The document discusses how social media and broadband are converging to shift control of communication from traditional broadcasters to the open internet. It notes that the internet is becoming the dominant broadcasting platform as more people share information online. This represents a shift from one-way communication models to two-way collaborative models. Traditional media providers face challenges from this new environment and must explore options like becoming gated communities that facilitate collaboration online. However, consumers increasingly turn to platforms like Facebook and YouTube for online content over telecom providers. This shift changes the business models of traditional media and telecom companies.

1. Social Media
Where Broadcast and
Broadband come together
Rob van den Dam, Global Telecommunications Sector Leader
IBM Institute for Business Value
© 2010 IBM Corporation

2. Majority of CEOs, including those of media and communications companies,
experience the New Economic Environment as distinctly different
Face-to-face interviews with over 1,500 CEOs
The New Economic Environment
%
13% 18% 69%
More volatile
Deeper/faster cycles, 79%
30
Complexity
more risk gap*
More uncertain 60%
14% 21% 65%
Less predictable 49%
More complex
18% 22% 60% Multi-faceted,
interconnected
26% 21% 53% Structurally different
Sustained change
Currently Expect high/very Feel prepared
experiencing high level of for expected
Not at all/ To a large/ high/very high complexity over 5 complexity
To some extent
to a limited extent very large extent level of complexity years
© 2010 IBM Corporation

3. One thing is sure, the days of the media landscape as we knew it are
over, the internet is becoming the dominant broadcasting platform....
The
communications The
and media
landscape, where Open
large Internet is
organisations becoming the
were dominant
broadcasting
controlling platform of our
the channels and civilization
messages is
increasingly
SHIFT IN
slipping away COMMUNICATION
CONTROL
© 2010 IBM Corporation

4. ...and a large portion of the world population is sharing information - be
it news, opinion, thoughts, images or video - via this Open Internet
Media has become
VIRAL COLLABORATIVE a mass of
WIKI’s
conversations,
BLOGS based on two-way
BOOKMARKING FAST communication,
not on traditional
CONSUME
one-way
ON A LARGE SCALE information push
FORUMS models
CROWDSOURSING
PRODUCE
SHIFT IN
TWO-WAY
VIDEOSHARING COMMUNICATION
PATTERN
© 2010 IBM Corporation

5. These 2 trends - shift to the Open Internet and to collaborative
communication - are shaping the future of the media landscape
Collaborative Gated Communities Shared Social Space
Communication Pattern
n
ctio
dire
ket
ar
Traditional M Open and Free
Broadcasting
Terrestrial Telecom Telco TV
Broad providers
casters operators
Satellite Cable
Broad
One-to-One companies
casters
One-to-Many
provider-
Communication Environment
Open
controlled
Internet
© 2010 IBM Corporation

6. Traditional broadcasting has been the domain of broadcasters and
cable operators, but Telcos have entered the scene ...
Which of the following consumer/residential services do you believe are most critical
for you to invest in over the next 5-10 years?
Social media 43%
IPTV/ Video on Demand 34%
Intelligent lifestyle services 30%
Fixed Mobile Convergence (FMC) 29%
End-user, security, authentication 27%
Mobile Payments 21%
Content storage 20%
Internet-basedCommunications 14%
Location-based /availability Services 13%
Face-to-Face
Mobile TV/Video 9%
9%
interviews with
3D Television /Video
Unified messaging 7%
Telecom
Mobile B2C transactions 7% Executives
Mobile e-Mail 5% (IBV 2009
Mobile / multi-player games/Virtual Worlds 5% Global Telecom
Video telephony 4% Industry Survey)
Voice conferencing 2%
Video conferencing 2%
© 2010 IBM Corporation
2009 IBM Institute for Business Value Telecom Industry Survey N=61

7. ...and experimenting with new services such as « Game streaming
from the cloud » : video games distribution over Broadband networks
Game as a Video flow
Devices with
Video rendering
Gaming
Capabilities High Bandwith cloud
Low latency
IP network
Game as a Video flow
Server runs game sessions
Consumer selects a game And encodes game screens
in a catalog and start playing In appropriate
Resolution / frame-per-second
For the target device.
© 2010 IBM Corporation

8. However, only a tiny proportion of Telcos expect IPTV to make
significant contributions to their revenues over the next 5-10 years
What do you believe will be the relative contributions of the following models/services to your
revenues over the next 5 – 10 yrs? IPTV
4%
14% 10% Revenue
30% 27% 26% Contribution
33%
96% Above 10%
86% 90%
70% 73% 74% Below 10%
67%
Source: 2009 IBM
Institute for Business
Value Telecom
Industry Survey
N=61
Traditional per Mixed tariff Tiered broadband Triple/Quad play Analytics to Internet IPTV
minute voice bundles incl. 'all- based on speed / reduce churn, communications (subscriptions
you-can-eat' quality improve cross/up- (e.g. VOIP, IM and advertising)
sell Social Networks)
Many Telcos see offering TV/video services mainly as a necessity to combat the trend
of losing subscribers to cablecos which are increasingly offering triple-play bundles
© 2010 IBM Corporation

9. The Open and Free model provides alternatives for linear television
and IPTV at the expense of Traditional and IPTV providers
Impact of Online Video Viewing on “Traditional” TV Viewing
50% US Respondents Segmented by Age
40% Watch slightly
less TV
30% Watch
significantly less
TV
20%
10%
0%
18 - 21 21 - 24 25 - 34 35 - 44 45 - 54 55 - 64 65+
New channel consumption is happening at the expense of traditional linear
television, particularly for the younger demographics
© 2010 IBM Corporation
Source: 2009 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US

10. The Open and Free model alters the equation for the Traditional and IPTV
providers – Clashes will be unavoidable for distribution ......and advertising
Increased OTT traffic
Voice
OTT providers as Hulu, BBC’s TELCO
iPlayer and YouTube shift the IPTV
distribution problem to the
infrastructure owners OTT Internet
provider
Fight for advertising relationships
GoogleTV
Targeted Advertising
Google CEO Eric Schmidt: “Google TV will bring both search and
context to traditional television, with behavioral data to both. That would
shift the $70 billion annual TV advertising market in favor of Google’s
strengths. W’re getting into the game by tilting the playing field.”
© 2010 IBM Corporation

11. Relying on subscriptions and PPV models is unsustainable in a world
where consumers do not expect to pay for all content
Global Users interested in Online Video Ad-supported versus paid content online
Add-Supported Consumer-Paid
90%
83%
80% 73%
69% 70%
70% 64%
62%
60%
50%
40% 38% 36%
31% 30%
30% 27%
20% 17%
10%
0%
Australia Germany India Japan UK US
Ultimately it all revolves around advertising relationships and the
possibilities the Internet offers for more efficient targeting
Source: 2009 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US © 2010 IBM Corporation

12. Many consumers will accept advertising in exchange for relevancy
and value
Under what circumstances will you be willing Willingness to Provide Information
to accept advertising? About Yourself
80%
If message and content are
71% 2008 2009
relevant and personalised 62%
60% 57%
If offered a discount for voice 50% 48% 50%
64% 49% 48%
/text services in return 45%
If offered free shopping 40%
61%
vouchers
If offered free music or video 20%
46%
downloads
If it is entertaining, innovative
39% 0%
or amusing
Australia Japan UK US
If it is embedded in content I
19%
am already watching People will provide information about
themselves, opportunity exists for
0% 20% 40% 60% 80% more contextual marketing
Source: 2008 and 2009 IBM Digital Consumer Survey. Total
Source: IBM Institute for Business Value Global Telecom Consumer Survey, 2009; n=6753 responses = 2800 across six countries: Australia, Germany, India,
Japan, UK, US © 2010 IBM Corporation

13. The Gated Communities is still a “walled garden” approach – but one
that facilitates collaboration services
TV and Web 2.0 convergence Personal media
management on TV
– Bring internet Video to TV, create a new consumer experience
– Use the « context » of TV (what I am/will be watching) either live or Family calendaring
onDemand to integrate with Web2.0 services (forums/real-time messaging)
Wheather Forecast
SocialTV
News headlines, watch/share
– Recommendation among consumers (Live or OnDemand)
– Communication among consumers My YouTube Playlist on TV
Information / Entertainment / Communication YouTube top20 on TV
– Bring personalized info in one click (wheather / traffic / news / stock)
FlickR on TV
– Integrate voicemail and telephony on TV
My Personal channel
Media Management and sharing
– TV is the natural screen to view/share family photos and videos, family TV chat
history could be managed like TV channels
My photos on TV
Commercial parties applications
– Major brand TV presence = Direct access to loyalty card, promotions, etc. Thematic Web2.0 on TV
– House Appliance (domotic) = Health, Alarm systems
Music streaming on TV
Community of developers, Pro-consumers
© 2010 IBM Corporation

14. The power of Television to view and share Personal Media.
« View and share my personal content like any TV channel »
« The basics »
Share
Upload, restore, Photo/Video
Preview, organize Repository
Share
New photo notification / preview
Add to my screenshow, view my screenshow Upload
Share my screenshow photos
TV integration Mobile integration
© 2010 IBM Corporation

15. There are different options for traditional providers to move to the
Gated Communities space
Open
Community
Community of developers, AppStore / Revenue
Pro-consumers Sharing model
Commercial parties
Apps developed by applications, e.g. major
partners but hosted brand TV presence
by the Service Provider
Applications developed
& hosted by the Scope of technical/
Service Provider Partnering capabilities
Service Provider applications as Media
Management and Sharing, Social TV,
TV Chat, Family calendaring, etc
© 2010 IBM Corporation

16. Many IPTV providers are experimenting with these concepts
However, the question remains whether ..............
Verizon Communications has
developed TV-based widgets
for Facebook, Twitter and
other features in an attempt to
make FiOS TV a more fully-
integrated TV an online
content experience. In
addition, plans to add the
ability to stream online videos
from YouTube.
It has also opened its widget
platform application
programming interface
to outside developers, and its
"Widget Bazaar " .
© 2010 IBM Corporation

17. ....telecom operators are seen as the logical providers for consumers
to turn to for online video and other entertainment content
Question: Over the next 5 - 7 years, whom will you expect to go to for online
video, music, games and other entertainment content? Select all that apply
80%
70% 68%
65% All ages
60% Under 25s
50%
42% 42%
40% 35%
30% 29% 29% 29%
30% 25% 23% 26%
20%
10%
0%
Internet Pay TV (e.g. Telecom Social Device Content
Information Cable) Provider Provider Networking Manufacturer aggregator
Provider (e.g. Sites (e.g. Nokia) (e.g. Apple
Google) iTunes)
Source: IBM Institute for Business Value: Global Telecom Consumer Survey, 2009
© 2010 IBM Corporation

18. Telcos are 2nd to 5th choice depending on age and country
US NL Spain UK Sweden Germany Australia China India
Internet Internet Internet Internet Internet Internet Internet Internet Internet
Information Information Information Information Information Information Information Information Information
Provider Provider Provider Provider Provider Provider Provider Provider Provider
Pay TV Pay TV Telecom Pay TV Telecom Telecom Telecom Telecom Pay TV
Provider Provider Provider Provider Provider Provider Provider Provider Provider
Social
Telecom Pay TV Telecom Device Content Pay TV Pay TV Telecom
Network
Provider Provider Provider Provider aggregator Provider Provider Provider
Sites
Social Social Social
Content Content Pay TV Pay TV Content Device
Network Network Network
aggregator aggregator Provider Provider aggregator Provider
Sites Sites Sites
Social Social Social
Telecom Content Device Device Device Device
Network Network Network
Provider aggregator Provider Provider Provider Provider
Sites Sites Sites
Social Social
Device Device Content Device Content Content Content
Network Network
Provider Provider aggregator Provider aggregator aggregator aggregator
Sites Sites
© 2010 IBM Corporation
Source: IBM Institute for Business Value: Global Telecom Consumer Survey, 2009

19. Shared Social Space is the domain of players as Facebook & YouTube
- throughout the world, people are turning en masse to these sites
Aug-04 Aug-06 May-10
1 Yahoo! Yahoo! Google
2 MSN MSN Facebook
3 Google Google Youtube
4 Microsoft MySpace Yahoo!
5 Passport Live Live
Twitter was the
6 eBay eBay Blogger
fastest-growing
7 Amazon Youtube MSN
Web brand growing
8 Offeroptimizer Microsoft Twitter
1,928 % from June
9 Fastclick Amazon Wordpress
2008 to June 2009
10 Doubleclick Orkut MySpace
11 go Blogger Google UK
12 Alibaba Google UK Microsoft
13 CNN Passport Amazon
14 BBC BBC Bing
15 165.254.12.202 Craigslist eBay
The largest Social
16 AOL Go LinkedIN Network with ± 500M
17 Google UK CNN Flickr unique visitors
18 Gator Alibaba Craiglist worldwide per
19 eBay UK Megaupload Rapidshare month
20 Searchscout Imdb Livejasmin
Social Media Sites
Note 1. Ranking reflects top 20 English Language Web sites; the multilingual Wikipedia is not shown in this list
Note 2: The traffic rank is based on three months of aggregated historical traffic data, and is a combined measure of page views and users (reach). © 2010 IBM Corporation

20. With the “Digital Natives” at the forefront of this shift, older audiences
have followed the younger audiences to social networking sites
Adoption of Social Networking Sites by Age
US 2007 - 2009
100% 2007
85% 85% 2008
2009
80% 77%
74% 73%
68%
60% 56%
52%
50%
40%
31% 31%
24%
20%
0%
18 - 24 25 - 34 35 - 44 45 +
Source: 2008 IBM Digital Consumer Survey. Total responses = 2800 across six countries: Australia, Germany, India, Japan, UK, US. IBM 2007 digital © 2010 IBM Corporation
consumer survey: Total responses = 2800 across five countries: Australia, Germany, Japan, UK, US

21. Because of the speed in which social media enables communication,
‘word of mouth’ now becomes ‘world of mouth’
If Facebook were a country it would be the world’s fourth largest between the US and Indonesia
> 1.5 million pieces of content (Web links, news stories, blog posts, etc.) are shared on Facebook daily
Currently YouTube has more than 2 billion views per day
There are over 200.000.000 blogs. 54% of bloggers post content of tweet daily
Twitter has nearly 100 million users who send on average of 600 tweets per second
People continue to spend more time on SN and blog sites than ever before
, with total minutes increasing 82% year-over-year
the average time per person increasing 67 % year-over-year
© 2010 IBM Corporation

22. Social Media is redefining what broadcasting really means
Citizen Haiti 2010
Journalism
Iran 2009
Fligth 1549 2009
China Earthquake 2008
Fast and viral
distribution on
large scale
© 2010 IBM Corporation

23. Subject to this disruptive force of changing human communication
behaviour, the option of doing nothing is a luxury few can afford
OLD MEDIA MINDSET
+
NEW MEDIA CONSUMER
=
DISINTERMEDIATION
© 2010 IBM Corporation

24. and the Telcos ??
© 2010 IBM Corporation

25. Much of the growth of traffic over telecom networks has been over-
the-top with share of traditional unchanged
FRANCE TOTAL COMMUNICATIONS MARKET
(billions of call minutes and equivalents¹)
1200
1000
800
Increased share of
600 communication services by
Internet Communication
400 services providers
200
Stable use of traditional
0 communications services
2005 2006 2007 2008 2009 2010
Wireline Mobile SMS/MMS E-mail(excl. spam) IM P2P VoIP
Source: Idate: Telco’s views of
Notes: (1) An SMS/MMS or e-mail is considered as a 30 second call. Openess, Digiworld Summit 2009
Source: Ronald Montagne “Telcos’ views of openness”, IDATE, October 2009 © 2010 IBM Corporation

26. This communication is increasingly augmented with videos, photos and
other multimedia content resulting in phenomenal growth of data traffic
2184
Global Consumer Internet Mobile Internet /Data Traffic
Traffic, 2008–2013 Petabytes/ month 89
32.154
Petabytes/ month
Ambient Video 615
25.312 Middle East & Africa
Internet Video to TV
Latin Amercia
Internet Video to PC 40%
CAGR 18.762 Central and Eastern Europe 1076
Internet Voice, Video Western Europe
Calls and Gaming 37
135%
File Sharing 12.836 Asia Pacific CAGR 342
867
Web/Email North America
8.844 483
6.035
15
406
158
207
85 182 397
65
34 80 201
41 91
6 17
2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013
SOUTHEAST • 2007: 75% of traffic was fixed/mobile voice
ASIA • 2012: 90% of traffic is fixed/mobile data (2/3 of which is mobile data)
Source: Cisco Visual Networking Index, June 2009, IDATE, IBM institute for Business Value (IBV) Analysis © 2010 IBM Corporation

27. The telecom Industry is fast approaching an inflection point, and it is
not clear how it will evolve over the next 5 – 10 years
Traffic
Traffic
Volume / Voice
Revenue Dominant Network Cost
(existing
technologies)
Ecosystem Revenue
Value
Opportunity
Telecom Revenue
Network Cost
(future
technologies)
Data Dominant
Time
Telecom revenues do not track the increases in network traffic anymore
© 2010 IBM Corporation
Source: Nokia-Siemens; IBM Institute for Business Value (IBV) Analysis

28. IBM’ research into mid term industry scenarios highlights four alternative
contrasting futures that are distinctly different from the present.
Expanding
Addressable Market Growth
CLASH OF GENERATIVE
GIANTS BAZAAR
Telco
2015
Declining/Stagnant
SURVIVOR MARKET
CONSOLIDATION SHAKEOUT
Concentrated / Vertical Fragmented / Horizontal
Competition / Integration Structure
© 2010 IBM Corporation

29. Telco 2015 – five telling years, four future scenarios
IBM undertook Scenario Envisioning to access future scenarios …
Challenges & Trends Scenarios & Outcomes Implications
Primary Research
Consumer Survey Telco Provider
(9 countries) Interviews (±60)
Strategic Imperatives
1,541 CEO interviews from Global
CEO Study; ~80 from CSPs CLASH OF GENERATIVE Critical attributes for
GIANTS BAZAAR success
Potential capability gaps
Telco
Industry Trends Telco by Operator
2015
2015
SURVIVOR Scenario-specific
MARKET
Forces Shaping Telecom CONSOLI-
SHAKEOUT recommendations
DATION
Uncertainties Cross-scenario
recommendations
Scenario Revenues and Profitability
Macro Industry Data/ Revenues
Economic Analysis
Trends (IDATE)
2008 S rvivo
u r Market Clashof G ts
ian Ge rative
ne
C so tio
on lida n Sh ut
akeo Ba r
zaa
Secondary Research Free Cash
Flow
(EBITDA - Capex)
2008 Surviv or Market Cla sh o f Gi ants Ge neratie v
IBM Institute for Business Value Analysis Co nsoli dati on Sh akeou t Ba za ar
© 2010 IBM Corporation

30. ...outlined in the IBV’s latest Telecom Executive Report
http://www-935.ibm.com/services/us/index.wss/industry_library/imc/a1000065
© 2010 IBM Corporation

31. IBM Institute for Business Value for Telco and Media industries
www.ibm.com/iibv
Just Launched
Rob van den Dam
Global Telecom Industry Lead,
Thank you! IBM Institute for Business Value
rob_vandendam@nl.ibm.com
© 2010 IBM Corporation