White paper

Nokia Siemens Networks
  New Revenues

Opportunities for growth
02/16   Nokia Siemens Networks – New Revenues


           03 1. Executive summary

           04 2...
1. Executive
04/16           Nokia Siemens Networks – New Revenues

2. Global service provider
            revenue trends

3. Changing user
                                                            buying behavior

2.2 Voice remains an importa...
06/16           Nokia Siemens Networks – New Revenues

3.2 Bifurcation of user behavior
4. Revenue growth directions
           for Service Providers

                 Pure price reductions just produce
08/16           Nokia Siemens Networks – New Revenues

Enhanced voice quality increases
voice revenues by addressing th...
Revenues follow data rates –                      In the mobile segment, Internet use is     4.2 Expanding to new segments...
10/16           Nokia Siemens Networks – New Revenues

A different way of extending the           more than 5% during t...
IPTV is a platform for different revenue          Beside IPTV, mobile TV services are       Evolution of TV towards a mult...
12/16         Nokia Siemens Networks – New Revenues

main source of revenues.
14/16   Nokia Siemens Networks – New Revenues

       5. Supporting your
revenue growth strategy

        Broadband – t...
                                     ADSL              Asymmetric DSL
                                     AMR   ...
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New Revenues: Opportunities for growth


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A white paper of Nokia Siemens Networks on global service provider revenue trends, changing user buying behavior and revenue growth directions for service providers.

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New Revenues: Opportunities for growth

  1. 1. White paper Nokia Siemens Networks New Revenues Opportunities for growth
  2. 2. 02/16 Nokia Siemens Networks – New Revenues Contents 03 1. Executive summary 04 2. Global service provider revenue trends 04 2.1 Broadband penetration – the key revenue enabler 05 2.2 Voice remains an important cash cow – but margins are under pressure 05 3. Changing user buying behavior 05 3.1 Users are in search of a better usage experience 06 3.2 Bifurcation of user behavior 07 4. Revenue growth directions for Service Providers 07 4.1 Managing customer experience – catching the low hanging fruits 09 4.2 Expanding to new segments – covering the white spots 10 4.3 Differentiating services – capturing up sell opportunities 12 4.4 Implementing winning business models – entering virgin soil 14 5. Supporting your revenue growth strategy
  3. 3. 1. Executive IPTV and mobile TV services, such as those offered by Belgacom and KPN, have been found to have a large summary potential audience. Success stories in Asia and Europe indicate results above expectations, based on a solid, competitive differentiation by perceived quality and content. The TV business is not a ‘low hanging fruit’ but a strategic investment. 4) Implementing winning business models enlarges the addressable One of the major foundations of future Internet use. Providers simply need to market. With multi-play packages – revenues is making the best use of provide a reasonable speed and use providing one-stop-shopping of high the coming broadband market will follow almost automatically. speed Internet access, fixed and revolution, while at the same time mobile voice as well as TV – service maintaining voice as a cash cow. 2) Expanding to new segments to providers are trying to maximize There are four strategic directions of cover whitespots in terms of regions their share of the user’s wallet. Yet, revenue growth: and customer types: Wireless these commercial bundles are mostly broadband technologies can reach “me too” and therefore insufficient to 1) Managing the customer unconnected people in areas where ensure competitiveness. experience: Customers are service the use of wireline technologies is not Competitiveness can be gained by providers’ most valuable assets. Taking economically feasible, for example at simplicity – achieving a situation where care of these assets, by building remote sites with long copper lines. access to personal services and stronger and more profitable customer Additionally, VoIP and community communities is as simple as placing a relationships, is an effective way to services provide excellent opportunities voice call is today. This implies: increase revenues and improve for to reach users that are outside the • continued service between different customer loyalty. Managing the value provider’s own region. access types, independent of the of legacy services can maximize the location customer life time value by 30 to 70%.1) One largely untapped customer • adapting applications to the segment is enterprises. Service capabilities of different devices, One of the most important aspects of providers can double their ARPU in ranging from small handsets to user experience is voice quality as, this segment with Premium IP large HD TV screens despite the boom of broadband, communication packages and • a simple “push button” like access classic voice is not dead. In realistic enhanced mobility solutions. to the personal service suite. Basics scenarios, HiFi-like voice quality can like the user profile and comfort boost classic voice revenues by 20%. 3) Differentiating services: functionality such as presence, Users value the new dimension of The success of services lies in the location and profile based service naturalness in speech, with many ability to create clear value for users selection and presentation should regarding speech quality as more by enriching their lifestyles. Users also be available independently of the important than any Internet service. expect to have greater control over access and device type. the services they use. Addressing In the broadband Internet segment, these needs with exciting and tailored Advertising is another opportunity, speed is a key enabler and at the service bundles requires a stronger with growth driven by Internet and same time a limiting factor for user focus on understanding users and mobile advertising. Key advantages convenience and the type of services their consumption patterns. Among are the opportunities of multi-channel that can be used with an acceptable a variety of innovation areas, TV advertising, personalization and the quality. High Definition sets the services is one that is very obviously abilities to monitor the success of a benchmark for video services, growing. There is clear demand for campaign in realtime. providing room for competition based convenient and seamless TV services, on nearly unlimited data rates via anywhere, anytime and on any To sum up, true revenue generating VDSL and by bringing fiber nearer to device, with consumers having full and mass market capable services the user. In mobile markets, true control of how they use the services. are based more on quality, user broadband speed provided by HSPA This change of mindset is strongly convenience and personalization and and WiMAX is the kick-start for mobile driven by Web 2.0. less on sophisticated functionality. 1) Nokia Siemens Networks, whitepaper “Managing the Customer Experience”, 2007
  4. 4. 04/16 Nokia Siemens Networks – New Revenues 2. Global service provider revenue trends The service provider industry 2.1 Broadband penetration – Within the wireless segment, HSPA, continues to be an arena for healthy the key revenue enabler as an upgrade of 3G for true broadband business. Nokia Siemens Networks speed, is gaining momentum – about predicts a worldwide growth of service Fixed and wireless broadband is 90% of all WCDMA networks have provider revenues of 4.2% a year until booming, with new collaborative and already launched HSPA and more 2012. Whereas new growth markets interactive multimedia web applications than 600 HSPA capable devices are like the Middle East, North and East driving broadband deployments. available.4) As a result, 7% of Europe, Asia Pacific, China and Latin As a result, worldwide Internet traffic worldwide 3G users were connected America show a strong revenue grew from 2003 to 2006 at a via HSPA by the end of 2007, a figure growth of up to 9%, the growth in more compounded annual growth rate of which we expect to approach 40% by saturated markets like North America 75%.2) In particular, the explosive the end of 2012.5) At this point, one and Western Europe is slowing down. growth in the use of video services is quarter of worldwide mobile users will Growth segments in the market are filling broadband access networks and have Internet access via HSPA and fixed and wireless broadband, with backbones. Until 2015, we estimate mobile Internet browsing will start to mobile voice still growing in many traffic will increase 100 fold. Broadband complement other growing messaging countries. access can be offered in different services as a main revenue generator. ways, via DSL and fiber technologies, providing superior data rates, or via The broadband boom affects service HSPA and WiMAX, providing superior providers’ revenue opportunities in mobility and coverage. several ways: • Mobile and fixed operators as well These trends lead to a heavy ramp up as Cable operators and ISPs can of broadband access lines, a process still earn healthy ARPUs and that started with fixed and is now margins with plain high speed continuing in wireless. Current Internet access. worldwide fixed broadband household • Broadband provides diversification penetration is at 17% and expected to opportunities – with broadband rise towards 25% until the end of and IP the services become 2012.3) In leading broadband markets independent of the network. like Korea, nearly every Internet Therefore, broadband is the key household is already connected via enabler for making any kind of broadband, leading to penetration service available on fixed as well as figures of 80% and more. on mobile access, breaking down market segment boundaries. • On the other hand, an operator’s own broadband pipe is used for any kind of Internet services, making the vertically oriented “silo” model obsolete in the fixed segment. The same happens in mobile markets, changing actual business models. 2) Business Week, “Telecom: Back from the Dead”, 25.06.2007 3) Nokia Siemens Networks Business Intelligence, 2007 4) GSA, 2008 5) Nokia Siemens Networks Business Intelligence, 2007
  5. 5. 3. Changing user buying behavior 2.2 Voice remains an important 3.1 Users are in search of a Internet economics also expand cash cow – but margins are better usage experience into the mobile segment under pressure By upgrading 3G networks towards Nomadic user behavior HSPA on a wide scale and launching The situation and trends for fixed The decline of subscriber loyalty is WiMAX, the open Internet model is and mobile voice are quite different. accelerating. According to our Pulse also entering the mobile world. The fixed voice segment is shrinking surveys in 2007, the likelihood of users There are clear indications of mobile for several reasons: changing their provider within the next broadband subscribers who are using • Continued fixed to mobile three months has recently reached a huge variety of mostly free web substitution. the highest value in nearly every applications.7) Users do not accept a • Accelerated shift towards cheap market examined. Users select their limitation to the boundaries of the flat rate VoIP on top of broadband provider mainly according to criteria walled garden of a single provider. access. In many of today’s related to costs, provider brand, As a consequence, there is no longer a broadband packages, voice is often network quality and – in the case of prime contractor that offers the whole offered without a separate price tag. mobile operators – the attractiveness service from access to application and • Price competition from low cost of the handsets. Apart from the bill. Users want the freedom of choice no-frills providers. associated customer acquisition costs, among a variety of applications that • Massive inroads of Internet players service providers are aggressive in are available on the web. who are using their large user subscriber acquisition in order to base to offer cheap VoIP and other overcompensate for subscriber Beside price the usage experience communication services. churn. As falling prices in all market becomes the dominant success segments show, the competition is factor In contrast, mobile voice continues to mainly based on price and pricing User research indicates a definite rank deliver cash reliably. Driven by a structure, if particular minimum of criteria when it comes to the decision heavy price decline in many markets, thresholds regarding factors like the to use a service offering or not. sometimes even leading to a flat rate offered DSL bit rate are met. 1) Price – no surprise pricing model, the number of minutes 2) Ease of access – simplicity is key of use worldwide will increase by Apart from the rather nomadic 3) Speed and quality – clear demand nearly 70% during the next five years. selection of providers, users also for high speed broadband and In the same time frame, average change their use of new services. crystal clear voice worldwide prices per voice minute are Most users do not have specific 4) The content – users assume that expected to fall by more than 30%, expectations of new applications, there is interesting content on the leading to eroding margins per preferring to play around with the new Internet minute.6) In emerging markets, voice features. Some of the new services revenues will still be rising, while in are tested only once or twice but Beside this, most users – independent mature markets we will see stagnation further usage stops due to usability, of their culture – demand a one-stop- and even decline of voice revenues. quality or cost concerns or the lack of shopping experience for different The reason is that price elasticity in partners to communicate with. services like Broadband Internet, fixed most markets is decreasing so that telephony, mobile subscription and TV. price reductions lead to a less than Around 60% are in favor of service proportional increase of minutes. bundling.8) 6) Nokia Siemens Networks Business Intelligence, 2007 7) Nokia, Smartphone360 user study, 2007 8) Nokia, The Future of Voice Traffic, 2006
  6. 6. 06/16 Nokia Siemens Networks – New Revenues 3.2 Bifurcation of user behavior Simplified user segmentation These decision making factors vary High across user segments. Although there “Consumers” “Prosumers” is a large number of lifestyle segments • Bite-sized packages • All options everywhere in the market, for clarity, they can be • Passive media consumption • Active community membership • High degree of classic TV style • High degree of voice, Internet clustered into three main user types. infotainment utilization and messaging utilization Due to their comparably low income, Simplicity and personalization Always on & innovative services Income the “Still Disconnected” require stratum basic services based on cost-efficient technologies in order to not exceed “Still Disconnected” their budget limit, which in many • Basic communication & infotainment emerging markets is below 5 EUR per month. They are the largest group Affordability in most emerging markets. Low Traditional Basic user beliefs Modern The “Consumers” dominate mature • Planning reliability • Fun & independence markets. Their rather low involvement in • Tidiness • Performance new communication and infotainment technologies and their pragmatic attitude are barriers for selling Figure 1. Users split up into always on “Prosumers”, sometimes on “Consumers” and “Still Disconnected”. sophisticated service innovations. Key success factors are clearly defined packages, an extremely simple service access and intuitive Well known representatives of the • Strong multimedia orientation with and limited interactivity. Web 2.0 are social networking strong focus on video – most communities like Facebook and Internet traffic is already video. In contrast, the always-on MySpace, as well as content sharing “Prosumers” need their personal sites like the video sharing platform The Web 2.0 is a reality. There are application and content suite YouTube. Changing user behavior in more than 450 million registered everywhere. They like to communicate four dimensions drives the “Web 2.0”: social networking users worldwide, and share their content and opinions • Deep interaction in communities meaning that about one third of with others having the same interests. with intensive communication worldwide Internet users are currently Blended communication services over various channels in social engaged in social networks.9) Due and broadband everywhere allow networks to their communication intensity, them to stay close to their community. • Individual media discovery, where the “Prosumers” are the potential The “Prosumers” are the drivers of the search and user generated content early adopters of service innovations, so called “Web 2.0” which describes is replacing media company control but the mass market still mainly the evolution of the Internet towards a • Flexible consumption, meaning consists of “Consumers” and the more open, flexible and participatory the freedom to use services at any “Still disconnected”. platform for creating content, time and place and on any device, applications and business models. according to personal preferences 9) Pyramid Research, Social Networking Goes Mobile”, 2008
  7. 7. 4. Revenue growth directions for Service Providers Pure price reductions just produce additional revenues, as long as one is “Hunting” in the elastic area of the price response curve. The effects are only Market Legacy New short-term, since this strategy sparks markets markets a pure price competition. Increasing Service portfolio demand will no longer over compensate for price reductions, Legacy Managing the customer Expanding to new because the price elasticity in the services experience segments market decreases. Customers mainly • Increase usage by service • Expand in new regions enhancements and markets “Farming” compare prices and as a result, their loyalty is shrinking because of the few perceived differences between the New Introducing differentiating Implementing winning services services business models service providers. However, there are • Upsell with differentiating • Diversify the revenue four techniques to maximize service services source revenues in the long run: 1) Managing the customer experience: By enhancing the existing service Figure 2. Revenues can be expanded in four directions. Strategic revenue growth options for service providers. offering with higher levels of customer experience, the market share within the currently addressed market can be boosted. User experience has a positive into new revenue sources. This is user experience that is associated affect on the acquisition potential, about doing things differently at a with the legacy offering: Are there any customer lifetime, usage intensity much larger market place. levers to boost intensity of service and eventually price level. usage and the share in the presently The adopted strategy depends on the addressed market? Most service 2) Expanding to new segments: specific market, the assets and providers worldwide, particularly in Covering white spots beyond the heritage of the provider: FNO, MNO, saturated markets, have customer currently addressed market hybrid operator, ISP or cable operator. experience management at the top of monetizes opportunities in new their agendas. Nokia Siemens regions and market segments. Networks’ research into user 4.1 Managing customer experience has discovered that a 3) Introducing differentiating services: experience – catching the low significant increase in CLTV can be Broadband is the key enabler of hanging fruits achieved through improvements in Up sell opportunities, by providing network quality, billing accuracy and access to own or 3rd party Internet Improvements in customer customer service. Our investigations like multimedia services. experience have direct effects unveil that about 30% can be gained on revenue in mature markets and 70% in growth 4) Implementing winning business As well as launching innovative markets.10) models means diversifying the services to develop new revenue service and market portfolio to tap sources, it is worth looking at the 10) More at: https://inside.nokiasiemensnetworks.com/global/Work/Sales/Sales+Materials/ OBS+Sales+Material/Marketing_themes/Managing+Customer+Experience.htm
  8. 8. 08/16 Nokia Siemens Networks – New Revenues Enhanced voice quality increases voice revenues by addressing the Voice user segments Voice revenue delta in % due to most attractive user segments enhanced voice quality (WB-AMR) “I only switch my “I only use my – per annum – One key lever of user experience is mobile phone on mobile phone if to be reachable.” 22% 28% I have a quick 30% voice quality, since voice is used by message to nearly everyone on a daily basis. somebody.” 11% With the exception of video, it is the 20% 39% most lively and human communication. That means voice quality affects all 10% users and improvements have a good “I use my mobile “I also like to use my chance of being perceived. phone for business.” mobile phone for longer calls when on the move.” 0% YE 1 YE 2 YE 3 YE 4 YE 5 Voice quality is not perceived by users Increased fixed line substitution as a big problem in current networks Gaining market share and but moving from good to excellent retaining users voice quality provides an obvious Reaction of target user segments Increased Minutes of Use upside. Effects on user behavior and • They notice and highly appreciate enhanced voice quality Assumptions spending have been intensively 80% penetration of WB-AMR phones • Willing to accept an increase in the monthly bill after 5 years analyzed. Nokia Siemens Networks • Would switch their current provider for better voice quality Results based on user study performed a user study together with a large European operator.11) Users compared different sound samples Figure 3. Enhanced voice quality lifts voice revenues by addressing the most attractive user segments. (WB-AMR coded, NB-AMR coded, ISDN and others) in different scenarios: with or without background to them. For business users, the (those who value voice quality noise, male or female voice, different decrease in stress through highly) and retain more of the radio conditions. Measurements show enhanced voice quality plays an current users by removing quality that HiFi-like WB-AMR is perceived important role. constraints as a reason for churn. to be of significant higher quality • To them, improved voice quality • An improvement in voice quality than legacy codecs. Consequently, justifies an increase in the monthly leads to higher Minutes of Use per the majority of users stated that their bill. For the target consumer subscriber. This benefit will come expectations were met or even segment, high voice quality is even automatically, since the user does not surpassed by the improvement. more important than the amount of have to make an intentional buying the monthly bill! decision: the more fun, the more talk. The initial target segments for improved • They have a disposition to change • Mobile operators can enforce fixed voice quality can easily be spotted by the provider to get better voice line substitution: As many users still looking at subscribers’ usage behavior: quality. use a fixed line for voice quality business users who use voice reasons, HiFi like quality overcomes communication a lot and consumers According to the study, improved voice this obstacle. who like to use their phone for longer quality has at least three direct effects conversations. They have the following on revenues: A revenue model based on primary in common: • By improving voice quality, the user research reveals an opportunity of • High voice quality is highly beneficial provider can attract more users about 20% additional voice revenues. 11) Siemens Communications, “Voice Quality – The End-Users’ View”, 2006
  9. 9. Revenues follow data rates – In the mobile segment, Internet use is 4.2 Expanding to new segments The snowball effect of a true gaining momentum for one major – covering the white spots broadband experience reason – the upgrade of 3G networks The coherence sounds simple, but it is with HSPA. HSDPA provides Providers can develop new markets by true – as soon as users are provided maximum downlink data rates of expanding their geographical reach with the experience of a high speed 14.4Mbps and HSUPA enables uplink and addressing new user segments. connection to the Internet, they use it rates of up to 5.76Mbps. With HSPA+ and pay for it.12) maximum data rates are moving Enlarging the regional coverage towards 28.8 Mbps at the downlink Wireless can provide ubiquitous User expectations of bandwidth have with an upside potential of 43.2Mbps broadband Internet access in white grown quickly. Current DSL entry and 11.5Mbps at the uplink. spot areas where the use of wireline packages start at 2Mbit/s, 6Mbit/s Additionally, the flat Internet-HSPA technologies is uneconomic, for connections are common and up to network architecture clearly improves example in remote areas with long 20Mbit/s are offered at the high end the user experience by lowering copper lines. Typically, mobile with ADSL2plus. The quality demands latencies. The result is a shortened operators position their HSPA based of a user generation that gets used to round trip and channel set-up time, broadband offering from a price HDTV can only be met by VDSL, which is similar in importance to the point of view as an alternative to DSL. which can provide up to 100Mbit/s in actual peak rate for many applications At the same time, they extend their either direction if the DSLAMs are like video, fast e-mail synchronization, broadband coverage beyond close to the subscriber. VDSL provides real time gaming and VoIP. metropolitan areas to cover DSL enhanced interactivity options and the white spots. An efficient option is to parallel use of several high-definition The availability of HSPA boosts refarm existing GSM spectrum in the TV channels, high speed Internet revenues in all known markets. 850 or 900MHz band. This means access and premium VoIP services. Providers aggressively promoting using this spectrum for GSM as well Further developments within VDSL HSPA reach data ARPUs and growth as for WCDMA/HSPA with obvious and fiber based Passive Optical far above market average. Data advantages – the lower the carrier Networks (PON) technologies provide revenue growth for such operators in frequency, the further radio signals can nearly unlimited performance at a Europe is about 40–60% compared travel. Therefore it takes fewer radio significantly higher network reach. to an 11% market average, already cells to cover the same area, enabling With GPON, symmetrical data rates of resulting in a double digit share for extended coverage at minimal cost. 100 Mbit/s can be achieved over broadband in total revenues.14) distances of 20 km. The fast diffusion Also, fixed broadband providers are of broadband access in mature Asian An alternative to HSPA/LTE is WiMAX. able to cover their DSL white spots and European countries, with about WiMAX and HSPA/LTE have been with new cost efficient wireless three quarters of all Internet developed in parallel and show technologies like WiMAX. The households accessing the Internet via similar performance characteristics willingness-to-pay for a mobility Broadband at ARPUs around 40 EUR for comparable scenarios. Both premium varies by country – while per month13), indicate the compelling technologies will co-exist, each the Germans are reluctant, the British effect on the user experience. addressing different operator types. are willing. Anyhow, existing fixed WiMAX is especially tailored to new broadband prices clearly set a wireless broadband entrants with an benchmark. Internet centric offering. 12) Nokia, Smartphone360 user study, 2007 13) Nokia Siemens Networks Business Intelligence, 2007 14) Nokia Siemens Networks / InCode, “Global Market Watch”, 2007
  10. 10. 10/16 Nokia Siemens Networks – New Revenues A different way of extending the more than 5% during the next five 4.3 Differentiating services – regional reach is using the access years, fostered by a strong outsourcing capturing up sell opportunities independence of the Internet. trend. Providers with enterprise A service provider’s own subscribers packages are successful – a European Developing a successful portfolio of can access services from “foreign” mobile operator gained 16% user innovative value-added services is a provider access networks or its own growth and 12% revenue growth in the pre-requisite for healthy revenue services can also be used by enterprise segment with a tailored growth for retail providers in the future. subscribers of a “foreign” access offering to SMEs within one year.15) Among a variety of innovation areas, provider. Excellent opportunities are TV services are one of the very provided by VoIP and community There is a clear trend towards an obvious growth opportunities. services. “Everywhere Enterprise” to accelerate • With VoIP, service providers can the company’s business processes New mass services in sight extend their reach by out-of-region through fast communication and the Beside voice and Internet, TV is the plays. Additionally, fixed mobile capture of actual information from most widespread medium worldwide. convergence makes use of anywhere. This significantly improves In contrast to other communication numerous fixed and mobile access the service to their customers, services and electronic media, TV is networks. Even business users allowing faster response to customer also preferred by people with a rather need such services for calls from queries. In particular, this improves inactive lifestyle – the “Consumers”. abroad. the productivity of mobile job functions But the passiveness of TV is changing • Providers can leverage scale like sales and service. and the recipients want the freedom effects by providing an Internet to choose the content they like and based Web 2.0 community platform Hosted IP communication solutions consume it when and where they like which is open to any Internet user ideally meet those expectations by on their preferred device. This attitude in the world. Even if the community providing the same suite of is strongly driven by Web 2.0 video is exactly tailored to special applications with feature transparency, services. At the same time, user interests and therefore only independent of the geographical area expectations regarding video and attracting a niche in the regional and device. At the same time, upfront audio quality are steadily rising. market, it can be scaled to a mass investments for PBXs and their HDTV quality is setting the benchmark market on a world wide basis. associated maintenance costs can be for all video services. substituted by a service fee. With a Enlarging the market coverage hosted service, a North European These trends can ideally be met with For many service providers, the operator achieved around 50% IPTV, a platform for multimedia enterprise segment is a largely additional ARPU from enterprise services delivered over IP based untapped customer group, despite the customers. By up selling industry networks with a premium visual and large revenue opportunities. Enterprise specific features, a service provider audio quality, reliability, interactivity users’ ARPU is typically higher than can achieve the status of an all-in-one and security. In principle, IPTV can be consumer ARPU while being more provider. used from any IP capable device. loyal. Market benchmarks illustrate that Typical components of IPTV are up to 25% of mobile users are from dedicated TV channels, time shift TV enterprise customers and generate and Video on Demand as well as value up to 40% of total revenues. Global added services such as electronic enterprise service revenues are program guides and communication expected to grow at an annual rate of services such as video telephony. 15) Yankee Group, 2007
  11. 11. IPTV is a platform for different revenue Beside IPTV, mobile TV services are Evolution of TV towards a multi- streams: also gaining momentum. According to access personal entertainment • Differentiation of the plain Nokia Siemens Networks’ user solution broadband access to gain more research, more than 60% of the mobile Due to its development prospects, broadband market share users worldwide are interested in TV TV should be seen as a strategic • A premium subscription fee for on mobile. Increasing wireless Internet investment. TV services can be dedicated channels usually not access further raises expectations evolved towards a multi-screen, available on free TV regarding the ubiquitous availability interactive and personalized • (Near) Video on Demand fees on a of content. There is a measurable entertainment solution. subscription or pay per view basis need for different use cases, such as • Interactivity: Web 2.0 influenced • Advertising fees for targeted and Live TV, video on demand and video “Prosumers” can be targeted with even personalized advertising, download. About half of the target enhanced interaction capabilities a great advantage compared to users would use the service on a daily such as advanced interactive ordinary broadcast basis. TV and music account for more program guides, voting, chatting, • Current market response looks than 50% of the users’ willingness-to- messaging and gaming promising: About half of salient pay for new mobile services. applications, as well as the broadband users are interested in possibility of sharing user generated IPTV and 6% of fixed line owners Key factors for a successful TV content. already use IPTV.16) Success stories business are: • Simplicity: “Consumers” in of user take up, revenue growth • Differentiation with exclusive particular appreciate intuitive and and increasing customer loyalty are content, quality and flexible pricing instant connectivity to their quite encouraging – already, only schemes right from the start. This preferred media. This can be two and a half years after market is particularly important in markets achieved by a high degree of launch, IPTV services contributed with considerable Free TV and personalization: user profile based nearly 5% to the total revenues of Pay TV competition. selection of content, individual play an Asian operator while also • Users are in convenient control of lists and advertising. stabilizing the fixed line business. the entire consumption process • Personal media: TV can be Also, European operators claim from purchase (order and pay), developed into a central that their expectations regarding program navigation (browse, entertainment and communication users and revenues were exceeded preview and search), controlled portal with the possibility of storing, and that their IPTV offering – consumption (pause, continue, accessing and sharing personal although in an early phase of the replay, record and store). The content and music – also lifecycle – measurably supports possibility of time independent addressing non PC users. their core business. For example, media consumption provides a • Personal content anywhere: The Belgacom reported 250,000 users decisive added value compared to anywhere and anytime user attitude in September 2007 – the service broadcast. in the context of Web 2.0, together was launched in June 2005 – and • Complementing the TV content with the parallel uptake of IPTV an IPTV revenue of nearly 16 EUR with Internet and communication and Mobile, results in a market for per subscriber. services, usable with the TV. access independent “3 screen” TV. • Brand extension towards an entertainment brand and even positioning as a prime TV contender. 16) Average value of ten examined markets, Nokia Siemens Networks, Pulse 2007
  12. 12. 12/16 Nokia Siemens Networks – New Revenues Multiplay packages Value added services Leading DSL Fixed Mobile TV Video on Online markets PSTN VoIP CS voice DTT IPTV Music Pay-TV demand games Korea France Taiwan Japan 4.4 Implementing winning Netherlands business models – entering Germany virgin soil UK Italy Diversification means exploiting new US revenue sources in market segments Hong Kong that have not been addressed before. % of countries 100% 90% 80% 80% 90% 60% 100% 100% 50% The goal is to extend the addressable market by implementing new bundles Service launched and business models, as well as providing new use cases to the Figure 4. Multi-play bundles are common in leading broadband markets. Overview on leading DSL countries (status 2007). customer. Diversification is the most Source: Ovum 2007, provider websites. effective lever of revenue growth. Broadband everywhere enables multi-play services Providers from different heritages – his user base with more TV style confused in the face of an exploding FNOs, MNOs, hybrid operators, ISPs “Consumers”. variety of services, bundles, and Cable operators – are competing applications, content and technologies. for the entire telecommunication and As the “Prosumers” want to be always A convincing multi-screen “Always infotainment budget of the users. on in order to stay connected with best connected” strategy prevents In order to maximize their share, these relevant content and peers, Internet and pure price competition. providers have to cover different use TV on the move is a key differentiator. cases: at home and on the move, The fixed use cases promise more Always... Internet applications and more TV ARPU, but communication and Seamless mobility in the sense of style infotainment. infotainment on the move is essential for roaming and handover between “Prosumer” acquisition and retention, different access technologies, e.g. DSL In this broadband multi-play arena, providing a seamless experience. when the user is at home and HSPA the fixed Internet usage including when he is on the move, is a key voice provides the largest ARPU for Since multi-play strategies can be differentiator: The user does not have communication providers, since most seen as a common practice today, to think about the location because the of the use, from voice to high speed the question is how sustainable current personal service suite can be used Internet, takes place at home or in the strategies will be in the mid-term anywhere with the same look and feel. office. Also, many mobile service future. Providers have to differentiate providers target the fixed home themselves by providing a better user Best ... broadband market – an original use experience than the competition. The capabilities of different broadband case and market of FNOs and ISPs. A major deterrence for adoption is access technologies and device types Once the fixed use case is covered, complexity. “Consumers” in particular are considered automatically. The there is a great opportunity for a fully hate complex functionality which is most obvious adaptation needs are for fledged home entertainment solution. hard to understand. Getting access to video, since different qualities ranging Users are willing to pay for premium personal communities and services from TV on a small mobile phone to content combined with interactivity has to be as uncomplicated as placing high definition TV on a large flat screen and thus the provider is able to enlarge a voice call. Yet today, users are often at home must be supported. In order
  13. 13. main source of revenues. • Direct marketing: In the mobile segment, SMS and MMS are “pushed” to the user. Direct marketing can also take the form of “idle screen marketing” were the to ensure high speed connectivity, tighter subscriber lock-in than pure phone screen runs the especially for real-time applications, commercial bundles. advertisements while idle. In most providers must have efficient of our examined markets, less than bandwidth management. Providers Advertising revenues become 20% of users find adverts they stay in control of the traffic by more significant receive on the mobile phone differentiating applications with Deep Another form of diversifying revenue interesting,20) which indicates some Packet Inspection and prioritizing sources is advertising business. room for improvement. different traffic types. The advertising market continues its • On-portal advertising: Portal healthy growth. Total Advertising advertising can take the form of Connected expenditures in Western Europe banner ads, search advertising or The Internet and the personal service crossed USD100 Bn in 2006 and are any other form used in online suite are accessible at a single point. expected to reach almost USD130 Bn advertising. Basics like the user profile and by 2011.17) The main segments are comfort functionality such as classic media, followed by TV. Yet, Communication providers are presence, location and automated primary drivers of growth are the becoming more attractive to terminal configuration should be Internet and mobile advertising.18) advertisers for several reasons: made available independently of the In markets like the UK, mobile • Based on multi-play services, access type. In order to integrate advertising accounted for about 1% of multi-channel advertising different applications into one service, total mobile operators’ revenues in campaigns across different media a single user centric charging policy 2006.19) The appealing opportunity in can be started. For example, must be in place. This also allows for mobile lies in its promise of highly with Virgin Media in the UK, the efficient charging of up sells. segmented advertising and large advertiser can plan a campaign numbers of reachable users. The more including TV, Internet, and mobile. In a typical always best connected targeted the advertising is, the more • The available information about the scenario, users can, for example, valuable it is for advertisers. The subscriber allows segment specific select IPTV content on the move and success of the advertising will depend and even personalized advertising. start watching it on their mobile phone. on its acceptance by users – at a Only relevant advertisements are Users can also program all VCR minimum, it needs to be relevant, non- presented to the users. functions on their mobile device. intrusive and personally beneficial. Furthermore, the interactive nature Arriving home, they can seamlessly of services like IPTV provides a continue watching, now in HD quality There are three basic types of more intensive communication with on the TV set, where the latest advertising from which a provider can the potential customer than is messages can also be answered in earn a direct or indirect fee: possible with classic one-way media parallel. In this way, different wireline • Sponsored content: This reduces such as broadcasting and print. and mobile access pipes are the user barriers to mobile • Success metrics for the campaign combined into a single solution, hiding advertising. With sponsored are instantly available. all the network complexity. content, the user gets a piece of content free of charge in exchange Advertising is a new business model Diversification means to provide the for watching the sponsor’s that requires new skills and capabilities. user with numerous relevant use advertisement. Sponsored content In the eco-system for advertising, cases, while at the same time keeping or minutes can even be the basis operators can select different roles that it very simple. Access dependent of completely new business fit best into their core competences service availability provides a much models where advertising is the and overall service strategy. 17) Strategy Analytics, 2007 18) Strategy Analytics, 2007 19) Nokia Siemens Networks / inCode, 2007 20) Nokia Siemens Networks, Pulse survey, 2007
  14. 14. 14/16 Nokia Siemens Networks – New Revenues 5. Supporting your revenue growth strategy Broadband – the foundation for Whatever services or business revenue growth models our customers wish to deploy, Nokia Siemens Networks’ portfolio of Nokia Siemens Networks can fixed and wireless broadband solutions integrate all products and services, is the widest in the whole industry, together with the ability to operate, ranging from all DSL variants to host and manage the whole network. different fiber options. In the wireless On the delivery side, we provide area, Nokia Siemens Networks is integrated solutions covering devices, able to offer HSPA with a clear access network, distribution and core evolution towards LTE as well as network, service systems, user WiMAX as a complementary experience tracking and customer technology. Together with the identity management. experience of numerous successful implementations, customers can count Leveraging user data for new on us to select the best solution. revenues Today’s repositories of customer Bringing it all together data – demographic, behavioral and Far beyond connectivity, Nokia contextual – plays an essential part of Siemens Networks provides all the Nokia Siemens Networks strategy components for providing the for service innovations. Around this seamless user experience of being data, our customers are able to build always best connected, independent innovative multi-play service bundles of the specific fixed or wireless access matching users’ personal lifestyles. network. We support multi-play strategies based on a proven track of In addition, our market insights, based innovative solutions like IPTV and on permanent customer business Mobile TV, designed for a rich and talks, the presence in all important convenient user experience. industry fora and our systematic market research, help service Working closely with each customer providers ensure that new service to understand local opportunities and offers are compelling, useful and easy challenges, we offer consulting to access. services for business model and business case, E2E solution architecture and integration and license application.
  15. 15. Glossary ADSL Asymmetric DSL AMR Adaptive Multirate ARPU Average Revenue Per User CLTV Customer Lifetime Value DSL Digital Subscriber Line DSLAM Digital Subscriber Line Access Multiplexer FNO Fixed Network Operator FTTx Fiber To The Home / Building / Curb GPON Gigabit PON HD High Definition HDTV High Definition TV HSPA High Speed Packet Access HSDPA High Speed Downlink Packet Access HSUPA High Speed Uplink Packet Access IP Internet Protocol IPTV Internet Protocol TV ISDN Integrated Services Digital Network ISP Internet Service Provider LTE Long Term Evolution MMS Multimedia Messaging Service MNO Mobile Network Operator NB-AMR Narrowband AMR PON Passive Optical Network SMS Short Messaging Service TV Television VDSL Very high speed DSL VoIP Voice over IP WB-AMR Wideband AMR WCDMA Wideband Code Division Multiple Access WiMAX Worldwide Interoperability for Microwave Access The contents of this document are copyright © 2008 Nokia Siemens Networks. All rights reserved. A license is hereby granted to download and print a copy of this document for personal use only. No other license to any other intellectual property rights is granted herein. Unless expressly permitted herein, reproduction, transfer, distribution or storage of part or all of the contents in any form without the prior written permission of Nokia Siemens Networks is prohibited. The content of this document is provided “AS IS”, without warranties of any kind with regards its accuracy or reliability, and specifically excluding all implied warranties, for example of merchantability, fitness for purpose, title and non-infringement. In no event shall Nokia Siemens Networks be liable for any special, indirect or consequential damages, or any damages whatsoever resulting form loss of use, data or profits, arising out of or in connection with the use of the document. Nokia Siemens Networks reserves the right to revise the document or withdraw it at any time without prior notice. Nokia Siemens Networks and the Wave-logo are registered trademarks of Nokia Siemens Networks. Nokia Siemens Networks product names are either trademarks or registered trademarks of Nokia Siemens Networks. Other product and company names mentioned herein may be trademarks or trade names of their respective owners.
  16. 16. Nokia Siemens Networks Corporation P.O. Box 1 FI-02022 NOKIA SIEMENS NETWORKS Finland Visiting address: Karaportti 3, ESPOO, Finland Switchboard +358 71 400 4000 (Finland) Switchboard +49 89 5159 01 (Germany) Copyright © 2008 Nokia Siemens Networks. All rights reserved. Nokia Siemens Networks and the wave logo are registered trademarks of Nokia Siemens Networks. Other company and product names mentioned herein may be trademarks or trade names of their respective owners. Products and solutions herein are subject to change without notice. Product code B301-00216-RE-200804-1-EN – Indivisual www.nokiasiemensnetworks.com