Ernst & Young Reveals New Insight Into How IP Technology Will Revolutionize Customer Interfaces in The Connected Society

GENEVA (PROTEXT) - Ernst & Young's IP Research and LandmarkConnected Society Study Provide Key Communication Perspectives atTelecom '99 Conference in Geneva Ernst & Young announced today atTelecom '99 a new report on the impact of IP network technologyon customer relationship management in the next century. As afollow-on report to Ernst & Young's recently completed landmarkglobal communications study entitled The Connected Society, thenew paper reveals that IP- based systems will fundamentally alterthe business model for communications providers. The new systemswill change all the pre-existing rules about customerrelationship management, highlighting the need to adopt a new andflexible approach to the customer, including reengineeringcustomer interfaces and all the processes which support them in anew era of communications competition. Entitled Survival in The Connected Society, Why IP SpellsTotal Transformation For Telcos, the paper documents the totalbusiness transformation necessary for communications companies asthey embrace the open systems movement and prepare for a completeoverhaul of infrastructure systems to capture or retain thehigher value customer in the Connected Society. "IP turns service providers' models 'outside in,'" said JohnEdwards, with Ernst & Young's Asia Pacific communicationspractice. "The combination of the open IP architecture with free-market economics puts the customer in complete control and forcescommunications providers to fulfill customer needs in new value-added ways. The IP business transformation affects the strategicbusiness model, the core profit center, the corporate culture,and the tactical OSS of the communications provider all at thesame time." While the first impact of IP networks will be to dramaticallyreduce pricing models, the most important long term effect willbe a new strategic business model to handle the customer withinan open systems environment. Incumbent carriers will need toadapt to different pricing schemes, form extensive new partneralliances, and transform underlying OSS to accommodate the new IPopen architecture world. "Today a company's OSS and their business model areinterdependent. They must be co-developed and co-designed tosucceed," said Jeff Perelman, with Ernst & Young's StrategicAdvisory Services. "Moreover, even if you have a successfulstrategy, the business model and OSS will remain the criticalsuccess factors." Supporting research referenced in the paper also demonstratesthe expected rapid growth of IP-based basic services such asvoice and fax reaching $30 billion in revenue opportunities overthe next five years. In addition, data from the report suggeststhat voice communications, which today still provide some 70-80%of the traditional carriers' revenues, could essentially be afree service in the coming five years on the back of explodingdata volumes. And some observers expect the total volume of IP-based traffic to surpass that of the circuit-switched PSTN assoon as 2004. "To remain a leader in the new open IP environment and tosatisfy customer demands, carriers will need to investsubstantially more on the systems layer than they currentlyinvest on the IP network layer," said Hugh Jagger, with Ernst &Young's European communications practice. "Virtually everycustomer-facing system and supporting process will have to bereengineered for maximum flexibility and effectiveness insatisfying the Connected Society customer." In order to prepare communications companies for thesedramatic changes ahead, Survival in The Connected Societyprovides recommendations to companies facing the challenges ofthe new IP world and related considerations in attaining andkeeping customers in the Connected Society. According to thepaper, incumbents must: - account for rapid depreciation of packet-based networkinfrastructure (less than 36 months vs. 7-to-20 years) - accommodate a shift in intelligence to the edge of thenetwork as opposed to intelligence in transport or signalingsystems - bridge current applications (and their associated revenue)from multiple service-specific networks to a converged IP network - resist short-term pressure to rely on their massive sunkinvestment - re-educate a workforce that has spent decades optimizing thetechnology that IP is replacing - shift IT spend from maintaining legacy systems totransforming business processes and OSSs to handle the customer-centric open IP environment The IP paper was developed on the heels of the breakthroughConnected Society study recently completed by Ernst & Young thatdocuments a profound restructuring of the communicationsindustry, focused on addressing customer needs more rapidly andeffectively in an era of new communications services andincreased competition. This unprecedented study, involvingdiscussions with over 100 CEOs and executive leaders at 96 of theworld's top communications service providers and equipmentvendors, provides content and perspectives for discussions at theTelecom '99 Forum in Geneva, including two major industry panelsat Telecom '99 involving CEOs and other industry leaders: - The Connected Society Roundtable:

Sunday, October 10, 1999, 2:30 p.m. - 5:30 p.m. at Arena - The Information Age Company:

Monday, October 11, 1999, 9:00 a.m. - 1:00 p.m. at Palexpo About Ernst & Young Ernst & Young provides assurance and advisory businessservices, tax services and consulting services for globalclients. Ernst & Young International is a global organizationwhose member firms have 85,000 people in 132 countries worldwide.Worldwide revenue of the organization in fiscal year 1998, endingSeptember 30, 1998, was $10.9 billion. Ernst & Young consultstelecommunications clients around the world, with servicesincluding strategic planning, system and process development,outsourcing, audit, and tax. Visit the Ernst & Young web sites at http://www.ey.com/communications http://www.eyi.com ots Original Text Service: Ernst & YoungInternet: http://www.newsaktuell.de Contact: Barbara McFarren ofErnst & Young, (in the USA) 408-947-4969; or Derek Kober ofNeale-May & Partners, (in the USA) 650-328-5555, ext. 126

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