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Mobile Telecoms Tech & Market Disruptions - April 2015 Version

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The next 5 years will bring huge changes to the mobile network industry. Network operators will see revenue and usage from voice telephony & SMS decline, while new communications apps will mostly be driven by context & design, not 3GPP standards.

4G networks will continue to be deployed, with 5G coming into view - but data traffic may not grow to the degree expected. WiFi is growing in important - but will only have limited integration with cellular. Net Neutrality concerns will continue to rumble - but most of the new "ideas" like paid priority or sponsored data will fail.

We will also see "multi-stakeholder" issues coming to the fore, where regulators will need to ensure the telecom industry encompasses the needs of users, venues, app developers, IoT companies, brands & Internet players. That said, attempts by Apple and Google to enter the cellular space with SIMs and MVNOs will remain niche

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Mobile Telecoms Tech & Market Disruptions - April 2015 Version

  1. 1. Mobile Telecoms Disruptions 2015-2020 Dean Bubley, Disruptive Analysis April 2015 dean.bubley@disruptive-analysis.com @disruptivedean
  2. 2. About Disruptive Analysis  Tech/telecom analyst house & strategic consulting firm  Cross-silo, contrarian, independent  Forecasting & anti-forecasting  Consultant & advisor to telcos, vendors, regulators & investors  Speaker at 30+ events per year in Europe, US & Asia  Reports on Mobile Broadband, WebRTC etc Twitter @disruptivedean Blog: disruptivewireless.blogspot.com Copyright Disruptive Analysis Ltd 2015April 2015 Many of the topics covered in this report tie into more detailed comment pieces on the Disruptive Wireless blog
  3. 3. Coverage of this document  Introduction – overarching trends & challenges in telecoms  Reshaping the comms, telco service & Internet landscape  Future of Voice (& video, messaging, WebRTC, context etc)  Service innovation / service curation for telcos  New roles & value chain (Apple SIM, Google MVNO etc)  The market, technical & regular battles for the mobile data  4G, WiFi, 5G networks  Spectrum considerations  Net Neutrality, zero-rating & sponsored data  Dangers of “creeping cellular-isation” Copyright Disruptive Analysis Ltd 2015April 2015 This document does not give all the answers or cover all strategic areas. Contact information@disruptive-analysis.com for a custom private workshop or advisory engagement
  4. 4. Telecom Megatrends: Heterogeneity Copyright Disruptive Analysis Ltd 2015April 2015 Standardised services Designed & differentiated services Standardised telecom operators Diverse stakeholders & participants Standardised customers & metrics Subscribers, users, developers, Things Standardised vendors & eqpt Cloud, NFV/SDN, IT players, open-source Standardised telephony & SMS Embedded & contextual comms Key question for telcos & regulators: Embrace heterogeneity, or try to re-impose homogeneity?
  5. 5. The big problem Copyright Disruptive Analysis Ltd 2015April 2015 Beyond Peak Telephony
  6. 6. Top-level strategic options & threats for telcos Copyright Disruptive Analysis Ltd 2015April 2015 Mainstream Evolution Digital Innovator Vertical Specialist Diversified Portfolio Business Services & Wholesale Focus Evolved messaging voice / video
  7. 7. Fragmentation & “OTTs”: The best tool for the job Copyright Disruptive Analysis Ltd 2015April 2015  Telcos vs. “OTT” is a logical fallacy (false dichotomy)  Telecom industry thinks of “voice” & “messaging” as services  In fact, they are capabilities for a given use / purpose
  8. 8. 3 trends: competition, context & substitution Copyright Disruptive Analysis Ltd 2015April 2015 Cheaper, better, “calls” Better ways to perform tasks Non-call & embedded contextual voice Skype Tuenti Viber iMessage Amazon Snapchat Uber Facebook Kayak Messaging & voice is becoming purpose- and context-specific Video optional
  9. 9. Communications in Context Copyright Disruptive Analysis Ltd 2015April 2015 In-app In-Browser In-Thing
  10. 10. VoLTE: Slow growth vs. contextual headwinds  Core business of telephony under threat  Competition from direct & indirect substitutes  “Official” new standard of VoLTE is too little, too late  Bundling & data-led prices just delay the inevitable Copyright Disruptive Analysis Ltd 2015April 2015 Source: Disruptive Analysis LTE uptake not mirrored by VoLTE use “Phone calls” slowly becoming obsolete
  11. 11. Peak telephony a reality in developed markets Copyright Disruptive Analysis Ltd 2015April 2015 136% 74% 63% 40% 38% 15% 15% 5% 5% 1% 0% 0% -7% -7% -12% -14% -14%-20% 0% 20% 40% 60% 80% 100% 120% 140% 160% IND CHN BRA RUS POL SGP FRA AUS JPN ITA KOR GER NED USA ESP SWE UK Source: Ofcom, IHS, Disruptive Analysis Aggregate Fixed+Mobile Outgoing Voice Telephony Volumes, Minutes, 2013 vs. 2008
  12. 12. VoLTE Status (GSA, Jan’15) Copyright Disruptive Analysis Ltd 2015April 2015 • 50-100 VoLTE networks expected live by end-2015 • ViLTE video irrelevant • RCS useless & unused • Most will not reach all areas / subs / phones / usage • Complex & costly • Needs IMS, upgrade to core network etc • Telephony v1.1 not a ground-up rethink of voice
  13. 13. WebRTC: #1 catalyst for voice / video evolution  Puts voice/video into browsers & mobile apps  Enables thousands more developers to do comms  Can be used to extend telco voice/VoLTE too  Oppo’s for telcos in PaaS, enterprise comms, UC/DUC  But will be very fast-moving & very crowded  Players include Google, Ericsson, Cisco, Avaya etc  Leading telcos: Telefonica, NTT, Telenor, AT&T, Tata Copyright Disruptive Analysis Ltd 2015April 2015 0 1000 2000 3000 4000 5000 6000 7000 2011 2012 2013 2014 2015 2016 2017 2018 2019 Other (TV+M2M/IoT) Smartphones Tablets PCs WebRTC-enabled devices, m installed base, year-end Source: Disruptive Analysis Q1 2015 WebRTC update Next phase of voice/video innovation starting now
  14. 14. Two equal domains for telco service innovation Copyright Disruptive Analysis Ltd 2015April 2015 Network- based services (IMS, SS7, IPTV etc) Non-network based services (Telco-OTT, partners etc) Internal telco APIs, NFV resources, bundling, OTT extensions etc
  15. 15. Policy & innovation…… …..vs. politics Copyright Disruptive Analysis Ltd 2015April 2015 Strategy Telco execs & central labs In-house apps & content Marketing / Product ITCore network Radio network Devices Legal Tensions Tensions Distance Tensions
  16. 16. New stakeholders in telecom services creation Copyright Disruptive Analysis Ltd 2015April 2015 Telco / MSO End-user Vendors & standards Services creation Experiences consumption Experiences curator Experiences designer Experiences developer Cloud API player IT vendor Platform creation Open- source In-house develop- ment Element creation
  17. 17. SIM-card evolution: Apple & beyond Trend Likelihood / extent Impact on MNOs Full Soft-SIM & MVNOs by Apple etc Limited / theory only Major risk but likely far off / never eUICC for M2M Already starting Beneficial Programmable / eUICC for tablets Apple SIM Poss up/downsides, sentiment hit Programmable / eUICC for phones Maybe. No signs yet Risky but complex Multi-IMSI M(V)NOs Existing but niche eg Truphone, Google Minor impact Multi-SIM devices Common Easy switching MNC liberalisation, new MVNO models Slow & patchy changes Unpredictable Copyright Disruptive Analysis Ltd 2015April 2015
  18. 18. Google Fi MVNO  Announced April 2015  Interesting, but only trial stage & some good / some bad aspects  US-based, uses multi-IMSI SIM on T-Mobile US & Sprint  WiFi via a curated network – details of locations/partners unclear  Only available on $650 Nexus 6 device ($27/mo financed)  Not cheap for US domestic use at $20/mo + $10/GB + taxes  Good value for outbound US roamers as $10/GB in 120 countries, 20c/min  Allows multi-device telephony & SMS, but needs Hangouts for this  Unclear data/privacy implications – but auto-VPN use on WiFi is cool  Model is very hard to extend internationally (MVNO regulation & deals, porting number to Google Voice/Hangouts, data/privacy etc) Copyright Disruptive Analysis Ltd 2015April 2015 Overall: worth watching & some nice ideas, but not a big deal for now
  19. 19. Data traffic growth: is there really a “tsunami”?  Rapid growth of 4G user-adoption & continued network deployment….  … 500m+ subs, but next billion users will be lower-ARPU / data-users  Many forecasts overlook shift to prepay segment (& use of WiFi)  Mean data-use brought down by late-adopters (falling median)  “Congestion” just a convenient pseudo myth to persuade regulators / ITU? Copyright Disruptive Analysis Ltd 2015April 2015 0% 50% 100% 150% 200% 250% '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Subscriber numbers Data per subscriber Smartphone 3G/4G data traffic growth Source: Ericsson, Disruptive Analysis Dominated by subs growth Unrealistic view of usage growth in prepay-dominated market? 0 500 1000 1500 2000 2500 3000 3500 4000 4500 '12 '13 '14 '15 '16 '17 '18 '19 Postpaid Prepaid Mobile data subs, year-end, m Source: Disruptive Analysis Mobile Broadband report Mostly fixed monthly quotas Incentivised to use less data?
  20. 20. Traffic & spectrum forecasts overcooked? Copyright Disruptive Analysis Ltd 2015April 2015 585% increase in 4G users 149% increase in 4G usage Early adopters = heaviest Late adopters use less Traffic growth mostly subs # Incremental use grows slowly M2M/IoT mostly small Only c10% cells congested Source: Vodafone
  21. 21. Application-based mobile data models Mobile Data models Neutral open access User pays for all data Certain data zero-rated Certain data sponsored Partial Internet access Specific applications allowed Specific applications blocked Differentiated Internet access Paid priority “specialised” services Differentiated Wholesale / MVNO Copyright Disruptive Analysis Ltd 2014April 2015 Many of today’s mobile broadband plans “Fully neutral mobile Internet” Data treated equally, charged differently: “Grey Area” Data treated differently by network “Non-Neutral”
  22. 22. Neutrality, Zero-rating & “Specialised Services”  Ongoing debates in US, Europe, elsewhere. Asia more relaxed  No obvious major new workable sources of revenue  AT&T Sponsored Data very limited uptake. Bharti Airtel likely to be similar  Threat of future “Internet regulation” (eg TRAI) increases risk / uncertainty  Also mostly unworkable (encryption, definitions, mashups, WiFi, speed of change etc)  Prisoners’ dilemmas may drive lose-lose outcomes Copyright Disruptive Analysis Ltd 2015April 2015 QoS, Sponsored Data etc have little impact on potential mobile data revenue Source: Disruptive Analysis Mobile Broadband report Net Neutrality does not necessarily impact investment: eg Netherlands
  23. 23. Sponsored data – attractiveness matrix Copyright Disruptive Analysis Ltd 2015April 2015 Ads Web Apps BYOD Ease of implementation Ease of selling by telco Ease of buying by client Revenue potential Impact on network Reputational risk Market maturity required Workarounds/"gotchas" Adjacent revenues/costs Prevalence 2014 Prevalence 2019 Sponsored data for: Good Fair Poor Bad Source: Disruptive Analysis “Non-Neutral Mobile Broadband” report, Dec 2014 Attractiveness for mobile operators vs. key criteria
  24. 24. Use of zero-rating will continue to grow strongly Copyright Disruptive Analysis Ltd 2015April 2015 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2012 2013 2014 2015 2016 2017 2018 2019 Global mobile Internet users exploiting zero-rated data, m, year-end, est. Source: Disruptive Analysis “Non-Neutral Mobile Broadband” report, June 2014 Note: excludes non-Internet zero-rating eg of MMS & BlackBerry BIS data
  25. 25. Towards 5G - the underlying story… “We need more spectrum to contain the forecast* growth of current 3G/4G mobile data uses & biz models. We’re designing 5G to absorb many other uses, as well as continued forecast* growth of the current ones, so we’ll need much more spectrum in future too. We’re not huge fans of WiFi & alternative mobile architectures that consume spectrum, add competition & arbitrage, unless we can integrate & control them. Or displace them entirely” *rather aggressive & questionable forecasts Copyright Disruptive Analysis Ltd 2015April 2015
  26. 26. The path to 5G  Lots of “visions”: 5GPPP, NGMN, 4G Americas, GSMA, vendors, Japan, Korea, etc  Lots of politics: Telcos vs. Industry etc  Lots of hype & jockeying for position  Attempt by telecom industry to “own” WiFi & IoT  Lots of inter-dependencies on NFV, SDN etc.  Lots of “use-cases” or “profiles”?  Actual technologies way behind the promises  Key target date is 2020 Tokyo Olympics  Key interim point: Dec ITU World Radio Conf. Copyright Disruptive Analysis Ltd 2015April 2015 Ultra-fast mobile broadband Critical & low latency Super- dense IoT 2015 2016 2017 2018 2019 2020 2021+ Use-cases & requirements Feasibility studies R&D, prototypes Formal Standardisation Early eqpt & testing 1st commercial deployments New spectrum & uses
  27. 27. Specifying 5G needs to be multi-stakeholder Copyright Disruptive Analysis Ltd 2015April 2015 5G MNOs Govt & cities Large Co’s App/IT Co’s Users Requirements Telco Vendors M2M & IoT Acad- emia Web Co’s IT vendors Innovations 5G must not just be another telco/vendor-defined technology. Other parties – Cities, App/Internet players, Transport & other players need to be involved
  28. 28. WiFi = multi-stakeholder & complex landscape Copyright Disruptive Analysis Ltd 2015April 2015 User Mobile operator Venue Fixed/cable operator App / content OS / OEM Employer / sponsor Many groups excluded from standards / regulatory discussions Advertiser / brand
  29. 29. Do we need “WiFi Neutrality” regulations?  “Seamless handover” sounds compelling…  … until one considers that “seams” are decision-points users & applications, about which network/biz models to use  Some early signs of concern among regulators about telcos dominating / over-exploiting WiFi spectrum (eg Israel nearly banned WiFi offload)  Many 3GPP & related technologies aimed at integrating WiFi with cellular (ANDSF, I-WLAN, EAP-SIM, Passpoint, HotSpot 2.0…)  Some add user utility & value, others reduce choice & options, or reduce WiFi utility for other stakeholder groups  Who has “admin rights” over WiFi selection, on/off, preference lists etc. ?  Some arguments for specific instances (eg disallowing children access to “fully open” 3rd-party WiFi, or enterprises choosing based on security)  Regulators have not addressed this issue so far. Little analysis of “3rd- party WiFi as partial access competition to cellular” Copyright Disruptive Analysis Ltd 2015April 2015
  30. 30. Other “Disruptive” trends & opinions  Privacy & encryption becoming more important post-Snowden  LTE-U / LAA has a lot of questionmarks, tech & regulatory  Lots going on with enterprise & cloud comms – watch MS Lync / Skype4B, IM/social-centric & various PaaS  Trend to “disunified” comms out-stripping “unified comms”  Telco developer platforms struggle without “anchor tenants”  Security is a major oppo (& threat) for telecoms operators  SDN & NFV likely game-changers, but patchy & slow  IoT is important but fragmented. Watch low-power networks  Reach & impact of Apple, Facebook, Amazon, Google, Microsoft cannot be underestimated. Watch capex & R&D Copyright Disruptive Analysis Ltd 2015April 2015
  31. 31. Copyright Disruptive Analysis Ltd 2015April 2015 Want a private “Telecom Disruptions” workshop for your company? For details email information@disruptive-analysis.com
  32. 32. www.disruptive-analysis.com disruptivewireless.blogspot.com @disruptivedean information@disruptive-analysis.com Skype:disruptiveanalysis Copyright Disruptive Analysis Ltd 2015April 2015

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