Business Model Flexibility & the threat of Under the Floor players

Network Sharing, London, 25th May 2011

dean.bubley@disruptive-analysis.com

About Disruptive Analysis

Analyst house & strategic consulting firm Founded by Dean Bubley Blog at disruptivewireless.blogspot.com

Twitter @disruptivedean & also on LinkedIn and Quora

Covering mobile VoIP since 2004, pico/femtocells since 2001 Regular focus on the links between innovative mobile network technologies & the impact on devices and applications Partnered with Telco 2.0, Diffraction Analysis & Martin Geddes Consulting Coined the term Happy Pipe to describe profitable broadband strategies

Also Tyranny of the SIM card, Mobile data offload & Under the floor player

Recent reports on Mobile Broadband Traffic Management & RCS Upcoming study on Telco-OTT services Masterclasses on Future of Voice.

SF event June 30th, London event on July 14th

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May 2011

Potential risks of 3G/4G outsourcing

Flexibility
Value Cost
May 2011

New business models network-based Unanticipated challenges for data

Connectivity is the basis for revenue Most telco services are vulnerable
Immediate cost-savings tempting But 3G/4G cost profile changing fast

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Telcos face encroachment from all sides

Source: STL PartnersStrategy Report The Roadmap to new Telco 2.0 Business Models May 2011

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Operators need new sources of revenue

Source: STL PartnersStrategy Report The Roadmap to new Telco 2.0 Business Models May 2011

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Towards two-sided business models?

Media & content Other Telco Brands & adver -tisers Web players Possible payment for QoS, voice API access, ads, customer info etc $ $$$ Telco End users

Wholesale

Developers
May 2011

Govern -ment

IT shops

But not as easy as it looks to achieve. Platforms, SLAs, IT, sales

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Mobile data: the network is the differentiator

Despite the rhetoric, higher-level services & applications are proving very difficult to differentiate in. Core voice & messaging are looking vulnerable
Policydriven retail data Two-sided data, QoS & smart pipe Enhanced wholesale, M2M, cloud

Basic retail data plans

Mobile broadband, advanced infrastructure & wholesale data services are showing most promise for operator services revenue uplift
May 2011

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Dumb pipe, or happy piper?

Should telcos be more scared of under-the-floor players than over-the-top?

May 2011

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Wolves in sheeps clothing?

May 2011

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Complex broadband traffic & policy decisions

Tuning TCP/IP & contention mgmt Macro radio network upgrades & optimisation Policy-based traffic-shaping Compression & transcoding

Core

Internet

X. Y. Z

Device-based solutions

Local offload (WiFi / Femto)

Caches / CDNs

Transport / core offload

Congestion APIs & monitoring

Dynamic situation how does outsourcing fit with holistic policy management?
May 2011 Copyright Disruptive Analysis Ltd 2011

If neutrality laws change who is in control? Controversial Arguable Accepted

Blocking or degrading 3rd-party apps (eg Skype, femto IPsec) Upstream-paid web priority Modifying content (eg ad insertion) Operators VoIP & IPTV priority Limiting P2P throughput User-chosen priority (eg VPN) Throttling to lower IP transit cost

Anti-DDoS / severe congestion Illegal content Emergency / health traffic

May 2011

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QoS vs. QoE: any real value in network QoS?

Operator B

NNI Radio

Network QoS

Mashup

End-to-End QoS
Quality of Experience
May 2011

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Managing the shifting metrics

Index
Mobile broadband traffic

Oversimplified analysis

Revenue

Time

Need for more sophisticated metrics: uplink vs. downlink signalling traffic busy cell / busy hour device & user application / use-case

Yesterdays metrics dont tell the whole story. Signalling load kills 3G networks, not data tonnage. Outsourcing contracts need to cope with the unexpected.
May 2011

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Verticals & M2M: inherent need for smart pipes?

Smart meters: need for extra security, priority, ease of provisioning, multinetwork access etc Mobile healthcare: security, privacy, 2sided payments by 3rd parties (eg insurance companies). End-to-end QoS Video tablet: subscriber data for adverts, prioritisation & QoS, cacheing, content control, DRM etc Sensors: Numbering/HLR offload, power management as a service, meshing etc
May 2011

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Clearwire / Ericsson deal embodies flexibility

"In short, while we have entered into an agreement with a company whose core competency is network excellence, Clearwire will continue to own our 4G network and remain responsible for network design, network strategy, vendor selection and long-term investment decisions," Clearwire said in a blog post. "Our network is still ours--Ericsson is just managing it--allowing us to streamline the business and deliver a high-quality mobile broadband experience to our customers."

May 2011

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Conclusions

Network operations can account for 20% of telco OpEx

Strong impetus for controlling this via outsourcing

But in developed markets, both business model & technical flexibility remain key sources of value & differentiation

New & unpredictable trends in devices, applications & user behaviour Ongoing regulatory changes (Net Neutrality, Internet universal service) Experimentation with new business models Extra variables brought in with LTE

Two-sided models, future wholesale, novel approaches to broadband traffic management all add complexity Outsourcing can reduce costs, but may also limit future opportunities to increase revenues Dont let Under The Floor players push you into the hands of the OTTs
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May 2011

www.disruptive-analysis.com disruptivewireless.blogspot.com dean.bubley@disruptive-analysis.com

+44 (0) 7941 100016

May 2011

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