Mobile Telecoms Tech & Market Disruptions - April 2015 Version

Mobile Telecoms Disruptions 2015-2020
Dean Bubley, Disruptive Analysis
April 2015
dean.bubley@disruptive-analysis.com @disruptivedean

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

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”
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

Telecom Megatrends: Heterogeneity
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?

The big problem
Beyond Peak Telephony

Top-level strategic options & threats for telcos
Mainstream
Evolution
Digital
Innovator
Vertical
Specialist
Diversified
Portfolio
Business
Services &
Wholesale
Focus
Evolved messaging
voice / video

Fragmentation & “OTTs”: The best tool for the job
 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

3 trends: competition, context & substitution
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

Communications in Context
In-app In-Browser In-Thing

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
Source: Disruptive Analysis
LTE uptake not mirrored by VoLTE use “Phone calls” slowly becoming obsolete

Peak telephony a reality in developed markets
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

VoLTE Status (GSA, Jan’15)
• 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

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
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

Two equal domains for telco service innovation
Network-
based
services
(IMS, SS7,
IPTV etc)
Non-network
based
services
(Telco-OTT,
partners etc)
Internal telco APIs, NFV resources,
bundling, OTT extensions etc

Policy & innovation…… …..vs. politics
Strategy
Telco
execs &
central
labs
In-house
apps &
content
Marketing
/ Product
ITCore
network
Radio
network
Devices
Legal
Tensions
Tensions
Distance
Tensions

New stakeholders in telecom services creation
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

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

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)
Overall: worth watching & some nice ideas, but not a big deal for now

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?
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?

Traffic & spectrum forecasts overcooked?
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

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
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”

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
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

Sponsored data – attractiveness matrix
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

Use of zero-rating will continue to grow strongly
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

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

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.
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

Specifying 5G needs to be multi-stakeholder
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

WiFi = multi-stakeholder & complex landscape
User Mobile
operator
Venue
Fixed/cable
operator
App /
content
OS / OEM
Employer
/ sponsor
Many groups excluded
from standards /
regulatory discussions
Advertiser
/ brand

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”

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

Want a private “Telecom Disruptions” workshop for your company?
For details email information@disruptive-analysis.com

www.disruptive-analysis.com
disruptivewireless.blogspot.com
@disruptivedean
information@disruptive-analysis.com
Skype:disruptiveanalysis

Mobile Telecoms Tech & Market Disruptions - April 2015 Version

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