How Can the Telecom Industry Start Growing Again?


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Will wireless kill wireline vendors? Will Google kill telcos? What is next-gen? The idea of strategic growth conjures up dozens of questions—and no specific answers. Mobile traffic is rising, and consumers and enterprises are constantly demanding more bandwidth, content and speed. The communications industry must work to keep up by both evolving traditional business models and building the capacious, ubiquitous network needed to satisfy demand.

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How Can the Telecom Industry Start Growing Again?

  1. 1. How Can the Telecom Industry Start Growing Again? July 27, 2010
  2. 2. Today’s Speakers <ul><li>Camille Mendler , Vice President and Senior Research Fellow </li></ul><ul><li>Benoît Felten , Principal Analyst </li></ul><ul><li>Declan Lonergan , Vice President </li></ul>
  3. 3. Agenda Telcos and the Three Faces of Eve Loving and Leveraging the Network Farewell, Flat Rate Q&A
  4. 4. Telcos and the Three Faces of Eve Camille Mendler Vice President and Senior Research Fellow
  5. 5. Redemption: After a Decade of Atonement <ul><li>The Enron Era </li></ul><ul><li>Irrational exuberance </li></ul><ul><li>Corporate malfeasance </li></ul><ul><li>Collective delusion </li></ul>The Cloud Era New business models Third-party ecosystems Strategic wholesale The Noughties Bottom line focus Divestment Disintermediation 1990s 2000s 2010s
  6. 6. Redemption: From a War Fought on Many Fronts ICT Hardware, Software and Services Cisco, Ericsson, HP, IBM, Microsoft, NSN Consumer Electronics Apple, HTC, Nokia, Samsung, Sony Cloud Amazon, Google, Facebook, YouTube, Source: Yankee Group and Telecom Italia, 2010 Media and Broadcast BBC, Bertelsmann, Disney, Sony Music
  7. 7. Gluttony: In a New World of Demand 20 th -Century Consumer 21 st -Century Consumer Image credits: Tristar, Fox Broadcasting Oliver Twist “ Please sir, can I have some more?” Homer Simpson “ More, doh!”
  8. 8. Gluttony: In a Renewable Energy Economy Picture sources: Flickr The Jevons Paradox : An invention that improves the efficiency of a product’s consumption also increases the volume of its consumption. William Stanley Jevons, a Victorian economist The coal-fired steam engine A lump of coal
  9. 9. Insanity: It’s Time for Multiple Personalities <ul><li>Let’s end a century of bilateral interaction </li></ul><ul><li>We sell – you buy </li></ul><ul><li>It’s time for multiple ‘personalities’ </li></ul><ul><li>Sell with/joint venturing </li></ul><ul><li>Sell through </li></ul><ul><li>Not just Sell to </li></ul><ul><li>Move to multilateral interaction </li></ul><ul><li>Revenue share </li></ul><ul><li>Shared risk, shared reward </li></ul><ul><li>Bigger universe </li></ul>The Three Faces of Eve, 1957
  10. 10. Insanity: NTT Creates a Cloud Keiretsu with DiData <ul><li>Dimension Data </li></ul><ul><li>Activities: </li></ul><ul><li>- Sell to </li></ul><ul><li>Sell with </li></ul><ul><li>Sell through Customers: - Enterprises - CSPs - Vendors </li></ul><ul><li>Markets: </li></ul><ul><li>- Mature - Growth </li></ul>Infrastructure Cloud services IT services Integration NTT Com Brands: Emerio, Integralis, Pacific Crossing, Verio NTT Data Brands: Intelligroup, Adelante, Cirquent, itelligence, Revere Group
  11. 11. Loving and Leveraging the Network Benoît Felten Principal Analyst
  12. 12. Key Issues for NGN Deployment and Adoption <ul><li>Traditional telcos want to think that services will finance the infrastructure short-term </li></ul><ul><li>Fiber to the home is a natural monopoly, at least in large parts of the territory </li></ul><ul><li>Demand from end-users is limited due to lack of service differentiation </li></ul>
  13. 13. Mythbusting: Google Must Pay to Offset the Cost <ul><li>CEOs of incumbent telcos in Europe have recently stated that Google needs to share some of its revenue to offset the cost of NGN investment. </li></ul><ul><li>As our April 2010 report “What If Google Paid?” shows, such a revenue share wouldn’t make any significant difference to the investment conundrum. </li></ul>
  14. 14. Collaboration May Be the Key… <ul><li>The investment cannot and will not be paid back in a time frame acceptable to telco shareholders. </li></ul><ul><li>Governments could intervene, but right now they have no money. </li></ul><ul><li>A network co-financed by private players might be the right model. </li></ul>
  15. 15. The Italian FTTH Deployment Model <ul><li>Fastweb, Wind and Vodafone announce €2.5 billion co-investment in EP2P FTTH </li></ul><ul><li>Benefits of this model: </li></ul><ul><ul><li>More network for the same price </li></ul></ul><ul><ul><li>Maximum network utilization from day one </li></ul></ul><ul><ul><li>Instead of opex to the incumbent for access, investors pay themselves (indirectly) </li></ul></ul>
  16. 16. How to Bring Cheap Services to Fiber Users Fast Infrastructure Role Capacity for Timely Innovation <ul><li>On the whole, network operators have not been the best service innovators. </li></ul><ul><li>Internet-layer players have, but they lack the ability to leverage key network components (end-devices, QoS). </li></ul><ul><li>The solution? Network operators should outsource innovation to those who know how to be innovative. </li></ul><ul><li>That’s what the iPhone App Store does. Can this inspire us? </li></ul>
  17. 17. Why Does the iPhone App Store Work? Known environment Working developer ecosystem Developer Context Market Context Large addressable market for apps Low end-user prices Business Model Win-win model (kinda) Apple Sauce Apple brand and marketing savvy
  18. 18. Schematic View of a Fiber App Store Ecosystem End-Users Fiber Network Operator A Fiber Network Operator B Fiber Network Operator C Open Network Components A Open Network Components B Open Network Components C Fiber App Store … Developer Communities
  19. 19. Farewell, Flat Rate Declan Lonergan Vice President
  20. 20. Mobile Networks Will Be Stretched to the Breaking Point Traffic Demand Estimates for Broadband Mobile Phones and Connected Computing Devices (U.S. Market)
  21. 21. Operators Must Act Now <ul><li>Network supply and demand must be managed </li></ul><ul><li>Pricing innovation is critical </li></ul><ul><li>Customer segmentation is the starting point </li></ul><ul><li>Operators must be allowed to innovate </li></ul>
  22. 22. Operators’ Mobile Broadband Objectives Must Change
  23. 23. This Is the Future of Mobile Broadband Pricing The holy grail is converged , personalized and dynamic pricing
  24. 24. Services and Price Plans Should Be More Personal
  25. 25. Consumers Will Demand True Convergence Super bundles for today’s super consumers
  26. 26. The Real End-Goal Should Be Dynamic Pricing
  27. 27. Key Takeaways <ul><li>We’re heading for a mobile network traffic jam </li></ul><ul><li>Operators must act now to address it </li></ul><ul><li>Customer segmentation and pricing innovation are part of the solution </li></ul><ul><li>The holy grail is converged, personalized and dynamic pricing </li></ul>
  28. 28. Q&A Camille Mendler, VP and Senior Research Fellow Cloud Computing, Regulation and Service Delivery Architecture Blog: Twitter: @cmendler Recent research: “ Commoditizing the Cloud: New Adventures in Liquid Markets ” & “ Cloud 99.99: The Small Print Exposed ” Benoît Felten, Principal Analyst Broadband, Regulation Blog: Twitter: @fiberguy Recent research : “ FTTP Leader Asia-Pacific Offers Lessons for Other Regions ” & “ What If Google Paid? ” Declan Lonergan, VP Consumer Access Services, Mobile Internet Services, Consumer Pricing and Packaging Blog: Twitter: @dlonergan Recent research: “ Milking the Voice Cow ” & “ Messaging Is Dead. Long Live Messaging! ” Register to access free research at
  29. 29. Read analyst blogs at Watch analyst videos at Follow us on Twitter: @YankeeGroup Fan Yankee Group at Upcoming Yankee Group webinar: IPTV Market Trends Tuesday, Aug. 31, 2010 | 11 a.m. ET Register at Thank You