Communications Review V 15 N 3

8/7/2019 Communications Review V 15 N 3

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Com m u n ica t ion s ReviewValue: Getting it. Giving it. Growing it.

A journal for telecom, cable, satellite and Internet executives

Volume 15, No. 3

Mobile data :Where will your compa ny be?

Value. You need to deliver it. Your shareholders demand

it. Your customers expect it. In th is issue we present

articles that explore how comm unications companies

can harness, create and expand value in an ever more

complex world of interrelated risks and opportunit ies.

Vert ical markets:Healthcare anywhere

Managing capex:Discipline; simply discipline

Broadband: Ubiquity vs. ultrafast


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Communications Review

300 Madison AvenueNew York, New York 10017 USA

EditorColin Brereton

Managing editor

Shelly Ramsay

Contributing writersIan CordenDan GarrettAndrew LightColin LightBrian PotterillTrigvie Robbins-Jone sGary TaylorVincent Teulad eChristopher Wasden

Production d irector

Teresa Perlstein

DesignerCinthia Burnett

PwCs Commun ications Industr y pra ctice delivers a complete range of professional services to telecom, cable, satellite andInternet service providers across the globe. The group provides industr y-focused assuran ce, tax and ad visory services to buildpublic trust and enh ance value for its clients and their stakeholders.

Drawing on our a ccumulated e xperience, we ant icipate and m eet the challenges of global regulatory change, and help ourclients deal with the impact of industry convergence. We continue to add measur able value to our client relationships throughour leadership and innovation, which are evident in our evolving services and products.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professionaladvice. You should not act upon the inform ation conta ined in this publication without obtaining specific professionaladvice. No representation or warranty ( express or implied) is given as to the accuracy or completeness of the information

contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees andagents accept n o liability and disclaim all responsibility for the consequ ences of you or anyone e lse acting, or refraining to a ct,in reliance on the information contained in the publication or for any decision based on it. Should pr ofessional advice berequired, you ma y contact Colin Brereton of PwC by phone at [44] (0 ) 20 7213 3723.

To request additional copies of this publication, please contact Shelly Ramsay by e-mail at [email protected] issues are available for download a t www.pwc.com/ communicationsreview.

Communications Review is a trademark of PricewaterhouseCoopers LLP.


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Communications Review 1

Conten t s

6

M essa ge fro m t h e ed it o r

F e a t u r e s

8Staying re levan t in am obi le da ta w orld

Today, smartph ones, high-speed connections,

all-you-can-eat data ta riffs and the removal ofoperator s walled content garde ns are drivinga dramat ic change in attitudes to and uptake ofmobile content and d ata . As we enter a wholenew mobile world, how operators respondin the immediate future will determine theirprospects for th e longer te rm. The ability tosurvive and t hrive in an open environment willcall for a ra nge of new business capabilities.The consumer is on centre sta ge. And opera torsneed to create t he right user experiences andcustomer-centr ic approache s to maintain theirrelevance and their hea lthy share of the market.

by Colin Light, Andrew Light and Vincent Teulade

1 6Heal thcare un wired

In the quest to develop new revenue streams,communicat ions companies are focussing on

vertical markets, where specialised servicescan add value to both end users and companyshareholders. One of these ma rkets ishealthcare. While individuals and businessesacross the health industry value chainhave started to embrace communicationstechnologies in recent years, opportunitiesabound for mobile communicationsapplications and services to transform thesector. An excerpt from a recent study byPwCs Health Research Institute providescommunications operators with new insightsinto the att itudes, preferences and need s ofstakeholders across the health industry.

by Dan Garrett and Christopher Wasden

2 6M ak ing be t t er be t s

Network operators recognise the importanceof capital allocation and have teams ofanalysts producing reams of paper onproposed cap ital projects. Many executivesfind the sheer volume of paperworkgenerated comforting, reasoning that theteam must have covered all the angles here.In PwCs experience, however, the con trar yis often tru e. Rather tha n viewing capexplanning as a recommendation-based process

seeking the right answer, organisationsdo better to view capital projects as keyjunctures in the ir strategy-making journeyones that provide opportunities to explorethe irred ucible tradeoffs inherent in everyallocation of resources.

by Gary Taylor, Trigvie Robbins-Jones

and Ian Corden

3 4Broadb an d: One s izedoes no t fi t a l l

There is a lot of interest from Europeanpolicymakers eager to bring the benefits ofultrafast broadband to everyone. Economicstudies of the impact of broadband onnational economies show broadband to be afoundation for economic growth, job creation,global competitiveness an d a bett er way oflife. However, interest isnt matched by actionfrom private investors or end usersevenwhere ultra fast broadband is available.Policymakers expectat ions, consume rdemand, technology, financing andregulat ion are all critical factors in helpingoperators determine how, when and wherethey invest. One t hing is clear: We canexpect very different broadband experiencesin the future in urban and rur al areas.

by Brian Potterill


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2

6

di t o r i a l

Art icles

8Rester com pt it i f dan s unm on de de do nn es m obiles

Aujourdhui, les smartphones, les connexions

haut d bit, les tarifs pour des donnesillimites et la suppre ssion de lexclusivitdes donnes des oprateurs entranent unchangement profond des comportements etde la consommation de contenu mobile et dedonn es. laube d une t oute n ouvelle re dumonde m obile, les perspectives des oprate urssur le long terme dpe ndront de la ma niredont ils ragiront dans u n avenir proche. Lapossibilit de survivre et de prosprer dansun environnement ouvert fera appel touteune palette de nouvelles comptences lies lactivit. Le client e st la pr iorit. Et lesoprateurs doivent crer lexprience utilisateuradquate et des approches centres sur le client

afin de rester comptitifs et de conserver unepart de mar ch confortable.

par Colin Light, Andrew Light et Vincent Teulade

1 6Un sys tm e de san t san s fi l

Afin de dvelopper de nouvelles sources derevenu, les entreprises de tlcommunication

se concentrent sur les marchs sectoriels,dan s lesquels des services spcialisspeuvent apporte r de la valeur ajoute auxutilisateurs finaux a insi quaux actionna iresde lentreprise. Le systme de sant est lunde ces mar chs. Alors que depuis quelquesanne s, les part iculiers et les entreprisesde lensemble de la chane d e valeur dusecteur de la sant commencent adhreraux technologies de tlcommunication, denombreuses opportunits dapplications et deservices lis la tlcommunication mobilese prsentent pour tr ansformer le secteur.Un extrait dune tu de rcente m ene parle Health Research Institute de PwC apporte

aux oprateurs de tlcommunication unenouvelle comprhension des att itudes,prfrences et besoins des actionnaires dan slensemble du secteur de la sant .

par Dan Garrett et Christopher Wasden

2 6Placer de m eilleurs p ar is

Les oprateurs d e rseau reconnaissentlimportance de la dotation en capital etdisposent d quipes danalystes qui produisentun certain volume de documents sur despropositions d investissement . Le volume

gnr suffit rassurer de n ombreux cadresqui se disent que lquipe doit avoir couvertla question sous tous les angles . Cepend ant,selon lexprience de PwC, il arr ive souventque ce ne soit pas le cas. Plutt que deconsidrer la planification des dpensesdinvestissement comme une procdure derecherche de la meilleure solution sappuyantsur des r ecommandations, il est prfrabledenvisager les projets dinvestissementcomme des tapes cls dans llaborat ion dela stratgie dune organisation qui permettentdtudier les compromis inhrents touteaffectation de ressources.

par Gary Taylor, Trigvie Robbins-Joneset Ian Corden

3 4Le ha ut dbi t : une v i tesse quines t pa s la solut ion un iversel le

Le trs haut dbit suscite beaucoup dintrtauprs des responsables politiques europensqui souhaitent vivement que toute lapopulation puisse en profiter. Selon les tudesconomiques traitant de son impact sur lesconomies nationales, le haut dbit est unsocle favorisant la croissance conomique,la cra tion demplois, la compt itivitinternationale et un meilleur mode de vie.Cependan t, lintrt suscit ne se concrtisepas par laction des investisseurs privs etdes utilisateurs finaux, y compris l o letrs haut dbit est disponible. Les attentesdes responsables politiques, les attentes duconsommateur, la technologie, le financementet la rglementation sont autant de facteursdterminants pour aider les oprateurs dcider comment, quan d et o investir. Une

chose est sre : nous pouvons nous attend re des expriences haut dbit trs diverses lavenir, dans les zones urba ines et ru rales.

par Brian Potterill

So m m a ire


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6

M e n s a j e d e l e d it o r

Art culos

8Cm o seguir r elevan teen un m un do m vil

Los smartphones, las conexiones de alta

velocidad, las ta rifas planas sin lmite de da tosy el fin de los contenidos restringidos de losoperadores estn generando un cambio radicalen las actitudes y el consumo. A medida d e quepasemos a un mu ndo mvil completamentenuevo, la respuesta de los operadore sdeterm inar las perspectivas a ms largo plazo.La capacidad para sobrevivir y prosperar confuerza en un ent orno abierto exigir todo unabanico de nu evas competencias empresariales.El consumidor se encuentra e n el centro deatencin y los operador es necesitan crear nuevasexperiencias y enfoques centra dos en l parapoder man tener su relevancia y su importantecuota de mercado.

por Colin Light, Andrew Light y Vincent Teulade

1 6La asistenciasan i tar ia ina lm br ica

En la carrera por crear nuevos ingresos,

las compaas de comunicaciones se estninteresando por los mercados verticales,es decir, aquellos donde los serviciosespecializados pueden aportar valor ta nto alos usuarios finales como a los accionistas.Uno de esos mercados es el de la a sistenciasanitaria. En los ltimos aos, por un ladolos particulares y las empresas del sector hancomenzado a utilizar todas las tecnologas decomunicacin, y por otro las oportunidadespara tr ansformar el sector medianteaplicaciones y servicios de comunicacinmvil han aumentad o. En un reciente estudiorealizado por el Health Research Institutede PwC, se presentan a los operadores de

comunicaciones nuevas perspectivas sobreactitudes, preferencias y necesidades de losgrupos interesados en todo el sector sanitario.

por Dan Garrett y Christopher Wasden

2 6Lograr m e jores apu es tas

Los operadores de redes reconocen laimportancia de a signacin de capital ycuentan con e quipos de a nalistas queproducen pginas y pginas con propuestaspara ello. A muchos directivos les tranquilizala mera cantidad de pa pel generado con elpretexto de que seguramente el equipo hacubierto todos los ngulos en ese informe.Sin embargo, la experiencia de PwC apuntaa que a menudo es lo contrario. En vez deconceptuar la planificacin de inversionescomo un proceso basado en r ecomendacionesdestinadas a encontrar la respuesta correcta,es mejor considerar los proyectos de capitalcomo si fueran coyuntur as clave en laelaboracin de estrategias de una empresa,ofreciendo oportunidades para explorar loscompromisos y altern ativas irreducibles,inherentes a toda asignacin de recursos.

por Gary Taylor, Trigvie Robbins-Jones

y Ian Corden

3 4Banda ancha: l a t a l lan ica n o s i r ve

Hay mucho inters por parte de polticoseuropeos para que todas las ventajas de labanda ancha ultrar rpida lleguen a todoel mundo. Algunos estudios financieros

sobre la repercusin de la band a ancha enlas economas nacionales muestran queconstituye la base del crecimiento econmico,la creacin de puestos de empleo, lacompetitividad global y una mejor forma devida. Sin embargo, los inversores privadoso usuarios finales no han compartido eseentusiasmo, incluso dnde ya est disponiblela banda ancha ultrar rpida. Las expectativasde los organismos normativos, la deman dade los consumidores, la tecnologa, lafinanciacin y la regulacin son, tod os ellos,factores crticos para ayudar a los operadoresa determinar cmo, cundo y dndeinvertir. Una cosa est clara: el futuro traer

experiencias muy diferentes en las zonasurbanas y rurales.

por Brian Potterill

ndice


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4

6

Vo r w o r t d e s H e r a u s g e b e r s

Bei t rge

8In einer m obilen Daten welt re levan t b le iben

Smartphones, breitbandige

Internetverbindungen, Flatrate-Datentarifeund die Abschaffung geschlossener Portaleder Netzbetreiber haben das Verhalten d erKonsumenten dramatisch verndert und dieNutzung des mobilen Inter nets stimuliert. WieMobilfunkunterne hmen kur zfristig auf dieseVernd erun gen reagieren, wird den Grundsteinfr den langfristigen Erfolg in einer vollstndigneuen mobilen Welt legen. Die Fhigkeit, sichin einem offenen System zu behaupte n undweiterzuentwickeln, erfordert eine breite Palettean neuem Leistungsvermgen. Konsumentenstehen mehr d enn je im Mittelpunkt desGeschehens. Anbieter sind gefordert, dierichtigen Erlebniswelten fr Konsumen ten zu

schaffen und zu lernen, eine auf die Kundenfokussierte Denkweise anzunehmen, um ihreBedeutung und ihre Stellung am Markt nichtzu verlieren.

von Colin Light, Andrew Light und Vincent Teulade

1 6Das ka bel lose Gesund hei tswesen

Auf der Suche nach der Entwicklungneuer Geschftsmodelle konzentrieren

sich Telekommunikationsunternehm enzunehmend auf vertikale Mrkte, aufdenen spezialisierte Dienstleistungen frKonsumenten und Shareholder zugleichzustzliche Werte generieren knnen. Einerdieser Mrkte ist das Gesundheitswesen.Kommunikationslsungen werdenbereits seit einiger Zeit in der gesamtenWertschpfungskette des Gesundheitswesens,sei es von Einzelpersonen, aber auchvon Unternehmen, eingesetzt. WeitereEinsatzfelder bieten mobile Anwendu ngenund Dienste, die die Branche signifikantverndern knnen. Ein Ausschnitt auseiner jngst verffentlichten Studie

des Health Research Institu te von PwCbietet Telekommunikationsunternehmenneue Einblicke in die Einstellung zu, diePrferenzen von und die Wnsche derAnteilseigner der Gesundheitsbranche.

von Dan Garrett und Christopher Wasden

2 6Bessere Wet ten abschl ieen

Die Bedeu tung d es Kapitaleinsat zes istunter den Netzbetreibern unbestritten undAnalystenteams erstellen oft Unmengenan Berichten und Untersuchungen,

die Wege aufzeigen, wie das Kapita lbestmglich eingesetzt werden kann.Viele Unternehmensleiter schtzen dieseDokumentationen mit der Begrndung, dassschlielich alle Mglichkeiten un tersuch tund a bgedeckt werden mssten. PwC hat d ieErfahrung gemacht, dass oft da s Gegenteil derFall ist. Die Capex-Planung sollte weniger a lsempfehlungsbasierter Prozess aufgesetzt sein,in dem n ach der richtigen Antwort gesuchtwird. Vielmehr sollten Investitionsprojekteals entscheiden de Verbindungsstelle imStrategiefindungsprozess eines Unternehmensangesehen werden, mit denen d ieunterschiedlichen Mglichkeiten ausgelotetwerden, die jede Ressourcenallokation bietet.

von Gary Taylor, Trigvie Robbins-Jones

und Ian Corden

3 4Brei tband : KeineEinh ei t sgre fr a l le

Europische Politiker zeigen derzeit einreges Interesse daran, hochleistungsfhigeBreitbanddienste fr jeden Haushaltzugnglich zu machen. konomischeUntersuchungen zum Einfluss vonBreitbandinternet auf die volkswirtschaftlicheEntwicklung zeigen, dass Breitband dasWirtschaftswachstum frdert, Arbeitspltzeschafft, die globale Wettbewerbsfhigkeitstrkt und auch fr ein komfortableres Lebensorgt. Nichtsdestotrotz begegnen privateInvestoren und Konsumenten dem Interesseder Politiker nicht im gleichen Ausma auch dann nicht, wenn es um ultraschnellesBreitband geht. Die Erwartu ngen derPolitiker, die Nachfrage der Konsumenten ,die Technologien, die Finanzierung und

die Regulierung sind wichtige Faktoren,die Netzbetreibern Anhaltspunkte dar bergeben, wann, wie und wo sie investierensollten. Eins steht schon jetzt fest: Wir werdenauch in Zukunft in lndlichen Regionenund Ballungsgebieten sehr unterschiedlicheErfahrungen mit Breitband machen.

von Brian Potterill

Inhal t sverze ichnis


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6

8

: Colin Light, Andrew Light Vincent Teulade

1 6

: Dan Garret t Christopher Wasden

2 6

: Gary Taylor, Trigvie Robbins-Jones Ian Corden

3 4

--

: Brian Potterill


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6 Message from the editor

M essa ge f rom th e edi tor

This edition ofCommunications Reviewis being published at a moment whenthe ou tlook for the global economyand for t he business environment forcommunications operatorsis bothfascinating and finely balanced. On theone hand, growth is powering aheadin many (especially emerging) marketsfollowing the downturn . On the other,continuing concerns over sovereigncreditwort hiness, especially in theeurozone, are inhibiting confidence.

The resulting mix of optimism anduncertainty is fostering a continuingsense of caution am ong consumers

and bu sinesses in many markets.However, for those commun icationsproviders able to iden tify and seizethem, real an d sustainable sourcesof value do exist. Often, seizingopportu nities requires courage and anability to think beyond the traditionalboundar ies of the industry and tapinto what is new a nd p reviouslyunforeseen. For th ose reasons, thetheme we have chosen for this issueis how to harness, create and expandvalue in an ever more complex worldof inter related risks and opportunities.

In the first ar ticle, Staying relevantin a mobile dat a world, authors ColinLight, Andrew Light and Vincen tTeulade examine how successfully theindustry has lived up to the promiseof information on the run, anytime,anywhere. Initially, the combinationof bandwidth constraints, small screensand confusing prices left consumersdisappointed and often baffled.

However, with all these barr iers nowbeing overcome, oppor tunities tounleash a new generation of mobileapplicationsand to create additionalvalue for customers and shareholdersare expanding apace.

As the a uthors point ou t, contentcreators, service providers and handsetmanufacturers are all competing hardfor a share of th is value, by seekingto roll out innovative an d compellingofferings for consumers. So far,operators have been struggling tokeep up. To close the gap in th is race,they will need to develop clear and

cohesive strategies encompassingaspects that include the right businessmodel, product, infrastructurean d financing. With th e consumernow firmly at centre stage, the wayoperators respond will shape theirlonger-term prospectsand the keysto success will lie in creat ing the rightuser experiences and in maintaininga customer-centric approach.

In our second article, we drill downinto one specific area of opportunitythat offers huge potential for creatingvalue: e-health . In Healthcareunwired, drawn from a recent studyby PwCs Health Research Institute,authors Dan Garrett and ChristopherWasden examine what they believeare abund ant opportu nities formobile communications to transformthe way health applications andservices are designed, developed anddelivered. To capita lise successfullyon t hese opportunities, operators


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must understand, as well as respondappropriately to, the attitudes,preferences and needs of stakeholdersacross the health ind ustr y. As theauth ors highlight, th is is an a reawhere operatorsby enabling rapidadvan ces in a vertical sector that isread y for and highly receptive to thetechnologies now availablecan bothcapture and give a lot of value.

The next article, Making better bets,widens the focus to how operatorscan maximise th e retur ns fromtheir overall capital expenditureinvestment, in a world where capital

is still at a premium. In the view ofauthors Gary Taylor, Trigvie Robbins-Jones and Ian Corden, companies canglean significantly higher value fromtheir investments by applying great erdiscipline during the decision-makingprocess. This means moving awayfrom the trad itional approach, basedon producing reams of paperwork, andinstead cutting throu gh the fog of datato focus on the issues that really affectthe value returned.

The authors prove their point byisolating and discussing four keyobstacles that often cause majorinvestments to fail to deliver thehoped-for value. They close the piecewith a valuable five-step guide to bestpractice in opt imising project capex.I believe th is article makes a majorcontribution towards helping theindustry address one of its traditionalpain-pointsand I urge anyoneinterested in these insights to contact

me or the authors to find out more.

Last but not least, our fourth ar ticlesees author Brian Potterill take astep back to examine t he widereffects of the global econom ic andfiscal environment on the rollout ofultra fast broadband ser vices. As hepoints out, policymakersespeciallyin Europeare seeking to encouragethe availability of ultrafast broadbandas part of their efforts to stimulatetheir economies. However, publicdiscussions on this topic often confusetwo distinct issues: universality andultrafast broadband . Whilst boththese aims have the potential tocreate h igher value for societies and

operators, the opportu nities varywidely, not least between urban andrural areas.

Mr. Potterill concludes tha t t he digitaldivide is set to stay. Urban areas canexpect superfast broadband sufficientto support multiple streams of high-definition TV and competition at leastat t he service layer. Rural areas, incontrast, will not achieve ubiquity ofbroadband availability. While somerural areas will benefit from urban-typespeeds, many otherswith servicedelivered over existing copper or overwireless or satellitewill have to makedo with speeds that barely supporttodays mass-market applications. Toserve these different market segments,incumbents will need to developdifferent business models.

We see value a s an increa singlycritical component of every businessstrategy, including our own. Youmay have noticed t hat this issue ofCommunications Review has a differentlook. It is the first to be published underour new brand, which focusses on valueand clarity of expression. This focusmakes it doubly appropriate that t hetheme of this issue is seeing and seizingvalue-creating oppor tun ities. If youwould like to discuss or comment onany of the ideas expressed in this issue,I am eager, as ever, to hear from you.So please send any comments to me a [email protected], or feel free

to call me on [44] (0) 20 7213 3723.

Colin BreretonPartnerGlobal Communications LeaderPwC


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8 Staying relevant in a mobile data world

Information on the run, anytime, anywhere was the

promise of early versions of mobile data applications

and devices. Wireless Application Protocol and other

proprietary platforms seemed to offer consumers the

ability to take content and the Internet with them

wherever they went. Unfortunately, slow speeds and

small screens, along with per kilobyte pricing that

baffled consumers, meant that users experience fell

very short of the industrys ambitious promises.

Today, smartphones, high-speed connections, all-

you-can-eat data tariffs and the removal of operators

walled content gardens are driving a dramatic change inattitudes to and uptake of mobile content and data. Is the

dream in danger of turning into something of a nightmare

for operators? Do content creators and handset makers

really have everything to play for? Or are the technical

and lowest-cost challenges likely to favour the big, overly

innovative and creative players?

By Colin Light , And rew Light

an d Vincent Teula de

Colin Light, Andrew Light a nd VincentTeulad e ar e dir ectors in PwCs Telecoms,Media and Technology practice. For moreinformat ion, conta ct Mr. Colin Light byphone at [ 44] 20 7213 4778 or by e-mail [email protected]; or Mr. Andre wLight by phone at [ 1] 416 869 2454 or bye-mail at [email protected]; orMr. Teulade by phone a t [ 33] 01 56 57 8958or by e-mail at [email protected].

The auth ors wish to thank Colin Breretonand Ian Corden for their contributions tothis article.

Sta y in g re leva n t in a m obi le d a ta w or ld


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The declining unit pr ice of voice inrecent years, in both fixed and mobile

markets, has led operators to innovatein services, with the data market seenas a vehicle to sustain or grow margins.Early efforts to capitalise on da taservices were thwarted by technologiesdelivering below customer expectationsin terms of speed and overall browsingor downloading experience. Today,technological development s inbroadband da ta rates and user devicesare facilitating strong deman d forevolving d igital services.

Continuing to develop alongside t hetelecoms industry, content and socialnetwork service providers are bringingan increasing volume of media andapplication spending into the onlinedomain. More users are connectingmore often, over devices that a regrowing in number and sophistication,and a re consuming richer contentand a pplications that a re ever morebandwidth hun gry. The spectacular

success of the recent smartphones withunlimited dat a plans has demonstrated

the un derlying consumer demand forthese applications and services. Thatsuccess drives further demand for moredata and greater bandwidth.

PwC forecasts that smartphonepenetra tion should continue to increase

at the expense of enhan ced handsets.We expect it to reach 17% of the globalmobile-subscriber base by 2014 (55%in developed countries and 10% inemerging countries). ( See Figure 1.)

Figure 1: Evolution of mobile subscribers by device

2009 2010 2011 2012 2013 2014

inbillions

7

6

5

4

3

2

1

0

Smartphone Enhanced phone Basic phone PC card

Source: PwCs analysis.


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consumers use mobile data has beenprofound and out of proportion tothe ir sales. As shown in Figure 2,these companies represent 54% ofthe profitability of the mobile handsetmanufacturing market, yet only 21%of revenues and just 6% of sales.

As manufacture rs ta rget low-cost

smartphones and blur the boundarieswith the enhanced handset, then thestage is set for an explosion in mobiledata through creating a truly viable,mass-market Internet-access option.

R id i n g t h e r u n a w a yd a t a t r a i n

The recent success of smar tphonegrowth has been spectacular. In manycases, it has far outstripped operators

own da ta p rojections, some of whichhave been wrong by 200% to 300% ormore. As a consequence, t he n etworkdemands (and the funding needs) havecaught m any of the most successfuloperators by surprise.

There is a major degree of uncertaintyamong mobile operators about howthe average mobile data traffic per userwill evolve. Some anticipate a relativelystable evolution, with early adopters

above-average consumption mitigatingthe more mod est requirements ofnormal users. Others expect that t heaverage traffic per user will double everytwo years, as has been the case withthe fixed Internet. This uncertainty isreflected in the difference between theforecasts from Nokia and Cisco shownin Figure 3 .

Easy access to content has fuelledconsumers in demanding more fromhandsets and from operators. Apple

demonstrated the power of easeof access through t he iPod, whichrevolutionised the d igital musicdownload market. That model has setthe tone for the dramatic growth in

More important than simply thepenetration of devices is the fact thatsmartphones will become the dominan tmeans of accessing th e Internet ona port able handset. We forecast that39% of mobile Internet subscribers willconnect through smartphones by 2014,compared to only 13% today.

Of course, smartphon es are by nomeans the whole story. While attentionhas been focussed on this more excitingend of the market, the needs of otherusersstill very much in the majorityshould not be overlooked.

Nevertheless, the attractiveness of thesmartphon e market lies in its potentialto unlock profit for original equipmentmanufacturers (OEMs). Apple and RIMmay have, between them , a relativelysmall share of the global mobile devicemarket, but their influence on the way

The commercial success of the iPhone has blinded

most market observers; and market segmentation

will become increasingly important again in the

future, as not everyone wants [or] needs an iPhone

or smartphone and many users need only a voice-

only handset.

Ber tra nd Dupuis, head o f service, Nokia

Figure 2: Volume, revenue and profi t breakdown (2009)

100%

80%

60%

40%

20%

0%

Volume Revenue Profit

RIM Apple HTC NokiaOther Samsung MotorolaSony Ericsson

Sources: Gartner; Credit Suisse (August 2009); PwCs analysis.


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Figure 3: Evolution of mobile data traffi c

4.0

3.5

3.02.5

2.0

1.5

1.0

0.5

0.0

2009 2010 2011 2012 2013 2014

Cisco Nokia

Source: PwCs analysis.

Apps are not the answer, per se. Phones need to get

easier for people to use. As an example: the iPhone

doesnt ship with a manualit comes with the

device, power adapter and a computer cable.

Mark Korteka as, genera l man ager

on line tech no logy, BBC

mobile content and data consumption.Easy access drives demand. Unlimiteddata packages add fuel to the fire.

The Wireless Industry Par tnershippredicts that the number of smartphoneusers accessing application stores willquadruple by 2013. PwC forecasts thatthe mobile content market (excluding

access) will reach 25 billion by 2014,with a significant contribution fromwireless gamesa large prize byany standard.

On top of this growth in traffic in themarket, further pressures on networksare ar ising from the growth in illegalfile sharing and from regulatory movestowards broadband service obligationsin some jurisdictions.

The experience of certain opera torsillustrates the potential strain on

network capacity. Operators such asAT&T in the United States and O2 in theUnited Kingdom, as exclusive providersof the iPhone when it was launched,experienced a sudden demand for

bandwidth unleashed when consumersstart ed using the ir devices for muchmore than simply voice and text. Bothoperators have publicly announcednetwork strain brought about byconcentrated da ta use.

Fixed line operators have takento throttling speeds and capacityto man age peak load ing. Mobileoperators also can take advantage ofthat a pproach. That kind of throttlingwill help manage th e issues tha t havecaused per iodic network failures.It does not mitigate, however, theunderlying issues of rising smartphonepenetration or the mobile databandwidth tsunami that threatens

to engulf the operators in everincreasing network investment.

By introducing bandwidth throt tling,operators are denying themselves thegrowth t hat they originally soughtwith data services to manage the costexposure by forcing a degrad ationin service levels. This appr oach isunderstan dable but r isky, and itthreatens customer satisfaction and,hence, increases the levels of churn.

Rebalanc ing th er is ing cos t o f da ta

All network technologies, whetherfixed or mobile, have performancelimitations, and a major componentof cost is typically in access (andbackhaul) networks. Data ratestypically decline as distance from thecarriers core network node increases.Consequent ly, coverage is tight lycoupled with capacity requirements;

a high m inimal-user-capacityrequirement usually means lowercoverage for a given cost, or highercost if coverage is to be at tained asa primary objective. Whilst moderntechnologies allow media service data


14/48


to be compressed, t hese technologies,too, have limitations: Media can becompressed only so far (in data rateterms) before quality levels degradebeyond acceptable bounds. Finite costmeans finite performance.

So what can be done at the networklevel? There is a mix of alternatives,from offloadingmoving datatraffic from the mobile wirelessnetwork to a more local radio accessnetwork and broadband backhaul,such as WiFi hotspots, femtocells,etc.to n ew spectrum purchases,refarming, cell splitting and/ or suchnetwork technologies as evolvingHSPA an d LTE. This mix will var yaccording to the operators competitivepositions, their legacy network andinvestments and requirements todifferentiate propositions to differentcustomer segments.

Fixed line broadband markets today

are very much characterised bycompetition in speed (available datarate s), with pricing levels typically setaccording to advertised data ratesand data volume capping levels. Inmobile, pricing usually is associatedprimarily with month ly data volume

capping levels; there in, price is usedto control dat a consumption. Pricingis also driven by market context, withfactors including users expecta tions,levels of competition , availability ofconten t, level of willingness to payand economic conditions.

As competition develops and marketsmature, ser vices trend towardscommodityforcing carrier s tocompete on price and basic levels ofquality. Service bundling can helpin the near term but tends to erodemargins and is no long-term solution.Normalised pricing ($/ Mbps) on fixedline Internet services in a num ber ofcountries has trended downwardsover recent years (see Figure 4) .

In mobile, within both pre- and post-paid segments, operators in developedcountr ies increasingly compete byoffering more minutes, text and datawithin the pr ice of a top-up or monthly

contract. Customers are d emandingand, more importan t, are getting morefor less or the same. Willingness to paydoes not necessarily increase in linewith the da ta rate or the volume ofdata consumed.

Establishing unlimited data tar iffs forthe new generation of smartphones wasone of the keys to igniting the mobiledat a explosion. Now, however, it iscrucial for mobile operators to learn thelessons from fixed line and rebalancetheir ta riffs in order to re-establish thelinks between supply and demand formobile bandwidth. With some operatorsannou ncing the end of unlimited datatariffs as they launch the next wave ofsmartphones, we are already seeingsigns tha t th is is happening.

However, there is no one-size-fits-all approach to this rebalancing.The greater the number of revenuegenera ting units or multiplay

services an ope rator provides tocustomers, then the greater th edegree offlexibility the operator hasto change terms and conditions orpricing levers within the bundle.

Mobile operators need to take theselessons onboard and fast.

Reachin g th ein flect ion p o in t

The delivery of services to dat a-hungry

devices like smartphones is drivingup t he costs associated with providinggreater bandwidth . As users proliferate,so too will the costs of serving them,to the extent t hat t he cost of mobiledata outstrips the ability to charge ata rate t hat consumers ar e willing topay. Arguably, we have already reachedthis inflection p oint in customersegments where the cost of supplyingtheir mobile bandwidth exceeds theassociated revenues for the operators.

As data demand per user and uservolumes increase, carr iers willfind itharder and harder to offer acceptablequality levels and pr icing will comeunder additional pressure.

Mobile operators are playing a vital role in defining

and implementing a new generation of smart

enabling services. The operators need to work closer

with the content industry to create viable business

models behind these services.

Gar y Schwar tz, chair, Nor th Ame r ican Mobile

Ente rt ainm ent For um (MEF)


15/48


We have prolific, even exponential,data growth that drives significant costsfor operators, declining ban dwidthvalue and a large, non-access revenueopportunity tha t could bypass theoperators altogether. It is no surprisethat some operators are wondering howto put t he genie back into the bottle.

The objective is to create differentialvalue in bandwidth-hungry services(e.g. video, mail downloads, streamingservices), whilst maintainingcompatibility with any net neu tralityregulation in an operators market.Who will be able to claim the pr izeis the major question. New businessmodelssuch as revenue-sharing

open-application storesare tearingdown the last remnants of walledgardens and p ose a significant r iskthat operators may miss out on thebulk of possible revenues.

Figure 4: Trends in fi xed line Internet pricingdeclining value of bandwidth

$18Mean CAGR: -19%

$16

$14

$12

$10

$8

$6

$4

$2

$0

Normalise

dprice($/Mbps)

2005 2006 2007 2008

Canada DSL France DSL Germany DSL UK DSL

Germany cable UK cable US cable Mean

US DSL France cable Canada cableSource: Organisation for Economic Cooperation and Development; PwCs analysis, 2010.

We need to make apps more relevant to the user.

[Apps] are an extension of the users personal

device that has a range of senses: a camera to see,

a microphone to hear, GPS to be location aware. It

is a very different experience than on the desktop.

As a result, one-third of mobile search queries will

have some form of local intent.

Mike Schipp er, produ ct mana ger, Google UK

The genie is well and tr uly out of thebottle, and application stores havestarted to whet consumers appetites forever-increasing amounts of content anddata . The question for operators is nolonger whether to pursue a da ta-drivenstrategy for increasing market shareand share of wallet. Instead, it is howfar to push this must-have capabilityand how fast?

Yet the explosion of mobile data isfar from being a straightforwardgood news story. If operators cannotfind a way to monetise content andapplications across their n etworks,will they follow the fat e of manylandline opera tors, becoming simplycommoditised infrastructure providersthat struggle to find ways of extractingadditional value from their customers?


16/48


Collaboration with operators has been a

cornerstone of RIMs successful global expansion.

Operators derive great value from their direct

relationships with consumers and they are

typically very good at identifying things that

work well in their markets.

Alista ir Mitchell, vice president multimedia,

Resea rch in Motion

For ging n ewbu siness m odels

The ability to survive and thrive in anopen environment will call for a ran geof new business capabilities. Businessmodels are going to have to becomemore collabora tive and will rely oncooperation between businesses that,to dat e, have seen others solely asfierce competitors.

Ensuring th at applications are

available across all platforms meansdeveloping industr ialised processesfor creating services that will operatenatively on any one of the ma nydifferent platforms that devicesmay use and consumers can choosefrom. If no single dominan t standardemerges, open source environmentsare likely to succeed in the future.

We are likely to see the emergence ofa creative coalition between operators

and OEMs that will enable developersand conten t providers, such as gamescompanies, to produce a pplicationsand con tent ea sily for all phonesand markets.

Operators, therefore, may well needto consider incorporating the costs ofconversion into their revenue-sharingarrangements with developers.The default 70/ 30 revenue sharingestablished by the Apple applicationstore is accessible for any developer. Butas operators rush (perhaps hastily) intocreating their own stores, developers areleft with a prolific number of operatorand/ or device types for which to manageand / or certify their applications.

Alternatively, opera tors will have to bearthe cost of tha t certification just to gainaccess to the revenue poten tial of themobile application and content market.

The future of t he opera tor-ownedapplication store looks uncertain. Thetemptation for operators to push theirown port al is strong; yet even withinitiatives such as the World MobileCongress Alliance, it requ ires th eoperators to demonstrate sufficientcontrol or customer-intimacy in content

delivery to prevent the consumer fromgoing completely off-port al. What ismore likely is that opera tors will seekto balance t heir own offerings againstthose available from other providersmuch like a super market providesconsumers with a choice between itsown brand and other branded goods.

Stay ing one s tep ahead of consu m ers

Increasingly, consumers make mobilechoices according to the services andcontent they want rather than the

intrinsic merits of a par ticular device.Also increasingly, they will make thosechoices across all three screenstha tis to say, across mobile, per sonalcomputers and television. For example,Facebook users rou tinely use bothmobile and desktop applications tomanage t heir social networking, andusers now access YouTube more oftenfrom mobile devices than from desktopmachines. Hulu, t he video contentprovider, is among many in planning

to expand its services to mobile. Musicservices, such a s Spotify, Rhapsodyand Last.fm, already integrate conten tseamlessly across desktops an dpersonal devices.

To avoid the off-port al scena riodescribed above, operators will haveto leverage th eir existing strengthswith consumers, including their long-standing relationships, their reputationfor reliable service an d t heir directbilling relationships.

Such existing characteristics maynot hold the kind of differentiatingcreative and brand recognition thatthe operators marketing divisionscrave. But they do provide a potentiallyvaluable advantage in developingdeeper relationships that do more thansimply connect customers to servicesand content.

Personalisation, location-based services

and t imeliness are all long-touteddifferentiators in t he mobile contentworld, but intrinsically they are factorson which opera tors can capitalisebetter than most. By using the wealthof information they already have abouttheir customers, operators can begin tooffer more personalised and customisedexperiences, such as creating personalapplication bun dles and monetisinguser data through merchandising.


17/48


Operators already have considerabledata with which to build socialnetworks. They can u se their subscriberbases to develop communication withincommunities, focussing on local servicesand content in which they understandthe market and what is likely to appealto their subscribers.

They need to understan d thecore of where they can add valueand, in part icular, how to leveragetheir local consumer knowledge anddeep relationship skills. The operatorsestablished, large-scale IT infrastructure,together with a wealth of data a ndsecurity that consumers prize, lendsitself to micro-billing and aggregatedpayments alike.

Enabling the social networking elementis key for the operators to then be able tomonetise the open application/ contentenvironment, whether by leveragingtheir m ulti-platform approaches or

throu gh their direct customer insight.More important , failing to create t helink among communication, contentand t ransactions means the operatorsare effectively relinquishing all controlto the content providers and OEMs andresigning themselves to a bit-pipe status.

Creat in g an edgea q u e st io n o f c o n t ro la n d fa s t a ct io n s

Operators, OEMs, developers an dcontent creators a re seeing a shift inthe balance of control on multiplefronts. Conten t creator s, serviceproviders and handset manufacturersare a ll rolling out game-changinginnovation to develop compellingofferings to consumers. To date,operators have been somewhatleft behind.

To exploit the potential for growthand to man age risk, operators needto develop a clear, cohesive strategy

across the business model, product,infrastructure and financial domains.

How operators respond in t heimmediate future will determinetheir prospects for the longer term aswe enter a whole new mobile world.The consumer is on centre stage. Andoperators need to create the right userexperiences and customer-centricapproaches to maintain their relevanceand their healthy share of the market.

That information opens up aworld of revenue opportunities.The opportu nities range from B2Bservices, such as mobile vouchers/advertising that make the best offerto an individual walking past a store;to application bund les targeted at aspecific consumer, which no third-party developer could match; to t heinevitably scatter-gun delivery routeof an application store t hat m ightbe home to more than half a millionother applications.

Leverag ing t he p ow er o f m a n y a n d o f o n e

The rise of social networking andviral marketing represents anot hermajor opportunity for operatorsifthey follow the right approach. Thepersonal natu re of mobile devices,arguably, makes them a more natu ralfit for social networking ser vicesthan are th eir desktop equivalents.

Recommenda tion and word-of-mouthare power ful drivers of consumerbehaviour, as demonstrated byonline ret ailers such as Amazonthat use bu yers comments to d riverecommendations and sales.

A new retail model now exists because of social

networking. A key objective of content should be

to drive social action and make it easy to get or

do things. Recommendations count.

Lee Epting, director o f con ten t, Vodafone


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16 Healthcare unwired

Hea lth ca re u n w ired

In the quest to develop new revenue streams,

communications companies are focussing on vertical

markets, where specialised services can add value to

both end users and company shareholders. One of these

markets is healthcare. While individuals and businesses

across the health industry value chain have started to

embrace communications technologies in recent years,

opportunities abound for mobile comm unications

applications and services to transform the sector.

The following is an excerpt from a recent study by

PwCs Health Research Institute (HRI). It provides

communications operators with new insights into theattitudes, preferences and needs of stakeholders across

the health industry insights that operators should

consider as they evaluate and pursue opportunities

in this exciting and evolving industry.

By Dan Garr ett a nd

Christoph er Wasden

Dan Garrett is a partner and ChristopherWasden is a ma naging dire ctor in PwCsHealth Industries pra ctice. For moreinformation, contact Mr. Garrett by phoneat [ 1] 610 256 2055 or via e-mail at daniel.garrett @us.pwc.com; or Mr. Wasden byphone at [ 1] 646 471 6090 or via e-mailat christopher.wasden@u s.pwc.com.

To download the complete study, HealthcareUnwired: New business models delivering care

anywhere, visit www.pwc.com/ us/ mhealt h.


19/48


Mobile technologies hold great promisefor keeping people healthy, managing

diseases and lowering healthcare costs.For years, telehealth h as providedclinical services for individuals wholacked physical access: farm ers inremote communities; soldiers nearthe battlefield; inmates in pr ison. Now,these technologies have demonstra tedthe ability to benefit almost anyindividual. Mobile devices are the mostpersonal technology that consumersown. They enab le consum ers toestablish persona l preferences for

sharing and communicating. Theycan enable health and wellness to bedelivered through mass personalisation.

Mobile hea lth could provide n eededconnections: for patient s who delay

care because they are too busy to waitin a doctors office; for physicianswho dont have enough time to spendwith pa tients; for device companiesthat want to monitor the performanceof their devices; for pharma ceuticalcompanies that wan t to ensure patientsare taking the medicines they need; forhospitals that d ont have the capital tobuild more beds.

In addition, a host of new players aredeveloping easy to use, affordable care

anywhere devices, services, solutionsand n etworks that are attra ctive toconsumers. Organisations that wantto play a role in making care anywherea reality will need to provide real valuein order for adoption to occur.


20/48


Providers are incorporating mobile into their

workflows of caring for patients, some even

developing their own applications and spinning

them off as businesses.

Figure 1: Mobile health business models

Operational/clinicalFocusses on internal operations of an

organisationrunning and growing thebusiness (e.g. fi nancial, cl inical performance,customer experience).

Consumer products and servicesServices related to individuals that span acrosshealth/fi tness, preventative care, acute careand chronic care (e.g. apps, fi tness devicesand games, personal sensors/monitoring).

InfrastructureFocusses on securing, connectingand speeding up health-relatedinformation exchange (e.g. platforms,software, bandwidth).

Goal: TransactionEnable the exchange orquery of information toaccomplish discrete tasks.

Goal: KnowledgeProvide new informationfor decision-making.

Goal: CommunicationEnable dialogue orinformation dissemination.

Goal: IntegrationUnify services, productsand players to form awhole solution.

CustomersConsumerPhysicianHealth systemHealth insurerEmployerPharma/device


21/48


Thr ee bu siness m odelsfor m obile hea lth

Mobile health encompasses a widearray of companies that sell productsand services in health and wellness

through technology applications. Wesee a plethora of pilots dotting thelandscape. Providers are incorpora tingmobile into t heir workflows of caringfor patients, some even developingtheir own applications and spinningthem off as businesses. Health plansare experimenting with m obile as away to reach out to their members fortransactions and as new ways to engagethem in hea lthy behaviours. Employersare t ext-messaging employees in

their health promotion/ monitoringcampaigns. Pharmaceutical and lifesciences compan ies are using mobileto support drug ad herence.

Curren t business models fall into thesecategories (see Figure 1) :

Operat ional and clinical capabilities

Consumer products and services

Infrastructure to connect,secure and speed up information

and services.

Operationa l an d clinical capa bilities

In looking at reducing traditionalhealthcare costs, the focus immediatelygoes to providers. Physicians a regenerally paid by task. Their time isvaluable but often wasted on taskstha t could be automated , eliminatedor reduced in scope th rough mobilehealth. For example, more tha n halfof physicians surveyed by HRI said

a signifi

cant port ion of offi

ce visits

could be eliminated through mobilehealth, which could improve accessfor patients and ease the number of in-person visits from chronic-care patients.Forty percent of physicians said th eycould eliminate 11% to 30% of officevisits through the use of mobile hea lthtechnologies like remote monitoring,e-mail or text messaging with pat ients.

Such shifts could rewrite physiciansupply and shortage forecasts for thenext decade and beyond. A recentstudy by the Mayo Clinics Departmentof Family Medicine supports this view.During the two-year study, e-visitswere able to replace in-office visits in40% of the 2,531 cases. In the study,

patients logged on to a secure onlineportal, where they had detailed historiestaken and were able to upload picturesand other files as needed. Physiciansresponded within 24 hours and patientscould access the port al to view results.

Workflow is important to physiciansbecause they get paid only for thepatients they treat. So, they are keenlyinterested in efficiency. Accessinginformation where an d when it isneeded is a top challenge for physicians,according to the HRI survey.

Currently, one-th ird of physicianssaid they make decisions based onincomplete information for nearly70% of their pa tients. Specialists andPCPs [primary care physicians] findthat the ir biggest obstacle when seeingpatients or running the ir practices isaccessing informat ion when and wherethey need it. Only half of physicianssurveyed access EMRs [electron ic

medical records] while visiting andtreating their patients.

Yet mobile health solutions will haveto ensure t hat t hey arent makingphysicians less productive. Physicianswant to see exceptions in the data , notall the data. Too much informationcould actua lly slow down care. Hospitalscan help the physicians who br ing inpatients by filtering the data they sendelectronically. For example, a physicianwho has seen pat ients with chest painthat have inconsistent outcomes canquery for every patient over the age of55 who came in with chest pain andwas given a spirin. This potentiallyallows hospitals to improve outcomesor work flows based on the data, saidJohnny Milaychev, produ ct manager ofNew Wave Software , a veteran clinical

integration vendor.

Another example is e-prescribing,where in physicians most commonorders are automatically populated onthe ir devices, said Donald Bur t, MD,chief medical officer of Pat ientKeeper,a physician informat ion technologyfirm. He said that PatientKeeper s25,000 daily physician users spend20% of their days on mobile devices.He added that experienced nurses

can post orde r requests on physiciansphones, and they can sign or modifythem wherever they are.


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Pharma company uses Bluetooth

and nurse reminder calls to boost

adherence of injectables

In a five-year journey to reinvigorate a por tfolio of gener ic, off-label orabandoned d rugs, one pha rmaceutical company found digital/ mobiletechnology could significantly boost patients adherence. While pharmacompanies typically focus on new drug development, Switzerland-based MerckSerono found that it could create double-digit growth in a pipeline of genericinjectable drugs that were long off-patent. The strategy centred on addingvalue to the products you already have, said Don Cowling, vice president andmanaging director of Merck Serono, UK and Ireland. The futu re is behind u s.Mr. Cowling said his team realised t hat the growth ma rket for pharmaceuticalsis in adherence rather than in finding new pat ients, since ha lf of all scripts arenever filled and half of those are never taken. People dont buy compliance;they buy pharmacoeconomic outcome, Mr. Cowling added.

With six therapy areas of focus, including neurology, fert ility and growththerapies, Merck Serono developed a smart electronic injection d evice withtwo-way Bluetoot h capability that could track all injections made. Nursesmade reminder calls within 30 minutes of a missed injection. For example,at one point, t he number of injection-site reactions was growing in patientstaking one of the therapies. After changing the need le depth requirement by3mm, the dropou t rate improved by 10%.

Real-time data gathering and feedback through mobile technology boostedMercks business case for mobile health. The strategy helped the company gainover 50% of new pat ients for several therapy areas, grow 38% in a static growthhormone market and decrease 20% of its workforce while doubling the volume

of work and creating a platform for future therapeu tics to be administered.


23/48


Having information at their fingertipsassures physicians that their time isused more effectively (see Figure 2) .Of physicians who are using mobiledevices in their practices, 56% saidthe devices expedite t heir decisionmaking and n early 40% said theydecrease administrative time. MountSinai Hospital in Ontar io, Cana da,connected its physicians to EMRsthrough their iPhones. Its VitalHubprogramme has changed the way itsphysicians work; they pull up patientscharts, labs, medical references andradiology images. Char t applicationsfrom leading vendor s may have arobust backend, but the physicianexperience is weak. They are strugglingwith making the chart somethingeasy to deal with. How do we help ourclinicians who are going to multipleplaces for locating informat ion? Wego to them, said Teek Dwivedi, chiefinformation officer at Mount SinaiHospital. The hospital spun ou t t he

intellectual property of VitalHub into aseparate externa l company with plansto offer th e platform model to otherinstitutions on a commercial basis.

The paradigm of healthcare has changed. You used

to bring the patient to the doctor. Now you take the

doctor, hospital and entire healthcare ecosystem to

the patient.

Rajeev Kapoor, for mer global man aging director,

Ver izon Connected Healthcar e

Figure 2: Physician interest in performing various tasks wirelessly

74%PCP

Specialist

69%

75%

=

Monitor patients in hospital

83%86%

82%

PCP

Specialist=

Prescribing medication

Total

86%PCP

Specialist

83%

88%=

Access EMRs

63%PCP

Specialist

65%

62%=

Initiate/track referrals

57%PCP

Specialist

65%

54%

=

Monitor patients outside the hospital

60%Specialist

=59%

Communicating w ith patients

61%PCP

PCP: Primary Care Physician

Source: PwC HRI Physician Survey, 2010.


24/48

Consum er produ cts and ser vices

The consumer market can be a h igh-volume, high-value, low-price market

where mild proof of efficacy can leadto rapid adoption.

People are busy, and sometimes theydont t ake care of themselves becausethey dont have the t ime. Individua lswho delayed care more than five timesdur ing the past year because it took toolong to get an a ppointment are morewilling than th ose who didnt delaycare to pay out-of-pocket for electronicdoctor visits (58% vs. 43%). In somecases, physicians have started t heirown electron ic medical practices inwhich they charge patients $50 for eachconsultation. Those who delayed t hemost care have differen t preferencesfor how t heyd like their p hysicians tocontact them for simple communication.Those who delayed more tha n fivetimes prefer communication throughcell phone, e-mail, text message andFacebook more than those who neverdelayed care du ring the past year.Nontraditional communication avenues

and electronic doctor visits could benew ways of reaching individuals whodont en gage proactively in their care.

For consumers, mobile is a synonymfor independence, said Yan Chow,director of the Innovation an dAdvanced Technology Group at KaiserPermanen te. I think that the abilityto be independent and get data whenand where you need it gives consumersa lot of freedom. Having consumersbe at the centre of their own care is aconcept Kaiser has been working withfor a long time. It gives us the chanceto build a new relationship with ourmembers. Rajeev Kapoor, former globalmanaging director of Verizon ConnectedHealthcare, added , The paradigm ofhea lthcare ha s changed. You used to

bring the patient to the doctor. Now youtake the doctor, hospital and entirehealthcare ecosystem to the patient.

In some cases, organisations aremobilising applications that t heyhave alread y hosted online. Forexample, Aetna made its most popu lartransactions, such as physician docfinder and claims check, available onmobile devices. Our technology isabout transparency and engagementat a ny level, and over t ime wellbuild stronger relationships with ourmembers, added Michael Mathias,Aetnas chief technology officer. Thedays of mass communication areover. We can now deliver customisedcommunication through mobile apps,online, telephonically or through themail based on our understand ingof how each member wants to becommunicated with.

Only half of consumers surveyedby HRI said they would buy mobiletechnology for their health, soits important to know who t heseconsumers are. Of those, 20% say theywould use it to monitor fitness/ well-being and 18% want their doctors tomonitor their hea lth conditions (seeFigure 3) . While 40% of respond entswould be willing to pay for a monthlymobile phone service or device tha tcould send information to their doctor,they would prefer to pay less than $10for the mon thly mobile phone serviceand less than $75 for the device.

Mike Weckesser, director of emergingbusiness-health solutions at Best Buy,

points out t he challenges of consumerprice expectations related to mobilehea lth techn ology. In our consumerresearch, although consumers identifieda price threshold, they also expectedthe payer to reimburse them for thosepurchases, thereby slanting the data .

Only half of consumers surveyed by HRI said they

would buy mobile technology for their health, so

its important to know who these consumers are.

Figure 3: Most important

reasons consumers would

buy mobile health technology

51%:I would not buy mobilehealth technology

11%:Monitor previouscondition

18%:Have doctormonitor conditionfrom afar

20%:Monitor fi tness/well-being

Source: PwC HRI Consumer Survey, 2010.



25/48


In a PwC survey of hospital CIOs, 42%

said they believed their device connectivity

vendors were unprepared or they did not

know if they were prepared to assist them

with medical device interoperability.

Though many consumers have nevertaken advant age of existing mobilehealth t echnologies, 85% of those whohave communicated with the ir doctorby means other than face-to-face weresatisfied with their discussion.

Infrastructure

Hospitals are increasingly feelingthe constraints of outdated wirelessnetworks. Adequate infrastructureis needed to suppor t high-capacityand h igh-bandwidth mobile systemswithin hospitals. New healthcare-dedicated frequencies and 4Gwireless networks are some of theways telecommunication companiesare enhancing the infrastructure ofhospitals to support advancementsin wireless technology. While we alluse multiple platforms everyday inall aspects of our lives, like MicrosoftWindows, Facebook, the iPhone andthe iTunes store, we rarely stop tonotice what a platform is or how itworks. However, such an understan dingis critical to und erstand t he type ofinfrastructure required to drive the

innovations necessary for the adopt ionof mobile health and wellness solutions.

In add ition, developers are focussingon platforms to allow for the grea testflexibility of applications an d devices.Platforms enable many technologiesand players to par ticipate in m obilehealth. There are several models ofplatforms with key character isticsthat include the core, peripherals andinterfaces. As companies determinetheir roles in the d igital world, theycould become hubs into which otherservices connect.

Key infrastructure markets

Developing th e r ight secur ity. Whenphysicians were asked about bar riersto adopting mobile health in t he HRIsurvey, worried a bout privacy andsecurity was the top answer, citedby one-third of PCPs and 41% ofspecialists. However, Bill Braithwaite,MD, who developed t he HIPAA[Health Insurance Portability andAccounta bility Act] regulat ions whenhe was with HHS [The US Departmentof Health and Human Services] inthe mid-1990s, suggests that dat a onmobile platforms can be secure with

the right measures. Multifactoralauthentication provides a higher levelof assurance that t he user is who he orshe claims to be, said Dr. Braithwaite,who is now chief med ical officer ofAnakam, a security software company.

There are three factors that can beused to ident ify you as the proper user:something you know, something youare an d something you have, addedDr. Braithwaite. Commonly, usernameand password are used, but both areinstan ces of a single factor, someth ingyou know. For stronger aut hentication,the user must also present a secondfactor, which could be something youhave, such as a registered ID card orcell phone, or something you are, suchas a fingerprint or voiceprint.

The financial services industry usessimilar security measures for onlinebanking along with behind-the-sceneslocation login monitoring. Messaging

about ou r banking security assuranceprogramme is key to the customer side,said Tom Trebilcock, vice presiden te-business and paymen ts at PNCFinancial Services. You n eed to firstestablish trust a nd a ssurance withthe customer.

Improving integrat ion. Of thephysicians who are using mobileapplications and devices, 63% areusing personal devices that are notconnected to their office or hospitalIT systems. Hospitals in general havenot pu t mobile connectivity at thetop of their IT list30% of physicianssaid their hospitals or practice leaderswill not support t he use of mobilehealth devices.

Joseph Kvedar, MD, director ofthe Center for Connected Healthat Partners HealthCare in Boston,emphasised that while sensortechnology may be rapidly becoming

commoditised, integration with EMRand data aggregation systems is notsomething we have seen don e well.We need to get better at gat heringinformation, adding logistical softwareto get to the intersection of all the dataand population health management.


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Health system, retailer, wireless company

team to improve palliative care

Physicians in New Jersey thought there must be a better way to ease the painof cancer patient s. After collaborative conversations with the leadership ofMeridian Health System, the idea for an innovative pain journal was born. Thejournals intent was to allow patients to record and communicate their painwhile resting at home. With more accurate communication, physicians couldbetter under stand th e pain medication needs of their patients.

The health system d idnt t hink insurers would pay for such a d evice, but m aybepatients mightif it was affordable. With this as a business model, an unusualbut powerful collaboration came together:

Clinical expertise: Meridian Health, a five-hospital he alth system in New Jersey(a teaching hospital, childrens hospital, home health and rehab centres). Most ofthe h ealth systems 1,600 physicians are in private practice, with ha lf in primar ycare and 100 physicians on sta ff.

Technology expertise: Cypak, a near field communication (NFC) companythat creates consumer tools.

Retail/ tech suppor t: Best Buy, an inter nation al retailer of consumer electron icsand technical support.

The collaboration developed a product called iMPaks Health Journal for Pain,an electronic diary in which patients are given an auditory queue and answertwo or three questions regarding their pain via buttons on the device. Thedevice is a t ri-fold, with each section measuring approximately four inches bysix inches. During office visits, physicians download t he informat ion, or it canbe downloaded at home into a web por tal or personal health record. To pairwith the health journal, iMPak is developing a smar t pill dispenser that mon itors

adherence. Based on t he doctors preferences, they can be alerted to fluctuationsor out liers in reporting. This may actually allow the physician to increase thebilling fee from a level three and four to a level four and five, said Sandra Elliott,Meridian Healths director of consumer technology and service development .

Including Best Buy in th e collaborat ion was a key strategy. We have lear nedthat we, as a health system, dont tru ly understand the r etail marketplace,add ed Ms. Elliott. Best Buy does and people go to them for the ir technology.The wireless networks are going to be a major part of getting technology inthe hands of consum ers, and we wanted to be able to leverage Best Buys retailknowledge as well as their Geek Squad for installat ion.

As a hea lth system, our job is to take care of people, continued Ms. Elliott.

We need to come up with strategies to get service fees and technology pricesdown. Our challenge is to think abou t how to manage an increasing patientpopulation withou t building new bu ildings.


Our challenge is to think about how to

manage an increasing patient population

without building new buildings.

Sand ra Elliott, Mer idian Health s

director of consumer technology

and service development


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Vendors may not be ready to helpeither. In a PwC survey of hospita lCIOs, 42% said they believed theirdevice connectivity vendors wereunprepa red or they did not know ifthey were prepared to assist them withmedical device interoperability. Suchinteroperability will be required in thelater stages of achieving meaningfuluse compliance.

Telecom vendors ar e, however,working on interoperability for theircustomers. Qualcomm recentlydeveloped a cellular module th atallows online health d ata from

wearable med ical devices to connectand exchange information throughseveral interfaces. Qualcommsplatform ha s the capab ility to linkthe body area n etwork devices, likea smar t Band -Aid, to persona l areanetworks like WiFi, to wide areacellular networks and t he Internet,said Don Jones, vice president ofbusiness development, h ealth an dlife sciences. You can mix and matchin many differen t ways.

Increasing ban dwidth . Hospitals arestarting to feel the crunch of outdatedwireless systems. Withou t a robustinfrastructure in place, care providerscannot utilise high-bandwidth mobilehealthcare technology. Sprint is using aninfrastructu re model to help providersextend t heir ability to provide careoutside of the hospital. One par tnershipgeared toward mobilising physiciansand eliminating bandwidth constraintsis with Calgary Scientific and its ResMDapplication. Were t aking a $100Kworkstation and bringing it to a mobiledevice like EVO tha t can display imagessuch a s a 3 -D brain scan, said Tim

Donahue , vice president of industrysolutions at Spr int. The network isas important as the device, he added.

EVO has a 1GHz processor in thedevice and needs a robust 3G or 4Genvironment to effectively use that kindof informat ion. Even Wi-Fi networks runinto capacity and mobility constraints.

About the research

Healthcare unwired is the most in-

depth research to date into mobile health

by PwCs Health Research Institute (HRI).

HRI conducted 35 in-depth interviews

with thought leaders and executives

representing healthcare providers,

payers, private sector technology

organisations, academic medical

centres, telecommunication companies,

pharmaceutical and device companies,

retail companies, comm unication firms

and employers. HRI also commissioned

an online survey in the summ er of

2010 of 2,000 consumers and 1,000

physicians regarding their u se andpreference of mobile technologies in

the United Stat es. Mobile health is

being defined broadly as the ability to

provide and receive healthcare treatment

and preventative services outside of

tradit ional care settings.

Mobile health tools can include remote

patient monitors, video conferencing,

online consultations, personal healthcare

devices, wireless access to patients

records and prescription applications

using a cell phone, smartphone orwireless tablet. Our m obile discussion

may also include telehealth, which is

more established, and the physical/

virtual integration and interoperability

of devices like heart rate monitors,

pulse oximeters and wireless scales.

PwCs Health Research Institute (HRI)

provides new intelligence, perspectives

and analysis on trends affecting all

health-related industries, including

healthcare providers, pharmaceuticals,

health and life sciences and payers.

Without a robust infrastructure in place, care

providers cannot utilise high-bandwidth m obile

healthcare technology.


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26 Making better bets

Network operators recognise the importance of capital

allocation and have teams of analysts producing reams

of paper on proposed capital projects. Many execut ives

find the sheer volume of paperwork generated comforting,

reasoning that the team must have covered all the angles

here. In PwCs experience, however, the contrary is

often true. Generating paperwork can be a displacement

activity to avoid addressing the difficult questions: Is this

investment simply propping up an unprofitable segment?

What options havent we explored? What is the evidence

for our assumptions?

By Gary Taylor, Trigvie Rob bins-

Jones and Ian Corden

Gary Taylor and Trigvie Robbins-Jones aredirectors and Ian Corden is an a ssistantdirector in PwCs Telecoms, Media andTechnology practice. For more information,contact Mr. Taylor by phone a t [4 4] 20 78040228 or by e-mail at gar [email protected];or Mr. Robbins-Jones by phone at [ 44] 20 72123399 or by e-mail at [email protected]; orMr. Corden by phone at [4 4] 20 7804 2433or by e-mail at [email protected].

The authors wish to thank David Russell forhis contribution to this article.

Ma k in g bet t er be t s


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Much of business is about betsbetssuch as taking a considered view of

the future, allocating resources andmanaging investments to securereturn s on those investments. Andwith an annu al capital expenditures(capex) bill of US$300 billion, fewindustr ies make bets as big as telecomsdoes. Yet those big bets can fail, andsometimes spectacularly so: Aroundone-third of all discretionary projectsdestroy significant amounts of value,as approximately 10% of projects areabandon ed before completion and

only 7% create significantly morevalue than anticipated.

So, despite their obvious importanceto operators, why do discretionaryprojects still go wrong so often ?

Investmen t decisions today areconducted mostly in the spirit of a

court-like advocate, cross-examinationand judgement process. But rat herthan viewing capex planning as arecommendation-based processseeking the right answer, the betterview is perha ps of capital projectsas key junctures in an organisationsstrategy-making journey that provideopportunities to explore the irreducibletrad eoffs inherent in every allocationof resources.

During the recession, many operatorswere tempted by the easy win ofindiscriminate capex cutting (Iwant 20% capex reductions fromall the bu siness units). Ultimately,though, th at wont work: Investorsdo not reward operators with lowerlevels of capex. Instead , premiumvaluations accrue to those who canredeploy capex away from low-growth,marginally profitable areas and restoregrowth in ear nings before interest,

taxes, depreciation and amortisation(EBITDA) and operating free cash flow.

(See Figures 1 and 2 on the followingpage.) This distinction matters, sinceit redefines the scale of ambitionfrom simply cutting capex, per se,to redeploying capex better to drivegrowth an d returns.

Wh y do m a jor investm en ts fa i l?

Stories abound of capex spending gonewrong, but r igorous research is thinon t he groun d. What little does exist,though, confirms our experience: Moreprojects are simply abandoned (9%)than deliver above-budget retur ns(7%), whilst nearly another quarter ofprojects are challenged (23%), i.e.come in 20% over budget and de liver15% less scope than plann ed.


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Premium valuations accrue to those who can

redeploy capex away from low-growth, marginally

profitable areas and restore growth in EBITDA and

operating free cash flow.

Figure 2: EBITDA growth is a good predictor in valuation multiples in telecom

12.0

0.0

2.0

4.0

6.0

8.0

10.0

-20% -10% 0% 10% 20% 30%

Projected EBITDA growth per annum

EBITDAmultiple

Sources: Capital IQ; PwCs analysis.

Figure 1: Lower capex levels do not attract premium EBITDA multiples

0%

5%

10%

15%

20%

25%

30%

1 2 3 4 5 6 7 8 9 10 11 12

capex/sales

EBITDA multip le

Sources: Capital IQ; PwCs analysis.

Why do capital investment appraisalsnot improve these ou tcomes? It iscerta inly not for a lack offinancialdetail, persuasive proposals andlegitimate challenge from investmentcommittees. Often financial detailmasks ana lytic rigour, proposalsgloss over deeply imbedded tradeoffsand cha llengers start from a murkyunderstan ding of the technical,strategic and financial a lternatives.

Our experience suggests thatopera tors face four major obstaclesin making most capital investmen ts(see Figure 3). From the lack of

alignment with the business strategy,to the failure to explore all options, toweak methodologies and delivery risks,most major investments simply are notfully vetted before t hey begin.


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Obstacle 1:Poor a l ignm en t w i thbu siness object ives

It is a truism to say tha t all decisionmaking should be linked to strategy,but sometimes the specific mechanismsfor linking the two are not clear. Incapital investment appraisal, askingthree specific questions can help startthe process.

The first question to ask is: Shouldthis investment happen a t all? Almostall operator s have a long tail ofmarginally profitableor downrightunprofitableproducts, networks,customers, chann els and segments.

A call for ad ditional investmen t inthose a ssets is an obvious juncture atwhich to consider closing, migrating or

consolidating. Yet network operatorsare notor iously slow at pru ning theirproduct portfolios, and they rarely useinvestment cases as a trigger to revisitthose basic assumptions.

The most common reason for skippingthis rather obvious step is simply thelack of good-quality information. Asoperators move towards a ll-IP networksand integrated offers, traditionalcosting models struggle, and inthe absence of reliable factscapexproposals and challenges becomepoliticised, a rbitrary and inefficient.

In our experience, the antidote topoliticised capex decision making is the

creation of a reliable, robust and agreedfact base on the economic profitability ofproducts, network, customers, chann elsand segments. When opera tors have

taken this particular bull by the horns,the benefits are twofold: Not only iscapital diverted away from low-growth,margina lly profitable activities, butalso the business case for network andsystem convergence is strengthened .

The second question to ask dur ing thecapital investment appraisal processis: Can the investment be deferred?One of the m ost common claims tolegitimacy in investmen t cases isThis is necessary. The network iscongested. Often that assessment iscorrect, and ongoing capacity upgradesare a fact of life for all opera tors.However, operators regu larly havehidden capacity masked by incomplete,

inaccurate or unconnected databases.

Figure 3: Why do major investments fail?

Investment leaders not welllinked to strategic agenda

Project strongly infl uenced bypolitical or technical agendas

No articulation of theinvestment philosophy

Investment used to prop upmarginal assets, productsor customers

Premature lock-in to singlesolution approach

Full range of optionsnot explored

Financial shape of

alternatives not understood Limited challenge by

independent experts/supply market

Business criteria for successnot well understood

Risks not properly assessed,and no risk management

plan in place No benefi ts tracking or

accountability for benefi trealisation

Project specifi ers driven bytechnical goals

Investment not broken intotransparent elements

No evidence for keyassumptions

Business casefor investment

not robust

Deliv

ery

risks

Weak

metho

dolo

gies

Options

not

fully

explore

d

1

4

2

3

Poor a

lignm

ent w

ith

business ob

jectiv

es


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Operators regularly have hidden capacity

masked by incomplete, inaccurate or

unconnected databases.

One major European network operatorhad spent m ore than $2.5 billion oncapex since the launch. In its drive forgrowth, the operator had not beenoverly concerned with cont rolling costsor ensuring the financial accountabilityof the project managers responsiblefor purchasing the network assets.Consequently, t he operator h advery poor network inventor y andinfrastructure information.

The company undertook a majorexercise to improve t he consistencyof asset data and processes betweenfinance and operations, implementing

common reporting and data controlframeworks to which both networksan d finance could adhere. Inthe immediate aftermath, thisexercise prevented the operatorfrom erron eously writing off 5%of its accumulated network asset base.The company also realised more thana $25 million improvement in thenext years capex budget as a result ofidentifying stranded assets, capturingunbilled services and preventingduplicate out-payments.

The third and final questionoperators should ask is: What is theappropriate investment philosophy?All capital investments car ry an

implied investment philosophy, bu tfew make tha t philosophy explicit,thereby creating one of the majororganisational fault lines in capitalinvestment appraisal.

Consider an Eastern European operatorwho was building a VoIP businessand also was increasing capacity onits switched voice network. Engineersassumed the underlying investmentphilosophy for both investmen tswas invest for the long run, whichbakes in resilience, redundancy andexcellence in quality. In fact, the VoIPinvestment was better suited to a

speed to market, proof of conceptphilosophy, and the switched voiceinvestment simply required somethinggood en ough for now.

All investmen ts have irredu cibletradeoffs around net present value(NPV), funding requirements, qualityand speed. Simply making suchtradeoffs explicit always enr ichesthe quality of strategy making andregularly improves the allocation ofscarce capital. Making bet ter businessbets in discretionary capex often worksfor operators who have resisted thetemptation to produce volumes offinancial ana lysis on variants of thesame basic option or solution, andwho instead have explored t hestrategic and financial shape ofmore fundamen tal alternatives.

Obstacle 2:Opt ions n o t fu l ly exp lored

A regulated network operator plannedto roll out a combined pr ivate mobileradio (PMR) an d fixed backhaul

network. Rumours hinted at a gold-plated, t op-of-the-line solution, andthe regulator had little confidence thatevery effort had been made to identifymore economically efficient options.The internal finance staff had performedstandard NPV analyses that cast doubton the validity of the investmen t.But t hose analyses were no ma tchfor engineersor the safety-shroudwavers who obscured t he choicesavailable by citing quality or safety as

dictating only one possible solution.

A review of the investment processdetermined whether investment teammembers had themselves addressedthe critical questions: Was theinvestment necessary at all? Coulda refurbishment suffice? Couldthe investment be delayed? Theinvestigation revealed that severallegitimate options had not beenconsidered, raising early warningflags that t he capital was notallocated efficiently.

Articulat ing complex investments inclear business terms is a task that beatsmany investment teams. Yet it is anessential building block for identifyingpossible alternatives, quantifying anybells and whistles in t he project scopeand tracking the realisation of benefitsthat must follow the investment.

In the case of the regulated PMR/fixed

backhaul opera tor, re-stating costs bybusiness objectives was a revelation (seeFigure 4) . The review of the investmentprocess highlighted that one businessobjective, previously considered to beof secondar y importance, in fact wasconsuming almost one-third of the


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total costs. The highly technical natureof the proposal meant that the task ofexpressing technology investments inclear business terms was a daunting onefor engineersand beyond the scopeof traditional financial analysis. Capexsavings of up to 80% on a whole-lifebasis were ident ified as a result ofthe review.

Obstacle 3:Weak m eth odo logies

When operators make inorganicinvestments ( i.e. mergers andacquisitions), they invariably deploya cross-functional team to explore thefinancial, strategic, tax and operat ional

aspects of the proposed acquisition.Those teams normally engage duediligence experts to ensure t hat noston

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