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7 taga

  1. 1. The battle for telcos in the digital home can still be won if …June 5th 2012Presentation to Telco-Forum/MoscowContact Person: Arthur D. LittleDr. Karim TagaManaging Partner 1
  2. 2. Agenda1 Crowded eco-system2 Market and segment perspective3 Strategic and opportunities for telcos4 Conclusion 2
  3. 3. 1 Crowded eco-system – A hot topic again For years, giants of electronics and software have developed “Smart Home” systems and appliances but so far with poor success – the question is why is it a hot topic again? Hype index1) “Domotic” phase “Smart Home” phase Why is it a hot topic again?  Societal trends (more activities at home: Home Lab entertainment, work …)  Broadband everywhere 1st centralized lighting system 1st full media (fixed and mobile) integrated system Screenfridge control  Technological convergence Bill Gates’ (IP & smart-systems 1st home full ICT house everywhere) system control Security remote  Over-The-Top2) initiatives control (new devices and personal data to manage) 1985 1988 1992 1995 1996 2000’s 2010’s Source: Companies, Arthur D. Little analysis; Note: 1) The hype index is an indicative measurement of how much the “Smart Home” & “Domotic” topics have been talked about; 2) Over-The-Top: Google, Amazon, Facebook 3
  4. 4. 1 Crowded eco-system – Homes have changed In the past ten years, Homes and the way we live and behave in them have changed dramatically 2000’s 2010’s Old Homes New Homes Size1: Price2: Size1: Price2: 105 m² 112 k€ 111 m² 270 k€ Old families New families Family with Collective usage Hybrid families / Individual usage 2 parents (eg. in front of TV) Ageing society (3,6 screens / person3) Old devices and supports More and new devices Source: Various industry sources, Arthur D. Little analysis Note: 1) Size of individual houses in France: 2006 vs 1996; 2) Price for an apartment in Bagneux (92, France) with 4 rooms, in 1996 vs 2009; 3) Western Europe 4
  5. 5. 1 Crowded eco-system – Fundamental trends Four fundamental trends will drive the take-up of the future Smart Home Fundamental societal Time allocation Value capture Digital addiction and consumption trends and activities @home by large players Societal trends Current trends Connectivity Over-The-Top  Ageing society  More free time  Broadband for all  Players such as Google  Hybrid families  Entertainment at home  More bandwidth (fixed and Microsoft through and mobile) applications and OS  Aspiration to well-being  Increasing confidence  Job & House nomadism in e-Commerce  Convergence  More intense and  Needs for content Service providers shared digital life everywhere  Players such as Consumption trends Telefonica and E.ON  Energy scarcity through the customer New trends Devices relationship  Green consciousness  e-Education  More screen per person  Increasing role of end consumer  e-Health  More usage per screen Appliances  Instantaneism (make  New e-Commerce  Multi-tasking manufacturers the most of every experience  Smart systems  Players such LG, minute)  RFID / NFC / sensors Philips and Bosch through their devices Source: Arthur D. Little analysis 5
  6. 6. 1 Crowded eco-system – Trend example Smart Home trend example (1/2) Selected examples “Societal”: Ageing society “Time allocation”: More free time Elderly adapted house example Life time share by activity Width of doors Easy route from Awaken time per day allow wheelchair Stair lift bedroom to bathroom (15h/day) (16,5h/day) Work 11 42 Physiological 28 time Childhood, 13 20 scolarship 11 Transports 24 10 30 Free time Bedroom at the Adapted Sockets, 11 entrance level WC, shower… controls… at a convenient height 1900 2009 Source: Various public sources, Arthur D. Little analysis 6
  7. 7. 1 Crowded eco-system – Trend example Smart Home trend example (2/2) Selected examples “Digital addiction”: More screen “Market evangelization”: Screen devices installed base in WE Appliances manufacturers ecosystems – LG LG THINQ System 1,7 2,6 3,3 3,6 Screens per person  Appliances, energy, food 1,5 Bn management  Remote/local user interface 1,3 Bn  Only supports LG appliances 1,0 Bn 0,7 Bn Source: Euromonitor, Strategy analytics, Nielsen, LG, Arthur D. Little analysis Note: 1) Tablet, eReader, PND 7
  8. 8. 1 Crowded eco-system – New bets Smart Home has become a hot topic again and players from various industries are now placing their bets Selected examples Devices / Service 1 2 IT equipment players 3 appliances providers manufacturers 6 Over-The-Top Assistance specialists 4 5 Smart Home pure players Source: ADL 8
  9. 9. 1 Crowded eco-system – Pure players Some pure-players are positioning themselves as gateways to the Smart Home and growing fast Example Product Control revenues Key Success factors portfolio M$ “keyboard” + software for CAGR: Home control: 1,600 dealers in the US and +44% / 68 Distribution Canada + international distribution year in 70 countries 57 Devices inter- 6,500 consumer electronics devices operability (+1000 in 2 years) 41 Partners such as Sony, Pioneer, “Intel inside” 23 and Panasonic embedding partnerships Control4 technology Leader of the Smart Grid Market Consumer Collaborative involving evangelization players such as GE, Best Buy, IBM 2006 2007 2008 2009 Source: Control4, Arthur D. Little analysis 9
  10. 10. 1 Crowded eco-system – Telco examples Many topics can be covered by telcos in the Digital Home, most often through partnerships with firms form other industries DT example Access e-Health / Well-being Media & entertainment Partnership with device makers (connectivity) T-Home Entertain (IPTV) Stores: music, videos, apps… Home Automation e-Education Smart metering, “Eduxnet” learning Appliances control platform Digital Home Services Smart cities Private data management Health, Education, e- “Instant IT Service” Government, Transport… “Mediacenter” Source: DT, Arthur D. Little analysis 10
  11. 11. 1 Crowded eco-system – Telco examples As an example, the Home Automation market is still highly fragmented lacking common standards and “the one” market leader (or partnership)... Example: Home automation Ecosystem Comment Home Automation Utilities /  Fully-integrated home automation is in a nascent Manufacturers systems specialist telecoms stage Security – only costly premium offers – Customers show low interest in fully integrated Energy management services  Only little involvement in Home automation Motorization services next to specialized manufacturers Lighting – telecoms mostly involved in security an entertainment solutions Entertainment – utilities focusing on energy management management How can a dominant home automation standard emerge and what will be the level of integration between the various systems? Source: Arthur D. Little; company information 11
  12. 12. 1 Crowded eco-system – Telco examples Telcos such as DTAG are developing partnership based Eco-Systems with numerous players to develop into full service providers... Data management  Platform for data collection, transmission and management Smart Grid / Network  Smart Metering & Home Management Smart Grid / Load management technology  Competence center for  Innovative smart grid development of intelligent energy Text developments networks  Energy surveillance and  Establishing transparency on management of energy consumption and intelligent decentralized power management generation White goods  Development of networked home automation  Intelligent home (energy consumption) Source: Arthur D. Little; company information 12
  13. 13. 1 Crowded eco-system – Telco examples Verizon and AT&T have recently made significant moves towards Home System Management Launched a pilot to develop a Verizon home Acquisition of Xanboo, home system systems management solution management solution specialist (Jan 2011) (Dec 2010)  Energy management: energy Energy Healthcare reader, smart appliance switches and thermostats,  Security : smart door and window locks  Video-camera : in-door, out- door +  Anytime/anywhere value proposition  Remote control via: Security / video Lighting – Smartphone – PC – FiOS TV product In Jan 2010, Verizon Wireless and 4Home* announced partnership to develop Home control applications Source: Public information, Verizon, AT&T, Arthur D. Little analysis Home Automation specialist 13
  14. 14. 1 Crowded eco-system – Telco examples Telecom operators are also active in the Smart Home field with initiatives around CPE or large alliances, mainly to response to OTT closed and integrated ecosystem Example of move around CPE Example of move around alliance Freebox Revolution Telefonica alliance “Beywatch” Gaming Internet on TV Gyro remote control Other players involved DLNA media server Apps store NAS storage server Source: Arthur D. Little analysis 14
  15. 15. 1 Crowded eco-system – Telco examples Free in France launched the FreeBox Revolution to attack the Digital Home market – it includes many disruptive features Case study FreeBox Revolution key features “With the Freebox Revolution, you are going to get rid of everything Connected TV Internet that is connected to your TV” (Web browser, access X. Niel (Free Founder) apps…) (up to 100 Mb) Network Phone attached storage  Linux distribution (DECT1 (250 Mb hard (BusyBox) technology) disk)  1.2 GHz Intel processor  400 MHz graphics card TV AirPlay and (Catch-up TV, AirSync Designed by P. Starck VOD developed compatibility by Hubee) Gyroscopic remote Gaming Blue ray Platform player and 3D (appstore) capabilities Source: Operators, Arthur D. Little analysis New 15
  16. 16. 1 Crowded eco-system – Telco examples PCCW introduced a compelling offer of digital home services Case study Key company facts Systems for- and actual product-provisioning  Established in 2000, subsequent acquisition of cable and  Access (Broadband, fiber, city wide Wi-Fi, HSDPA, 3G, wireless operator Hong Kong Telephone Company home wireless, etc.)  Business fields and key services  All IP-NGN infrastructure – Integrated communication, fixed line, broadband internet,  Services (Content aggregation, interactive services, news access, mobile, integrated global communications, and sports production, entertainment production, key infrastructure, contact centers, IPTV, advertising and segment partnerships) interactive services, IT solutions, data centers  Innovation driven by strong customer orientation – Digital living, multi screen viewing, high speed access  Basic financial data for the year ended 2010* – Revenues €2.2bn – EBITA €0.7bn – EBITDA margin 32% PCCW expands its content value proposition to enable future growth Source: Arthur D. Little analysis, PCCW *HKD/EUR exchange rates as of 09/02/12 16
  17. 17. 1 Crowded eco-system – Telco examples PCCW addresses many of the outlined growth opportunities and its device strategy is highly compelling Case study PCCW ubiquitous consumer side broadband offerings  Multi Screen, full IP-based NGN deployment (eye x broadband telephone – , superior user Broadband experience, android platform, market access, access to youtube, google maps, google search, telephone Gmail, online banking, cinema ticketing etc.)  Quad play fosters in-home digital convergence. To be leveraged in combination with Quad play complementary digital home products and services  Wide range of own productions (etc. Sports, entertainment)  U-hub cloud storage service Cloud  maximum flexibility through fixed and mobile access (multi platform and device support and synchronization, automatic video format adjustment)  Health and fitness tracking, prerequisite affordability to general public, targeting various e-Health market segments, automatic data capturing (heart rate, blood pressure, activity monitor, weight scale, etc.) Expansive horizontal and vertical integration enable provision of superior customer experience that leads to customer “wowing” and retention Source: Arthur D. Little analysis, PCCW 17
  18. 18. Agenda1 Crowded eco-system2 Market and segment perspective3 Strategic and opportunities for telcos4 Conclusion 18
  19. 19. 2 Market and segment perspective – Market growth Telcos are hoping to generate and benefit from new sources of revenue Smart Home market growth in 3 large European Countries Index £m 100 = Market revenues in 2010 450 400 Other 350 Assistance 300 250 Automation 200 150 Remote storage 100 50 Health 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Arthur D. Little analysis 19
  20. 20. 2 Market and segment perspective – Market potential Digital Home market could contribute significantly in 2020 to Telco’s topline (not including access and content revenues) Based on project example Digital home market forecast 2020 (8 countries2) Addressable market Potential revenue share Potential revenue (bn EUR 2020) 23 telco footprint share telco footprint (best case – bnEUR) (best case – mEUR) 11.4 8 2.4 1.4 178 5 1.2 45 9 4 34 2 4.3 1 24 1 2.6 0.1 4 0.1 35 38 3 0.7 0.0 2 2.1 2 6 0 2 2 1.7 25 38 Worst Case Best case All in Telco & Digital Home All in Telco & Digital Home Entertainment Integrator Entertainment Integrator e-Health Home Automation WC Private Data Management e-Education WC DH Services Source: Arthur D. Little estimates 1) High-level assessment only 2) Total population equals 266m 20
  21. 21. 2 Market and segment perspective – Market Scenarios We have identified four Strategic Scenarios for the Digital Home of the future Axis 1: Usages 2 4 New activities, in evolving houses “iHome” “My World @Home” 1 3 “Entertainment More, “Chaos @Home, the of the same in the Living Room” battlefield of Giants” Axis 2: Ecosystem Concentrated Fragmented giant patchwork ecosystems of alliances Source: Arthur D. Little analysis 21
  22. 22. 2 Market and segment perspective – Operator response Based on these future Digital Home scenarios, we have identified 4 possible Business Designs for Telco according to each configuration Axis 1: Usages 2 4 The New activities, Connectivity My Digital in evolving houses Partner in My Home Home Service Integrator alliances 1 3 The All More, Inclusive My Digital of the same Telecom & Home Life Media Simplifier Provider Axis 2: Ecosystem Concentrated Fragmented giant patchwork ecosystems of alliances Source: Arthur D. Little analysis 22
  23. 23. Agenda1 Crowded eco-system2 Market and segment perspective3 Strategic and opportunities for telcos4 Conclusion 23
  24. 24. 3 Strategic and opportunities for telcos On the way to 2020, telcos have a need to rethink drastically their business models as business as usual won’t work Comparable Operational Description Focus business EBITDA features models 1  On-line distribution & customer care  B2C/B2B2C  Amazon  Online retail portf. The ”On-line”  Web based services and processes  Platform  Self-service process 35-45 % company  High customer experience & agility  Portfolio /agile  Process automation 2 • Digital Home: service and content  B2C/B2B2C  Google  Apps/ services Service aggregator  Broad portfolio  Apple innovation 40-45 % excellence • Customer and service interface  Customer  Geek Squad  Partnership / 3rd party interface brand mgmt. 3  Universal service provider- from IT to  “Me too”  Utilities  Limit complexity telecom to energy to entertainment...  Cost  Best-buy  Scale single service One-stop-shop effectiveness 10-20 % 4  M2M/ Internet of Things  B2B (2C)  BTGS  Partnership  Vertical champion - the engine and  Vertical enabler  OBS  Recruitment in Mastering IoT  Home assistance  T-systems adjacent markets 5-15 % backbone for other industries 5  Best practice network operators  Lean Telco  American tower  Economies of scale Infrastructure as  Network developer (network as a  Network mgmt  GTL  Technology mgmt 20-25 % a Service service...)  Ericsson  Finance/ capital  Alcatel Lucent Source: ADL M2M: Machine to Machine OBS: Orange Business Services BTGS: BT Global Services IoT: Internet of Things B2C: Business to Customer IT: Information Technology B2B: Business to Business Arthur D. Little - Exane BNP Paribas 2012 Report – Findings 24
  25. 25. 3 Strategic and opportunities for telcos Telcos should select from four different flavors for entering the Digital Home market The All Inclusive The Connectivity My Digital Home Life My Digital Home Flavors Telecom & Enter- Partner in My Home Simplifier Integrator tainment Provider Service alliances The integrated solution Key technical player The service expert for The all-in-one solution Value provider for your Home within large alliance your Digital Home needs for all your Digital Home Proposition Telecom & serving new Digital related to IT & Media / needs Entertainment needs Home needs Entertainment  Offer connectivity and  Offer connectivity and  Offer advice,  Provide end-to-end access to content data management installation, integration, offers incl. advice /  Protect existing content infrastructure maintenance and installation / support Description revenues by bundling support solutions  Address entire DH1 (customer lock-in)  Focus on media & market (including new entertainment usages)  Access and content  Access and content  Access and content  Access and content Revenue distribution revenues distribution revenues distribution revenues distribution revenues  3rd party revenues (B2B)  Address all DH IT and  Address new revenue pools media/ entertainment pools beyond classical addressed revenues telco revenues Closest  n.a. benchmark2 Source: Arthur D. Little analysis 1) Digital Home 2) Players do not fully follow flavor, but are considered as closest to outlined business model flavor 25
  26. 26. Agenda1 Crowded eco-system2 Market and segment perspective3 Strategic and opportunities for telcos4 Conclusion 26
  27. 27. 4 Conclusion There is a unique opportunity for telcos to capture value in the digital home and use this opportunity as growth engine provided smart partnerships are built Key take aways  There is a significant potential revenue growth in the considered footprint addressable by Telcos  Multiple players are entering the game  There are few levers and insurances to control and eventually capture the value generated in digital home for telcos  Best go-to-market strategies balancing partnership vs stand-alone shall be considered 27
  28. 28. Interesting future … …high impact … high uncertainty 28