‘Two-Sided’ Telecoms Markets The $375 billion growth opportunity

Simon Torrance, CEO, Telco 2.0TM Initiative20th January 2009

Simon.torrance@stlpartners.com www.telco2.net

Business Model Innovation for the Digital Economy

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Introduction – the Telco 2.0TM InitiativeTo help players in the Telecoms-Media-Technology sector grow through business model innovation.

A research-based approach to developing new business models through a blend of four activities:

Mission

Approach

Research Brainstorms ConsultingOperator

Club

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Telco 2.0 Research Agenda for 2009Issues and opportunities

Corporate Strategy & Industry Issues

• Industry issues & new business model concepts

Growth Opportunities:

• Retail Services: • Digital Kids/Generation Y – next gen consumers • Voice & Messaging 2.0 – next gen personal comms

• Wholesale Services: • Online Video Distribution – fixing broken value chain

• Enterprise VAS:• Advertising and Marketing services• Enterprise Services – Comms-enabled CRM• Transaction services – billing and payments

Moving forward

Enablers:

• Open API commercial model – an industry framework• Regulation & standards – for Telco 2.0 world

Infrastructure:• Telco 2.0 Reference Architecture – Exploiting

customer data and on-demand systems• Devices – Mobile, Consumer premises equipment

Implementation:• Operational Agility – Building the low cost

transactional platform

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What do telco execs really think today?

Source: Telco 2.0 Executive Brainstorm, 4-5 Nov 2008. Participant survey N = 250

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Telco 2.0 and the ‘two-sided’ business model

• $375 billion telco growth opportunity• New telco proposition: “Reducing friction in

the digital economy”

• OTT threat if telcos don’t embrace it

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Friction in the Digital Economy

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco – Retail

Providers UsersBarriers

Other Party, Authorisation & Security

Promoting Offer

Conducting transaction

Fulfilling Order

Billing & Payment

Service & Support

Millions of Customers

Thousands of Segments

Barriers

Identifying Other Party, Authorisation & Security

Promoting Offer

Conducting transaction

Fulfilling Order

Billing & Payment

Service & Support

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Telco assets: well suited to reducing friction

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco – Retail

Providers UsersBarriers

Identifying Other Party, Authorisation & Security

Promoting Offer

Conducting transaction

Fulfilling Order

Billing & Payment

Service & Support

Telco Capabilities & Assets

Millions of Customers

Thousands of Segments

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Telcos have a wealth of untapped data assets…

MY CREDIT

Bad debt Demographics

Average balance

MY PERSONAL DATA

MY STUFFMY IDENTIFIERS

MY INTERACTIONS

MY RELATIONSHIPS

MY CONTEXT

MY DEVICES

Name

Address Gender

ProfilePreferences

SIM SoftSIM

Serial NumberDevice details

Number SIP Number

IP Address

Location Presence

On/OffRoaming

Pictures Videos

CalendarAddress Book

Bank School

FriendsWorkplace

Browsing History

.mobi domains QR Codes

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…by contrast, Google has very few

Search Term URLs

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Google is a ‘two-sided’ business model master

Advertisers Audience

FREE!

Attracts audience that upstream players (advertisers) value

$$$

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Many successful two-sided market players

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The Telco 2.0 platform connects providers to users, creating a ‘two-sided’ market

$

‘Upstream’ Customers ‘Downstream’ Customers

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco – Retail

Millions of Customers

Thousands of Segments

Content Owners

Telco Platform$

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ConsumersRetail Platform $$

SMEs

Enterprises

Public Sector

1.Developers

Retailers

Government

Brand Owners

Content Owners

Telco (Retail)

$$Wholesale Platform

Upstream Customers

2.

B2B VAS Platform$$

2.

Downstream End Users

New Telco 2.0 revenue sources – from ‘two sides’ now

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Examples and Use Cases

See www.telco2.net/blog Or www.telco2.net/researchOr www.telco2.net/event

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Telco growth potential (Mature Markets) to 2017

$1,230bn

$689bn

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B2B VAS: seven buckets of value potential

Total Market: $125 Billion

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Only telcos have the breadth of capabilities

Identity, Authentication and Security Advertising, Marketing & Business Intelligence Content Distribution Billing and Payments ()1. (Voice-based) Customer Care

Note: The relative quality of solutions has not been considered.

Ability for players to offer specific B2B VAS platform capabilities

1. Via Google Checkout

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Next steps towards Telco 2.0

1. Pilots around Telco 2.0 (two-sided) business models

2. ‘Joined-up’ strategy and business case

3. Board-level support

4. Separate dedicated organisation for B2B VAS business

5. Expertise in two-sided business models and pricing strategies

6. Enhance downstream relationships

7. Build upstream capabilities

8. Establish a process for cross-operator collaboration

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Telco 2.0 strategies now seen by leading practitioners as very important to future profitability (comparison with current strategies)

Source: Telco 2.0 Executive Brainstorm, 4-5 Nov 2008. Participant survey N = 250

Very important

Not important

Telco 2.0 Strategies

Telco 1.0 Strategies

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Powerful Platform Performance Precedent

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Telco 2.0 and the ‘two-sided’ business model

• $375 billion telco growth opportunity• New telco proposition: “Reducing friction in

the digital economy”

• OTT threat if telcos don’t embrace it

Thank youMore at:

www.telco2.net contact@telco2.net

Business Model Innovation for the Digital Economy