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Telco 2.0 Platforms Research Methodology 18 Sep 09

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The methodology used for market sizing of the 'Two-Sided' Telecoms Market Opportunity.

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Telco 2.0 Platforms Research Methodology 18 Sep 09

  1. 1. The Telco 2.0TM Two-Sided Telecoms Market Opportunity Report“Sizing the $125Bn Platform Services Opportunity”<br />Analysis Methodology, Sample Results and Validation Example<br />
  2. 2. In this Report we size each of the VAS platform’s service capabilities in detail<br />SIZING THE SEVEN SERVICE CAPABILITIES<br />The Seven Service Capabilities<br />Identity, Authen-tication & Security<br />Advertising, Marketing Services & Business Intelligence<br />E-Commerce Sales<br />Order Fulfilment - Offline<br />Order Fulfilment – Online (Electronic content)<br />Billing & Payments<br />Customer Support<br />Covered for Each Service Capability<br /><ul><li>Overall service capability sizing by vertical industry
  3. 3. Background information from public information
  4. 4. Key STL Partners assumptions
  5. 5. ‘Sanity checks’ for estimates</li></ul>These are covered for each service capability over the next 40 pages of the Report.<br />
  6. 6. Using government economic data, we have calculated the size of each of the 7 service capabilities across each vertical industry in the UK, Europe & the US<br />SIZING THE PLATFORM OPPORTUNITY: SUMMARY<br />Vertical Industry Revenues<br />Horizontal Service Capability Market for each Vertical Industry<br />Potential opportunity for Telco Platform<br />Checks & Balances<br />Office of National Statistics – UK National Accounts<br />UK<br />UK economic output split by industry (classified according to the EU NACE standards) which allows detailed analysis and permitting minimisation of double counting as one industries outputs are used as an input to another. <br />Estimates of % of vertical industry revenue spent on each service capability<br />Estimates of % of service capability market available to Telco platform<br />Validate sizing against industry data and/or sensible cross-checks<br />EuroStat – European Business Facts & Figures<br />Europe<br />Economic output by industry across all 27 country members. It also uses the NACE classification to allow a comparison and reconciliation to the UK figures. <br />For example:<br />Percentage of Financial intermediation (except insurance and pension funding) revenues spent on Identity, Authentication & Security services estimated at 1% = £880m<br />For example:<br />Percentage of Financial intermediation (except insurance and pension funding) revenues spent on TELCO Identity, Authentication & Security services platform estimated at 0.1% = £88m<br />For example:<br />£880m spent on Identity, Authentication & Security for Financial Intermediation = £22 per adult per year in the UK across retail and business banking, mortgage lending, credit cards etc. £88m for Telco platform = £2.20 per adult per year<br />US Bureau of Economic Statistics – GDP by Industry Stats<br />US<br />In other words:<br />Telco platform could potentially capture 10% of all Identity, Authentication & Security services in Financial Intermediation<br />US data split by industry and in the detailed input/output format similar to the UK data. There are small differences in the classification of industries with the US NAICS. <br />Note: See Appendix for detailed industry classifications and groupings used in our analysis.<br />
  7. 7. We calculate that three service capabilities could generate 73% ($90 billion) of the total platform revenue in 2017<br />SIZING THE PLATFORM OPPORTUNITY: SUMMARY<br />Advertising, Marketing Services and Business Intelligence (the one area that many operators are currently focused on) is the largest single service capability…<br />…but represents less than 30% of the total opportunity<br />Billing and Payments and Customer Care are both substantial opportunities for operators:<br />$26 billion each<br />Some service capabilities are smaller but enable others:<br />Identity, Authentication & Security are required to deliver advertising, E-Commerce sales, Billing & Payments etc.<br />E-Commerce Sales drives On-line order fulfilment and billing & payments<br />
  8. 8. SIZING THE SEVEN SERVICE CAPABILITIES – IDENTITY, AUTHENTICATION AND SECURITY, SANITY CHECKS<br />We tested our calculations for Identity, Authentication & Security in two vertical industries and believe we have been conservative in our assumptions<br />Financial Intermediation, except Insurance and Pension Funding<br />In the UK in 2004, the total industry generated revenues of £88 billion ($176 billion) which we expect to grow to £127 billion ($254 billion) by 2017 (assuming a 2.2% compound annual growth rate going forward)<br />We estimate that the amount spent on Identity, Authentication and Security by the Financial Services industry amounts to 1% of this total revenue:<br />1% x $176 billion = $1.76 billion in 2004<br />1% x $254 billion = $2.54 billion in 2017<br />The adult population in the UK is around 40 million which means that Financial Services institutions spent around $44 per adult per year on identity, authentication and security systems in 2004 and around $64 in 2017 to cover all retail and business banking products (current accounts, savings accounts, mortgages, personal loans, credit cards etc.)<br />Much of this expenditure is on proprietary internal systems and processes and so we calculate that a Telco platform could only capture 10% of the available revenues spent on Identity, Authentication and Security:<br />10% x $1.76 billion = $176 million in 2004<br />10% x $2.54 billion = $254 million in 2017<br />Thus, we calculate that the Financial Services community could thus spend only $4.40 per adult per year in 2004 and $6.35 in 2017 on a Telco platform offering identity, authentication and security services<br />Public Administration: UK Passports<br />The issue of passports is essentially an exercise in identity, authentication and security by governments<br />This, and identity card schemes, are areas where we forecast operators could have a role to play<br />In the UK, in 2006 the government charged £72 per new or replaced passport and £46 per amended passport and generated total fees of £346 million ($792 million)<br />Complexity (and cost) is increasing with the introduction of biometric passports<br />Launched the Passport Validation Service (PVS) with public and private sector customers, including the introduction of a call centre facility<br />We assume the total Identity, Authentication and Security opportunity for operators in Public Administration and Defence is 0.05% of the total value of the industry: a tiny fraction<br />Example of one detailedSector Vs Application Validation Analysis<br />

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