Next Moves, The: Convergence in the Communications and Content Industries

"For the telecommunications industry, convergence offers a new path toward growth after several years of stagnation. Copyright holders see convergence expanding their audiences while enabling them to add extra value to content offers. Working with both industries are device manufacturers, solution and service providers, financial institutions and retailers, all of whom contribute to create a seamless purchase and consumption experience by customers - at least in theory. The reality is that convergence has opened a wide array of opportunities to form new business relationships and to compete..."

This 28-page Economist Intelligence Unit (EIU) white paper, sponsored by Agilent Technologies, highlights the results of EIU research conducted in July 2004 to examine convergence, worldwide. This term describes a communications and information services environment where real-time (voice, video, music, instant messaging, etc.) and non-real-time (email, data files, still pictures) transmissions merge into a single broadband infrastructure based on Internet Protocol (IP), the packet-based architecture that underpins the World Wide Web (Editor's note: to learn more about IP, visit Wikipedia.)

EIU's research was motivated by the fact that broadband penetration is one of the biggest drivers of convergence, and by observations such as these: In Japan and South Korea, over 70% of all households and businesses have a broadband connection to the internet, and in the United States, the Federal Communications Commission (FCC) reported that high-speed access lines to the internet had reached over 47% of all households and small businesses by mid-2004. (In contrast, western Europe recorded 20% broadband penetration.)

To understand these trends, EIU conducted a global online survey in July 2004 of 100 senior executives on the topic of convergence, followed by in-depth interviews with senior executives at a number of companies in the communications and content industries. Detailed findings are shared here. For instance, participants noted that - in addition to broadband penetration - migration to IP-based networks and competition from new service providers are key factors driving the adoption of converged network services. Nearly one-third of all participants intend to achieve widespread migration to converged services in a year or less.

As explained here, the challenge for the telecommunications industry in moving forward seems to rest not so heavily on addressing technical hurdles, but, rather, on creating and
maintaining the quality of service (QoS) that customers are prepared to pay for. EIU finds that QoS is particularly crucial when it comes to networks and devices that must seamlessly handle such things as voice telephony, data transmission, real-time streaming, photography and electronic wallet functions. In short, convergence is stimulating a fundamental shift in how telecommunications companies are run, for network operators and their partners must turn their attention away from "the network" itself and focus instead on relationships with the customer - and on providing the QoS that he or she demands.