Telecommunications in 2015 - It’s a brand new game Rob Van Den Dam 20 Oct. 2011

© 2011 IBM Corporation

IBM Institute for Business Value

Telecommunications in 2015

It‟s a brand new game

Rob van den Dam Global Telecommunications Sector Leader IBV



2

Agenda

It is a brand new game

2

Smarter consumers, industries, CSPs

Four industry scenarios for CSPs

Introduction



3

Telecommunications Solutions Lab (TSL)

Telecommunications Research Lab

TSL China &

Telecom Research Lab (Beijing)

TSL North America (Austin, Texas)

Japan (Tokyo

Satellite TSL)

TSL Israel &

Telecom Research Lab

(Haifa Satellite TSL)

Telecom Research Lab

(New Delhi)

TSL LATAM (Sao Paulo,

Brazil Satellite TSL)

TSL Europe (La Gaude &

Montpellier, France)

TSL Russia (Moscow Satellite TSL)

South Africa (Johannesburg, Satellite TSL)

ASEAN (Kuala Lumpur

Satellite TSL)

TSL India (Bangalore Satellite TSL)

Telecommunications is IBM‟s #1 research focus

Worldclass Partner

Ecosystem

Mobile Web Services

Centers of Excellence

Institute for Business

Value

Telecom Research

Labs



4

The IBM Institute for Business Value creates fact based

thought leadership that help clients realize business value

Future

Agendas

Value Realization

Studies

3 to 10 year industry outlook

with action oriented next steps

In-depth assessment of today‟s

critical issues, opportunities, etc

CXO

Surveys

Chief Officiers studies – CEO,

CIO, CMO, CFO, CHRO, etc.



5

Primary research includes Face-to-Face interviews with Executives from the

Telecommunications industry and Consumer Surveys

Customer Spending

priorities for 2011 –

2013

Customers’ Adoption of,

Experience with, comms

products and services

Customer Sources of

Information for communi-

cation products/ services

Customers’ Attitudes

towards CSPs

Customer Advocacy

and Antagonism

Adjacent Market

Opportunities

Most recent Consumer Survey mid 2011 in 24 countries



Communications Service Providers (CSPs) are experiencing

significant change as the industry playing field transforms

6

It is a brand new game

Changes in the global hierarchy

Shifts in the way consumers communicate

Increasing power of the consumer



7

The global hierarchy is changing


Source: ITU statistics database; Global Wireless Matrix Q211, Merrill Lynch, IBM Institute for Business Value (IBV)

Total:

719 million

2000

Total:

5.4 billion

2010

Total:

2.2 billion

2005

USA; 208

China;

375 India; 75

Russia; 126

Japan; 90

Brasil; 86

Italy; 71

Germany; 79

France; 46

UK; 68

Top 10

Mobile markets

worldwide

(M subs)

USA; 297

China;

833

India;

688

Russia;

217

Japan; 116

Brasil;195

Italy; 90

Germany;107

Mexico;

88 Nigeria;84

Mobile Cellular Subscriptions



The communications industry is increasingly being driven by emerging

countries

Source: Global Wireless Matrix Q211, Merrill Lynch, IBM; Institute for Business Value (IBV)

1. Mobile Revenue YoY growth 1Q11

– Western Europe: - 2.5%

– Japan: - 0.6%

– North America: + 6.4%

– Emerging Asia: + 11.6%

– Latin America: + 10.9% – Brazil: + 10.9%

– Colombia: + 12.7%

– Argentina: + 19.6%

2. The emergence of new GIANTS:


0%

20%

40%

60%

80%

100%

120%

140%

160%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Colombia

Brazil

Argentina

Mexico

US

Canada

100.2%

June 2011

The Americas

8



2%

-8%

-9%

-10%

-12%

-17%

-17%

-19%

-20%

-21%

-26%

-37%

Utilities

Mobile Telepony

Transportation

Food & drinks

Mobile broadband

Pay television

Fixed Telephony

Clothing

Electrical

appliances

Sports

Holiday/vacation

Going out

Mobile Telephony

Mobile Broadband

Transportation

Pay television

Utilities

Elect. Appliances

Fixed Telephony

Holidays

Food & drinks

Clothing

Going out

Sports

29%

27%

27%

25%

20%

14%

13%

12%

11%

8%

1%

-2%

Holiday/vacation

Food & drinks

Clothing

Going out

Mobile Telephony

Mobile Broadband

Transportation

Pay television

Utilities

Electrical

appliances

Sports

Fixed Telephony

Mobile Telephony

Mobile Broadband

Transportation

Pay television

Utilities

Elect. Appliances

Fixed Teleph.

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 12848

Question: Compared to previous years, are you likely to spend less, the same or more on the following products / services in the next 2-3 years?

Consumer Spending Changes 2011- 2014

Net Increase/ Decrease Net Increase/ Decrease

In the emerging markets consumer sentiment is generally

higher than in mature ones


Holidays

Food & drinks

Clothing

Going out

Sports

9



20%

14%

12%

Mobile telephony

Mobile broadband

Pay television

Fixed telephony

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 12848

Question: Compared to previous years, are you likely to spend less, the same or more on the following products / services in the next 2-3 years?

22%

10%

9%

9%

Mobile telephony

Fixed telephony

Mobile

broadband

Pay television

-4%

-6%

-16%

-18%

Mobile

telephony

Mobile

broadband

Fixed

telephony

Pay television

-8%

-12%

-17%

-17%

Mobile

Telephony

Mobile

broadband

Pay

television

Fixed

telephony

Mexico

Brazil

USA

Canada

For spending on communication services, CSPs in emerging

countries face better times than those in mature markets


Fixed Telephony

Fixed Telephony

Fixed Telephony

Fixed Telephony

Mobile Telephony

Mobile Telephony

Mobile Telephony

Mobile Telephony

Mobile Broadband Mobile Broadband

Mobile Broadband

Mobile Broadband

Pay television

Pay television

Pay television

Pay television

1

2

3

4

1

2

3

4

1

2

3

4

1

2

3

4

Communications

spending

10



People are increasingly communicating over-the-top: email, IM, Chat,

Internet Video streaming, Social Networks, VoIP

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 12848; S06 How often do you use the following communications services?

Mobile Telephony

Email/IM/Chat

Social Networking

VoIP

Mobile Telephony

Social Networking

Video Streaming

VoIP

Video Streaming

Fixed Voice

80%

85%

38%

64%

72%

24%

75%

82%

59%

53%

33%

69%

Email/IM/Chat

Fixed Voice

Daily

Usage Daily

Usage

ABOVE 25s


Mobile Telephony

Email/IM/Chat

Social Networking

VoIP

Mobile Telephony

Social Networking

Video Streaming

VoIP

Video Streaming

Fixed Voice

78%

92%

61%

74%

49%

29%

79%

84%

76%

54%

20%

59%

Email/IM/Chat

Fixed Voice UNDER 25s

Brazil Mexico

11



The trend is towards many-to-many communications, increasingly taken

place over the mobile, augmented with videos, photos & other content

1:1/1:N

Open and Free

Gated Communities Shared Social Space

Co

mm

un

ica

tio

n P

att

ern

Open

Internet Communication Environment

Traditional

Communications

Provider

Controlled

Fixed

Voice

SMS Mobile

Voice

Mobile Social

Networking / Telco

Walled Gardens

Shift

E-Mail

Many to Many

Mobile

Social

Networking

is the fastest

growing Mobile Content

category

USA +56%

Dec ‘09

Dec ‘10

The

AppStore


Source: IBV report: “The changing face of communications”. May 2010 12

http://www.facebook.com/r.php

http://alleyinsider.typepad.com/photos/uncategorized/2007/07/24/myspacelogo_2.gif



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In Colombia, Social Networking is ranked as top category by share of

minutes with one-third of web time spent on social networking sites…


IM Usage in Latin America

is the highest in the world

71%

48%

84%

90%

88%

89%

WW

Asia Pacific

Europe

North-America

Latin America

Colombia

53%

29%

67%

75%

66%

80%

WW

Asia Pacific

Europe

North-America

Latin America

Colombia

35%

19%

41%

29%

68%

65%

WW

Asia Pacific

Europe

North-America

Latin America

Colombia

5,4

11,8

10,6

10,0

9,3

8,7

8,4

8,4

WW

Israel

Russia

Argentina

Turkey

Chile

Philippines

Colombia

Social Network sites Reach (Dec 2010)

Photo Sites Reach (Dec 2010)

Instant Messengers Reach (Dec 2010)

Monthly hours spent on

Social Networks (June 11)

With 89.5% reach, Colombia ranked as 5th most highly penetrated Facebook market

Colombians lead Latin America region in Online Dating

Source: Comscore: A rise of Social Networking in latin America, Sept 2011, Comscore: Digital Year in review: Latin America. March 2011

COLOMBIA



…and many activities are moving to the mobile

Download or listen to music

Upload or download photos and / or videos

Download or watch videos/television/ movies

Check e-mail

Use messenger

Go to personal page (Facebook, Twitter,

etc.) Use online services your bank

Online shopping

Consult / seek information on vehicular traffic

Which of the

following

activities you

usually do

with the

phone?

Take photos or videos

Location Fixed

Internet Mobile Internet

At home 56% 74%

At work place 32% 35%

On the street 6% 18%

Internet café 37% 5%

At friend 3% 4%

At college 12% 10%

Mobile

Internet

Fixed

Internet

Source: CINTEL, InteracTIC: Panorama mercado del sector TIC en Colombia, 2010



OTT Comms providers (e.g.

Google, Facebook, Microsoft)

Cable/satellite providers

Over-the-top aggregator

Mobile Device Manufacturers

IT application

WiMAX operators

NEPs

Entrants from new industries (e.g. Banking)

Consumer Electronics

Electric utility providers

76%

34%

29%

24%

16%

16%

9%

5%

3

26%

2009 IBM Institute for Business Value Telecom Industry Executive Survey N=61


76% of CSP‟s identify OTT comms providers as their greatest competitive threat

Industry transformation is increasingly evoked by new market entrants

competing with traditional telecom providers over the open Internet

Acquisition Skype “Together we will create the future

of real-time communications”

Buys Motorola Mobility ($12.5bn)

Google MVNO launches in Spain

„Next-gen” Messaging System “It’s not email, it’s everything”

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The new consumer reality has created an impulse economy,

characterised by immediacy, frivolity, and transience

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NO TIME! ALWAYS ON

TRANSPARENT I AM

CONNECTED

I AM LOYAL

TO ME!

FREE I HAVE NO

LIMITS

http://www.flickr.com/photos/trashd/1102373625




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Internet Search, Friends/Family, and Social Media have

become the preferred sources of information

70%

64%

51%

45%

31%

22%

19%

17%

0% 20% 40% 60% 80%

Internet Search

Recommendations/ advice

Social Media

Websites communication providers

Traditional advertising

Emails/ promotional offers

Retail stores

Shopping portals/ auctions

Q19 What are your preferred sources of information when

you are looking for communications products and services?

Source: 2011 IBM Global Telecom Consumer Survey

76%

65%

53%

35%

30%

29%

17%

10%

70%

62%

48%

37%

43%

18%

14%

17%

0% 20% 40% 60% 80%

Brazil

Mexico Emerging

Countries




As consumers encounter new products, services and experiences on

virtually a daily basis, they fell less loyalty towards specific brands

18


18% 22% 60%

Global (24 countries)

average of advocacy levels

in Telecommunications

industry

Advocates Antagonists Apathetics

Brazil US UK Germany Canada Italy France Mexico

Retail

Telecom

52% 51% 39% 34% 33% 32% 25% 26%

24% 17% 20% 20% 16% 13% 17% 21%

Comparison of advocacy levels in Retail and Telecommunications industry

Source: 2011 IBM Global Telecom Consumer Survey & 2010 IBM Global Retails Survey

Telecommunications



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Vast majority of the CSP CEOs therefore sense the new environment

as more volatile, complex, structurally different and uncertain

More volatile Deeper/faster cycles, more risk

More uncertain Less predictable

More complex Multi-faceted, interconnected

Structurally different Sustained change

Source: Q7 To what extent is the new economic environment different? Volatile n=1514; Uncertain n=1521; Complex n=1522 ; Structurally different

n=1523; Telco n=73

The New Economic Environment

19% 13 68%

23% 12 65%

29% 25% 46%

28% 35% 36%

Not at all/to a limited extent To a large/very large extent To some extent


Shifts in the way consumers

communicate




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The telecom industry has undergone

significiant structural changes over the last

decade

How will it evolve over the coming years?



Giving the ongoing uncertainties, IBM undertook scenario envisioning,

that enables the industry to assess alternative contrasting futures

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What are the trends: - Certainties (high degree of consensus)

- Uncertainties (multiple outcomes)

Future

Scenario C

Scenario D

Scenario B

Scenario A

Present

Major economic, competitive

and technological events that

trigger a particular scenario

Critical Success Attributes:

- Scenario-specific

- Cross-scenario

Revenue and Profitability

outlook for each scenario

2008 Survivor

Consolidation

Market

Shakeout

Clash of Giants Generative

Bazaar



IBM analyzed the forces shaping the future of the telecommunications

industry into 2015…

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INDUSTRY

STRUCTURE AND

REGULATION

USAGE/

SERVICES

BUSINESS MODEL

ACCESS FORCES SHAPING

FUTURE OF

TELECOM

usage

services

PSTN decline accelerates

VOIP (incl. mobile VOIP) grow

Ubiquitous and seamless access

High digital content consumption

Communication remains fragmented

Broadband pervasive as TV

Mobile broadband favors LTE

Ultra low-cost devices grow

One in three devices is smartphone, MID, or Netbook

Voice monetized as a feature of connectivity

Green Telecom revenues

3rd – party revenues

Cost structures changes

New infrastructure competition from government, municipality

Net Neutrality remains

Mobile and fixed termination converge

Pure plays disappear



….and potentially high-impact variables (13) that can have 2, 3 or 4

alternative outcomes……

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OTT vs. Network optimized content

Silo vs. unified communications

Demand for Voice communications

New Verticals

Addressable Market/

Growth Areas Industry /

Integration Model

Premium /Enriched

Connectivity

Vertical vs. Horizontal Integration

Network sharing vs. Outsourcing

Open versus closed devices

User vs. 3rd Party / ad funded

Regulatory Uncertainty

Ultra-fast Broadband Availability

Dominant Industry / integration model

Concentrated/ Vertical

Fragmented/ Horizontal

Addressable

market

Declining/

Stagnant

Expanding

Telco 2015 SCENARIOS

SCENARIO 1

SCENARIO 3

SCENARIO 2

SCENARIO 4

13 high-impact uncertainties that can

have 2, 3 or 4 alternative outcomes

Machine-to-machine (M2M) communications

Service Pricing Model



…and developed most likely scenarios, within the sphere of possible

futures, for the telecommunications industry in 2015

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Addressable market

• Reduce Spending

Consumers

• ARPU Erosion

• Investor Loss of

Confidence

• Cash Crisis

Concentrated / Vertical

Declining / Stagnant SURVIVAL

CONSOLIDATION

• Disaggregation of

Carrier Assets

• Involvement Govern-

ment, Municipalities

• Fragmentation

• Driven by Brands

Fragmented / Horizontal

MARKET

SHAKEOUT

Expanding CLASH OF

GIANTS

• Carrier collaboration

and alliances

• End-to-end Vertical

Market solutions

• Mega Carriers

• Emerging Carriers in

Mature markets

GENERATIVE

BAZAR



The Generative Bazaar is characterized by pervasive and open

intelligent access for any person, object and device

25

Stimulate a

range of new and

exciting next gen Services

by OPEN INNOVATION

such as telemedicine and

immersive learning

applications.

Two-sided Business

Model Deploy

ultra-fast

broadband

Shift to a more connected world: Connecting anything and everything

http://www.google.nl/imgres?imgurl=http://www.thomasgeeraerts.be/wp-content/uploads/lte-logo.jpg&imgrefurl=http://www.thomasgeeraerts.be/tag/breedband&usg=__HG8EXDRrq7fgrU48gFP4xCY7ZCs=&h=368&w=391&sz=12&hl=nl&start=22&zoom=1&tbnid=pxnUS8vUA4u6DM:&tbnh=116&tbnw=123&prev=/images%3Fq%3Dlte%26start%3D20%26um%3D1%26hl%3Dnl%26sa%3DN%26tbs%3Disch:1&um=1&itbs=1



The Colombian government has become a major catalyst for bringing

communication infrastructure to the population

Vive Digital Plan: Bring technology in the life of every Colombian

to:

• Reduce poverty

• Generate employment

• Improve International Competitiveness

• Achieve prosperity for all

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Establish a technological leap by:

• The massification of the Internet

• National Fiber Optic Project aimed to bring fiber

optic to 400 municipalities across the country in 2014

• Expect to expand internet penetration to over 90

percent of Colombian population

• Targeting 8.8 million broadband connections by 2014

• Increase of Internet centers for public access

• Broadband access to public institutions

• Development of the national digital ecosystem



IBM‟s IBV study identified scenario-specific critical success attributes

and cross-scenario ones

27



Concentrated / Vertical Fragmented / Horizontal

Addressable market

Declining / Stagnant

Expanding

SURVIVAL

CONSOLIDATION

CLASH OF

GIANTS

MARKET

SHAKEOUT

GENERATIVE

BAZAR Cost-effective ultra-fast

broadband strategy

Cost containment

Agile, flexible, reconfigurable

processes & infrastructure

Culture of innovation and

collaboration

Network /customer insights to

optimize experience & cost

Common Critical

Success Attributes



28

By 2010, 30 billion RFID tags will be embedded into our world and across entire ecosystems

An estimated 2 billion people will be on the Web by 2011 …. and a trillion connected objects – cars, appliances, camera, roadways, pipelines – comprising the “Internet of Things”

Every day, 15 petabytes of new information are being generated. This is 8x more than the information in all U.S. libraries

It is becoming increasingly

INSTRUMENTED

It is becoming more

INTERCONNECTED

Systems are becoming more

INTELLIGENT

Our world is changing and becoming smarter



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They have

instantaneous access to

information about

communication

products, services,

provider and other

consumers’ experiences

through technology

They use multiple

technologies to

interact with other

consumers and with

communication

providers

Interconnected

They have clearly

defined expectations

of what they want from

their provider now and

in the future

Intelligent Instrumented

The consumer is becoming smarter



30

Smarter CSPs can profit from the Big Data from their network and

other customer information to enhance the customer experience

Data

Transformation

Transactional Data

Referential Data

Transactional

Data

Historical

Data

Referential

Data Sets

Historical Data

Data Ingestion

Network/Customer insight to deliver a distinctive customer experience which

goes beyond satisfaction and creates an emotional engagement with their CSP

Deliver Customer

Experience



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Industries are becoming smarter, and Communications Service Providers can play a crucial role on enabling smarter industries

Smarter energy and utilities

Smarter government

Smarter healthcare

Smarter transportation

Smarter solutions for retail

Smarter banking Smarter insurance Smarter telecommunications

Smarter chemical and

petroleum

Smarter electronics



To respond to these challenges and strengthen critical success

attributes, CSPs must think and act differently – become smarter

32

New Business Models

Cloud

Smart Analytics

TELECOM INDUSTRY

Customer experience Adjacent Industries

Smarter energy and

utilities

Smarter governm

ent

Smarter healthca

re

Smarter transporta

tion

Smarter solutions for retail

Smarter banking

Smarter insurance

Smarter telecommun

ications Smarter

chemical and petroleum

Smarter electronics



Ultimately, the opportunity is for telecommunications to become “the

middleware for the smarter planet”

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R L

M

C E H

M

I G

F

RETAIL

LOGISTICS

MEDIA &

ENTERTAINMENT

CONSUMER

ELECTRONICS ENERGY & UTILITIES

HEALTHCARE

MANUFACTURING

IT

FINANCIAL

GOVERNMENT



34

Muchas Gracias

Rob van den Dam

Global Telecom Industry Lead


[email protected] www.ibm.com/iibv

Telecommunications in 2015 - It’s a brand new game Rob Van Den Dam 20 Oct. 2011

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Transcript of Telecommunications in 2015 - It’s a brand new game Rob Van Den Dam 20 Oct. 2011