IEEE_Xplore_Article_for_Telecom_Magazine

TECHNOLOGY LEADERS FORUMEDITED BY STEVE WEINSTEIN

10 IEEE Communications Magazine • January 2009

TELECOMMUNICATIONS: CHALLENGES & TRANSFORMATIONWU HEQUAN

VICE PRESIDENT, CHINESE ACADEMY OF ENGINEERING

he invention of a practical telegraph inthe late 1830s and the telephone in 1876

brought humanity into the era of electricaltelecommunications. After over 100 years oftriumph, public telegraphy left the communica-tions market. But telex took over and evolvedinto massively popular forms such as SMS andemail, while telephony remains the most widelyused means of communication in the worldtoday. Over the past century or so, communica-tions technologies have advanced from manualto automatic switching and from analog to digi-tal communications, alongside many othermajor technological revolutions.

However, the greatest changes in consumerexperience did not occur until mobile phoneand the Internet came out and became com-mon elements of life, and which continue to generate evenlarger changes. The United States launched the Next Genera-tion Internet Program (NGI) marked by the Internet 2 Pro-ject in 1998. The International Telecommunication Union —Telecommunication Standardization Sector (ITU-T) began todevelop the global information infrastructure (GII) standardsin the same year, while the industry proposed research intothe next-generation network (NGN). Over the 10 years sincethe NGI and NGN were begun, we have gone through thefoaming and burst of the Internet bubble, and are now facedwith unprecedented challenges within telecommunicationstechnologies and business. The industry is making an insight-ful self-examination, which rarely if ever happened in the lastcentury. The voices of convergence and transformation areechoing all over; the discourse ranges from business structureto network technologies and operation models.

This article focuses on the development of the telecomindustry in the last decade, taking as an example China’s net-work, analyzing its trend into the future, and discussing thetransformation and challenges within telecommunications.

The numbers in Table 1 are meant to impress the readerwith how rapidly telecommunications services have grown, inboth China and the world as a whole, between 1998 and 2008.These services are being transformed, taking on the character-istics of IP, broadband, streaming, and mobility. Ten yearsago, just 0.05 percent of the Chinese population used theInternet, but the proportion reached 19.1 percent of the pop-ulation by the end of June 2008, when the cumulative callminutes of domestic long distance voice over IP (VOIP)reached 1.65 times that of traditional fixed-line calls, andinternational VOIP calls made up almost 50 percent of thetotal international calls. At the end of June 2008, 84.7 percentof Internet users used broadband access, compared with 75percent at the same time in 2007. Of the domestic trunkbandwidth, 3 percent is used for telephony while the remain-ing 97 percent is consumed by the Internet. The internationaltrunk bandwidth of the Internet in China is now nearly20,000-fold what it was 10 years ago, with an addition of 58percent from end of June 2007 to the same time in 2008.

Larger bandwidth facilitates streaming media services.According to a China Internet Network Information Center

(CNNIC) report [1] issued in July 2008, 71 and84.5 percent of Internet users in China down-loaded online video and music programs,respectively. Peer-to-peer (P2P) service, eitherserver–user or user–user, reflects the trend ofstreaming media. According to the survey find-ings provided by China Telecom at the end of2006, P2P service is the number one applicationin consumption of bandwidth. No matterwhether it is through input and output ports ofinternational trunks, interworking interfacesbetween carriers or between MANs and thebackbone network, P2P services have taken up40–60 percent of the bandwidth, and even 90percent in the evening.

The trend toward mobility is also apparent.Chinese mobile phone subscribers outnum-

bered users of fixed-line services as early as 2004, with the for-mer making up 63.9 percent of total telephone users in thiscountry by the end of September 2008. Between January andSeptember 2008, the number of mobile phone subscribersgrew by an average of 1.47 percent per month, while the num-ber of fixed-line subscribers started declining at a rate of 0.38percent per month. Despite the fact that fixed-line phonebegan to lose its popularity in the developed countries beforeit did in China, it did not happen until fixed-line phone sub-scriptions reached saturation; in contrast, the replacement inChina started when the penetration rate of fixed-line phonewas merely 28 percent. Furthermore, the proportion of mobilein cumulative local outgoing call duration was 20 percent in2001 compared with 75 percent in 2007 and 81 percent inSeptember 2008, and the ratio of domestic long distancecumulative call minutes via mobile phone to that via tradition-al fixed-line phone was 0.79 in 2002 but 2.22 in September of2008, with a 28.9 percent increase in mobile from the same

T

WU HEQUAN

n Table 1. Telecommunications penetration in the last decade:China vs. World.

Prevalence 1998.1.1 2008.1.1 2008.7.1

World

Internet 2.0% 19.1% 21.1%

Fixed telephony 13.66% 19.46%

Mobiletelephony 3.68% 48%

China

Internet 0.05% 15.97% 19.1%

Fixed telephony 5.62% 27.8% 27%

Mobiletelephony 1.06% 41.6% 45.6%

Note: The 2008 world penetration rates of fixed and mobiletelephony are estimates.

LYT-TECHLEADERS-January 12/24/08 11:35 AM Page 10

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time in 2007, while calls made through fixed-line phonesdecreased by 17.1 percent.

It is safe to conclude that mobile telephony, either domes-tic long distance or local calls, has gone far beyond fixed tele-phony, and by the end of 2007, mobile long distancecumulative call minutes began to surpass wired VOIP. Anoth-er notable trend is that by mid-2008, 37 percent of mobilephone subscribers in China used wireless packet data services,and 28.9 percent of net citizens accessed the Internet bymobile handset. As third-generation (3G) business continuesto grow, the number of people accessing the Internet wireless-ly is expected to increase fast.

The changes in the development of the telecoms businessbrought opportunities as well as challenges for the industry.The challenging issues in China may be summarized as fol-lows. First, there is the conflict between the increase in Inter-net users and a shortage of IPv4 addresses. Internetpenetration rate grew by 55 percent at the end of June 2008from that of June 2007, bringing the total number of users upto 253 million, yet only 0.625 IPv4 address is, on average,available per user. This number excludes the address poolavailable to mobile Internet users, whose addresses are pro-vided by China Mobile as private addresses, the number ofwhich is also less than sufficient to support continued growth.The number of Internet users in the world caught up with thefixed-line phone by the end of 2007, and the supply of IPv4addresses is expected to be exhausted globally by 2012. Inter-net penetration in China is still lower than the world average.By 2020, China may reach the year 2000penetration level of the developedworld (i.e., 40 percent).

Transition to IPv6 is inevitable.However, software-based upgrade toIPv6 is impossible for the large num-bers of IPv4 routers online today. Fixednetwork operators are very cautiouswith large investments, especially thoselooking at rather slim profit margins.Besides, few terminals currently in usesupport IPv6, and the prospect of a“killer application” requiring IPv6 isnot yet good enough for the operatorsto make up their minds. In response,the Chinese Government initiatedChina’s Next Generation Internet(CNGI), a pilot project on experimentaldevelopment and application of IPv6-based equipment, terminals, and ser-vices. CNGI developed the SourceAddress Verification Authenticationtechnology, for which the Internet Engi-neering Task Force formed a specialresearch team. The progress of thiswork is expected to improve the safetyof the Internet. CNGI also deployedpilot application demonstrations such assensor networks and video surveillanceapplications in gymnasiums at the Bei-jing Olympics, aiming to exploit thelarge address pool of IPv6.

The second challenge arises fromthe conflict between soaring demandfor bandwidth required for broadbandstreaming media services and thereturns on investment for operators.According to the data from Chinese

fixed network operators, the bandwidth of the domestic back-bone network has to be increased by some 200 percent everyyear. But broadband capacity of infrastructure remains at alow level in China. The average available international Inter-net trunk bandwidth per Internet user was only 1.95 kb/s inmainland China at the end of June 2008 compared to 24.5kb/s in Hong Kong in 2007. Two reports from the UnitedStates demonstrate the size of the problem. A six minute pro-gram called “Evolution of Dance” on YouTube was down-loaded 54 million times in 2007, which resulted in data flowgreater than the Internet saw altogether across the globe overan entire month in 2000 [2]. An article published by Ciscopredicts that by 2010, the average American home will streamapproximately 1.1 Tbytes of video, data, and voice traffic permonth. At this rate, a typical neighborhood of 20 homes willgenerate more traffic than the amount that traveled across theentire Internet backbone in 1995 [3].

The population is dense in the urban areas of China, whichis a positive factor for deploying fiber to the home or building(FTTH or FTTB). Hopefully, system costs may be lowered toa level competitive with asymmetric digital subscriber line(ADSL). However, the broadband business model with a flatmonthly package fee that is provided by Chinese fixed net-work operators cannot limit the use of P2P services. P2P ser-vices will seize bandwidth intended for virtual private network(VPN) and voice services, and will eventually undermine thereal-time businesses and bring down quality of service (QoS)for VOIP clients unless the capacity of the network is expand-

TECHNOLOGY LEADERS FORUM

IEEE Communications Magazine • January 2009



IEEE Communications Magazine • January 200912

ed greatly and soon. However, merely scaling up the accessbandwidth means greater pressure on the backbone networkwhile failing to generate appropriate returns on investment.

As a result, Chinese telecom operators are starting to buildthe so-called second-Internet infrastructure. Take China Tele-com, for example. The existing Internet is used to providecommon users with services including P2P, and the new ChinaTelecom Next Generation Carrying Network (CN2) supportsboth IPv4 and IPv6, and applies the IP and IP/multiprotocollabel switching (MPLS) protocol stacks to non-VPN and VPNsubscribers, respectively. Essentially, it provides a dedicatednetwork for business customers. CN2 realizes business provi-sioning and safety control on its edge routers, limits the flowsaccording to different QoS strategies, and the core network isonly responsible for switching and transfer packets. Thismodel guarantees QoS for VPN clients. The CNGI Projectalso investigates and develops techniques for the IP-basedmanaged network.

The third challenge rests with the conflict between the riseof mobile Internet services and the scarcity of radio frequencyspectrum. The penetration rate of mobile communications isincreasing rapidly in urban areas of China. In some large cities

the penetration rate is over 90 percent. The high populationdensity makes it possible that the density of mobile phone sub-scribers will reach 120,000~140,000 km2 in a downtown area.The traffic load can reach 650 Er/km2 during busy hours, andeven as high as 5400 Er/km2 in case of a special event.

Table 2 assumes a 70 percent penetration rate of mobilesubscribers in a typical central business district in 2005, and cal-culates the GSM and 3G spectral bandwidth needed to providevoice services during regular busy hours [4]. Declining chargesfor mobile services have stimulated an increase in minutes ofuse in recent years, which annually grew by 14.8 percentbetween June 2003 and June 2008. Additionally, the largernumber of users accessing the mobile Internet and using broad-band services such as 3G and long-term evolution (LTE) alsoadd to the burden on urban mobile frequency spectrum.

As a solution, Chinese telecom operators try to deploybase stations at greater densities in urban areas. A smallerradius requires lower power of base stations so as to avoidinterfering with nearby base stations, which, on the otherhand, means weaker penetration of buildings, where addition-al coverage measures have to be added. Deploying extra basestations may also be impeded by difficulties in obtaining

antenna locations.Improvement of the radio air inter-

face technology is a direction deservingconstant effort in the pursuit of higherspectrum efficiency. A time-division–synchronous code-division mul-tiple access (TD-SCDMA) experimentin China based on time-division duplexand smart antenna technology showedbetter frequency efficiency than theusual frequency-division duplex. Chinais also developing LTE technology, pro-posed by the Third Generation Partner-ship Project (3GPP), and conductingresearch related to the IMT-Advancedstandards, seeking further enhancementof spectrum efficiency. China devotesconsiderable attention to the new gener-ation broadband wireless mobile com-munications network, one of the 16major projects in the Outline of theNational Program for Long- and Medi-um-Term Scientific and TechnologicalDevelopment (2006–2020) of China.

The last challenge lies in the conflictbetween the high expectations for con-vergence and transformation, and the


n Table 2. Examples of calculation of mobile communications spectral bandwidth in an urban location in China (assumed penetra-tion: 70 percent).

Indoors Walking On vehicle Total

Density of mobile subscribers/km2 68,800 48,000 900 117,700

Call duration per subscriber in busy hour (s) 108 90 48

Cellular radius (m) 50 300 600

GSM up/downstream bandwidth (MHz) 4.45/6.23 24.72/27.99 1.94/1.94 31.11/36.16

3G up/downstream bandwidth (MHz) 1.42/2.81 5.3/9.07 0.64/1.6 7.36/13.48



IEEE Communications Magazine • January 2009 13

uncertain path to get there. Fixed network operators hope toacquire licenses for mobile service operation and avoid thedrain of subscribers by bundling broadband services with fixedand mobile convergence. Since over half of mobile voice callsand an even higher proportion of wireless data access occurindoors, mobile service operators wish to complement thescarce mobile spectrum by using femtocells or WiFi.

Together with business expansion, another expectation forconvergence is to reduce capital expense and operatingexpense through sharing of network and service managementplatforms. The U.S. Telecommunications Industry Associationnoted, in its description of NGN, that “the term ‘convergence’refers to the advanced integration of communications andcomputing functionalities, in particular the ability to offervoice, data, video, and other increasingly intermingled multi-media services seamlessly over single or multiple infrastruc-tures and platforms” [5]. The European TelecommunicationsStandards Institute specifies that “The next-generation net-work offers the convergence of fixed and mobile telecoms ser-vices and data networks — all based on the same architectureas the Internet.... At the core of the harmonized ‘ALL IP’NGN is the IP Multimedia Subsystem (IMS) which providesan ‘access independent’ platform for a variety of access tech-nologies” [6].

As it supports both fixed and mobile services, IMS isregarded as a solution to FMC by many operators. IMSemploys SIP (Session Initiation Protocol), and it supportsapplications such as VOIP, IM (Instant Messaging) and IPTV.However, it is not preferred for some other applications suchas Web browsing, P2P, VOD or IP-VPN. Thus, IMS may notbe the only answer to the QoS problem, and how NGN willevolve remains an unanswered question [7], with such deci-sions as whether NGI should implement patches such as theInternet 2 Program [8] or employ a revolutionary approachsuch as those being sought by the NewArch and FIND pro-jects [9, 10].

China’s CNGI Project focuses on telecom operators, andseeks convergence of NGI and NGN with controllable andmanageable service applications based on the functions of theexisting networks. The telecom operators also want to trans-port television programs to provide enriched broadband ser-vice and drive their triple play services. Nowadays, theoperators are looking to IPTV to fuel the development ofinteractive value-added services and create new points of prof-itable growth. The TV and broadcasting operators also expectconvergence of the three networks to offer new billing modelsand add value to their cable TV and radio broadcast net-works.

Given the separation of the telecom and broadcast admin-istration systems, and the lag of relevant legislation, conver-gence of the three networks is constrained and, as a result,the number of IPTV subscribers in China still remained atabout one million at the end of 2007. Administrative systemreform for the convergence of the three networks (Telecom,Broadcast and Internet) has also been taken onto the agendaof the concerned authorities. Besides the technological evolu-tion for networks, it is also noted that businesses providingcontent enjoy a higher P/E ratio than telecom operating com-

panies [11].Three full service operators have been recently reorganized

as a result of China’s new telecom reformation. Chinese tele-com operators are striving for transformation of their businessdirections, lifting themselves from the conventional provisionof bearer services to provision of comprehensive informationservices and from a capital-intensive, technology-focusedmodel to a user-centric service-delivery model although the“killer” business models have yet to be validated. Operatorsare focused on not only surviving, but expanding by leveragingtheir natural facilities-based and carrier-class services to eithercompete against or augment content and services. For exam-ple, they might offer an integrated information inquiry servicefor phone users and an integrated application suite that meetsthe needs of business clients. Further extension services arestill under exploration, beginning with a services-orientedenterprise-like call center, video supervisory services, andother IT service outsourcing.

REFERENCES[1] CNNIC, “The 22nd Statistical Survey Report on the Internet Development

in China,” July 2008; http://www.cnnic.cn/en[2] A. Kishore, “Challenge 2.0: Social Networking Drivers New Require-

ments,” Dec. 2007; http://www.level3connects.com/down/Challenge-2.0-Social-Networking- Drives-New-Requirements.pdf, p. 4.

[3] C. Dominguez, “From Commodity to Customer Experience,” Exec.Thought Leadership Quarterly, vol. 4, issue 1, Cisco Systems, Inc.,http://tools.cisco.com/dlls/tln/media/newsletter/2006/issue-37/The-New-Consumer.pdf, pp. 8–9.

[4] Z. Meng et al., “Minimum Spectrum Demand of China Mobile duringthe Tenth-Five-Year Period,” Telecommun. Sci., 2001, no. 4, pp. 7–11.

[5] http://www.tiaonline.org/standards/technology/ngn[6] http://www.etsi.org/website/Technologies/NextGenerationNetworks.aspx[7] G. Keith Cambron, “The Next Generation Network and Why We’ll Never

See It,” IEEE Commun. Mag., Oct. 2006, pp. 8–12.[8] A. Doyle et al., “Internet2 Overview & Update: Engagement, Initiatives,

Network and Services,” Fall 2008 Internet2 Member Meeting, Oct.13,2008; http://events.internet2.edu/2008/fall-mm/agenda.cfm?event=911&day=&track=&details=on

[9] R. Braden et al., “Developing a Next-Generation Internet Architecture,”July 15, 2000, http://www.isi.edu/newarch/DOCUMENTS/WhitePaper.pdf

[10] Meeting rep., FIND Investigators Meeting, April, 2008, http://www.nets-find.net/Meetings/FifthPIMeeting/Agenda_FIND_FifthPI_files/April2008summary.pdf

[11] “Digital.Life,” ITU Internet Report 2006, http://www.itu.int/osg/spu/publications/digitalife/docs/digital-life-web.pdf, pp. 74–75.

BIOGRAPHYWU HEQUAN [SM] graduated from Wuhan Post and TelecommunicationsInstitute in 1964. He has worked for the China Academy of Post andTelecommunications of MPT since 1964. He was vice president and chiefengineer of the China Academy of Telecommunications Technology from1997 to 2003. He has studied optical fiber transmission systems and broad-band networks, and managed R&D projects. In recent years he has focusedon the development strategy of NGN and NGI as well as 3G. He was elect-ed Academician of the Chinese Academy of Engineering (CAE) in 1999 andhas been Vice President of CAE since June 2002. He iscurrently serving asVice Director of the Advisory Committee for the State Informatization ofChina as well as Vice Director of the Executive Council of the China Insti-tute ofCommunications and the Chinese Institute of Electronics, respective-ly. He is an advisor to the Communication S&T Committee of MII and amember of the Advisory Committee of the National Basic Research Programof China (973 Plan). He serves as director of the Experts Committee ofChina’s Next Generation Internet project.




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