Information Technology in a Global Economy
we looked at networks in general; however, in this discussion we’re looking at wireless networks, mostly focusing on mobile networks. Mobile networks in a global economycan be achallengefor multiple reasons. First, governments in other countries control the mobile networks. Second is the technology. Mobile networks in other countries might not be as good as the mobile networks within the US. As a global company, how can we deal with this? With a big push for 5G, which has speeds well over 2Gbps, how does that change the way you do business? What are some things you need to think about when it comes to doing business globally, using a wireless mobile network? A substantive post will do at least TWO of the following:
Ask an interesting, thoughtful question pertaining to the topic
Answer a question (in detail) posted by another student or the instructor
Provide extensive additional information on the topic
Explain, define, or analyze the topic in detail
Share an applicable personal experience
Provide an outside source that applies to the topic, along with additional information about the topic or the source (please cite properly in APA)
Make an argument concerning the topic.
At least one scholarly source should be used in the initial discussion thread. Be sure to use information from your readings and other sources. Use proper citations and references .
210
The money from hauling data, things like video and texts instead of
calls, is now 35.9 percent of total service revenue [in the US] The
phone networks carried 341.2 billion megabits of traffic in the first
half of 2011, according to the survey, up 111 percent from a year earlier
Talk, meantime, may be falling slightly out of fashion The
average length of a call was 1.83 minutes As recently as 2007, the
average call was near or above three minutes. Whos got time to talk,
when theres all that video to watch?1
Mobile data service is more than a booming business; it is a global
phenomenon. Teenagers text each other on their Droids as obses-
sively as business people check email and corporate data on their
iPhone or BlackBerry smartphones. TV stations show video
clips of everything from cute babies to the rebellion in Libya, cap-
tured and sent by people on cell phones. We take it all for granted.
Yet none of these capabilities was available as little as a dozen years
ago.
Just as remarkably, Aicent, a Silicon Valley startup founded in
2000 by an entrepreneur born in Taiwan, is a world leader in provid-
ing the data interconnections among the international wireless car-
riers that enable these functions across their networks. For example,
if you are visiting China or Indonesia and access your emails on your
BlackBerry, the chances are that you are using a network connection
managed by Aicent.
Aicent holds interest for reasons beyond its growth and suc-
cess. It provides an interesting case study of a new model for a
startup business: a company that was constructed from the start to
meet the challenges of operating globally even as a small enterprise.
9 Connecting the wireless
networks of the world
1 Q. Hardy, More wireless devices than people, http://bits.blogs.nytimes.
com/2011/10/12/the-u-s-has-more-wireless-devices-than-people/?scp=16&sq=wir
eless+networks&st=nyt, October 12, 2011.
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The evolution of w ir eless data serv ices 211
Unlike Ness Technologies, the company did not address its domes-
tic market first. Aicent was founded to provide a mission-critical
service to the global wireless telecommunications industry. This
placed it squarely in the largest and fastest-growing segment of the
world economy: in 2010 service businesses accounted for 63.2 per-
cent of global GDP.2
Aicents business depends on the wide global implementation
of new wireless technologies, and the rapid growth of mobile com-
puting and messaging. But its success was based on the vision of its
founder and the companys execution of its business plan. Having
entered the market early, Aicent was in a good position to ride the
rising tide of international data traffic. To fully appreciate its story,
we need to understand how wireless networks have evolved as plat-
forms for data services.
The evolution of wireless data services
Consumer wireless (cellular) service is so ubiquitous today that one
easily forgets how young it is and how quickly it has grown. It only
emerged as a major industry in the 1990s, but by 2004 its global sub-
scriber base had reached 1.7 billion. In 2011 that number was over 5
billion. Practically every inhabited part of the planet has wireless
consumer service.
Cellular mobile service started with first-generation (1G) ana-
log wireless systems, in use in the 1980s and 1990s. These were
designed to provide mobile voice-only telephony, and the handsets
were simply portable telephone receivers. There was practically no
standardization of technology in those early years. Had the industry
stayed analog and voice-only, there would have been no market for
an Aicent.
Everything changed with the introduction of 2G systems in
1991. This second-generation technology switched transmission and
2 Statistic from The World Fact Book, published by the US Central Intelligence
Agency, available at www.cia.gov/library/publications/the-world-factbook/
fields/2012.html.
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Connecting the w ir eless networ ks of the wor ld212
reception from analog to digital, opening the door to data services as
well as voice calls. In 1993 text messaging was the first data service
to be introduced.
Digital takes over
Three new generations (2.5G, 3G, and 4G or LTE) of digital wireless
networks have appeared since then, each representing a significant
advance over its predecessor. As carriers deployed these improved
networks, handset makers sought to exploit their capabilities, and
tempted consumers with ever newer, more sophisticated handsets.
Changes came incredibly fast. While analog landline telephones had
stayed virtually the same for decades, mobile phones had a model
lifespan measured in months.
Early digital handsets provided only telephony and short
message service (SMS, the foundation of todays Twitter network).
They soon added more data services, such as full Internet access,
first announced by NTT DoCoMo in Japan in 1998. Eventually they
evolved into todays smartphones. Smartphones have become plat-
forms for entertainment, personalization, and rich media commu-
nications. Voice communication is just one of their many functions.
Subscribers can use their smartphones to listen to music, connect to
the Internet, get GPS-based travel directions, access email, exchange
short messages, and send and receive pictures and short videos
recorded with cameras incorporated into their handsets.
These devices also serve as gateways to an ever-growing number
of personalized applications offered by the networks, such as online
payments and social network interaction. Data and video applications
dominate the list of features on handsets from companies such as
Apple and Research in Motion (RIM), maker of the BlackBerry phone,
and those equipped with Googles Android operating system.
Building out the network
Digital wireless networks grew rapidly, thanks in large part to the
orderly development of standards by international industry organi-
zations. Carriers seeking to upgrade their networks selected their
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The evolution of w ir eless data serv ices 213
digital technology from a limited menu of accepted standards. Most
carriers, including those in developing countries in Asia and else-
where, adopted GSM (Global System for Mobile Communications)
technology, which had originated in Europe. A smaller group, includ-
ing a few Asian carriers and Verizon and Sprint in the US, adopted
CDMA (Code Division Multiple Access) technology, developed by
another California startup, Qualcomm.
Regardless of which system a carrier chose, it was built on
digitally packetized data technology (discussed in Chapter 5). For
GSM operators, the need to offer data services meant adopting the
GPRS (General Packet Radio Service) standard. CDMA operators
had their own standards, which were not compatible with GPRS. In
either case, subscribers could access the Internet from handsets at
data rates higher than 100 kbps (kilobits per second).
Carriers deployed data-service-enabling networks in most of
the world between 1999 and 2009. As these networks proliferated,
smartphone sales grew rapidly, particularly after 2004 when many
networks were already in place. Sales increased from 35 million
handsets in 2004 to over 500 million units in 2011. Recently they
have roughly doubled every year.
Mobile computing arrives
Mobile computing, and the use of data service networks, took a big
leap forward with the introduction of wirelessly connected tablet
computers in 2010. In 2011, Cisco Systems projected that 15 billion
devices would be wirelessly connected globally by 2015. It predicted
that mobile data network traffic would nearly double every year.
A good way to appreciate the remarkable growth of mobile
computing is to compare it to that of PC-based personal computing.
A metric for the two industrial sectors is their comparative sales
of hardware and software, shown in Figure 9.1.3 In 2000 these rev-
enues were $348 billion for PC computing and only $500 million
3 T. McCourt and M. McKee, The mobile computing revolution, Morgan
Keegan, January 28, 2011, p. 4.
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Connecting the w ir eless networ ks of the wor ld214
for mobile computing. By 2005 mobile computing had reached $20
billion. By 2011, however, PC hardware and software sales had risen
to only $485 billion, a 40 percent increase, while mobile computing
hardware and software revenues had leaped more than eightfold to
$171 billion. This growth was primarily due to mobile network con-
struction and increased sales of smarter handsets.
Data traffic dilemma
As carriers deployed digital networks around the world, they found
an increasingly troublesome problem. Global wireless data offered a
major opportunity for revenue growth, but the data had to travel eas-
ily across all networks. Unfortunately, interconnection among the
networks was not transparent, because carrier traffic standards and
operating conditions were not uniform around the world.
This situation threatened to undermine the popularity of data
services. For example, what if a carriers customer was outside its
coverage zone, or roaming, in the parlance of the industry? The
customer would have to connect through another carrier. Voice
calls in this situation were expensive, so the carrier wanted to pro-
vide lower-cost data services such as SMS and multimedia message
service (MMS). Messaging was the first area of interest for carriers
Figure 9.1 A comparison of combined hardware and software revenues
in the personal computing and mobile computing industries (ref. 3).
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The evolution of w ir eless data serv ices 215
because the earliest popular data services consisted of SMS and
MMS messages.
However, because of the disparity in traffic standards, net-
work interconnection required extensive investments in connect-
ivity, followed by rigorous testing, involving the wireless carriers
interested in partnering. This was a big change for the industry.
Previously, when establishing voice interconnections, carriers had
typically negotiated much simpler direct bilateral agreements with
each other.
Market opportunities for intermediaries
To address the interoperability problem, in 2000 the GSM Association
established standards for GPRS Data Exchange, or GRX. Carriers
connected by a GRX-compliant hub could interchange data, thus
replacing the complicated, and dedicated, one-to-one technical
relationships previously needed to accommodate subscribers who
wanted to use GPRS services outside of their home network.
It worked like this. Each carrier would connect its switches,
provided with suitable new software, to a GRX computer hub. From
there its roaming data traffic would be connected to other carriers
with similar termination capabilities. Such a hub and spoke arrange-
ment freed wireless carriers from the cost and difficulties of man-
aging individual connections. CDMA operators also established an
interconnection service called CRX.
However, these technology-specific interconnections were not
a complete solution. In addition to both technologies needing hubs,
carriers that used CDMA technology could not connect their data
traffic to those that used GSM technology, and vice versa, without
another intervening gateway for standards translation.
Clearly this situation created opportunities for companies that
could build and operate interconnection hubs for the international
wireless industry. The more carriers that appeared and networks
that were built, the greater were the opportunities that arose. This
was the business for which Aicent was built. It was designed to serve
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Connecting the w ir eless networ ks of the wor ld216
as a trusted intermediary, providing interconnection for the carriers
and eliminating the need for them to establish and maintain bilat-
eral relationships for handling each others data traffic.
Precursor to an idea
Lynn Liu, the founder of Aicent, is a serial entrepreneur. Born in
Taiwan and educated at National Taiwan University, she came to
the US to earn an M.S. in Computer Science at the State University
of New York. At the completion of her studies she moved to Silicon
Valley where, in 1994, she co-founded GRIC Communications with
her husband, Dr. Hong Chen.
The idea behind GRIC was to provide people with low-cost
access to the Internet while they were traveling. In the 1990s, when
broadband connections were rare, there was a boom in companies
called ISPs (Internet Service Providers) who offered dial-up access
to the Internet over telephone lines. People would contract for an
Internet connection with an ISP that had phone numbers in their
local calling area. Since getting Internet access was a local call, they
could stay on line as long as they wanted without piling up long-
distance phone charges.
Everything changed when these subscribers were on the road.
Their regular number became long distance, and they would have
to hope their ISP had local numbers in the places they were visit-
ing. Without either a local connection or a toll-free dial-up number,
access through an ISP to the Internet became a costly long-distance
call, billed by the minute. GRIC offered a number of services, but the
most interesting one enabled travelers to access the Internet from
anywhere through a local phone call to a local carrier, as long as
the carrier participated in the GRIC network. GRIC negotiated the
agreements among carriers to permit travelers to access the Internet
through a local phone call, thus saving them the expense of timed
long-distance calls.
Dr. Hong Chen was chief executive officer of the company, but
Lynn Liu was its chief operating officer and head of international
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A icent gets sta rted 217
market development. Believing that the Asian market offered the
greatest growth opportunities, she concentrated on building relation-
ships with regional carriers in Asia. She earned the trust of senior
executives of the major carriers in China as well as those in Singapore
and Hong Kong. These relationships would prove extremely valuable
for Aicent.
Riding the Internet and telecommunications bubble, GRIC had
its IPO on NASDAQ in 1999. Despite its modest revenues it reached
a market valuation in excess of one billion dollars. Shortly after its
IPO, when its value burst along with the market, GRIC was acquired
by a competitor. This left Liu free to start Aicent in 2000. She was
joined by David Zhang, the former head of technology at GRIC and a
telecommunications expert.
The initial funding for Aicent came from Asian venture cap-
ital funds. That money lasted long enough for the company to reach
significant revenues and attract another investor, Warburg Pincus,
which invested in the company in 2005.
Aicent gets started
Lynn Liu had realized there was an opportunity to build a company
to solve the data interconnection problems of the wireless carriers.
The GSM industry association had defined standards for its GRX
interconnection service. But who was going to manage the inter-
change hubs it required? She positioned Aicent as a neutral third-
party enabler of data traffic interoperability for carriers around the
globe, concentrating at first on Asia, where GSM was dominant and
she had personal contacts.
Liu planned to establish digital traffic management hubs in
strategic locations such as Beijing, Hong Kong, and London, and con-
tract with carriers to route appropriate international traffic through
these hubs. Aicents revenues would come from two sources: fees
for message transmission; and payments from carriers for the use
of the interconnection links, based on the amount of traffic carried
on their behalf. Instead of building her own facilities, she rented the
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Connecting the w ir eless networ ks of the wor ld218
pipes that interconnected the data trunks of the various carriers.
This kept Aicents initial costs low, and allowed the company to
scale its infrastructure as traffic volumes increased.
It was a bold idea. There were three key conditions for its
success:
the economic build-out of a rented global network to attract the interest
of carriers in linking their traffic to the Aicent hubs;
trust on the part of the carriers that Aicent was capable of delivering a
reliable service at an attractive price; and
enough data traffic to fill the hubs and garner enough revenues to keep
Aicent in business.
Without all three of these factors working in the companys
favor, there was no business.
Building the network
For Aicent to succeed, it had to quickly establish a dominant pos-
ition by offering the most routes for data interconnection and the
highest reliability. This meant that a special network meeting the
most rigorous requirements had to be in place before carriers would
commit their traffic. When asked about her strategy in the early
years, Lynn Liu says a business like this needs to have the greatest
number of connected carriers the whole value is in the network.
Whoever has the best and widest network has the most attractive
one and gets the growth the winner takes all.
Right from the start, the Aicent technical team, managed by
David Zhang, proved itself capable of building and managing the
required international access networks. This was owing in part to
experience acquired at GRIC, but they also implemented a great deal
of novel digital technology to ensure security and reliability.
There were operational challenges too. When dealing with
carriers, failure of a link is not an option 100 percent uptime is
essential. That the Aicent team was able to meet this standard of
performance was a major reason for the companys eventual success.
Compatibility and adaptability were another requirement. Aicents
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A icent gets sta rted 219
service had to be compliant with the many existing industry stand-
ards; but the wireless industry does not stand still. The company
also needed the ability to implement new standards quickly.
Gaining the trust of big carriers
Demanding as these requirements were, building the network was
the easy part. It just cost time and money. Overcoming the trust bar-
rier was a much more difficult proposition. What carrier would trust
a startup with such a critical service? This is where Lius previous
experience at GRIC came into play.
When simple messaging was the only data traffic, the large
carriers, including China Mobile, entered into bilateral agreements
with each other for GRX data services. But as new messaging ser-
vices were introduced, many of the carriers, including China Mobile,
sought to avoid investing more time and effort in establishing bilat-
eral contracts, performing engineering tests, and running trials with
multiple operators. They shifted to a neutral third-party hub strat-
egy. Outsourcing such services to a trusted outside company made
strategic sense, but they had to find the right neutral party. The fact
that Liu had already worked with senior executives at the carriers
was hugely helpful. She was known and trusted, an important busi-
ness advantage in Asia, so when she presented Aicent as a vendor a
major barrier to achieving credibility was removed. While that level
of trust provided an opening for Aicent to build its business, it was
still a slow process in the early years. The company had to estab-
lish a reputation for quality and reliability. That wouldnt happen
overnight.
Liu was successful in securing China Mobile, already the lar-
gest wireless company in the world at the time, as an anchor cus-
tomer. This was a key milestone in the companys development.
Aicent created the transport network for China Mobiles data roam-
ing infrastructure. This relationship was critical in helping Aicent
to acquire other Asian carriers as clients. By 2005, Aicent had com-
mercial GRX contracts with thirty-four carriers in the Asia-Pacific
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Connecting the w ir eless networ ks of the wor ld220
region, representing a 59 percent market share in a part of the world
with 732 million wireless subscribers. By 2010 Aicent had the lar-
gest customer base for data roaming services in Asia. It was one of
the first to offer these services.
For better support to its Asia-Pacific customers, it has a
research and development and customer support center in Beijing,
China. Aicent has nearly two-thirds of its employee base in Beijing,
where the average engineer costs Aicent around one-third of what it
would cost to hire staff in Silicon Valley, the companys headquarter
site. This gives the company an important competitive edge over
larger competitors who entered the market such as Belgacom, which
is based in Europe, or Syniverse, which operates out of the United
States. Aicent has another advantage, too. Unlike some of its com-
petitors, it is an independent vendor. Many carriers are reluctant to
rely on another carrier to provide their data facilities.
Aicent rides the wave of data services growth
Building a network and earning the trust of big customers were
both necessities for Aicent, but logging enough traffic to generate
significant revenues was just as important. Here the company was
fortunate, though not at first. Carrier data services took a few years
to ramp up in volume. While the market was developing, Aicents
revenues remained low, and the company was not profitable but it
wisely used its resources to build a customer base. While the busi-
ness thesis appeared sound, predicting revenue growth is not a sci-
ence. It took real courage on the part of company management and
the investors to continue to support the business while revenues
grew slowly.
The turn in revenue growth finally happened in the mid-2000s,
jumping between 30 and 45 percent every year. This was because
there were finally enough 2G data service-enabled networks in oper-
ation to create significant interconnection traffic needs. In fact,
Figure 9.1, which charts the hardware and software sales of products
that enabled mobile computing (i.e. network deployment), shows
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A icent r ides the wave of data serv ices growth 221
that the inflection point at which growth ramped up came in 2003.
Carrier network deployment preceded data traffic growth, of course.
But when the traffic needs emerged, Aicent was there to handle it,
because it had the key infrastructure in place and the staff to handle
customer needs.
Since about 2005 the growth in mobile data traffic (and its
associated carrier revenues) has been huge. Worldwide mobile data
revenue grew from $65 billion in 2004 to $310 billion in 2011. Much
of this growth has been due to the popularity of mobile video. About
50 percent of the data being transmitted to mobile devices in 2011
is video. It is amazing to realize that in 2010, global mobile carriers
were handling data traffic three times bigger than what the whole
Internet handled in 2000. Roaming has also become a very profitable
revenue source for wireless carriers, increasing from 12.2 percent
of their revenues in 2004 to 21.5 percent in 2009. While voice traf-
fic is still the main revenue source on the new networks, in 2011
data accounted for about 20 percent of the worlds mobile carrier
revenues, with more growth on the horizon.
Expanding beyond Asia
As handsets proliferated, data services diversified, networks increased
their geographic dispersion, and international travel boomed, the
need of carriers and their customers to interconnect mobile services
across networks, across handsets, and across types of data became
more pressing. Aicent was well positioned to grab a bigger share of
this exploding market. It had benefited in the early years from the
fact that the interconnection market opportunity was too small to be
attractive to big companies. By the time the majors began to appre-
ciate the strategic value of such a business, they were in catching-up
mode. Aicent already had the network assets to exploit the oppor-
tunity and the reputation to sign up new customers.
Aicent, by contrast, was focused on expansion. It began con-
tracting with operators in Europe, starting with one of the major
carriers, British Telecommunications (BT). In 2004 BT decided to
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Connecting the w ir eless networ ks of the wor ld222
divest itself of its GRX interconnection service, which had yielded
only modest revenues. Accordingly, it invited bids from a number of
companies interested in acquiring it. However, BT was not anxious
to hand over its hubs to an international telecommunications com-
petitor. Making a deal with Aicent solved this problem, because it
was a neutral party. The company also committed itself to leasing
BT assets as needed to serve its customers. In effect, Aicent and BT
became business partners to the benefit of both. And Aicent gained
access to European carriers, complementing its Asian footprint.
In 2005 Aicent acquired an operating base in North America,
getting AT&T as a customer. AT&T is the new name of SBC, a spin-
off of the original AT&T, which bought its former parent that year
and adopted its name. AT&T also owns a majority share of Cingular
Wireless, which had acquired the original AT&Ts wireless division
a year earlier.
By 2011 the company was interconnecting 180 mobile service
operators with more than 2.5 billion subscribers, including nine of
the ten largest in the world. Its footprint is particularly strong in
Asia. It services all of the carriers in mainland China, Hong Kong,
Macau, Taiwan, South Korea, Singapore, Philippines, Malaysia,
Indonesia, and Thailand. RIM became an important customer, using
Aicents services to connect BlackBerry customers in Asia with its
central data center in Canada. On any given day, Aicents network
facilitates over 100 million roaming transactions generated in 114
countries.
New services are constantly being added to its portfolio. For
example, the rapid growth of WiFi services around the globe has
given rise to the need for roaming agreements, and the company is
providing a service that addresses that need.
Aicents ability to quickly address emerging needs is a tribute
to its excellent technology team in Beijing, with support from mar-
keting and customer service teams around the globe. Continuous
monitoring of the international network for quality assurance pur-
poses is conducted from the Beijing location.
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M a naging a globa l business 223
Managing a global business
It took five years, from 2000 to 2005, for the company to generate the
revenue growth it had hoped for. Once that was achieved, it ramped
to profitable revenues in excess of $50 million. As is the case with
all startups, this lag between investment and revenues is a critical
period. How well a company is prepared to make good on its promise
depends completely on following a wise investment strategy during
this early period which always lasts longer than any entrepreneur
or investor expects.
In Aicents case its growth was funded with a relatively modest
investment. This would not have been possible without the decision
to build the companys technical resources in China, where oper-
ating costs were much below those in California. The experience
of the co-founder of the company provided the basis around which
the outstanding technical team in network design and management
could be built. At the same time, however, the companys headquar-
ters were maintained in Silicon Valley. This was done in the belief
that it would be easier to attract international marketing and senior
management talent, as well as future funding, in this location. Lynn
Liu acquired a second home in Beijing and was able to manage the
company effectively from either side of the Pacific. As she spent a
great deal of time with Asian customers and the majority of the com-
panys employees were in Asia, this proved to be a good strategy.
None of this success would have been possible without out-
standing financial and operational management. Kallen Chan, the
chief financial officer of the company, provided the glue to knit
together the operations of the company around the globe from his
office in the Silicon Valley company headquarters. Born and raised in
Hong Kong, Chan came to the US to attend Santa Clara University,
where he earned an MBA. Prior to joining Aicent in 2005, he had
held senior financial management positions in several companies in
California. He joined the company just when its revenues were start-
ing to grow and profitability was in sight. Along with that growth
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