Asian Carriers' Conference: The Changing Face Of Communication Acc Rob Van Den Dam Final 22 Sept...

© 2010 IBM Corporation

Challenges and Opportunities for Carriers

Rob van den Dam, Global Telecommunications Sector LeaderIBM Institute for Business Value


More change in telecommunications over the past 10 years than in the previous 100

0%

10%

20%

30%

40%

50%

60%

70%

80%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Mobile celluar telephone subscriptions

Internet Users

Fixed Telephone lines

Fixed Broadband Subscribers

Source: International Telecommunications Union (ITU) ICT Statistics Database available at http://www.itu.int/ITU-D/icteye/Indicators/Indicators.aspx . 2009 figures are estimated published in ITU, “The world in 2009: ICT Facts and Figures”; ITU Geneva 2009, available at http://www.itu.int/ITU-D/ict/material/Telecom09_flyer.pdf

Telecom Penetration 1999 - 2009

Over a century after it was first invented, less than 1 in 6 of the world’s population had access to a telephone. In the last decade, however, this increased approx. 350% and now nearly 7 in 10 people have access to telephony


37%

14%

5%

1%2%

-3%

11%

33%

21%

8%5%

13%

4%

11%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005 2006 2007 2008 2009

MiddleEast & Africa

Latin America (excl. Brazil)

Brazil, Russia, India, China (BRIC)

Asia Pacific (excl. India & Japan)

North America

Europe (excl. Russia)

Japan

However, the key engines of growth - mobile telephony and emerging market expansion – appear to be losing and growth has begun to stall

Telecom Services Revenue Growth 2004 - 2014

Source : IDATE, in "World Telecom Service Market", 2008 Edition - January 2009, revision in July 2009; Global Wireless Matrix 2Q10, Merrill Lynch; IBM Institute for Business Value (IBV) Analysis

36%

14%

8%

20%

-5% -5%-10%

0%

10%

20%

30%

40%

2006 2007 2008 2009 2010 2011

Subscriber Growth

Service Revenue Growth

ARPU Growth

Mobile GrowthForecast

Emerging Asia


2 trends - shift to the Open Internet and to collaborative communication - are altering the competitive landscape in communications

Open and Free

Gated Communities Shared Social Space M:NC

om

mu

nic

atio

n

Pa

tter

n

Open Internet

Communication Environment

Traditional Communications

Provider-Controlled

1:1/1:N

FixedVoice

MobileVoice

SMS

Market d

irecti

on

Mobile Social Networking / Telco Walled

Gardens


While overall communication have increased, much of the growth has been over-the-top with share of traditional unchanged

Notes: (1) An SMS/MMS or e-mail is considered as a 30 second call.

FRANCE TOTAL COMMUNICATIONS MARKET(billions of call minutes and equivalents¹)

Stable use of traditional communications services

Increased share of communication services by Internet Communication services providers

2005 2006 2007 2008 2009 2010

Wireline Mobile SMS/MMS E-mail(excl. spam) IM P2P VoIP

Source: Idate: Telco’s views of Openess, Digiworld Summit 2009

Source: Ronald Montagne “Telcos’ views of openness”, IDATE, October 2009

0

200

400

600

1000

1200

800


And Asians love over-the-top communication over the open Internet as well

Social Networking in Asian Countries

Average Minutes perVisitor

Average Visits PerVisitor

148.9 15.1

Country

Asia Pacific

% reach of SocialNetworking

50.8

332.2 26.3Philippines 90.3

228.0 20.9Australia 89.6

324.4 22.6Indonesia 88.6

226.0 22.3Malaysia 84.7

217.5 20.3New Zealand 81.2

131.3 18.3Taiwan 75.9

223.3 25.4Hong Kong 75.4

130.1 13.0India 68.5

131.4 16.0South Korea 63.5

49.5 7.2Vietnam 46.1

Source: comScore World Metric, February 2010

Japan 42.3 120.5 14.0

http://www.comscore.com/Press_Events/Press_Releases/2010/4/Social_Networking_Across_Asia-Pacific_Markets


And this communication is increasingly augmented with videos, photos and other multimedia content resulting in phenomenal growth of data traffic

6.0358.844

12.836

18.762

25.312

32.154

2008 2009 2010 2011 2012 2013

Ambient Video

Internet Video to TV

Internet Video to PC

Internet Voice, VideoCalls and GamingFile Sharing

Web/Email

Global Consumer Internet Traffic, 2008–2013

Petabytes/ month

6 17 41 91201

397

80

182

406

867

65

158

342

615

15

37

89

34

207

483

1076

2184

85

2008 2009 2010 2011 2012 2013

Middle East & Africa

Latin Amercia

Central and Eastern Europe

Western Europe

Asia Pacific

North America

Mobile Internet /Data Traffic Petabytes/ month

40% CAGR

135% CAGR

SOUTHEASTASIA

• 2007: 75% of traffic was fixed/mobile voice

• 2012: 90% of traffic is fixed/mobile data (2/3 of which is mobile data)

Source: Cisco Visual Networking Index, June 2009, IDATE, IBM institute for Business Value (IBV) Analysis


However, telecom revenues do not track the increases in network traffic anymore

Traffic

Telecom Revenue

VoiceDominant

Data Dominant

Source: Nokia-Siemens; IBM Institute for Business Value (IBV) Analysis

Time

Traffic Volume / Revenue

Network Cost(future

technologies)

Network Cost(existing

technologies)

ValueOpportunity

Ecosystem Revenue


Telco 2015 – five telling years, four future scenariosScenario Envisioning

Primary Research

Consumer Survey(9 countries)

Telco Provider Interviews (±60)

Macro Economic

Trends

Industry Data/ Analysis (IDATE)

Secondary Research

Industry Trends

Forces Shaping Telecom

Uncertainties

Scenarios & Outcomes ImplicationsChallenges & Trends

SURVIVOR CONSOLI-DATION

CLASH OF GIANTS

MARKET SHAKEOUT

GENERATIVE BAZAAR

Telco 2015

Telco 2015

Strategic Imperatives

Critical attributes for success

Potential capability gaps by Operator

Scenario-specific recommendations

Cross-scenario recommendations

IBM Institute for Business Value Analysis

2008 SurvivorConsolidation

MarketShakeout

Clash of Giants GenerativeBazaar

2008 SurvivorConsolidation

MarketShakeout

Clash of Giants GeneratievBazaar

Scenario Revenues and Profitability

Revenues

Free Cash Flow

(EBITDA - Capex)

1,541 CEO interviews from Global CEO Study; ~80 from CSPs


There are a number of Forces shaping the future of telecommunications into 2015

ACCESS

BUSINESS MODEL

INDUSTRY STRUCTURE

USAGE/ SERVICES

Source: IBM Institute for Business Value (IBV) Analysis

PSTN decline accelerates

VOIP (incl. mobile VOIP) grow

Ubiquitous and seamless access

High digital content consumption

Multiple communication tools

Broadband pervasive as TV

Mobile broadband favors LTE

Ultra low-cost devices grow

One in three devices is smartphone, MID, or Netbook

Voice monetized as a feature of connectivity

Green Telecom revenues

3rd – party connectivity revenues

New infrastructure competition from government, municipality

Net Neutrality remains

Mobile and fixed termination converge

Pure plays disappear


In addition to these trends there are a number of potentially high-impact variables that are, as yet, uncertain

Vertical vs. Horizontal Integration

Regulation

Network sharing vs. Outsourcing

Open vs. Closed devices

User vs. 3rd Party / ad funded

Addressable Market Growth

Competition/ Integration Structure

OTT vs. Network optimized content

Silo vs. unified communications

The Future of Voice

Expansion into Adjacent Verticals

Premium Connectivity

Source: IBM Institute for Business Value (IBV) and IDATE Analysis

Service Pricing Model

Machine-to-Machine (M2M) communications

Ultra-fast Broadband Availability


The interplay of these critical variables / uncertainties produces four distinct future industry scenarios

SURVIVOR CONSOLIDATIONSpectrum

Passive Infrastructure

Active NetworkSupport

InfrastructureRetail

Channels

Devices

Customer

Few large players

dominateMarket

MARKET SHAKEOUT

SpectrumPassive

InfrastructureActive

Network

Support Infrastructure

Retail ChannelsDevices

Brand Brand

Customer Customer

Many players - Fragmented

GENERATIVE BAZAAR

Enabling the two-sided businessSERVICE PROVIDERS

CONSUMERS

NET CO-OPNET CO-OP

Banking & Finance

Banking & Finance

ElectricUtilities

ElectricUtilities Health Care

Health Care Telecom Retail

Telecom Retail

Media Organizations

Media Organizations

Aplication Developers


Device Manufacturers


Banking & Finance

Banking & Finance

ElectricUtilities

ElectricUtilities Health Care


Telecom Retail

Media Organizations

Media Organizations





$

$

CONSUMERS / BUSINESS

OPEN ACCESS

Telco$

Dec

lin

ing

/ S

tag

nan

tE

xpan

din

g

Ad

dre

ssab

le M

arke

t G

row

th

Concentrated / Vertical Fragmented /Horizontal

Competition/Integration Structure

CLASH OF GIANTS

TelcoOTT/ OEM

Spectrum




Channels

Devices

Customer

Spectrum




Channels

Devices

Customer


And represents the most optimistic outlook for telecoms, relative to the IMF’s global GDP forecast for 2010 - 2014

-1%

1%

3%

5%

7%

9%

11%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Global GDP vs.. Telecom Services Growth Scenarios

Source: International Monetary Fund (IMF), World Economic Outlook Database, October 2009; http://imf.org/external/pubs/ft/weo/2009/01/weodata/index.aspx, IBM Institute for Business Value (IBV) and IDATE Analysis, 2004 - 2009 growth forecasts are based on IDATE "World Telecom Service Market", 2008 Edition - January 2009, revision in July 2009. 2010 -2015 are IBM Telecom 2015 scenario forecasts

Generative Bazaar

Clash of Giants

Market Shakeout

Survivor Consolidation

2009 – 2015 Telecom Growth Scenarios

Global GDP

Global Telecom

5.3%

3.3%

1.8%

0.2%

4.5%

Gro

wth

Developing Asia GDP 8,6%


Growth opportunities in Clash of Giants (Asia focus)

Innovative network-optimized Services

Industry CollaborationCompete againstOTT0.8 billion

> $40/day

1.5 billion $4 - 40/day

1.3 billion $4/day

1.4 billion $2/day

1.3 billion $1/day

Expand customer baseto BoP as penetration ULC handsetsincreases

Packaged end-to-end services

meetingneeds/tastes of

lower-incomeconsumers

Emerging market providers

enter mature markets


Growth opportunities in Generative Bazaar (Asia Focus)

Stimulate arange of new and exciting next gen Services

by OPEN INNOVATION such as telemedicine, HDvideo conferencing and immersive learning applications.

Singapore

Next GenNBN

iN2015Healthcare

Two-sided Business

ModelDeploy

ultra-fast broadband


Making ‘dumb’ pipes smarter – and more profitable too

Providing pervasive and open access connectivity for any person, solution/service provider, object and a multitude of devices

Premium connectivity may include shared capabilities (e.g. presence, location, contact list), guaranteed low latency, security, CDN, network/customer insight by analytics, etc.

UPSTREAM

DOWNSTREAM

TelcoTelco

Banking & Finance

Banking & Finance

Electric Utilities

Electric Utilities Health Care


Telecom Retail

Media Companies

Media Companies

Application Developers

Application Developers

Device OEMs

Device OEMs

$

$Comms-enabled Applications/ Solutions

EXTENDED SOLUTION / SERVICE PROVIDERS

CONSUMERS / BUSINESS

OPEN PLATFORM$


Take actions in the context of the data traffic / revenue dilemma, that might include finding a commercial framework for free-riding services

Attitude towards mobile VoIP

Partner withVoIP

provider

Imposea

surcharge

Cha

lleng

erLe

ader

Prohibituse of VoIP

Allow usewith

data plan

Mobile VoIP:Strategies of leaders versus challengers

AccessWireless and Fixed

Internet Accessproviders

CDNLarge network and

cache of a variety ofcontent

Internet CoreGlobal networks

transporting Internettraffic

OTT ProvidersContent, media andApplication providers

End Customer

End Customer Advertisers

Subscriptions Pay per Use

Typically no charge

Peering charges for access to content

Charges foramount of data cached

Possibly charges for bandwidth used

Variety oftransactions/models

Per click or basic ad revenue

Peering/CoLocharges

to shift contentaround CDN

Business models that capture more value from OTT traffic & enhance user experience


Key contacts

Ekow NelsonGlobal Telecommunications Industry, IBM [email protected]

Rob van den Dam Global Telecom Industry Lead,

IBM Institute for Business Value

[email protected]

Nick Gurney

Global Telecom Industry Leader Global Business Services [email protected]

www.ibm.com/iibv

Thank you!

http://www-935.ibm.com/services/us/gbs/bus/html/ibv-telco2015.html?cntxt=a1000065

http://www-935.ibm.com/services/us/gbs/bus/html/gbs-telcos-socialnetworking.html?cntxt=a1000065

Asian Carriers' Conference: The Changing Face Of Communication Acc Rob Van Den Dam Final 22 Sept...

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