Global Titans Battle for Mobile IP
By Steve Wallage, Wed Jan 02 00:00:00 GMT 2002

The evolution to mobile IP will be a battleground between the traditional mobile infrastructure suppliers and vendors from the IP market.

The mobile market can be very inward-looking. The discussion on the evolution to mobile Internet usually centres on the activities of the 'traditional' mobile infrastructure vendors. However, the move to IP, and the convergence of mobile and IT solutions, is moving into the strengths of the global IT giants.

On the infrastructure side, there is also the assumption that companies who have traditionally made their money in areas such as transmission and routers, are happy to focus just on these areas. Go to the analyst or press event of a hardware vendor, and the one thing you can be sure that they will not talk about is hardware. Most vendors are desperate to get out of the commoditized IP core and want to go up the value chain to offer applications and services.

The case for an IP core for mobile networks is increasingly a no-brainer the only debate is when and how. One should never under-estimate the caution and timidity of many mobile operators.

The all-IP mobile network will still take three or four years. The benefits are clear such as ubiquity, reduced cost, future proofing, personalization, advanced functionality and unified services. However, it is bound to take some time to iron out issues related to the data transport model and architecture. And the 3GPP is at least two years away from defining this network.

December 2001 analysis from Sage Research identified significant deployment challenges to mobile IP for service providers. Market environment issues - such as regulatory, interoperability, spectrum, and standards issues - were considered the main barrier. Security issues were seen as both the most important and most challenging capability necessary for the success of mobile IP services. The research was conducted among 364 service providers from North America, Europe, and Latin America.

The IP infrastructure battleground

The companies from the IP marketplace see mobile IP as a natural extension. Take the Cisco marketing angle with two simple messages.

Message one: 'Cisco has a competitive advantage based on IP architecture and a comprehensive set of advanced IP services.'

Message two: ' Wireless Service Providers will see operating costs reduced by up to 70% using an all-IP infrastructure, compared to traditional networking techniques.'

There are three main approaches that are being taken by IP infrastructure companies aggressively chasing the mobile market. First, the complete offering approach of Cisco. Second, activity primarily focussed on a key joint venture. Third, the raft of partnerships.

The Cisco approach

Cisco is an intimidating company. Its success in the router market has been truly amazing, and it claims 15 of the 18 European mobile operator IP backbone contracts (admittedly, the figure includes a number of minor and multi-vendor wins).

Yet, its vision for mobile IP lies far beyond selling routers. Cisco has an impressive list of partners, including Comverse, Motorola, OpenWave, Logica, IBM and Italtel. The goal is to allow Cisco to provide the end-to-end IP network. Cisco already claims to offer such services as network management, quality of service, content switching, billing and location information. The company is a global leader in areas such as VPN gateways, firewalls and security.

However, Cisco faces three major challenges; relationships with mobile infrastructure companies, competing with its partners, and credibility.

Cisco's relationships with mobile infrastructure companies have suffered in 2001. At the annual Cisco analyst event in December 2000, the company lauded its relationship with Nokia. In fact, there was even some suggestion that the two companies could merge. Yet, Nokia has now acquired Amber Networks for its ability to develop fault-tolerant edge routers.

At the December 2001 event, Cisco still cited Nokia as a 'reseller' but the relationship has considerably weakened. The only mobile infrastructure company with whom Cisco still has a strong relationship is Motorola, including the Invisix JV. Both companies appear strongly committed to the venture, but there has been little in the way of dealflow.

Competing with its partners is a challenge for Cisco across the fixed, as well as mobile, market as it attempts to go ever further up the value chain. Companies for whom Cisco has been a long-term partner have suddenly found themselves competing with the company.

Credibility with mobile operators is also a major challenge. Cisco stated at their December 2001 event that they believed that their relationships were far stronger with the executive management of the mobile operators, than the operations and engineering departments.

CEO Jim Chambers also admitted that, "they need to better articulate their mobile and wireless strategy." There is also some concern from mobile operators that the Cisco push for wireless LANs may be to the detriment of 3G, although the two technologies are more complementary than competitive.

Cisco faces some major challenges in the mobile IP infrastructure market, and its 'all-IP' vision is still ahead of market reality. However, there is no doubt it will make a ferocious attempt in the next 12 months to gain a stronger foothold in the market. While its infamous acquisition quest virtually stopped in 2001 as the market slowdown hit hard, this will carry on in 2002. Chambers stated that Cisco plans 8-12 acquisitions in the next 12 months. At least two will be in the mobile IP space.

Nortel and Lucent also believe that they will be able to offer the full range of IP services to mobile operators, working with their partners. Although they have the mobile network background, they suffer from some of the same competition and credibility issues.

The key joint venture

A good example of this approach is EJN Mobile IP, Ericsson Juniper Networks. Juniper Networks is the clear number two player in the global router market, and is widely believed to be ahead of Cisco in developing next-generation products. The company has developed a GGSN to set up and manage data communications between mobile networks and a range of IP networks. Juniper M-series routers have been deployed in numerous Ericsson mobile networks.

Juniper has shown itself to be far more willing to 'stick to the knitting' and concentrate on its core product. It also has the luxury of partnering with the global the number one mobile infrastructure vendor. Another example of a key joint venture is the Alcatel/Fujitsu group, Evolium SAS.

One key advantage of a single-vendor solution is cost. Industry analysts estimate that mobile operators can reduce their capex and opex costs by up to 25% with a single vendor solution. Reasons for this include economies of scale (for example, the Vodafone global procurement program), single point of contact, reduced interoperability and network management costs, reduced management time, and additional 'free' services such as consulting.

Mobile operators are unsurprisingly cautious about a single-vendor solution. Yet, it is likely that they will increasingly focus their mobile IP infrastructure spending onto major partners.

The raft of partnerships

To gain credibility and maximize revenue opportunities, many infrastructure companies have looked to create a raft of partnerships.

Tellabs has been happy to allow its products to be re-branded by infrastructure vendors. Ericsson sells the Tellabs' FOCUS SDH systems while Nokia works with Tellabs on integrated transmission solutions and network management.

There are a large number of start-ups in the mobile IP infrastructure area including Watercove, Airvana and Cyneta networks. They have all tried to work with the major vendors to try and gain credibility and revenue streams.

Winners and losers

The emergence of mobile IP will not cause a sea-change among vendors. Most of the same major mobile infrastructure vendors will still be around in five years' time. Start-ups will find it very hard to break out of niche positions.

The challenge for the infrastructure vendors will be to break out of commoditized areas into the value-added market segments. Strong partnerships and acquisitions will prove the key, and some of the vendors will be left struggling at the bottom of the value chain.

Steve Wallage works and writes for the451. Steve has more than 13 years of experience as a technology analyst specializing in telecommunications.