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Telecom versus Online - Worlds in collision

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  • 1. Telecom versus Online - Worlds in collision Telecom Media & Entertainment Vienna, 30 August 2007
  • 2. Operators in Europe are faced with slowing growth in voice and Internet access revenues Mobile Revenue Growth, Fixed Voice Revenue Broadband Revenue %, 2006-2010 Growth, %, 2006-2010 Growth, %, 2006-2010 16% 25% 10% 22% 8% 20% 12% 6% 16% 4% 9% 15% 14% 13% 2% 11% 8% 2006 2007 2008 2009 2010 6% 0% 11% -2% 10% 8% -2% -3% -3% 7% 8% 4% -4% -4% 4% 3% 3% 3% -4% -3% -3% 5% 2% -4% 5% -6% -5% -5% 1% 2% 1% -8% 0% 0% -10% 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Western Europe North America Source: “Voice: A vision of the future”, Ovum, March 2006 © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 2
  • 3. Launch of new services is also not expected to significantly improve revenue growth prospects IPTV will not stem the overall losses in fixed Revenues from new mobile services are line revenues not expected to offset falling growth rates Wireline and IPTV Revenue Forecast, Europe, Year-on-year Mobile Revenue Growth – Western a (€ million) Europe (€ million) IPTV will account for only IPTV as % 10% of the broadband of overall 0.3% subscriber base by 2010 1% 154 revenues 146 New Services 336 9 CAGR 19 3% 18 22 Consumer Messaging 3,000 IPTV 111,664 119 113 Voice 99,000 Voice and Access 2006 2010 2006 2010 Source: Capgemini TME Lab analysis. Credit Suisse “European Telecoms 2007”, January 2007; Yankee Group “Mobile Data Applications Forecast”, September 2006; Gartner, “Forecast: IPTV Subscribers and Service Revenue Worldwide 2004 – 2010”, 2006; Strategy Analytics “Broadband in Western Europe”, August 2006; Datamonitor “The Evolving Broadcast Sector”, August 2006. Note: a. New services includes all non-voice services except messaging © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 3
  • 4. Online players are launching new communication and content services at a rapid pace... Selected Internet Players’ Telecom Initiatives, 2004–2006 © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 4
  • 5. …which are successfully capturing consumer attention and interest In France, the time spent on telco services now constitutes only 53% of the total time spent on communication Estimated time spent on communications per person in France per week (%) 2 hrs 23 mins X1.9 4 hrs 25 mins 1% Online 5% 2% Players 18% 30% IM Google Skype Yahoo AOL MSN Telcos 15% Email 47% 47% 95% 8% SMS 95% 75% Wireless Telcos 21% Voice 53% 53% 26% Wireline (incl. VoIP) 2000 2005 Source: Capgemini estimates based on Arcep reports, IDATE, “Telecom 2.0: emerging usages and implications for carriers”, June 2006. MSN Report, “Europe’s Online Youth”; Comscore Media Metrix, Worldwide IM usage, May 2006. © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 5
  • 6. Moreover, innovative business models are emerging, which challenge telcos’ fee-based revenue structures Examples of Disruptive Business Models for Providing Telecom Services Blyk is an MVNO, which will Jajah has partnered with large offer completely free mobile media companiesa in Germany services funded through and Austria advertising These media companies allow It intends to start offering their customers to make free voice services in the UK beginning calls using Jajah’s VoIP service, mid-2007 Free Voice and in turn share advertising Ad-subsidized revenues with Jajah Telephony Mobile Services Google is providing free Internet Fon allows users to earn revenues access funded by advertising in by sharing their fixed Internet San Francisco and Mountain connection with non-Fon users View, California Google and Skype are investing in Fon, mainly to extend the reach of It plans to serve focused Wi-Fi Community their services to Fon’s wide advertising and services to users Ad-Subsidized with Innovative network of WiFi access points based on their location within the Internet Access Revenue Model access network Source: Capgemini TME Lab analysis. Company Websites. NY Times, “Free, Ad-Supported Mobile Service”, January 2007; Market Wire Press Release, “JAJAH Unveils Ad-Supported Business Model for Free Telephony”, December 2006 Note: a. Jajah’s media partners include Pro7Sat1 (German TV station), Bild-T Online (German news portal) , and News Austria © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 6
  • 7. Telcos need to revisit their innovation strategy in light of a changing business environment Why do Telcos Need to Innovate Differently? Fast Pace of Innovation • Online players are launching communication products and services at a rapid pace Need to Change Innovation Strategies Emergence of Consumer Innovative Business Models Created Innovative Services • Consumers are increasingly • New players have introduced modifying online content, as radically different business well as creating their own models such as free Internet content using openly available access and ad-subsidized mobile Web 2.0 tools services Source: Capgemini TME Lab analysis © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 7
  • 8. Online players are also expanding their presence to tap creative talent across the world Leading Internet players have developed global networks of research and development centers Europe Google Zurich 2004 Ireland 2004 London 2005 Microsoft Cambridge 1997 Yahoo! Barcelona 2006 North America Google Mountain View 1999 Seattle 2004 Asia, Middle East and Africa New York 2003 Google Bangalore 2003 Washington 2005 Israel Planned in 2007 Pittsburgh 2006 Microsoft Beijing 1998 Microsoft Redmond 1991 Microsoft Bangalore 2005 Mountain View 2001 Yahoo! Bangalore 2003 Yahoo! Santa Clara 1995 Berkeley 2005 Chile 2006 South East Asia and Pacific Google Singapore Planned in 2007 Sydney 2006 Tokyo 2004 Source: Capgemini TME Lab analysis. Company websites and news releases. © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 8
  • 9. To launch new products rapidly, online players have acquired a large number of start-ups… Key Acquisitions made by Yahoo! and Google to Grow and Improve Service Offerings DoubleClick TrendAnalyzer Adscape MyBlogLog 2007 Internet ad serving Data visualization Video game Blog communities software software advertising service Writely YouTube Measure Map Sketchup Del.icio.us Kenetworks 3D modelling 2006 Integrated into Docs User-generated video Blog search and capabilities for Social Tagging and Bookmarking Mobile content and applications and Spreadsheets sharing site analytics tool Google Earth Android Reqwireless Urchin 2Web Ludicorp Dialpad Web statistics tool 2005 Mobile applications Mobile email software launched as Google Launched as Google Photosharing site VoIP capabilities for IM developer developer Spreadsheets (Flickr.com) client Analytics Where2 LLC ZipDash Keyhole Picasa OddPost Core mapping 2004 Mapping capabilities Launched as Google capabilities in Google Picture management Launched as new for Google Earth Ridefinder tools version of Yahoo mail Earth Kaltix Pyralabs Applied Semantics Sprinks Alltheweb OddPost Context sensitive ads Ads technology, Keyword-based pay- 2003 Personalized Search Blog Site technology, integrated integrated into Search Engine per-click Internet (blogger.com) into Adsense Adsense advertising Hotjobs Inktomi 2002 Online Job Search Search Engine Portal Source: Capgemini TME Strategy Lab analysis. Company Websites © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 9
  • 10. Telcos will need to address a number of challenges while adopting online players’ innovation practices Key Questions Faced by Telcos Pertaining to their Innovation Strategy Which methods and tools can telcos use to build and sustain employee generated innovation? Driving Innovation How can telcos create a start-up like environment conducive to creativity, Internally given their large existing structures and processes? How can telcos provide more attention and resources to innovation? How can telcos leverage external innovation? How can telcos effectively use consumer feedback in pre-launch stage Benefiting from (private beta, lab, public beta, non-branded)? External Innovation For which services can telcos involve the open developer community? How can telcos effectively use the innovative capabilities of acquired start- ups? Source: Capgemini TME Strategy Lab analysis © 2007 Capgemini – All rights reserved Telecom Media and Entertainment C4Lab_Research_Innovation_May2007 I 10