This document discusses how telecommunications companies (telcos) are exploring two-sided markets as their traditional business model comes under threat from digital innovators. It outlines how telcos operated as one-sided markets (Telco 1.0) but are now recognizing opportunities in two-sided markets (Telco 2.0) by opening their networks as platforms. Telcos have valuable customer and network data assets that could be leveraged in two-sided models, similar to how companies like Google and Amazon have benefited, but telcos need to act quickly to transition before losing further ground.

1. Click to edit Master title style
Telco 2.0 – Exploring 2 Sided Markets
Why Telco’s are up in arms against Google, Skype, Apple
Presenter: Vishal

2. Agenda
Telco Markets, 1 Sided Market
Telco 1.0 Characteristics and Operational View
Emergence of Web 2.0, The Long Tail Phenomenon
Define 2 Sided Market, Example – Google, ???
Define 2-Sided Telco, Telco2.0
Telco 2.0 Platform Offerings – Distribution, B2B B2C VAS
Telco’s Latent Data Exploits
Why Google Envies Operators, Matured Telco’s Status

3. Telco Markets
Wholesale
Retail

4. Traditional Market
Value moves from Left to Right
Growth beyond some point usually leads to diminishing returns. Profit
contribution is maximum when Marginal Cost = Marginal Revenue
Cost Revenue
Suppliers Price Advertise
Create Move Distribute Service Customers
(wholesale) (Retail) or Promote
Upstream Value Chain Downstream
Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR

5. Traditional Telco
Suppliers = Cost End User = Revenue
Content, Apps, Consumers
Devices
Products (Partners) SMEs
Network &
Termination
Products (Own) Enterprises
Interconnect &
Storage Multi-Nationals
Upstream Telco Downstream
Source: STL Partners, Telco2.0

6. Telco 1.0 Characteristics
Mass Market
Regular Business Model - Per minute, Flat rate
Applications - Voice, SMS
Technologies - Intelligent Networks, SS7

7. Telco 1.5
Late 90’s to earlier in decade
Applications - Content, VAS
Technologies - JAIN - Java API for Networks
Revenue - Via Walled Gardens, Closed Systems

8. Telco 1.0 Operational View
Millions in CAPEX and OPEX
Silo'd services delivery, Technology stack built ground-up
Many integration touch-points, High maintenance
Limited flexibility
Oriented towards single services, Resource-intensive
Limited new deployments per year
Long development cycles
Time-to-market, and profit, for delivering new services

9. Emergence of Web 2.0
Architecture of Participation - engaged users,
3C’s - Community, Collaboration, Conversations
Continuous Improvement - fail fast, Be in Beta..
Web as a Platform - Services not packaged Softw
Users in control of UI -Rich UI (AJAX)
Data transformability- Remixabilty of data (RSS
Data is the King
Cost effective scalability

10. Over 100 million users access Facebook from a mobile device
More than the combined population of Spain and Argentina - Facebook.com

11. Telephony Interactions
Social Networks
Communities
Relationships
Volume
Conversations
Telephony
Calls
Rendezvous
Source: STL Partners, Telco2.0

12. Telco 1.0 vs Web 2.0
Revenue Share Telco Web 2.0
Services
Platform
Core Network
Access Network
Licenses
Market Growth Low Rapid
Web2.0 - Inverse Revenue Model, higher profits, higher growth
Telco’s provide customer access and who owns them -???

13. Revenues: The First 9 Years
Six Times larger in 9 yrs in comparison to largest mobile operator
$18
$16 Google, $17b
$14
$12
Billions
$10
$8
$6
$4
$2
$- Vodafone, $3b
1 2 3 4 5 6 7 8
Years After Inception 9
Source: STL Partners, Telco2.0

14. Telco1.0 Service Delivery
Equipment
Telco
Vendor
Service
Provider Consumer
Source: DSP IP , Telco2.0

15. Future Service Delivery
Service Consumer
Provider
Equipment
Telco
Vendor
Source: DSP IP , Telco2.0

16. Future Service Delivery
Dumb pipe for service providers -???
Consumer
Telco
Source: DSP IP , Telco2.0

17. The Long Tail
Where is the opportunity -???
Head
Abundance
Popularity
Tail
New Market Place
Services/Products
Source: The Long Tail, Chris Anderson

18. The Long Tail
Head
Telco 1.0
Popularity
Telco 1.5 Tail
Telco 2.0
Services/Products
Source: The Long Tail, Chris Anderson

19. Telco Markets
Wholesale
Retail
2 - Sided

20. 2 Sided Market
Value moves in both directions, Left to Right and Right to Left
Marginal Revenue and Profit contribution is always increasing as user base
grows Network effect leads to economies of scale
Upstream Downstream
Customers PLATFORM Customers
Revenue Value Chain Revenue
Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR

21. Example 2 Sided Market
Massive Investment in Google Platform
Google Indexes 20B+ pages
Free Product for
Cheap Adverting for Low Cost Per
End Users
Brands Transaction
(subsidised)
Google Platform
Source: STL Partners, Telco2.0

22. Other 2 Sided Markets
Company Industry Type Platform Type
Google Web Search/Advertising Audience Builder
Amazon (ebay, Trading E-Retailer Matchmaker
Post)
Monster (Seek) Recruitment Matchmaker
iTunes Music Matchmaker
Betfair Gambling (betting) Matchmaker
AP Moller-Maersk Logistics Cost Sharing
Source: STL Partners, Telco2.0

23. 2 Sided Telco
Upstream Customers Downstream Customers
Developers, Content
Owners
Millions of
Retailers, Utilities Customers
B2B2C, VAS
Government
Telco Platform
Brand Advertisers Thousand of
Distribution Segments (SME’s
Media, Finance Enterprises, Public
Sector)
Telco - Retail
Source: STL Partners, Telco2.0
Source: STL Partners, Telco2.0

24. The Long Tail
Telco1.0 - carriers controlled the network as well as the user experiences
Telco2.0 - carriers open up the network as well as the innovation
Service
Bundles
Voice
Revenue
Hosting
Broad-
band New Services Expanded Offerings
Managed Services, Unified Comm, Cloud (SAAS, IAAS)
Subscribers
Source: The Long Tail, Chris Anderson

25. Telco 2.0
Market - many niche markets
Services - Personalised
Technologies - Telco web services, (open API - SOA), meshups, blended
Revenue - Open Gardens, Connect to 3rd parties (mesh up)

26. Telco2.0 Platform Offerings
Distribution
B2BB2C, VAS

27. Distribution
Data – iPad, Kindle

28. B2B B2C, VAS
Advertising via upstream customers, if downside customer clicks,
operators wont participate in it, but will report it

29. Telco's have many Valuable but Latent Data Assets
Address Gender Bad debt Demographics Bank School
MY PERSONAL MY
MY CREDIT
DATA RELATIONSHIPS
Name Profile
Preferences Average balance Workplace Friends
SIM SoftSIM Browsing History
MY
MY DEVICES
INTERACTIONS
Device details Serial Number .mobi domains QR Codes
Number SIP address Location Presence Pictures Videos
MY IDENTIFIERS MY CONTEXT MY STUFF
Email IP Address Roaming On/Off Address Book Calendar
Source: STL Partners, Telco2.0

30. B2B B2C, VAS Offerings
Advertising,
Identity,
Marketing Services
Authentication & e-Commerce Sales
& Business
Security
Intelligence
Order Fulfilment -
Order Fulfilment -
Online (Electronic Billing & Payments
Offline
content)
Customer Support
Source: STL Partners, Telco2.0

31. Telco 2.0 Platform
Customer Core
B2B Capabilities
Upstream & Products (for Downstream
Platform Enablers or
Customers Network Distribution Customers
Services Process
Data Platform)
Identity, Auth Personal
The needs of & Security
and interfaces Voice &
Mktg, Adv Device Devices
with other Mesgng Millions of
& BI
industries has Customers
been on neglect Identifiers
Channel Partners
Channel Partners
e-Comm Sales
side.
Order Fulfill Context
Some activity APIs Network Data
Offline
has been done Content
with developers Order Fulfill Thousand of
by individual Online Segments
operators (by
Interactions
Billing & (SME’s
MMA, GSMA Broad
Payments Relationships Enterprises,
and individual IT Band
operators) and Public Sector)
Customer Care Access
with Media (by Financials
MEF and others)
New Commercial Models
Source: STL Partners, Telco2.0
Source: STL Partners, Telco2.0

32. PayPal - Billing & Payments
Merchant Consumer
Paypal Rev($ Billions)
1.84
1.40
1.00
0.68
2004 2005 2006 2007
Customer and Merchant data never leaves Paypal
Source: STL Partners, Telco2.0

33. Google Envies Operators
Scale around communications and billing MY PERSONAL MY
DATA RELATIONSHIPS
Scale around retail sales and customer care
Data - lots & lots of data, Limited Knowledge of customer MY DEVICES MY INTERACTIONS
Weak!!
MY IDENTIFIERS MY STUFF
MY CONTEXT MY CREDIT
Source: STL Partners, Telco2.0

34. Matured Telco's
Architecture Maturity
Business Standardised Optimised Business
Silos Technology Core Modularity
Global Flexibility
High Flexibility
Local Flexibility
Low Flexibility
Source: 2005 MIT Sloan Center For Information Systems Research

35. Summary
Telco’s traditional business model is under threat
Innovation by digital companies like Skype driving Telco’s to re-invent
Multi sided model on a Digital platforms has a lot of promise
Telcos’ are well positioned to leverage Multi sided model but time is running out

36. Questions