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GLGi: Wireless, VOIP

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  • The mobile operators and the large Internet brands are coming together to dismantle the “walled garden” approach to mobile communications The old regime of per minute/MB/tex pricing is being replaced by flat rate Mobile operators are implementing all IP networks Allowing a unlimited choice of Internet services to be delivered Sales is moving beyond traditional retail stores and with larger focus on Online And the old school marketing channels are being extended with Viral marketing tools. Customer support, normally a very resource demanding operation, is moving over to simple Internet support. All in all Mobile is adopting basic Internet rules
  • There is a change of guards. Mobile used to be a very closed ecosystem where the operator controls services, Devices distribution and access. The walled gardens are coming down. Some are still trying to hold on to make additional lines of revenue. Vodafone Live 32 million users tried out of 206 subscribers. Spend more than 3 figure millions on Vodafone live and walled garden. Nobody wants a walled garden. Operators pushed back to Access even from their best “friends” Nokia. Content is king Link to INTERNET Internet changing the came – anyone can address a global market No longer advantageous to be big What used to be assets may become a liability for incumbents Those who succeed are those who make them become one world. Nokia Ovi in the PC world. Nokia –Ovi. Devices is not enough – need content. Nokia has close to a billion customers – and better integration, head start compared to Google and Yahoo. That will come out with own initiatives. Last time operator resistance – now because operator failed, Nokia is getting green light based on revenue share, Nokia acquire ad company Enpocket. Nokia product top and low cost phones. Strategy is paying off. However E-Series not selling compared to RIM. RIM is a interesting takeover topic. . Challenged by Apple Iphone and Google Phone. Key competitive advantage – Distribution, Marketing, volumes. Microsoft: Microsoft, whose mobile operating system has been available for years, has distribution agreements with 48 handset makers and 160 carriers around the world. Still, only 12 million phones sold this year will be based on Microsoft’s software, giving it 10 percent of the smartphone market, according to IDC. With introduction of All IP – unbundling service layer from access layer the entry for the Internet players is wide open. Google is moving up in the value chain, Eric E. Schmidt, has said several times that the cellphone market presented the largest growth opportunity for Google. Google is copying Microsoft, but open source linux, but they may not stop there, but go for access also. Wifi, Wimax and maybe 700mhz Open access. The rules, which the F.C.C. adopted despite opposition from Verizon and others, require that the network using a portion of that spectrum be open to any handset and software applications from any company. The mobile phone project at Google was built in part around Android, a small mobile software company it acquired in 2005. An Android co-founder, Andy Rubin, had founded Danger, which created the popular T-Mobile Sidekick smartphone. Mr. Rubin works at Google’s headquarters in Mountain View, but another part of Google’s team is reported to be in Boston, where Android’s co-founder, Rich Miner, another veteran of the mobile phone industry, is based. Apple is also coming in strong in the mobile space with their iPhone. And now also opening up the platform for all developers.
  • Operator Branded Phones The Jet - 02/Telefonica aim for 20 to 30 per cent of sales made up from own brand devices. Bit potential for large operators like the Telefonica Empire with 148million mobile subscribers. Vodafone is also going down the same route with its’ own brand 3G phones . Vodafone's annually purchases around 55m handsets globally which is a significant 5.5% of the overall market size of 1.1billion in 2007. 20-30% of 55m handsets is a contract that most ODM's in the world would die for. Although a lot of people think that mobile operators should not enter the handset manufacturing market, I believe it is the easiest (and possibly riskiest) avenue to create differentiation in the eyes of the consumer. Maybe the Open Source initiative could be interesting to operators, but they risk becoming a bit pipe. cost disadvantage compared to Nokia & Motorola economies of scale issues operators own no GSM patents and therefore will have to pay royalties. Estimates of GSM royalties between 8% and 28% Nokia on the other hand have taken a clear stand – stick to brand – build services around to protect market share. Is it a phone, a camera, a navigator, a music player, a TV etc. Cleaver move with Navtec and Gate5 – taking the fast growing Navigation market. Google is building a mobile phone operating system, as well as what technologists call a “reference platform,” a set of specifications for how hardware makers would build a phone based on that software. Google is also beefing up its mobile applications, and it is believed to be creating software to ensure those apps run smoothly on as many phones as possible. In a way, that looks a lot like what Microsoft does with Windows Mobile and Symbian does with its mobile operating system. Yet no one really talks about the “Microsoft Phone.” Rather, there’s the Motorola Q running Windows Mobile, the Palm Treo running Windows Mobile and so forth. So maybe speaking of the Google Phone is a bit of misnomer. Maybe we should simply be talking about the, well, we don’t yet know who will make these phones, but say if it were HTC, we would talk about the HTC phone running Google’s mobile Linux. Then again, there is the possibility, raised by some analysts, that Google could decide to brand or co-brand phones with some manufacturers. In such a case, there really would be a Google Phone. It would also be the first time that Google would be pushing a consumer device, and as some people have noted, it could create conflicts for Google CEO Eric Schmidt, who sits on the board of iPhone maker Apple. by 2012 the number of Linux powered devices will reach 128 million, about 8.8% of all mobile phones sold. As for the ODM-makers, they are Amoi, CECT, E28, FIC, Hisense, ImCoSys, WNC and Vitelcom. Apple: has build a phone around Internet services. Projected to sell 4 million by end 2007 and 12 million by end 2008. It is still a drop in the ocean on Nokia’s more than 400million phones shipped in 2008.
  • Social networks: MySpace, FaceBook, Linkedin, Plaxo The walled garden of the content provider! Now its them putting up walls. Unified messaging – GardenCentral, Microsoft communication Server Music (60$ million spend on loudeye – itunes alternative), Games, Maps with GPS (gate5), Twango for media sharing, Nokia offers $8.1 bln for Navteq 60$ million spend on loudeye – itunes alternative- Most Europeans sideload music from PC instead of download. Over the air as operators had hoped. Twango – Youtube/Flicker – Nokia paid $100m200 million music capable nokia phonwscompared to xxx Ipods. Unexplored: Music and Ecommerce, Games (NGage) No debt and $9.5 billion cash to by more.
  • A few visionary operator, that have decided to tear down the walls to their network, embracing the Internet and providing users with a choice. Differentiate offering from competitors – Service only available on operator network Grow customer base by tapping into millions and millions of users Increase spending on mobile broadband Create stickiness - Internet sites creates loyalty Reduce customer acquisition costs – Use Skype to promote three to our customer base (commercial incentive)
  • 1.1 Billion Mobile phones projected shipping in 2007 Nokia securing its market share Samsung on the rise Motorola in fast decline from 22% in Q406 to 14% - too thin a portfolio with a history of a few blockbusters: Razr before Startag) SonyEricsson up 25% LG steady state Others: HTC growing fast 6.1% Windows – 85% HTC devices 1.6% Palm 5.6% Rim Blackberry 1.3% Apple Iphone Merril Lynch that 4 million iPhones for the second half of 2007, even with a flat shipments rate through 2008, would equal 12 million iPhones or 2 million units over Apple's publicly-stated goal of 10 million iPhone units shipped by end of 2008. Compare that with Nokia 400 million phones shipped in 2008.
  • Motorola's new CMO, Motorola "In the U.S. our operator-carrier partners have been trying to develop their own services and their own experiences," Keller said. "We work closely with them to make sure we can enable those experiences on the devices." SonyEricsson - http://www.mobile-review.com/articles/2007/se-strategy-en.shtml price of a Nokia’s handset averaged 89 Euro (almost a half of all sold devices were below the 49 Euro watermark). Average price for a Sony Ericsson handset made up 134 Euro (33 percent higher). SE 21.8 million units. Motorola http://www.mobile-review.com/articles/2007/motorola-london-en.shtml Palm goodbye to Access Plenty of companies can make good smart-phone hardware - HTC, for example - limiting Palm's bid to stand out founded on its handsets' on-board software and the brand. And the two are closely connected: Palm's brand may have been built on the back of its PDA roots, but that's much less of a sell in these phone-centric times. The build the brand, then, it needs to promote software innovations, and that can only be done if it controls its own product.
  • There was tremendous activity in the area of Mobile Advertising. There is a lot of confusion around what it means. All carriers are active in the space. Even T-Mobile is running trials. Google wants to extend its dominance of online advertising to the mobile Internet, a small market today, but one that is expected to grow rapidly. It hopes to persuade wireless carriers and mobile phone makers to offer phones based on its software. The cost of those phones may be partly subsidized by advertising that appears on their screens. Google has expanded its AdWord product to mobiles which will be a cornerstone for their GooglePhone initiative. This allowing creators of mobile content to embed Google advertisements into their pages and receive revenue on click-throughs. Advertisers pay for every user that arrives at their landing page (the page the advert links to), and the page hosting the advert gets around 80 per cent of the money. Google's initial intention is to apply that same model to mobiles; serving the same adverts to pages designed for mobiles, without offering advertisers the ability to target either platform. Taking an internet model and applying it to the mobile browsing experience may not be the best idea. Google is planning to trans-code the landing pages to suit the mobile device being used. Most landing pages require the user to buy or sign up to something, which may suit the user sitting in a comfortable office chair, but is unlikely to be of interest to the same user trying to find a pub. Nokia's purchase of Enpocket was a recognition of that company's understanding of the mobile advertising business. In 2-3 years Microsoft will make 25 per cent of its revenues – projected to be around $14bn by then – from advertising. “quote Steve Balmer: The Register” UK-based mobile technology firm ROK Entertainment Group announced plans to buy US rival Xero Mobile as a prelude to the launch of a competing service next year. Los Angeles-based Xero Mobile has tested an ad-funded mobile service in college campuses across the US but has yet to launch a full service. ROK, which plans to float in the US later this year, wants to buy the company for its technology which it will use for its own service, aimed at students, to be launched this side of the Atlantic next year.
  • Disney Mobile: subscribers were using its data services actively, but the costs of distribution and the inability to gain traction in big-box stores were insurmountable. Also, the company learned that selling the message on data services—despite its massive promotional ability with Disney ABC, the theme parks, etc.—was a tougher message in the marketplace than the carriers’ message of “buy one handset, get three free.” Unlike Mobile ESPN, Disney subsidized its handsets and, overall, took a more pragmatic approach. In the end, it wasn’t enough. 
  • 3.6Mbps HSDPA supports a maximum of 24 users. It's doubtful if all 24 could do decent VOIP. Also latency for data (VOIP) is 150ms to 999ms+
  • 55% do not use their mobile for international calls
  • ~65% of all calls are made from locations that could be covered by Wifi “ 30-50% of total mobile revenue arrives from On campus communication” http://en.wikipedia.org/wiki/Unlicensed_Mobile_Access EarthLink worked with Philadelphia , San Francisco , Anaheim and nine other cities to deploy public Wi-Fi networks. It teamed up with Google in an effort to bring such a network to San Fransisco. EarthLink saw citywide Wi-Fi as a way to compensate for the ongoing loss of dialup customers, and hoped to use its strong brand identity and established customer base to gain an edge in the market. EarthLink's municipal wireless efforts began to dissolve in late August 2007 when the financially ailing company said it was no longer willing to solely fund construction of city-wide wireless networks in San Francisco and 11 other cities. The plan to build free wireless in San Francisco was formally scrapped by the city on 12september 2007 UMA great opportunity for MVNO’s like Helio. TMobile @Home $10 on top of regular bill to make unlimited calls on Wifi. Currently only 2 handsets supported. Nokia 6068 and Samsung t409 Unlimitd mobile access compared to Femto Cells.
  • 4G: Wimax or 3GLTE? LTE (Long Term Evolution: WCDMA 4G: upgrading UMTS to a so-called fourth generation mobile communications technology, essentially a wireless broadband Internet system with voice and other services built on top. Targets include: Download rates of 100 Mbit/s, and upload rates of 50 Mbit/s At least 200 active users in every 5 MHz cell. (ie 200 active phone calls) Optimal cell size of 5 km, 30 km sizes with reasonable performance, and up to 100 km cell sizes supported with acceptable performance Co-existence with legacy standards (users can transparently start a call or transfer of data in an area using an LTE standard, and, should coverage be unavailable, continue the operation without any action on their part using GSM/ GPRS or W-CDMA-based UMTS) Trellia Networks: Sprint’s Xohm WiMax network will provide powerful high-speed wireless broadband connectivity alongside WLAN, LAN and other network technologies to both consumers and enterprises. The intelligent, seamless management of all these networks, and the ability to provide the necessary control for enterprise IT departments, will be key for the successful deployment of Sprint’s Xohm services.
  • MetroPCS – Prepaid wireless (offering 45$ to 50$ unlimited voice and data) Leap Wireless – Prepaid wireless Segment growing at 5 times the rate of the postpay segment. Carecteristics of a prepaid market.
  • 2007 to at end at approximately $11 in data ARPU or 20% of the service revenues.
  • Verizon Mobile: 5.6million subscribers Helio: 125K The overall subscriber penetration currently stands at approximately 80%. Helio 125K customers and Amp’D boasted $100 ARPU and 100K subscriber base but the burn rate and Cost of Customer Acquisition remains quite high and killed Amp’d. Helio is still struggling. By early 2007 the US mobile market remained dominated by AT&T Mobility, Verizon Wireless and Sprint Nextel, together accounting for 75% market share. T-Mobile, Alltel and US Cellular make up the next tier, accounting for around 20%. In 3G networks, Verizon Wireless and Sprint Nextel were dominating with their CDMA2000 technologies, with subscriber numbers outstripping those on the W-CDMA technology offered by AT&T Mobility and T-Mobile. However, the launch of HSDPA enhancements is expected to significantly close that gap. The next battlefield will be in 4G technology. Mobile data is accounting for an increasing share of company revenues and will continue to do so as mobile broadband services and mobile TV gather momentum. Developments in these new mobile multimedia services have been spurred on by the Advanced Wireless Services auction in which T-Mobile and Verizon Wireless acquired valuable new spectrum. The 700MHz auction in 2008 may provide an opportunity for new entry, though the incumbents are likely to price this spectre into their bidding.
  • Transcript

    • 1. GLGi: Wireless, VOIP & Mobile Operator Updates Eric Lagier Director Business Development Skype
    • 2.
      • Council Member Biography
      • Eric Lagier is the Director of Business Development Mobile at Skype, a global leader in VOIP communications. He is responsible for developing commercial partnerships with mobile operators, and managing relationships with mobile device manufacturers that produce Skype certified phones and accessories including Nokia, and AMOI. He was also responsible for the Skypephone launch with Hutchison 3. Previously, he was the Director-Wireless and Voice Division at Oracle. He has also held positions at TDC Mobil, where he was responsible for the mobile internet division.
    • 3.
      • Topics
      • How can mobile operators prevent cannibalization of revenues?
      • What is the future of roaming, international call charges, and interconnect?
      • Will it be convergence or a substitution: GSM vs. Wifi?
      • What are the new business models as the internet goes mobile?
    • 4.
      • About GLG Institute
      • GLG Institute (GLGi SM ) is a professional organization focused on educating business and investment professionals through in-person meetings. It is designed to revolutionize the professional education market by putting the power of programming into the hands of the GLG community.
      • GLGi hosts hundreds of Seminars worldwide each year.
      • GLGi clients receive two seats to all Seminars in all Practice Areas.
      • GLGi’s website enables clients to:
        • Propose Seminar topics, agenda items and locations
        • View and RSVP to scheduled and proposed Seminars
        • Receive a daily briefing with new posts on your favorite tickers, subject areas and from trusted Council Members
        • Share Seminar details with colleagues or friends
    • 5.
      • Gerson Lehrman Group Contacts
      • John Aronsohn
      • Vice President, TMT
      • Gerson Lehrman Group
      • 850 Third Avenue, 9th Floor
      • New York, NY 10022
      • 212-984-3673
      • [email_address]
      • Aaron Liberman
      • Managing Director, Sales and Marketing
      • Gerson Lehrman Group
      • 850 Third Avenue, 9th Floor
      • New York, NY 10022
      • 212-984-3684
      • [email_address]
      • Carly Pisarri
      • Process Manager
      • Gerson Lehrman Group
      • 850 Third Avenue, 9th Floor
      • New York, NY 10022
      • 212-750-1435
      • [email_address]
    • 6.
      • IMPORTANT GLG INSTITUTE DISCLAIMER – By making contact with this/these Council Members and participating in this event, you specifically acknowledge, understand and agree that you must not seek out material non-public or confidential information from Council Members. You understand and agree that the information and material provided by Council Members is provided for your own insight and educational purposes and may not be redistributed or displayed in any form without the prior written consent of Gerson Lehrman Group. You agree to keep the material provided by Council Members for this event and the business information of Gerson Lehrman Group, including information about Council Members, confidential until such information becomes known to the public generally and except to the extent that disclosure may be required by law, regulation or legal process. You must respect any agreements they may have and understand the Council Members may be constrained by obligations or agreements in their ability to consult on certain topics and answer certain questions. Please note that Council Members do not provide investment advice, nor do they provide professional opinions. Council Members who are lawyers do not provide legal advice and no attorney-client relationship is established from their participation in this project.
      • You acknowledge and agree that Gerson Lehrman Group does not screen and is not responsible for the content of materials produced by Council Members. You understand and agree that you will not hold Council Members or Gerson Lehrman Group liable for the accuracy or completeness of the information provided to you by the Council Members. You acknowledge and agree that Gerson Lehrman Group shall have no liability whatsoever arising from your attendance at the event or the actions or omissions of Council Members including, but not limited to claims by third parties relating to the actions or omissions of Council Members, and you agree to release Gerson Lehrman Group from any and all claims for lost profits and liabilities that result from your participation in this event or the information provided by Council Members, regardless of whether or not such liability arises is based in tort, contract, strict liability or otherwise. You acknowledge and agree that Gerson Lehrman Group shall not be liable for any incidental, consequential, punitive or special damages, or any other indirect damages, even if advised of the possibility of such damages arising from your attendance at the event or use of the information provided at this event.
    • 7. Overview
      • Internet meets the mobile world
      • Change of guard in the value chain
      • Benefits working with an Internet brand
      • The War of Titans – Going Mobile
      • The failure of the US MVNO’s
      • Mobile Advertising
      • Voip going mainstream
      • The Wifi opportunity
      • Wimax heats up the competition
      • Conclusions
    • 8. Internet meets the mobile world
      • Mobile
      • Per minute/MB/text
      • Circuit switched
      • Walled garden
      • Retail Stores
      • “ Old school” Marketing
      • Customer support
      • Internet
      • Flat rate
      • All IP
      • Unlimited choice
      • Online Sales
      • Viral marketing
      • Internet Support
    • 9. Change of Guard Content/ Services Platform Devices Access OEM’s Wireless Carriers IT/Internet Brands
    • 10. What phone would you buy? Content/ Services Platform Devices Access Branded Phone build around services Phone build around open Source platform Feature Phone Operator Branded Phone
    • 11. The War of Titans – Going Mobile - Widgets News YahooGo! MSN Mobile News/ Sports/Finance - Facebook/.Groups Orkut/Blogger/Zingku 360’ Spaces Social network Twango/ LoudEye Itunes/ YouTube/Webcallery YouTube/ Picasa Video/ Flickr Video/ Spaces Media Gtalk Gmail Maps Search Google - - Messenger Messenger VOIP /Chat Mail/ Calendar Maps Search Intellisync Navtec/ Gate5 Search/ (Visual) Nokia Ovi Mail Google Maps Search Apple Mail Local Search Yahoo Hotmail Local Search Search Microsoft
    • 12. Benefits Working with an Internet Brand
      • Differentiate offering from competitors
      • Grow customer base by tapping into communities of millions
      • Increase spending on mobile broadband
      • Create stickiness
      • Reduce Subscriber acquisition costs
    • 13. OEM Market Share Q207
    • 14. The old kids on the block Content/ Services Platform Devices Access OEM’s
    • 15. Mobile Advertising – the Future business model
      • It’s the “Metro” newspaper coming to Mobile – potential to disrupt the entire industry offering free data and calls
      • Nearly all major Operators running trials, as a preventive measure to counter new competitors.
      • Blyk
        • first UK based commercially launch ad sponsored mobile network
        • Co-founded by former Nokia President Pekka Ala-Pietilä
        • Ad sponsored mobile network for 16-24 year olds.
        • Blyk charges brands for sending messages to users, and gives the users the money back in the form of free texts and minutes.
        • Users get 217 texts and 43 minutes free every month, and up to 6 MMS messages a day from selected brands .
        • No contract and top up will cost just 10p per text or 15p per minute.
      • Google expands AdWords to include Mobile channel, which will be a cornerstone for its mobile activities
      • Nokia waking up and acquire EnPocket to provide Platform to operators and OVI.
    • 16. The failure of the US MVNO’s
      • Goodbye ESPN, Disney Mobile, AMP’d
      • US mobile market exceeding 80% penetration
      • 3 Dominant players and a few challengers
      • In a saturated market the game is to steel subscribers
      • MVNO being killed by subscriber acquisition costs of going from 350$ to 450$
      • The cure?
        • Internet brands
        • MVNE Sonopia
    • 17. Mobile Voip Status
      • Still early stage with early adopters
      • Market very fragmented with many vendors
      • Carriers using Voip for backhaul not last mile
      • Issues:
        • Availability of wifi phones
        • Price Plans
        • Standards
        • Phone integration
        • CPU/Battery
        • Coverage/Bandwidth/concurrent users per base station/latency
        • Emergency calls, legal intercept
    • 18. Effect of MobileVoip on Industry
      • Users expectations changing:
        • ‘ Unlimited’
        • Transparent pricing
        • Rich experience (presence)
        • Free calls over Wi-Fi
        • Lower roaming/international call costs
    • 19. The Wifi opportunity
      • Extended coverage
      • Better network capacity
      • Replacing fixed line
      • Limited battery
      • Not intuitive (yet)
      • Price uncertainty
      Away Mobile Home mobile Home fixed Voice minutes by location 33% 11% 56% WiFi Mobile USA example UMA
    • 20. Fon
      • Worlds largest Wifi provider with more than 190,000 hotspots
      • Fon's 'social routing' business plan features Aliens, Linus' and Bills.
        • Linus users let other Fon subscribers access the internet over their wifi connection in exchange for free access on any other Fon hotspot around the world.
        • Bills charge for access at their hotspots and share the revenues with Fon,
        • Aliens are roaming users that pay to access Fon hotspots.
      • 500k users
      • Recently done deals with BT to allow access for 3million broadband customers
      • Funded by Google, Skype, Index Ventures, Sequoia Capital
    • 21. Wimax heats up the competition
      • Clearwire up and running reporting 258K customers, $32 ARPU, and $343 in customer acquisition costs.
      • Sprint Nextel’s Xohm deploying WiMAX network reaching 100 million people by year end 2008.
      • Commercial launch in a number of U.S. cities beginning the second quarter of 2008
      • Nokia with Internet tablet devices and PC manufacturers Acer, Asus, Lenovo, Panasonic and Toshiba signing up for WIMAX
      • Strong push by Intel
      • Will initially be a DSL killer, but may be challenged by 3GLTE offering wider mobility.
    • 22. Conclusions
      • Change in command in the mobile value chain
      • Customer is King
      • Content & Services
      • With Internet comes Advertising
      • Wifi and Wimax networks offers alternatives
    • 23. Area’s to follow
      • Mobile Advertising
      • UMA MVNO
      • Femtocells/Picocells
      • MVNE SAC
      • 700mhz Auctions
    • 24. Q&A
    • 25. Appendix
    • 26. US Market
    • 27.  
    • 28. Access competition GSM/WCDMA WIMAX WiFI