Scenarios for future telco revenues in 2012-2015,

1. Telco Sources of Revenues 2012
ETIS November 14, Brussels
Bernt S Ostergaard
Washington DC / Paris
1

2. Identifying Future SP Revenue Sources
attempt to make accurate forecasts, but to provide
No
ʻviewsʼ to improve decision-making today
Identify decision elements and their interrelation – and
possibly their speed of development
Serious forecasting takes much time and effort to
ensure consistency in thinking. For that Iʼll refer to an
in-depth study, SP2015 from Cisco
On that basis Iʼll assess Revenue Sources
2

3. Cisco Scenarios in Telco Developments 2008-2012
 Consumers take up new
Expanding services but are not willing
 Consumers pay or
Market to pay much for them.
place a premium on a
Everything free or cheap
quality experience
Mass Wireless
 Best-effort quality
 Co-opetition: SPs and
(likely in Africa
 Significant value
OTTs collaborate and
& Latin
destruction in SP; Value
America share growing pie New Order
migrates to OTTs
 Value migrates to
trusted brands
Futurama Fragmented
Consolidation
Evolution Competitiveness
Service Provider
renaissance
Bloodbath
Cyber Shock
(likely in China)
Bankruptcy
Concentration
Static Market
Primary Scenarios
Secondary Scenarios
Source: Fernando Gil de Bernabe: The Cisco SP2015 study

4. Topics
Elements: What defines the market for Telco
Decision
services?
Interrelations
Speed of Change
The
Scenario for 2012
The fight for advertising revenues
4

5. Decision Elements: The Power Quadrant
macro-economic
preferences
The
Customer
conditions
Technology adoption willingness

Bears & Bulls

Evolution of social relations

Competitive conditions

on national markets
Regulation
Technology
Conditions for providing Basic technology moving
 
services and content
everyone forward (LTE,
HTTP)
Competitive relationships and

dependencies between SPs
5

6. Interrelated Revenue Trends
preferences
Customer
Broadband mobility with services from strong consumer brands

Growing social reliance on telecoms

macro-economic conditions
The
Softening of investment climate, focus on optimization

Shift from network core to the edge

Regulation
More centralized EU-level regulation and level playing field

Infrastructure split between QoS and best-effort net-neutral Internet

Technology
Focus on Collaboration services and any-content-to-any-device

Multiple wireless broadband technologies

6

7. Interrelations In Futurama & New Order Scenarios
Futurama focus is on CapEx and OpEx reduction
The
The New Order presupposes significant technology
improvements to support new services and increased
revenues
FTTH Home Network
ULL eConsumer
Better STB
Resellers
economics eGovernment Web 2.0
Regulation Increased eEconomy
+ Penetration
Competition Attracts $
Usage Data
- Market Enterprise& WSPs Center
Share
No New No New
-
Services Diff Services
Revenue
Quality
IP Traffic Productivity
suffers Squeeze
- Video
Complexity
No NW Vendors
Upgrades
- OPEX
Cut CapEx
New
Productivity
-Legacy
Cut Cost Revenue IT
suffers Margin Capex Transform
Managed
IP NGN
Services
Change Biz
SEF
Mode to NGSP
BW and Footprint
IP
Source: Cisco IBSG Disruption
7

8. Speed Of Change
Main sources of Current Future
revenue % - KPN Drivers DRIVERS:
SBN: Social & Business
MS
1. Fixed Line 25% Networking
2. Wireless 45% IPT, SBN, ES IPT: Video & Mobile Data
IP Traffic Growth
BB, IPT,
3. Broadband 15% TS: Technology shifts
4. IPTV 5% TS, IPT, ES, Reg MS: Managed Services
And Business ICT
10%
5. VOIP SBN, IPT, MS EB: Emerging SP
6. Other (advertising, 1% Reg, ES Business Segments
Reg: Regulation
sponsoring etc.)
The World In 2010
Wholesale DSL to ULL,
30PetaBytes per
then to FTTh; Cable
month driven by web
Upgrades; Digital TV
on-the-go
Second Wave of 46 ExaBytes per month; 42%
Productivity enabled CAGR until 2012
by Web 2.0
246 Million New BB
Competitive market
WSP (OTTs), Households
structures for
Broadcasters, Media
broadband diffusion
8

9. …And the Bigger Income Pie
New Order vs.
Futurama
$ Trillion
4
3
2
Source: Ovum, IDC, Current Analysis, Canalys, Gartner, Jupiter, PWC, e-Marketer, Cisco IBSG analysis July 2006
9

10. Comms Spending by 2015 Will Have Significant Growth
1,200
2015 End-user
Spend ($B)
1,000
IT Services
800
600
VAS Consumer
Mobile Voice
Fixed Data
400 Mobile Data
VAS Business
200 Devices
Services to OTTs
Fixed Voice
Traditional TV
-20% -10% 0% 10% 20% 30% 40%
2005–2015 CAGR
>50% Captured by SPs
“Best Guess” Assumes the Following Probabilities:
10–50% Captured by SPs
Europe: New Order 40%, Evolution 40%, Futurama 20%;
<10% Captured by SPs
1 Includes xDSL, BWA, Legacy and Cable
Note: Not Adjusted for Inflation
2 Includes IPT, CMTS, Security, WLAN, Traditional Optical
Source: Ovum, IDC, Current Analysis, Canalys, Gartner, Jupiter, PWC, e-Marketer, Cisco IBSG analysis July 2006
10

11. Revenues Affected By New Delivery Chain
SP’s Losing Direct Customer Contact
Aggregation/ Network
Content/Solution End-User
Commerce Service
Creation Device
Enablers Delivery
? ?
End User
FMC opens SDP
opportunities
Current Thrust Emerging
Source: Cisco IBSG

12. The Consumer Service Delivery Platform Key To Indirect Revenues
Consumer
Brand third
party content
Advertising server
providers
Commoditized
This is the “smart pipe” SP
12

13. SP Business Services Are Moving Up the IP Delivery Stack
System Integrators
Outsourcers
Business
Business Consulting
Transformation
BPR /BPO Transformation
Services
SI Consulting
ICT Outsourcing, ICT Managed Services
Outsourcing &
IT Outsourcing
Managed
IP Network outsourcing
Services
VoIP, Collab. Apps, Call centres, CRM, Apps mgmt
Applications &
Apps. management
Messaging, Portals, Web Services
Monitoring & managing Apps specific SLAs
Operators
IP Infrastructure
IP processing, Directories, Security, Storage, Hosting
Services
Desktop, LAN, WAN, Wireless, Co-Lo
Equipment manufacturers
13

14. Incumbent Service Examples Of Whatʼs To Come
Competing for Advertiser Revenues
Telefonica's mobile ad platform

Vodafone

Building the SDP with partners
E.g. risk transfer to IBM:

14

15. Shifts In Future Revenue Sources
Main sources of Current Future
revenue Percentage Drivers DRIVERS:
SBN: Social & Business
MS
1. Fixed Line 25% Networking
2. Wireless 45% IPT, SBN, ES IPT: Video & Mobile Data
IP Traffic Growth
BB, IPT,
3. Broadband 15% TS: Technology shifts
4. IPTV 5% TS, IPT, ES, Reg MS: Managed Services
And Business ICT
10%
5. VOIP SBN, IPT, MS EB: Emerging SP
6. Other (advertising, 1% Reg, ES Business Segments
Reg: Regulation
sponsoring etc.)
Main sources of 2012
incumbent carrier
revenue New Order Futurama
1. Fixed Voice 5% 15%
2. Wireless 50% 45%
3. Wire Broadband 10% 25%
4. IPTV 15% 5%
5. VOIP 10% 5%
5%
6. Other (advertising etc.) 10%
15

16. Incumbent SP Survivor Profiles 2012
concentrated SPs
Large,
4-5 in Europe

– Revenues from MNCs
– Massively scalable multiplay service provisioning
independent of underlying infrastructure
SP
Strong SDP and OSS/BSS integration

Sophisticated Contextual Advertising Delivery

Wireless and Wireline BB delivery capabilities

integrated in delivery chain
SP
Sometimes taking the lead, but mostly just provisioning

Tightly integrated with major entertainment and broadcaster content

providers
with global delivery capability
SP
Global collaboration services

16

17. Challenger SP Survivor Profile 2012
Illiad Subscribers:
Ultra high speed delivery capability
Q1 07: 2,1 mill

Q1 08: 3,1 mill

Strong end-to-end delivery capability
(400K FTTH households passed)
Digital Home provisioning
Base subscription €29.99

Service Personalization capabilities
per month for both ADSL & FTTH
Clearly identified customer segments
Discount, stripped down services option
Personal privacy focus
Green policy champion
Technical:
Unbundled ADSL2+

FTTH in 80 cities

IPTV/MPEG-4

Financial:
CapEx: €70/€400 apartment/house

CPE Cost: €300

Power line Connec,ons for HDTV
APRU / sub: Not disclosed
 connec,ons in‐house
Source: Free www.free.fr
A fiber-connected Freebox home 17

18. On-line Advertising – One Future SP Income Source
Grabbing a share from
 Like Microsoft 20 years ago, Google wants to shift users to a new platform - its own - for which it
is blowing its trumpet very hard but not in response to any clear user demand. There have been
plenty of service interruptions and hiccups among Internet based service providers, and Google
is not about to offer any SLAs.
 Google has made many sizeable enemies along the Internet supply chain, who would like to eat
its lunch. Carriers are developing their own content services with context sensitive advertising
servers that additionally have much more information regarding user habits than Google has.
 Google is completely advertising revenue dependent. Any serious dislocation of this revenue
stream will impact Google very hard.
 Google is a prime target for privacy violations and copyright infringement suites. Googleʼs
sharing of Internet user activities with its advertising partners like Facebook, Blockbuster and
Fandango is facing courtroom challenges
Source: Current Analysis Advisory September 30, 2008: The OTT Giants: Google – The Jack of All Trades, Master of On-line Advertising
18

19. The BIG Online Advertising Bomb
€40bn in 2008 growing SPs have unique ability
18% p.a. in Europe To identify customer
interests
• Identifiers: phone numbers, IP address,
SIP number, id
• Devices: SIM, softSIM, STB
• Context: location, presence, time
• Interactions: browsing, domains, TV and
movie behavior, purchases
• Personal Data: address, gender, name,
profile, preferences
• Treasures: Pictures, videos, files, address
book, calendar
• Credit: demographics, bad debt, average
balance
19

20. Of course the future may change course or slow down….
Posted in Security, 1st October 2008 22:04 GMT
Security experts say they have discovered a flaw in a core
internet protocol that can be exploited to disrupt just about
any device with a broadband connection, a finding that could
have profound consequences for millions of people who
depend on websites, mail servers, and network
infrastructure.
In which case Flexibility is a pretty good survival trait too
20

21. Competitive
Intelligence
levels the playing field…
Competitive
Response TM
enables you to
Win.
Current Analysis is the only competitive research firm that provides solutions to improve
your companyʼs Competitive Response TM
For more information, please contact…
Bernt Stubbe Østergaard
Research Director
+45 45 50 51 83
Bernt Stubbe Østergaard: bostergaard@currentanalysis.com
21