Jan Dawson - Presentation at Emerging Communications Conference & Awards (eComm 2011)

Telecoms in 2020: a vision of the future Jan Dawson Chief Telecoms Analyst @janovum 27 June 2011

Agenda
Looking over the horizon
The trends that will shape the next ten years
Two sets of players: SMART and LEAN
Operator strategies
Conclusions / Q&A

Ovum ’ s Telecoms 2020 research series 1. LOOKING OVER THE HORIZON

In 2001…

Major trends in the next ten years 2. THE TRENDS THAT WILL SHAPE THE NEXT 10 YEARS

Managed device platforms as a major force
The last several years have seen the rise of device platforms – notably from Apple, RIM, Palm, Microsoft and Google – which go considerably further than the traditional model
Under this model, the platform vendor (not the mobile operator) controls and supplies:
the operating system
some or all of the pre-installed applications
a developer platform for creating applications to run on the device
a mechanism for procuring those applications (an ‘app store’)
Roles traditionally held by the operator are being usurped by these platform vendors, which we refer to as managed device platforms
2. THE TRENDS THAT WILL SHAPE THE NEXT 10 YEARS

MDPs in the wireline market
The same trend is emerging in the wireline market
A range of players, including some of the same as in the mobile arena – are developing platform plays for the home device market
Notable examples are Google and Apple, with their respective TV offerings
Interestingly, these are tied into mobile platforms – Android and iOS as operating systems for STBs
Amazon ’s Kindle strategy is another interesting example
This means what we ’re really looking at over time is the emergence of integrated MDP players combining fixed and mobile platforms
2. THE TRENDS THAT WILL SHAPE THE NEXT 10 YEARS

Apple as a platform provider 2. THE TRENDS THAT WILL SHAPE THE NEXT 10 YEARS

Google as a platform provider 2. THE TRENDS THAT WILL SHAPE THE NEXT 10 YEARS

Amazon as a platform provider 2. THE TRENDS THAT WILL SHAPE THE NEXT 10 YEARS

Consumer – SMART players versus LEAN operators
In 2020, there will be two main player types in the broader market of which telecoms will be part:
LEAN operators – focused on infrastructure ownership and wholesaling services to other operators who serve retail customers (possibly including their own retail arms)
SMART players – operators and other players (primarily CE vendors) who offer a managed broadband experience including device management, technical support, backup/security/storage etc., for the whole home – these grow out of today ’s managed device platforms
Some operators may combine 1 and 2 through netcos / servicecos
Many operators will instinctively flock towards 2, but there will be limited room in all categories leading to more consolidation
3. TWO SETS OF PLAYERS: SMART AND LEAN

Consumers in 2020 – mature markets Digital citizens – by far the largest group (perhaps around 60%) - seek safety, ease of use, and predictable spend commitment through a relationship with a SMART vendor, which provides a bundle including devices, configuration and ongoing management, applications, content and connectivity – for a fixed one-off fee or a leasing arrangement. Digital adventurers – A small minority – perhaps 5-10% of users – continue to value fully open platforms, self-configuration and management, and unmediated access to free content on the web, via P2P and rogue servers Digital ‘metics’ – A larger group (perhaps 25-30% of users) are resigned to limited low-cost devices, direct contracts for connectivity, and simplified access to minimal transaction-oriented content and applications (ticketing, banking, etc)‏ 3. TWO SETS OF PLAYERS: SMART AND LEAN

Consumers in 2020 – emerging markets Digital citizens – The ‘digital citizen’ type of consumer will account for only around 30% of the users in the emerging markets in 2020. These will be in the upper tiers of the customer pyramid, and like their mature market counterparts, will seek the safety, ease of use and predictable spend commitment of a relationship with a SMART provider, which will provide them with a bundle including device, management / configuration, applications, content and connectivity. High speed, high capacity broadband will be at the centre of the service bundle for these consumers. Digital adventurers – Most of the youthful segments will be digital adventurers (30% of the total) which will continue with the practice of self- configuration and management, as well as unmediated access to content on the web Digital ‘metics’ – The largest group (40%) will be digital metics who will remain limited to low cost devices and simplified access to basic content and applications (e.g. mobile money, health, education, commerce). 3. TWO SETS OF PLAYERS: SMART AND LEAN

SMART players 3. TWO SETS OF PLAYERS: SMART AND LEAN
Likely heritage
Consumer electronics vendors
Software vendors and online service providers
Operators
Services provided
Connectivity
Content, applications, services
Management, care, sales & billing
All of the above bundled
Assets and skills required
Branding, marketing, charging
Service provision, management, care
Content creation and/or aggregation, devices, and platforms
Customers
Mainstream end user consumers ( “digital citizens”)

LEAN operators 3. TWO SETS OF PLAYERS: SMART AND LEAN
Likely heritage
Operators
Equipment vendors
Services provided
Low-cost, interconnected bandwidth
Network management
Application performance management
Assets and skills required
Efficient network management
Application performance management
Interoperability with other systems
Customers
SMART players
Some consumers (a portion of “digital adventurers”, “digital metics”

Telcos need to be very clear about which strategy they want to pursue
There are dramatic differences between the SMART and LEAN models, in terms of:
the skillset required
the revenue mix (see next slide)
the investments that need to be made
the relationships with platform vendors, device vendors, content providers
Decisions need to be made now in order to start down one of these two paths, including investment, acquisition, partnering decisions
Interestingly, elements of LEANness and SMARTness are useful steps on both paths
4. OPERATOR STRATEGIES

Future revenue mix for fixed telcos 4. OPERATOR STRATEGIES 2010 LEAN – 2020 SMART – 2020 Consumer, of which: 50% 20% 60% - Voice 33% 5% 10% - Broadband 16% 15% 25% - Content 1% 0% 25% Business 30% 30% 25% Wholesale 20% 50% 15% Relative size of total revenue 100 60 120

Future revenue mix for mobile operators 4. OPERATOR STRATEGIES 2010 LEAN – 2020 SMART – 2020 Consumer, of which: 60% 20% 70% - Voice 40% 5% 15% - Broadband 15% 15% 30% - Content 5% 0% 25% Business 20% 20% 20% Wholesale 20% 50% 10% Relative size of total revenue 100 60 120

Advice for operators
Two initiatives are key for both paths:
Maximizing efficiency
Enabling third party value creation
Beyond that:
SMART players will need deep content, device, service management, service creation strengths
LEAN operators will need application performance management, high-quality interconnection, QoS / CoS capability
These efforts need to start now even if the 2020 vision takes a number of years to develop in its entirety

Orange vision for multi-screen content 4. OPERATOR STRATEGIES

Verizon as a platform provider 4. OPERATOR STRATEGIES

Verizon provides several useful lessons
Using the home TV service as a gateway to owning TV/video on the mobile, or vice versa
Opening the TV platform to third party innovation is much easier than the telco platform
A platform doesn ’t have to be an OS, and in fact in many cases won’t be – rather, a set of apps on various operating system
Porting to other platforms provides a beachhead there too, and creates stickiness – much more compelling than mere bundling
If operators don ’t do this, others will – need to take the first steps now

But platforms are broader than just devices
Building an operator platform means exposing the core operator asset – the network – to third parties
This is done through carefully controlled, secured and monetised APIs and other interfaces
It has two major benefits:
Outsources a measure of innovation along with the risk
Enables a much better experience for consumers and content partners when using “over the top” content
Overall, it turns the network into an asset multiple parties can innovate on, not just the operator

Building a platform useful for both paths 4. OPERATOR STRATEGIES Telcos LEAN Operator SMART player Smart Enabler 2015 Position in value chain 2010 2020 End states for telcos

Conclusions
“ Telecoms ” as a discrete market will be hard to identify in 2020
It will have become part of a larger, content-centric ecosystem
There will be two major roles for operators to fill – SMART players, and LEAN operators
There will be plenty of competition for both roles, with operators only one of the groups pursuing them
Maximizing efficiency and enabling third party value creation are key to both paths
Beyond that, they require different skillsets, which operators have to start building now
5. CONCLUSIONS / Q&A

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Jan Dawson - Presentation at Emerging Communications Conference & Awards (eComm 2011)

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Jan Dawson - Presentation at Emerging Communications Conference & Awards (eComm 2011) — Presentation Transcript