Dublin Two Sided Markets

The Two-sided Telecoms Business Model The new telco business model 30 May 2008 Martin Geddes, Chief Analyst, STL Partners [email_address]

Four messages
Future growth: Reliant on new business model
Two-sided telecoms ‘platforms’ could deliver $350bn+*
Step-by-step journey – grows from existing consumer core business
Needs collaboration and investment now
* 12 top country markets (US, W. Europe, Japan) alone, per annum, from 2017 – STL Partners/Telco 2.0 Future Broadband Business Models Report (Jan 2008) & 2-sided Platform Opportunity Report (Mar 2008)

Before we begin…

Telecoms is a freight business for bits 10100010111001001001011000110 10000101111101010010010101010 00101010111101010101010001010 010100110101010001001110101011010100100101011101010010101010001010111011110100010101010 01011100100010001011011001010 11100111010000001011001010100 Voice, video, web, messages

Container shipping: precedent Containers vs. IP packets

Container shipping lessons Value-based pricing of the containers doesn’t work #1

Container shipping lessons New technology and lowered costs are not enough #2

Container shipping lessons Increasing returns to scale for infrastructure #3

Container shipping lessons The ports get the money, not the shipping lines #4

Container shipping lessons People pay most for logistics solutions #5

… with a twist One sided market Multi-sided market

Telco 2.0 TM Framework

Let’s define ‘Telco’ Telco Utility (pipes and cell towers) Systems Integrator Distribution systems only Product + Distribution systems Product only Infrastructure IT & Professional services Packaging Plumbing Products (partners’) Products (own) Packets & Platters

Some companies have re-structured around this model Telco Utility Systems Integrator Packaging Plumbing Products (partners’) Products (own) Packets & Platters

Sorry… Can’t make the fibre fairy visit

Limits to retail growth

Pressure on core Voice & Data Services 2017 % of Total Mobile Voice Minutes, Europe 2007 2012 Traditional Telephony Enhanced Carrier Voice Private Voice Apps & Handsets Other Broadband Data (fixed/mobile ISP product)

e.g. BBC iPlayer breaks UK ISP model iPlayer = high quality streaming video, launched in UK end Dec 2007 Now available on: (iPhone & iPod Touch via WiFi not EDGE)

Impact: ISP streaming costs tripled in first month e.g. BBC iPlayer breaks UK ISP model Detailed analysis here: http://www.telco2.net/blog/2008/02/bbcs_iplayer_nukes_all_you_can.html

Video: Be a telco or a media company?

Future business models? (Telco 2.0 Survey, Sept 2007) ISP OK Triple or quad play OK New business model needed 20% 25% 55%

Introducing 2-sided markets

Today: Revenue only from 1 Side $ $ Suppliers = Costs End Users = Revenue Telco Content, Apps, Devices Network & Termination Interconnect & Storage Consumers Enterprises SMEs Multi-Nationals Products (partners’) Products (own) Packets & Platters

Tomorrow: Revenue from 2 sides $ ‘ Upstream’ Customers ‘ Downstream’ Customers Millions of Customers Thousands of Segments $ Developers Retailers Government Brand Advertisers Content Owners Telco – Retail Content Owners Telco

Telcos have many valuable but latent data assets MY PERSONAL DATA MY STUFF MY IDENTIFIERS MY INTERACTIONS MY RELATIONSHIPS MY CONTEXT MY DEVICES MY CREDIT Name Address Gender Profile Preferences SIM SoftSIM Serial Number Device details Location Presence On/Off Roaming Pictures Videos Calendar Address Book Bank School Friends Workplace Browsing History .mobi domains QR Codes Bad debt Demographics Average balance Number SIP address IP Address Email

Google Envies Operators in Key Areas
Sub-Scale in:
Voice & Messaging
Billing & Payments
Retail sales and customer care
Interoperability
Limited Knowledge of Customer
Google increasingly paying for inventory, skills & data MY PERSONAL DATA MY STUFF MY IDENTIFIERS MY INTERACTIONS MY RELATIONSHIPS MY CONTEXT MY DEVICES Weak! MY CREDIT

Multiple supply chains & customer bases ‘ Upstream’ Customers ‘ Downstream’ Customers Millions of Customers Thousands of Segments Sold to upstream customers Sold to downstream customers Three Core Propositions Four Product Sets 1. Bundled voice, video and data plus VAS 3. Logistics Services for Data 2. Bulk Wholesale Data by-products Developers Retailers Government Brand Advertisers Content Owners Telco – Retail Platform Products (partners’) Products (own) Packets & Platters Processes NEW! NEW!

Examples of 2-sided markets

Learning from the master

Google: Lowers transaction costs
HUGE SCALE
FREE products for end users
CHEAP advertising for brands
= +
LOW COST per transaction
+
Massive investment in Google platform

Betfair: Stock Exchange for Gamblers Bookie Punter ‘ To Win the Champions League’

Strong Growth from Big Scale Platform
Explodes in 2003 following launch of open API for bookies
More transactions than all European stock exchanges COMBINED

A New Telco Proposition?

Additional Telco Value Proposition Now: Bundled voice, messaging, video and internet access Next: Personalised Logistics Services for Data

Logistics Services in the Physical world 1. “Planes & Payloads” – Distribution Collection Multi-Modal Transport Delivery 2. “Processes” – B2B VAS Tax & Duty Management Documentation Management Denied Party Screening Scheduling & Supply Chain Management Systems Integration Tracking & Monitoring

‘ Personalised Logistics Services … for Data’ 1. Distribution Origination & Capture Multi-Modal Transport (Core+Edge assets) Termination & Display 2. “Processes” – B2B2C VAS Identity, Authentication, Security Advertising, Marketing Services Ecommerce Order Fulfilment Billing & Payments Customer Services Telco (2.0)

1. Distribution Platform

New Types of Wholesale Products Video Content delivery networks for 3 rd parties Data “ Postage and packing included!” – for data Become supplier for 3 rd party voice services Voice +

2. B2B2C Value Added Services Proceses

Current Approach: Media & Advertising… $ $ Upstream Customers Revenue Side 1 Downstream Customers Revenue Side 2 Telco Brand Advertisers Consumers Enterprises SMEs Multi-Nationals

… but market is too small! Revenue, $ Billions 2006 2010 $2,000bn $2,490bn $425bn $533bn $30bn $62bn Fixed and Mobile Telecoms Global advertising On-line and mobile advertising

Open Up More Markets for Telco Platform $ Millions of Customers Thousands of Segments $ B2B2C VAS Distribution Upstream Customers Downstream Customers Developers Retailers Government Brand Advertisers Content Owners Telco – Retail Content Owners Telco Platform

VAS: Help Customers Interact More Easily
Barriers
Identifying Other Party, Authorisation & Security
Promoting Offer
Conducting transaction
Fulfilling Order
Billing & Payment
Service & Support
Customers – Revenue Side 1 Customers – Revenue Side 2 Millions of Customers Thousands of Segments Developers Retailers Government Brand Advertisers Content Owners Telco – Retail

VAS: Telcos assets well suited
Barriers
Identifying Other Party, Authorisation & Security
Promoting Offer
Conducting transaction
Fulfilling Order
Billing & Payment
Service & Support
Customers – Revenue Side 1 Customers – Revenue Side 2 Telco Capabilities & Assets       Millions of Customers Thousands of Segments Developers Retailers Government Brand Advertisers Content Owners Telco – Retail

Value of the opportunity

Potential Market of $350+ billion?

Opportunity into perspective

Making it happen

Five things to get right Scale Packaging Rewards Privacy Reliability

The Two-sided Telecoms Market Opportunity THANK YOU More info at www.telco2.net/blog

Appendices

Telcos have many under-exploited assets, capabilities and resources to enable these new models. Here’s a map, centred around the most important: DATA WEB 2.0, CEBP Rating & billing Hosting, personal vault & data storage Customer service, support & CRM Brand & promotional partners Usage metrics, data mining and analytics Enabling Capabilities Retail distribution, provisioning & logistics Payment handling & online transactions Advert inventory, insertion and tracking Credit, fraud & revenue management Developer program Content acquisition & management Wholesale provisioning & payments Legal intercept SUPPLY CHAIN SERVICE CREATION & DISTRIBUTION PLATFORMS UPSTREAM CUSTOMERS & SERVICES Portals, Content Aggregation & Retail Mobile Devices Application Environment Search (via partners) Service deployment & execution Content & service Personalisation CONSUMER & ENTERPIRSE USERS & CUSTOMER RELATIONSHIP Social Networking (via partners) DISCOVER DELIVER DEVICE Access Network IP Access (with QoS) NGN Voice RAN Security Environment (e.g. SIM, managed certs) Voicemail SMS & MMS Other IP Services Circuit voice Device Management Operator VAS e.g. music, games User Interface (e.g. EPG, on-device portal) 3rd Party Access Platform IPTV Home Hub STB or Media Server Local access (L1/L2) CDNs DEPLOY ENABLING DATA RESOURCES Core customer data Name, Address, Gender, National ID, Profile & Preferences MY PERSONAL DATA Digital Lifestyle Aggregators & PIM Pictures, Videos, Bookmarks, History, Files ; Calendar, Address Book, To Do, Notes MY STUFF Identity and persona creation for user Number, address or ID provisioning; porting; avatars MY IDENTIFIERS Naming and tracking non-human resources .mobi domains, web browsing history, QR codes read MY INTERACTIONS Knowledge of personal and business interactions My bank, school, workplace, friends MY RELATIONSHIPS User real-time activity and environment Location, Motion, Temperature, On/Off, Roaming, In-call MY CONTEXT User ID linked to physical device or token; configuration SIM, USIM, SoftSIM, serial number, profile & settings MY DEVICES IDENTITY MANAGEMENT Technology Standards Standardised Deployment Regulatory & Legal Compliance Privacy, Security & Trust Pervasive Activities Roaming & Interoperability User Experience Integration

Today’s telco business model – coming to ‘end of life’
Revenues:
Voice & messaging plans
ISP Plans
Bundles
3 rd party products
Hosting
Customer Relationships:
Low-intimacy recurring subs
Prepaid subs
Resources:
Voice Network
Msg Network
Video Streaming
Internet Access
Activities
Network Mgt
Content
Handsets
Incumbent svcs
Value Proposition: Bundled voice, messaging, video and internet access
Customer Segments:
Consumers
SMEs
Enterprise
Distribution
Channels:
Independent retailers
Own retail
Online retail
Affiliates
Costs:
Network Ops
Access
Termination
Content
Device subsidy
Marketing
Subscriber mgt
Partners:
ODMs
NEPs
Portals
MediaCos
IT Integrators
Success or Failure?

Key elements of tomorrow’s telco business model
Revenues
Slice n Dice Connectivity
Data logistics
B2B2C VAS
Consulting
Integration svs
Customer Relationships
2-sided Markets
Indirect retail channels
Resources
Customer Data
Distribution platform: CDNs, IP networks, Home networks
SDPs
Billing & Provisioning Systems
Activities
Customer management
Identity managment
CRM & Data mining
Fine-grained wholesale
OSS/BSS APIs
Value Proposition Personalised Logistics Services for Data (Multi-modal delivery services, B2B VAS)
Customer Segments
Advertisers
MediaCos
Merchants
ISVs
SIs
Banking
E-Commerce
Government
Enterprise IT
Distribution Channels
Aggregators
SIs
Middleware vendors
OSS/BSS Vendors
CDN operators
Costs
Equipment
Operations
Biz Devt
Insourced customer data and access
Partners
IT Vendors
Handset Vendors
Consumer Electronics
Success or Failure?

New two-sided business model
Revenues:
Voice & messaging plans
ISP Plans
Bundles
3 rd party products
Hosting
Customer Relationships:
Low-intimacy recurring subs
Prepaid subs
Activities
Network Mgt
Content
Handsets
Incumbent svcs
Value Proposition: Bundled voice, messaging, video and internet access
Customer Segments:
Consumers
SMEs
Enterprise
Distribution
Channels:
Independent retailers
Own retail
Online retail
Affiliates
Costs:
Equipment
Operations
Biz Devt
Insourced customer data and access
Access
Termination
Content
Device subsidy
Marketing
Subscriber mgt
Success or Failure?
Revenues
Slice n Dice Connectivity
Data logistics
B2B2C VAS
Consulting
Integration svs
Customer Relationships
2-sided Markets
Indirect retail channels
Resources
Customer Data
Internet, Voice, Messaging, & Video Networks
Distribution platforms: CDNs, NGN IP networks, Home networks
SDPs
Billing & Provisioning Systems
Value Proposition Personalised Logistics Services for Data (Multi-modal delivery services, B2B VAS)
Customer Segments
Advertisers
MediaCos
Merchants
ISVs
SIs
Banking
E-Commerce
Government
Enterprise IT
Distribution Channels
Aggregators
SIs
Middleware vendors
OSS/BSS Vendors
CDN operators
Two-sided market pricing
Cross subsidy
PLATFORM CAPABILITIES PLATFORM USERS PLATFORM USERS PLATFORM USERS
Partners:
ODMs
NEPs
Portals
MediaCos
Activities
Customer management
Identity managment
CRM & Data mining
Fine-grained wholesale
OSS/BSS APIs
IT Vendors
Handset Vendors
Consumer Electronics

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Dublin Two Sided Markets

by Martin Geddes on Jun 03, 2008

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