chaIn
Because they controlled the network and services, operators have become accustomed to owning the customer relationship. With the arrival of the iPhone and the subsequent growth in OTT applications and content, thats all changed. OTT players have successfully decoupled applications from the underlying infrastructure. Operators are losing their relevance in the mobile data ecosystem as subscribers spend increasing amounts of time engaged with OTT application and content providers. In the subscriber mind, value increasingly lies in the applications and devices rather than the network that delivers the content. That leaves operators in the difficult position of providing the resources The telecom market has clearly reached an inflection point. How operators react to and strategize the new telecom environment will define their success or failure over the next decade. to drive bandwidth-intensive services but playing a smaller role in the application and device revenue chain. Even more troubling, subscribers are building direct commercial relationships with OTT providers and sharing large volumes of valuable, personal data.

the Future IS now

The telecom market clearly has reached an inflection point. Vertically integrated business models of the past are obsolete. How operators react to and maneuver in the new telecom environment will define their success or failure over the next decade. They cant afford to be late to the game; mobile device and application providers already are poised to capture their markets and customers. Those that delay might find themselves consumed by the powerful forces of the competitive markets and some relegated to the dustbin of mobile history.6 Operators must decide today what path they will take in the future. Will they be relegated to utility providers, supplying the network infrastructure for third-party application and service providers? Or, will they serve as enablers, providing a robust network, application programming interfaces (APIs) and data that powers the most useful and popular consumer applications and services? Or, will they retool their business models and open their network for innovation to become digital lifestyle providers, leveraging social media, entertainment, rewards programs, and mobile commerce partners?

BuSIneSS tranSFormatIon StartS wIth the network

Existing networks were not built with the DNA to foster innovation and respond quickly to dynamic markets to meet the demands of the connected world. To reinvent themselves as digital lifestyle providers, operators will need to refashion their legacy infrastructure into a highly evolved, completely software-defined network (SDN) the thinking network. The thinking network is analogous to the human body. The memory is the subscriber database. The language is the Diameter protocol, the central nervous system is the new product category of Diameter Signaling Routers (DSRs), and the brain is policy.

Chetan Sharma, Operators Dilemma (and Opportunity): The 4th Wave, 2012.

The thinking network self-organizes and self-determines responses to unprecedented and unpredictable variables. Its elastic and dynamically enables new services and content in real time, anticipating subscribers preferences and behaviors. It thinks as a human mind by processing new information with what it already knows, morphing and gaining more intelligence as time, events and content are added.

Media

OTT Apps Web Content

Carrier Public Cloud Mobile Advertising

Social Media Sites

On-Deck Apps

Internet

Intelligent Control Layer

OTT/Closed Proxy

As operators transition to digital lifestyle providers, policys

Policy as a Service Charging as a Service Identity as a Service SDN Control

complexion will be transformed. The majority of use cases will not involve charging systems at all, and the number of enforcement points will mushroom.

Subscriber Data as a Service

Virtualization Manager

Elastic Carrier Transport Layer

RAN

Liquid Network Stream

Liquid Network Stream OpCo Wi

Unnassigned Resources RAN

OpCo Wi

Figure 2. The Thinking Network

PolIcy everywhere
In this intelligent network model, policy is the engine for innovation and differentiation. Its role evolves dramatically from its current usage, expanding both in application and scope. Early policy use cases have focused primarily on monthly quota and fair-use management, which employ relatively simple logic thats fairly easy to dimension and scale. Those applications require little subscriber intelligence and involve interaction with a limited number of core network elements, primarily gateways and charging systems. As operators transition to digital lifestyle providers, policys complexion will be transformed. The majority of use cases will not involve charging systems at all, and the number of policy enforcement points will mushroom. Policys reach will become pervasive, expanding beyond the boundaries of the core network to subscriber devices, machine-to-machine (M2M) devices, cloud providers, and service delivery and OTT 5

provider platforms. Policy will be defined centrally within an intelligent control layer that is independent of the underlying network infrastructure and applied globally across networks, devices and applications. It will intelligently orchestrate the subscriber experience, leveraging network, subscriber, device and application awareness and Diameter signaling routing.
Core Network PGW DPI

GGSN

Cloud

Machine-to-Machine

P O LIC

Y
Service Delivery and Over-the-Top Platforms

Smart Devices

Figure 3. Policy Everywhere

With the ability to push policy control beyond the network core to its edge, operators can develop creative strategies to: Optimize and personalize each subscribers experience. With context and subscriber awareness originating from the device, operators can create a service experience thats tailored to each subscriber based on preferences, location, access network, device type, and network conditions. For instance, they can provide a temporary boost in content delivery quality to a customer streaming a soccer match, provide a relevant mobile advertisement, or inform the subscriber when a usage threshold is reached to prevent bill shock. Or, a service provider can zero rate social networking usage so it doesnt count against the subscribers data bucket. Operators can offer service plans that guarantee bandwidth for certain high-value customers like corporate accounts, create flexible pricing plans that match a subscribers preferences and budget, or allow subscribers to share one quota across multiple devices. Create lucrative, two-sided business models with third-party, OTT and cloud providers. Operators hold a number of valuable assets QoS, security, billing relationships, subscriber profiles, context, usage, and device awareness that can be used to create profitable commercial relationships. For instance, they can enable targeted, thirdparty advertising that leverages multi-screen channels and goes beyond traditional demographics to include user behavior analysis. Operators can offer identity as a service, enabling subscribers to use their network identity as a single-sign-on for third-party applications. Or, they can leverage the trusted relationship theyve established with subscribers to provide secure, consolidated billing for OTT and 6

cloud applications. Another avenue is providing application and subscriber-specific policy and charging treatment for third parties such as guaranteed QoS, service-level agreement (SLA) compliance, quota and session management, and rating. Maximize resources and improve QoS. By leveraging policys ability to intelligently control network access and application utilization, operators can implement creative solutions to manage network congestion. Advanced Wi-Fi offload use cases based on preferential network access, subscriber tier or type, device, application, quota, or network conditions can be implemented to relieve congestion on licensed spectrum and improve subscribers data experience. For example, a device can be moved to the best available network to ensure that the subscriber application usage receives the best available QoS based on current network conditions. The impact of highbandwidth applications can be minimized by offering subscribers incentives to shift their usage to a different time of day or less congested location. With advanced policy tools, operators can reduce the effect of the excessive signaling generated by chatty apps that constantly query the network. Radio access network (RAN) congestion can be mitigated by prioritizing individual packet flows based on subscriber profiles, near real-time and historical analytics. Moreover, by enforcing policy on the mobile device, operators can react quickly to application issues that may impact network performance by blocking misbehaving applications at the device before they impact the core signaling network.

key PolIcy conSIderatIonS

Operators need to consider their policy selection carefully as they plan for the digital future. The architectural choices they make today will dictate their success or failure as they transition to digital lifestyle providers. They need to factor in several critical criteria when selecting a policy server. Delivering increasingly innovative and personalized services and managing network resources at a more granular level requires a robust policy infrastructure that includes: A user friendly graphical user interface (GUI) that enables service provider personnel even non-specialists to intuitively engage the system; System interoperability with support for standardized and non-standardized interfaces for quick and easy integration with other policy endpoints such as 3G/ LTE access gateways, content optimization systems, business support systems (BSSs), operations support systems (OSSs) systems, and deep packet inspection (DPI) solutions; A diverse menu of policy triggers to create advanced rules related to a host of factors such as subscriber tier, device and network type, network capacity, network congestion, application type, consumption, session duration, and time of day/day of week; Easy-to-use, integrated policy analytics tools that enable operators to understand traffic patterns and user and service behavior and use that data to rapidly create, deploy, and evolve services and adapt to subscriber behavior;

 A broad array of use cases to monetize and manage mobile data growth across multiple access networks by leveraging an innovative, real-time subscriber profile repository; Proven scalability and reliability to meet the demands of escalating traffic, new service models, and increasing device and application data usage in the worlds largest networks ; and, Seamless integration with a Diameter-based, next-generation signaling architecture.

tekelecS PolIcy everywhere Framework

Tekelec extends the reach of policy management to devices, OTT applications and business intelligence with its Mobile Policy Gateway, Application Manager, and Policy Analytics products. Each product integrates with Tekelecs market-leading Policy Server to create a policy everywhere framework, which makes policy the brain not only of the core network, but of the entire network extending all the way to billions of devices. Extending policy to the networks edge enables operators to evolve policy beyond fair usage and tiered services to innovative services like subsidized or toll-free data, opt-in mobile advertising, loyalty programs, and application-based plans with partner ecosystems.

Mobile Policy Gateway

Tekelecs Mobile Policy Gateway (MPG) extends policy directly to the device. The MPG combines a standards-compliant access network discovery and selection function (ANDSF) with dynamic network and subscriber aware policy management. It turns smart devices into policy enforcement points, reducing the need for costly DPI and policy and charging enforcement functions (PCEFs) in the network core. By implementing Tekelecs MPG, operators, can: Manage network congestion with intelligent Wi-Fi offload based on preferential network access, subscriber tier or type, device type, application usage, quota, or network conditions. Improve quality of service and extend device battery life by managing signaling traffic from chatty applications frequently attempting to communicate with the network. Secure devices and personal information by blocking malware and fraudulent activity. Identify upsell opportunities based on services in use, network conditions and subscriber preferences and conveniently offer them in the application the subscriber is using.

aPPlication ManaGer
The Application Manager connects Tekelecs Policy Server and Subscriber Profile Repository to service delivery platforms (SDPs), third-party OTT applications and native OTT applications. It converts web-based protocols (LDAP, SOAP, XML, HTTP, etc.) to Diameter, allowing applications and SDPs to know current subscriber activities. This single point of control allows service providers to create two-sided business models with OTT, cloud and third-party application providers. With Tekelecs Application Manager, service providers can: Provide application- and subscriber-specific policy and charging treatment, such as guaranteed QoS, SLA compliance, quota and session management, and rating. Insert targeted advertisements with native or third-party applications. Securely expose network application programming interfaces (APIs), protecting network and subscriber data.

Policy analytics PlatforM

Tekelecs Policy Analytics platform gives service providers granular business and network insight about how subscribers use and access services and applications. The intelligence allows service providers to see how policies impact subscribers behavior and network resource allocation so they can design new plans based on device, content, time, application or network congestion. Policy Analytics can reveal, for example, that: A new handset model generates a 40 percent increase in data traffic through the social networking application. Video traffic doubles for subscribers who migrate from 3G to LTE devices. Subscribers who exceed data quotas for three consecutive months have a 75 percent acceptance rate when the device offers them a promotional rate to move to the next highest service tier. Bandwidth speeds decreased by 25 percent in congested areas for certain subscribers or device types improves the entire cell area quality of service by 40 percent. These types of detailed findings allow service providers to create targeted tariff plans based on subscribers usage, pricing and quality of service preferences unlocking intelligence buried in millions of policy event records. Policy Analytics gives service providers dashboards, reports and multi-dimensional analysis tailored for network operations, IT and marketing departments. In addition, the platforms policy-simulation tools give service providers new abilities to test and evaluate the impact of new policies before implementing them in the network. This type of network safety net improves rule creation and lets multiple departments assess the effects of new policy rules. 9

concluSIon
The convergence of universal broadband access, virtually unlimited content and smart mobile devices has created a perfect storm, which has permanently altered the telecommunications market. As subscribers increasingly focus their spending on overthe-top applications and devices, traditional telecom revenues are declining. To remain relevant in this rapidly changing environment, operators must reinvent themselves as digital lifestyle providers. To do so, they will need to refashion their legacy infrastructure into a highly evolved, thinking network, in which policy is the engine for innovation and differentiation. Its role will evolve dramatically from its current usage, expanding both in application and scope. Policys reach will become pervasive, expanding beyond the boundaries of the core network to subscriber devices, M2M devices, cloud providers, and service delivery and OTT provider platforms.

aBout tekelec
Tekelecs intelligent mobile broadband solutions enable service providers to manage and monetize mobile data and evolve to LTE and IMS. We are the architects of the new Diameter network, the foundation for session, policy and subscriber data management. More than 300 service providers use our market-leading solutions to deliver cloud, machine-to-machine and personalized services to consumers and enterprises. For more information, visit www.tekelec.com.

acronymS uSed In thIS document

ANDSF API DPI DSR GGSN GUI MPG OTT PCEF QoS RAN SDP SLA Access Network Discovery and Selection Function Application Programming Interface Deep Packet Inspection Diameter Signaling Router GRPS Support Nodes Graphical User Interface Mobile Policy Gateway Over the Top Policy and Charging Enforcement Function Quality of Service Radio Access Network Service Delivery Platform Service Level Agreement Short Message Service

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Tekelec has more than 300 customers in more than 100 countries. For information on our worldwide offices, visit the Tekelec website at www.tekelec.com/offices. This document is for informational purposes only, and Tekelec reserves the right to change any aspect of the products, features or functionality described in this document without notice. Please contact Tekelec for additional information and updates. Solutions and examples are provided for illustration only. Actual implementation of these solutions may vary based on individual needs and circumstances. 2012 Tekelec. All rights reserved. The EAGLE and Tekelec logos are registered trademarks of Tekelec. All other trademarks are the property of their respective owners.

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