Mega market and technological trends are creating a very new world for consumers, businesses and markets as a whole. A potential role for communications service providers in this new world charts a path to growth

1. TELECOM 2020Preparing for a very different future
Rob van den Dam
Global Telecom Industry Leader
IBMInstitute for Business Value

2. Content
•How we see the world changing
•Future trends that are happening right now
•Our vision for a Telco in 2020
•Making it happen
•What does YOUR future like?

3. The acceleration of OTT
50 Million Users
100 Million Users (Int)
300 Million Users (China)
200 Million Users
50 Million concurrentUsers
40 Million Subscribers
Google fiber
1.2 Billion Users
255 Million Users
130 Million Users
230 Mio Active Buyers

4. OTT and the new generation
26%
25%
19%
17%
13%
30%
45%
55%
58%
66%
71%
76%
79%
27%
55%
54%
72%
41%
77%
SOCIAL NETWORKING 68%
EMAIL
INSTANT MESSAGING / Chat
MOBILE MESSAGING (SMS)
MOBILE VOICE calls
INTERNET VIDEO streaming/download
MICRO-BLOGGING
FIXED VOICE calls
VOIP ((Voice over Internet)
VIDEO CALLING
Emerging Markets (age < 25)
Mature Markets (age <25)
2014 IBM
Global
Consumer
Survey
•35 countries
•22,000
consumers
DAILY USAGE
Source: 2014 IBM Global Telecommunications Consumer Survey

5. The global OTT players thrive
2004 data as of 9/17/2004. 2013 Market value as of 12/19/2013. 2012 Revenue is TTM.
List excludes Alibaba ($75B), whose private market value would put it in the Top 10.
List also excludes Skype (bought by MSFT in 2011 for $8.5B), YouTube (reported as part of Google) and Paypal (reported as part of eBay)
The market value of the Top 15 equals that of the Top 100 publicly- traded CSPs
The top 5 have more than $115B of cashon their balance sheets
2012/13
2004
OTT and Internet category players

6. Growth CSPs is stalling
Source: 2014 IBM report: What being global really means
15 largest Global CSPs

7. The implications for CSPs
Soaring customer expectations
CSP’s are behind consumer brands in customer experience and risk losing significant revenue year-on-year.
Needs new forms of innovation
A new kind of CSP is required that involves customers, employees and partners to co- create new kinds of products and services.
With a new enemy
New entrants in your market. Not your normal competitors, and they are innovating faster than you.

8. 3 key forces will drive changes
FORCES
Traditional telcomodel will disappear; new business models & partnerships required to sustain revenue growth
Threats to revenue
The growth in Internet services and subscription
will not offset declines in fixed line, voice calls and SMS
Information
CSP’s have to manage a rich variety of data from both external and internal sources sources
Data and analytics move from back-office to a critical profit enabler driving innovation in the front office
Consumers
Consumers want exceptional service from CSP’s as provided by consumer- oriented brands
Innovate, partner, or die” becomes an unspoken mandate as new entrants reach out directly to consumers and bypass the traditional CSP operator
IMPLICATIONS IN 10 YRS

9. Major technological advances
Program
Learn
Natural Language
Analytics DeepQA
Cognitive
Computing
“SyNAPSE”
Silicon
Devices
Nano Scale
1 Billion
Transistors
1,000X
1 Trillion Devices
Nano
Systems
Workload
Optimised
Systems
Exascale Software
Defined
Environments
1,000X
Big
Data
1,000,000X
Real-time Inference & Knowable
Future

10. Cognitive systems: Applications
Sensor Networks / Internet of Things
Infrastructure
Buildings
Vehicles
Grids
Metering
Billions of end points
100K+ elements,10ms latency
Multiple feedback time-scales
Social Business
Five-in-Five
Watson
Human and knowledge capital analytics
TM
Cognitive Sensing Technology:
•Hearing and voice recognition
•Extracting knowledge from pixels
•Sniffing for healthiness
•Haptic technology for retail
•Healthier molecular based recipes

11. How we see the world changing
Human Society

12. How we see the world changing
Machine-to-machine communication

13. How we see the world changing
Internet for everyone
Fully open, free to use Wi Fi in the Moscow metro

14. How we see the world changing
Mobile as a remote for our lives
To control home heating
And home entertainment
To manage home gaming
Even to control toilet activities!

15. How we see the world changing
The instrumented life

16. How we see the world changing
True peer-to-peer

17. How we see the world changing
Peer-to-peer innovation

18. In short: a new world
•New classes of services
•Connected lives/ mass personalisation
•Business functions as a service
•Industry value chains reconstructed
•Disrupted competitive landscape
Consumers
Business
Government/ Industries

19. 4 themes for CSPs
Four Common Themes
Cost Reduction
Telco industry
•Data dwarfs voice
•High growth gone; fight is now for niches and markets further from the core
•Digital, more demanding empowered customers shaped by experiences outside of telco
•Industry consolidation just starting
Media industry
•TV everywhere: 195M tablets sold in 2013; and 5B smartphones by 2018
•Simultaneous consumption: 75% of consumers surf the web and use social media while watching TV
•Audiences become collections of “ones”
Customer Experience
New Revenue Sources
Reinvent the Enterprise

20. Cost savings

21. Cost savings: Leveraging synergies
In which AREAS was your organization able to CAPTURE SYNERGIES?
(15 largest Global CSPs)
Captured synergies to some or significant extent
Priority focus areas
Source: 2014 IBM report: What being global really means

22. Customer Experience: CSPs are not leaders by any customer measure
No CSPs in Top 25
Telecom lowest among 7 industry groups
No CSP in Top 50
No CSPs in Top 50
No CSP in Top 100
Wireless industry ranked 44 of 50 industries
No CSP in Top 50
Only one CSP in Top 100, O2 at #46

23. Customer Experience: Look outside the industry for leadership

24. New Revenues Sources
Exploit remaining pockets of growth
Business Services revenue increased 26.4% to $3.2B
Small business continues to drive growth: increasing contribution from mid- size businesses
Source: Comcast 2013 Earnings Presentation
Enter higher growth adjacent spaces
AT&T and IBM today announced its Internet of Things / M2M alliance to initially focus on creating new solutions targeted for city governments and Midsize utilities.
Source: TelecomLead, February 18, 2014
T-Mobile USA Network analytics for operations and CEM
Source: https://www.youtube.com/watch?v=IBZYJpDT0vQ
Leverage on differential insight
Cannibalize before being cannibalized
iOlets you make calls, chat and share images with other iOusers over the Internet for free (WLAN and 3G/LTE)
Source: Swisscomwebsite
Partner
with OTTs
Source: Spotifywebsite

25. The New Enterprise Model
Developers
ISVs
Banking
Consultants/ SIs
Healthcare
Media
Social business
Personal comms
Security
Policy
Analytics
M2M
Etc…
Etc…
Managed customer interface, services, platforms and networks
Service providers and partners
CSP solutions
Consumers
Business
Government/ Industries
Example Players in the services economy today
$1.5B revenueof10K+ Affiliates
Expecting $10B transactions on mobile in 2012
40% total units sold by outside sellers
40% new business comes from non-CRM offerings
API only company reaches150,000developers and 1.5Mcalls a day
4.5M API invocations per month
In 2020 up to 60% of today’s IT market is addressable through this delivery model

26. Over to youWhat does YOUR future look like?

27. The CSP rolein tomorrows world
1.Lean and mean Network provider ORSmart Teleconnect/ Ecosystem provider?
2.Follower ORLeader?
3.Customer driven service company ORProduct supplier?
4.Differentiated ORCommoditized?
5.Need for Vertical AND/ORHorizontal integration?
6.Work with new entrants ORFight them
7.Do it Yourself ORCo-create?
8.Local ORGlobal?
9.Consolidator ORbe consolidated?

28. Thank you
Rob van den Dam
Global Telecom Industry Leader
IBM Institute for Business Value
rob_vandendam@nl.ibm.com
www.ibm.com/iibv