STEM newsletter

Business-driven multimedia solutions

30 April 2003

The South African telecoms market is being opened up to a significant number of new entrants. The Independent Communications Authority (ICASA) has awarded a nationwide licence for a converged multimedia and telecoms operator, which will require a next-generation, carrier-grade network with system architectures able to offer current and future IP-based multimedia services.

Ericsson and Marconi Communications responded to a request from this newly licensed carriers’ carrier for business and marketing strategic support, integrated with end-to-end network solutions. The Ericsson-Marconi consortium developed a business strategy, created complex network designs incorporating both companies’ diverse equipment portfolios, and used STEM as the modelling tool of choice to develop appropriate business and investment plans.

Developing strategies for a multimedia services operator

The consortium developed a three-phase market-entry strategy designed to facilitate incremental growth and investment. This three-phase approach starts with a carriers’ carrier network business, moves on to multimedia service provision, and ends with the roll-out of an appropriate access network necessary to operate as a retail provider targeting chosen end-customer market segments.

This strategy allows for the deployment of a cost-effective network with quick revenue growth on minimum investment, with the reduced operational costs associated with combining conventional voice and data services.

STEM was used to evaluate marketing strategies in terms of their associated revenues and network costs. Various scenarios were modelled in order to support the development of appropriate network solutions. The financial effects of capacity scaling were evaluated for differing scenarios of user take-up. This was crucial in quantifying the effects of market forces in the newly-liberated South African communications market.

Financial modelling of an end-to-end network

The network was designed as an end-to-end deployment of Marconi and Ericsson products, and the modelling therefore needed to incorporate both the applications layer and the detailed transmission, routeing and access technologies:

  • core network transmission
  • core network switching and routeing
  • core network intelligent control
  • network management
  • OSS BSS
  • different broadband access network technologies, both wireline and wireless
  • customer premises equipment.

The STEM model mapped different market segments and usage patterns onto network resource requirements. The related traffic engineering processes were then used to dimension the infrastructure required at the access interfaces, switch-routeing nodes, transport network and cross-connects. A number of scenarios were used to compare the impact of different core network transport options (leased capacity, dark-fibre leasing, etc.) on the network costs and consequential financial results.

Decision-making according to financial results

Proposed network solutions for a complete, converged multimedia and telecoms business were dimensioned according to various business strategies. These strategic options were tested against varying market forecasts and calibrated with financial outputs from STEM. Risk analysis was a key determinant for evaluating investment decisions. The analysis identified the importance of being able to implement highly scalable technology solutions, directly linked to comprehensive financial proposals based on real network costs.

The consortium was able to design best-fit technology solutions based on a thorough consideration of business needs and market conditions. In today's competitive telecoms markets, business-driven decision-making through comprehensive and dynamic financial modelling is key to the generation and maintenance of an operator's differential advantage.


Ericsson provides mobile and broadband Internet communications solutions in more than 140 countries around the world.

Marconi Communications provides broadband next-generation networks specifically designed for a converged service delivery environment.

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