Beyond connectivity Ten strategies for competing in a post-Web world

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Introduction A bigger broadband market calls for bigger ideas

A time-worn way to highlight broadbands potential has been to point to the ever-increasing market for Internet access services. True, subscriber numbers will continue to grow rapidly for many years to come, but they paint only a fraction of the picture of the opportunities on offer to players from across the telecoms, media and consumer-electronics industries.
Informa Telecoms & Medias latest forecasts show that the total number of fixed-broadband subscriptions will pass 934 million by the end of 2017, equal to 44% of the worlds households (see fig. 1). Mobilebroadband subscriptions, meanwhile, will reach a staggering 5.4 billion, equivalent to 72% of the global population (see fig. 2). What is harder to quantify is what consumers and businesses will use broadband for. The inclusion of ever-faster connectivity in smartphones, tablets, TVs and other devices means that Internet access is about far more than just Web browsing. The smart home promises to take broadband beyond conventional communications and media to the unconnected realms of home energy, security and white goods. Broadband is also opening up new markets for a host of players. Consumer-electronics manufacturers are becoming Internet-content providers. Internet-content providers are becoming consumerelectronics firms. Operators are adopting cloud and over-the-top business models to become more like Internet firms, in both the consumer and enterprise markets. Thats not to say the broadband-network business isnt changing, too. An array of superfast fixed- and mobile-broadband technologies have emerged over the past few years. Wi-Fi, meanwhile, is redefining what people expect from broadband at home, in the office and on the move. Virtualization, software-defined networking and content-delivery networks promise to re-engineer networks for the next phase of the Internets evolution. Options are often a rare luxury, but these ones raise tough questions that will take many companies outside of their comfort zones. What applications and services do smartphone and tablet users really want? Which network technologies are worth the investment? Can operators reinvent themselves in new markets? What business models and partnerships will make competing in the connected era sustainable for all? Informas experts on operators, networks, content, devices and enterprise services have created a list of 10 strategies that address these key questions, and more. In each case, the advice is supported by extensive research, including Informas market-leading proprietary data and forecasts. We hope the following will provide food for thought and starting points for how we can help you to remain competitive and successful.

Fig. 1: Global, fixed-broadband subscriptions, 2012-2017

1,000

800 Subscriptions (mil.)

600

400

200

2012

2013

2014

2015

2016

2017

SOURCE: Informa Telecoms & Media

Fig. 2: Global, mobile-broadband subscriptions, 2012-2017

Subscriptions (bil.)

2012

2013

2014

2015

2016

2017

SOURCE: Informa Telecoms & Media

Rob Gallagher is Head of Broadband & TV Research for Informa Telecoms & Media, and responsible for directing the companys coverage of broadband, TV, digital media and the connected home. rob.gallagher@informa.com @robdgallagher

Informa UK Limited 2012. All rights reserved. The contents of this publication are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa UK Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this publication are the trade marks, service marks or trading names of their respective owners, including Informa UK Limited. This publication may not be:(a) copied or reproduced; or (b) lent, resold, hired out or otherwise circulated in any way or form without the prior permission of Informa UK Limited. Whilst reasonable efforts have been made to ensure that the information and content of this publication was correct as at the date of first publication, neither Informa UK Limited nor any person engaged or employed by Informa UK Limited accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard - readers assume full responsibility and risk accordingly for their use of such information and content. Any views and/or opinions expressed in this publication by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Informa UK Limited.

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

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Digital reincarnation is a necessary leap of faith for aging telecoms operators

Revenue growth is a fading memory for many telecoms operators in developed markets, with data revenues barely compensating for declines in voice and messaging.
Operators used to think that new services such as IPTV delivered to existing customers would generate meaningful new revenues. And there was always the expectation that people would pay more for faster connections. But they now understand that such services and capabilities are important just to stand still, if only to maintain customer spend and loyalty. So they have started to look at opportunities outside their corenetwork and access businesses. This is taking them in all sorts of directions, including mobile payments, connected health care, mobile advertising and machine-to-machine communications. Not all of these potential new businesses are new. M2M communications has been around for more than 30 years and predates cellular technology. But where we are seeing a new approach is in the way operators are structuring their activities in these areas and seeking to invest in innovation to create compelling new services and areas of differentiation. Partnerships with over-the-top players and investments in startups are central to this new approach, along with an open mind as to whether the business model is B2B, B2C or B2B2C or B2B2E. Spanish telecoms operator Telefonica has gone further than any other operator by creating a dedicated 6,000-employee-strong division called Telefonica Digital to develop new capabilities and lines of revenue (see fig.). It has set itself the target of generating 5 billion (US$6.5 billion) in services beyond the network by 2015. Other telecoms operators have similar initiatives, but in most cases they are spread across a number of different divisions. The cultural difference between early-stage businesses based in Silicon Valley and slow-moving, conservative telecoms operators is the biggest single challenge these new businesses face. But there are other significant ones as well. Telecoms operators are not alone in targeting connected verticals such as health care, transportation and utilities. IT service providers have a longer track record of providing specialized services to them than telecoms operators, which have largely supplied connectivity until now. But by setting up divisions such as Telefonica Digital and being prepared to act swiftly and decisively either to invest in new opportunities or shut down failing projects, operators are at least giving themselves the chance to develop new lines of business and play a bigger part in the digital economy.

Telefonica Digital revenues, 2011 and 2015

1,500 1,200 900 600 300 110 0

1,200-1,500 1,100-1,300

Revenue ( mil.)

800-1,100 810 500-800 800 300-600 320 80 M2M Content distribution Financial services/ advertising** Security/cloud Subsidiaries
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500-700

350

2011: Total revenues 2.4 billion*

2015: Total revenues 5 billion

NOTE: 1=US$1.29. *2.4 billion total from Telefonica, breakdown by vertical by Informa Telecoms & Media. **For 2011, estimated financial-services revenues are 10 million, estimated advertising revenues are 100 million. For 2011, estimated security revenues are 240 million, estimated cloud revenues are 80 million. SOURCE: Informa Telecoms & Media

Related Research
Telefonica Digital: A new model for a 21st century telecoms operator? The new incumbents: Antitrust in the digital economy Poor conversion rates make mobile search desktops poor relation

Mark Newman is a Chief Research Officer at Informa Telecoms & Media, focusing on the role of operators in broadband and Internet markets and new business models and partnerships. mark.newman@informa.com

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

E-health

TV Everywhere: The right screens, the wrong vision

The very idea of TV Everywhere (or its variant, TV Anywhere) is inherently flawed. It suggests that what consumers want is a version of TV replicated on whichever screen is the most accessible. It also suggests that TV is the experience to which smaller screens aspire. Neither is true.
Consumers dont just want a series of portable TVs: In 2012 and beyond, they want content experiences that are optimized for their devices capabilities. The readiness of consumers to follow the 2012 Olympics via a wide array of connected devices, including PCs, tablets and smartphones, wasnt just because they werent near a TV. Successful future content experiences will involve real-time communication, interaction and a personalized experience of the sort typically delivered via a handheld device as well as high-quality video images enjoyed on a large TV screen. So is TVs dominance in the living room on the wane? Are viewers turning away from the traditional lean-back TV experience? Certainly not. The profusion of complementary content experiences around the Olympics, for example, enhanced the TV coverage, as record TV-viewing figures across the globe confirmed. The future is not about TV competing with other screens it is about providers delivering a host of content across four screens simultaneously to ensure the viewer remains potentially engaged at all times. As viewers experiment with the way they use different devices in new combinations, the screen experiences should complement each other. Todays multiscreen services have barely scratched the surface of the potential role of tablets, smartphones and other second screens within the wider TV experience. Content providers, operators and advertisers must understand the way consumers are accessing content in order to secure their own role in the future provision of video content. Although these new connected devices will not necessarily replace the TV as the primary video-viewing device, they are changing viewers notion of what TV will mean in the future. As viewers increasingly flit between the TV and the tablet, and start to combine viewing and commenting, it becomes clear that the old verities of the TV business are increasingly under pressure. Viewers do not watch programs, or the accompanying advertising, on TV from start to finish in the way they apparently once did. The opportunities to be distracted are greater than ever, but so, fortunately, are the opportunities to engage viewers more deeply, via complementary connected devices. Clever providers are looking to build services, on multiple screens, that reflect this new reality, to ensure that their offer remains relevant to their viewers needs and expectations. As we have seen elsewhere, the money eventually must follow the eyeballs.

Fig. 1: Relative merits of the four screens for aspects of watching the 2012 Olympics

Activity Live TV On-demand Shared viewing Social interaction Additional event data Navigation On-the-go

TV 1 4 1 4 4 4 4

PC 2 1 2 3 1 1 3

Tablet 3 3 3 1 2 2 2

Smartphone 4 2 4 2 3 3 1

NOTE: 1 = best device for this activity, 4= worst device for this activity. SOURCE: Informa Telecoms & Media

Fig. 2: Key usage statistics from broadcasters multiscreen coverage of the 2012 Olympics
Broadcaster NBC Key usage statistics The most watched TV event in US TV history 219 million viewers on all platforms 95 million VOD video streams and 64 million live video streams 9.9 million mobile devices were used to watch the closing ceremony 10.1 million downloads of the nbcolympics.com mobile app BBC 26.3 million viewers of the closing ceremony on TV 106 million website video views 12 million video views on mobile 9.2 million UK mobile users: 34% of daily TV viewers used a mobile device at some point to follow the action 1.9 million downloads of the BBC Sport mobile app CTV 95% of Canadas population watched the Olympics on at least one screen 3.4 million hours of online video streamed 16.8 million video views on PC 7.2 million video views on mobile 15.4 million VOD video streams and 8.6 million live streams Terra 97.8 million watched some Olympics coverage from Terra 122.4 million video streams viewed (live and VOD) 10 million video views on mobile

SOURCES: Informa Telecoms & Media, NBC, BBC, CTV, Terra

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Nick Thomas is a Principal Analyst, covering TV and digital media and leader of Informa Telecoms & Medias TV-consultancy practice. nick.thomas@informa.com @analystnick

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

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Go beyond quad play with OTT, smart home and the cloud
Leading operators are starting to move beyond the triple- and quad-play bundles that have served them well in the past decade to include an array of next-generation services and applications in their multiplays (see fig. 1).
Operators are being forced to get more creative in their multiplay strategies, not only by competitive factors, but also because the addressable market for current bundling strategies is shrinking as multiplay penetration increases, especially in advanced markets (see fig. 2). Multiscreen is a key part of the new multiplay. Singaporean operator StarHub and German giant Deutsche Telekom are both scheduled to commercially launch pay-based multiscreen services in 4Q12, with StarHub charging subscribers S$5.35 (US$4.30) a month for access and Deutsche Telekom 4.95 (US$6.25). But some operators, like Korea Telecom (KT) in South Korea and Chunghwa Telecom (CHT) in Taiwan, have accepted that subscribers will not pay extra for multiscreen. In these advanced markets and others, customers are coming to expect multiscreen as a matter of course, thanks largely to OTT players being first to market with such features. But OTT content and services are also proving to be effective parts of the new multiplay. Numerous operators have partnered with musicstreaming service Spotify, and Orange in France has already brought leading OTT-content providers such as from Spotify rival Deezer and video service Daily Motion onto its platform. Moreover, back in March, Orange launched la nouvelle TV dOrange, to which it has already migrated 400,000 of its IPTV subscribers. The operator primarily uses the new platform to promote multiscreen viewing and deliver OTT video services. In Japan, second-ranked telecoms operator KDDI is looking to use partnerships with OTT players, including VoIP provider Skype, as a key means of differentiating its multiplay service from that of market giant NTT. Cloud-delivered services are also a key part of the new multiplay era. South Korean giant KT rolled out its uCloud storage service in June 2010 and already has 2 million subscribers, while Hong Kongs PCCW has launched uHub Storage, a digital-content-storage service. Some operators are also beefing up their customer-rewards and loyalty programs in order to keep hold of their multiplay subscribers. And operators such as Orange in France are moving beyond telecoms services and offering features such as discounted movie tickets and discounts at retailers. Operators will have to keep reinvigorating their multiplay offers with new services and applications that meet the changing demands and needs of their subscribers. Failure to do so will leave the door further ajar for the OTT players to step in and do it themselves.

Fig. 1: The new era of multiplay services

Multiscreen services OTT-delivered content Cloud-based services (storage, etc.) Connected-home services Enhanced rewards and loyalty programs Digital-media products

SOURCE: Informa Telecoms & Media

Fig. 2: Bundling penetration, selected operators, 2008-2011

70 60 Bundling penetration (%) 50 40 30 20 10 0

2008 KT (South Korea)

2009 SingTel (Singapore)

2010

2011 StarHub (Singapore)

Related Research
Beyond Quad-Play: OTT, multiscreen and the Cloud are keys to the future for operators Long-term partners, or short-term fling? Operator and music-service partnerships Case study: StarHub Where to now for APACs master multiplay provider?

Telstra (Australia)

SOURCE: Informa Telecoms & Media

Tony Brown is a Senior Analyst with Informa Telecoms & Media, covering converged operator strategies of the Asia Pacific region. tony.brown@informa.com @tonybrownitm

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

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OTT TV revenues and why operators should be excited, not fearful

Preliminary data from Informa Telecoms & Medias most recent over-the-top forecasts show that the market for standalone OTT video-subscription services will be worth US$11 billion globally by 2016. An impressive-sounding number for sure, but what is more relevant is the amount of the overall pay-TV subscription pie that OTT will take. Informas integrated OTT and TV forecasts show that by 2016 the figure will be 5.4% (see fig. 1).
A majority of revenues? Clearly not. But a game-changing number? Absolutely. The old adage that there is no money in OTT is simply not the case anymore. Yet the true value of OTT is not fully encapsulated in the data above. The subscription element of OTT revenues includes only revenues from users paying directly for an OTT service, be that from a new entrant like Netflix or an operator service such as Modern Times Groups Viaplay service. These revenues therefore exclude usage of the vast majority of multiscreen services, which tend to be bundled with a users subscription rather than billed directly. Even if consumers do not pay more for them, they are still heavily used and highly valued. The situation is unlikely to change much during the forecast period. In most markets, Informa expects relatively few users to take stand-alone OTT services from operators, apart from lower-tier, entry-level services such as Skys Now offer. But it is possible to crudely estimate the true value of OTT by attributing operator revenues based on the amount of time a user spends watching OTT services. For example, if about 10% of the time a pay-TV subscriber spends watching his pay-TV service is via OTT rather than a managed network, then it could be reasonable to attribute 10% of that monthly subscription fee to OTT. This percentage will, of course, vary significantly by operator and market. But it is possible to model this assumption based on three theoretical cases, where OTT represents 5%, 10% and 20% of service viewing, respectively (see fig. 2). And even where OTT makes up only 5% of service-viewing time, it will still be extremely important for the operators bottom line. What does this mean for operators? The answer is straightforward but multifaceted. OTT is a chance for operators to target customers who would not usually take a full pay-TV service. Its an opportunity to drastically reduce the costs of a service capex in particular, but, as streaming costs come down, opex, too. And in the future, OTT will simply be a prerequisite for staying competitive. Operators must embrace it for all these reasons.

Fig. 1: Global, TV and OTT subscription revenues, and OTT share, 2011-2016

200

Subscription revenues (US$ bil.)

160

120

OTT share (%)

80

40

2011 OTT TV

2012

2013

2014

2015

2016

Pay TV

OTT share of subscription revenues

NOTE: Data are preliminary and subject to minor changes. OTT revenue is defined as subscription revenue collected for stand-alone OTT video services from either operators or third parties. SOURCE: Informa Telecoms & Media

Fig. 2: Global, contribution of OTT to operator core subscription revenues by scenario, 2012-2016

40 35 Subscription revenues (US$ bil.) 30 25 20 15 10 5 0 2012 2013 2014 2015 2016

Scenario A: OTT accounts for 5% of a subscribers pay-TV package in 2016 Scenario B: OTT accounts for 10% of a subscribers pay-TV package in 2016 Scenario C: OTT accounts for 20% of a subscribers pay-TV package in 2016

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Global, Internet services and traffic interactive forecasting tool Connected-content services: Both iOS and Android trump connected TVs in OTTservice stakes OTT original content: why Netflix, YouTube et al. must not create TV 2.0

SOURCE: Informa Telecoms & Media

Giles Cottle is a Principal Analyst at Informa Telecoms & Media, covering digital music, video, advertising and Internet traffic and services. giles.cottle@informa.com @gilescottle

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

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Partnerships key to unlocking smart-home success

A growing number of broadband providers are looking to extend connectivity to energy, security, white goods and other common household features as a means to increase average revenue per user and reduce churn. But multiple problems with the so-called smart home mean operators need to readjust their ambitions, keep prices low and seek out partners rather than going it alone.
Perhaps the biggest stumbling block for any company looking to launch a smart-home service in the near future is that the market can be described as immature, if not nascent. There are only a few eager early adopters willing to invest the time and money in making their homes smart. For operators in particular, the problem lies in convincing users that the provider of their telecoms and TV will be a capable supplier of such services. But some operators are succeeding. Verizon is a prime example of an operator successfully pushing limited smart-home services to its subscribers. However, it has done so using a very low monthly fee. AT&Ts and Verizons cable rivals have been quick to respond, either by tweaking their own services often focused on security or by launching an equivalent offer. But these rivals are charging a much higher monthly fee. It remains to be seen whether users will be willing to pay these additional costs. Offer a smart pipe, not a smart home Informa Telecoms & Media remains skeptical about predictions of strong growth in the smart-home market in the coming years. The market is small and will grow, but at a rate slower than some operators have forecast. Churn might well be reduced, but if operators are not careful, the associated costs of rolling out smart-home services could wipe out any additional revenues. Instead of offering their own services, operators should seek out companies specialized in the building blocks of the smart home, such as utilities, security firms, white-goods manufacturers and dedicated startups (see fig. 1). This approach enables operators to use their core assets and knowledge for new revenues, rather than having to heavily invest in and subsidize new equipment merely to retain new subscribers. In addition, Informa believes that any closed or walled garden services will ultimately be overtaken by open platforms that let customers pick and choose from an array of third-party smart-home services (see fig. 2). Convergence a must for many services For many smart-home services, a mobile element will be essential. Health care and assisted living, where a constant connection will significantly improve the service on offer, are classic examples. There is, for instance, little need for a heart monitor that can report a heart attack only inside the home. So operators should be quick to break down any arbitrary divisions between their home and mobile services and instead focus on offering smart-lifestyle packages that exploit connectivity everywhere.

Fig. 1: Smart-home entrants strengths scorecard, 2012

rces sou Re

1 2 3

Stro ng bra nd

serv ices

4 5

elevance nd r Bra

Innovative

User

Bill in gr ela tio

g lin

gth en str

Operator Utility CE manufacturer Startups

SOURCE: Informa Telecoms & Media

Fig. 2: Smart-home market development

Walled-garden smart-home services launch, driving early growth

Open platforms emerge

New services launch, taking advantage of the slow spread of open platforms

SOURCE: Informa Telecoms & Media

Related Research
Operators take heed: Smart homes need smart pipes Smart-home strategies: Verizon and DT show that OTT is the only way to go Multiple technologies to power next-generation home networks

Andrew Ladbrook is a Senior Analyst with Informa Telecoms & Media, covering the impact of the latest developments in home-network technology and smart devices. andrew.ladbrook@informa.com @andrewladbrook

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

p hi ns
mpetencies Core co

Bu nd

Open platforms overtake walled gardens and begin to dominate the market. Services on these platforms start to ourish

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Target the sweet spots of a less-neutral Net

The deployment of content-delivery networks by a growing number of telecoms network operators (see fig.1) means that operators can increasingly prioritize and accelerate the delivery of different types of Internet content and services within their own networks. But in several countries, the launch of telecoms-operator CDNs has led to fears that operators could use this power to distort the so-called neutrality of the Internet by acting as gatekeepers for access to their broadband subscribers.
Net-neutrality supporters assert that telecoms service providers should not delay, restrict or speed up IP traffic based on its source, destination or content type. To support their argument that the openness and equality of the Internet continues to be compromised, they point to instances of operators throttling (limiting the speed of) peer-to-peer file-sharing or video streaming, as well as cases where operators block or charge extra for voice-over-IP services in mobile networks. But these often excessively polarized debates about net neutrality fail to acknowledge the ways the Internet already makes extensive use of and even depends for its survival on a wide array of trafficmanagement techniques by network operators. These include traffic shaping, by which operators manage the pressures of heavy Internet users on network resources, as well as efforts to block or restrict traffic that is harmful, illegal or undesirable, such as spam. Similarly, CDNs already play an essential role in ensuring that the Internet works. Since the early 2000s, major websites have paid CDNs like Akamai to speed up the delivery of their content. And over the next few years, CDNs will only grow in importance, accounting for an increasing share of total Web-traffic delivery (see fig. 2). The use of CDNs becomes even more of a gray area in the netneutrality debate when you consider that Internet giants including Google, Microsoft, Amazon and Netflix are building CDNs of their own. Similarly, many major third-party CDNs, such as market leader Akamai, have been seeking to partner with network operators in ways that would combine the strengths of the two parties. The Internet is clearly becoming less neutral, and not just because of operators. Informa Telecoms & Media recently produced a series of case studies assessing the CDN plans of a number of operators and third parties. The reports pointed to a variety of possible futures. One of Informas conclusions was that network owners need to understand how they can use their unique assets to make the Internet work better for content owners. CDNs will play a central role in this effort.

Fig. 1: Global, confirmed telecoms-operator CDN initiatives, 2005-2012

120

100

No. of initiatives

80

60

40

20

2005

2006

2007

2008

2009

2010

2011

2012

SOURCE: Informa Telecoms & Media

Fig. 2: Global, CDN traffic and total Web traffic, 2010-2017

1,800 1,600 1,400 Web trac (exabytes) 1,200 1,000 800 600 400 200 0 2010

2011

2012

2013

2014

2015

2016

2017

Web trac not delivered by CDNs Web trac delivered by CDNs

SOURCE: Informa Telecoms & Media

Related Research
CDN Future Scenarios: A growing market delivers new business opportunities CDN traffic and revenues: Global summary and forecasts Case study: ChinaCaches CDN strategy

Chris Drake is a Senior Analyst at Informa Telecoms & Media, covering converged-operator strategy and content-delivery networks globally. chris.drake@informa.com @cfadrake

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

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Five ways to succeed with software-as-a-service

Want to sell software-as-a-service? Join the crowd. SaaS accounts for more than 80% of the US$20 billion cloud-services market and everyone wants a piece of the action. But how, exactly, can communication service providers, an increasingly important channel for SaaS resale (see fig. 1), profit for the long term from selling SaaS?
The No. 1 target group for SaaS is small and medium-sized enterprises. A handful of CSPs have established marketplaces for SMEs, such as Orange with Le Cloud Pro, Telefonica with Aplicateca and PLDT with SME Nation. But based on a landmark study of more than 900 SaaS offers in the telecoms cloud, Informa Telecoms & Media warns that CSPs SaaS portfolios for SMEs remain immature. Most CSPs sell only three types of business SaaS: a business-productivity suite (e.g., Microsoft Office 365), security (e.g., F-Secure) and storage (e.g., EMCs Mozy). Informa believes that the convenience of a single bill is not a good enough reason to keep customers buying these or other apps from a CSP. CSPs must work smarter to make SaaS work for them. They must create upsell opportunities that secure the need for broadband their core revenue stream with services that can help SMEs put their business processes into the cloud (see fig. 2). Tie them up: CSPs must defend their core revenues by proactively selling preferential SaaS and broadband bundles. For example, Singapores StarHub markets Office 365 with 100Mbps fixed broadband for US$42 per user per month, based on a five-user, 24-month contract. Get picky: As resellers, CSPs get a share of SaaS revenues, typically 20% to 50% of the retail price. CSPs should shop around, and look close to home: A local SaaS vendor is more likely to value the muscle that CSPs can bring for sales distribution and that may yield a better revenue share. Telefonica sources 80% of its portfolio from Spanish SaaS vendors. Make it easy: A salesman does not need to call unless a customer requests it. CSPs must provide a transparent and interactive SaaS portal where customers can navigate to the best choice and price, with the ability to order online. SaaS marketplace enablers such as AppDirect, Jamcracker and NEC can help. Reward loyalty: Discourage customers from buying SaaS direct from the vendor. Offer client discounts and freebies. Polands Netia offers up to six months free access to certain services. Some SaaS partners even redirect prospects to Netias online store. Make it better: Offer cloud services that position CSPs as valueadded, not commodity, resellers. Focus on services that play to CSP strengths, particularly where latency, ubiquitous access and data security are critical.

Fig. 1: CSPs are a key channel for SaaS Global SaaS sales: US$16 bil. 162 CSPs resell SaaS

CSPs (15%) Other channels (85%)

North America (23%) Asia Pacic (42%) Western Europe (43%) Eastern Europe & CIS (27%) Latin America (11%) Middle East & Africa (16%)

SOURCE: Informa Telecoms & Media

Fig. 2: CSPs can take offices into the cloud

Upsell

... CRM +US$12 Business apps +US$6 Storage +US$7 Security +US$4

Core revenues

Unied comms +US$14 Voice +broadband (xed and mobile) Communications Productivity

NOTE: Note: Average price charged per user per month for telecoms SaaS offers. Storage based on 10GB.

Related Research
Webinar: Emerging Markets: The Cloud Imperative Informa Telecom Cloud Monitor The SME cloud opportunity: A market overview

SOURCE: Informa Telecoms & Media

Camille Mendler is a Principal Analyst with Informa Telecoms & Media, covering vertical enterprises, cloud services, Ethernet and M2M. camille.mendler@informa.com @cmendler

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

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A new vision for NGA: numerous generations of access

The ever-growing array of superfast broadband technologies means that operators now have more ways to upgrade their fixed networks than ever before. But where should operators go for the quick win of so-called DSL-acceleration technologies, and where should they play the long game with fiber-to-thehome (FTTH)?
Much of the industrys attention has recently been focused on so-called DSL-acceleration technologies, which promise to extend the life of copper networks by enabling them to support fiber-like speeds. VDSL vectoring, pair bonding, phantom mode and G.Fast are set to push growth in the VDSL market (see fig. 1), but will not be appropriate in all scenarios or for all operators. VDSL vectoring aims to increase broadband speeds by eliminating interference, known as cross talk, between different lines to deliver downstream bit rates of 100Mbps with 500m copper loop lengths. But the technology works best at shorter loop lengths and might not be appropriate for deployment everywhere because of the position of existing network street cabinets. There might also be regulatory concerns where subloop-unbundled VDSL is present. VDSL bonding has already been deployed by operators such as AT&T in the US and Pakistans PTCL. Bonding allows operators to improve reach or increase bit rates to near double those provided via a single VDSL line. But the technology requires two copper pairs per home, and the pairs must be accessible to operators. Operators also need to know which homes have more than one pair, which is not always the case. Phantom mode combines vectoring and bonding to enable operators to create a third virtual pair from two bonded real pairs. Vendor lab trials have produced downstream speeds of 300Mbps over 400m copper loops. Although phantom mode promises even higher bandwidths, it suffers from the combined limitations of vectoring and bonding. G.Fast promises an aggregate upstream and downstream bit rate of 500Mbps and is likely to see widespread commercial deployment by 2016. Drawbacks include the need to deploy more active equipment than would be necessary for an FTTH deployment to single-dwelling units. And as with all DSL-acceleration technologies, operators might prefer to move straight to FTTH if the copper network is of poor quality or does not have extensive coverage. Whether operators deploy DSL acceleration, FTTH or both will depend on local and technical circumstances, leading to big variations in VDSL subscription numbers by region (see fig. 2).

Fig. 1: Global, VDSL subscriptions, 2012-2017

50

40 Subscriptions (mil.)

30

20

10

2012

2013

2014

2015

2016

2017

NOTE: VDSL subscriptions refers to services based on VDSL-from-the-central-office and FTTC/N architectures, and not FTTB-based ones. SOURCE: Informa Telecoms & Media

Fig. 2: Global, share of VDSL subscriptions by region, 2017

Western Europe (45.1%) Latin America (6.8%) Middle East (0.5%)

North America (33.1%) Eastern Europe (4.4%)

Asia Pacic (8.8%) Africa (1.3%)

NOTE: VDSL refers to services based on VDSL-from-the-central-office and FTTC/N architectures, and not FTTB-based ones.

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SOURCE: Informa Telecoms & Media

Stephen Wison is a senior Analyst at Informa Telecoms & Media, covering current- and next-generation fixed-network and operator strategy in Central and Eastern Europe. stephen.wilson@informa.com

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

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Wi-Fis dominance means operators must rethink the value of cellular

As smartphone adoption has continued to rise, consumer and enterprise dependence on Wi-Fi has grown in parallel. According to a joint study conducted by Informa Telecoms & Media and Mobidia of more than 100,000 Android and iOS smartphone and tablet users, Wi-Fi accounted for more than 80% of total traffic from iOS smartphones and almost twothirds of traffic from Android smartphones (see fig. 1).
The trend has been shaped largely by the users themselves, who came to realize that Wi-Fi in their homes and offices could offer a superior and, crucially, lower-cost alternative to cellular services. These users now expect their home or office Wi-Fi experience to be replicated wherever they go and at every point of their day: during their journey to work on public transportation; at their favorite lunch or coffee spot; and in bars, restaurants, sports stadia and other leisure venues. Where fixed or cellular connections were once the main connectivity option, Wi-Fi now rules the roost. Whats more, Wi-Fi is not just enabling the connected home, but increasingly dominating it (see fig. 2). Even considering a rapid transition to 4G, it is difficult to envisage any near- or medium-term scenario in which the grip of Wi-Fi in the connected home or office will be loosened. In fact, the role of Wi-Fi will only grow as more smart devices and appliances exploit its power. And user expectations are forcing a growing number of restaurants, hotels and other customer-facing businesses to offer access to Wi-Fi or risk seeing their customers vote with their feet. As a result, operators will need to redefine and restate the value offered by cellular networks in order to set their services apart from Wi-Fi-based connectivity, inside and outside the home. This exercise is likely to drive cellular networks back toward their heritage as a means to provide services in truly mobile contexts. Key points of difference will be always-on availability, simplicity of access, reliability and stability, and security and privacy. If operators educate consumers about these inherent advantages, they will not only ensure the continued relevance and importance of cellular networks, they will also be able to justify a continued premium compared with Wi-Fi.

Fig. 1: Global average data traffic per month by access technology by OS by device type, May-12 Smartphone Android iOS 4.0 GB 2.9 GB 82%

66% 34%

18%

3G/4G-connected tablets Android iOS 8.6 GB

5.2 GB 87% 57% 43% 13%

Cellular

Wi-Fi

SOURCE: Informa Telecoms & Media

Fig. 2: Global, private Wi-Fi connections and penetration of fixed-broadband subscriptions, 2011-2015

700 600 500 Connections (mil.) 400 300 200 100 0

80 70 60 50 40 30 20 10 Penetration (%)

2011

2012

2013

2014

2015

Related Research
Wi-Fi Reloaded: The M2M opportunity Consumer smartphone survey: A better understanding of the fast-changing UK market is needed to maximize opportunities A global survey of the status of the LTE ecosystem

Private Wi-Fi connections SOURCE: Informa Telecoms & Media

Penetration of xed-broadband subscriptions

Thomas Wehmeier is a Principal Analyst at Informa Telecoms & Media, specializing in mobile-operator strategies. thomas.wehmeier@informa.com

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

WWW.INFORMATANDM.COM

Virtualization and SDN will reshape businesses as well as networks

Todays physical-network model governs the way in which traffic handling, capacity management and ultimately application and service delivery are organized. Network virtualization and software-defined networking promise to revolutionize the services telecoms operators offer by removing many of these physical constraints.
This fundamental change will involve the creation of an infinitely more flexible, virtualized model, where a new software layer will substitute traditional network elements and interfaces, enabling the dynamic allocation of network capacity based more closely on customer needs. This deployment model will also enable networks to follow traffic patterns more closely, rather than plan for extra capacity at many levels, including access, transport and core. The bursty and somewhat unpredictable nature of traffic, especially mobile broadband, warrants a more fluid network topology that can be enabled by virtualization. Virtualization and software-defined networking are widely used for computer networking, where the control plane is software-based and the hardware platform uses commodity equipment. Although the application of SDN and virtualization to mobile networks is in its infancy, with vendors still drawing up their strategies, these technologies could completely reshape and redefine the operation of mobile networks, while allowing them to be technology-agnostic and customer- or traffic-centric. Mobile operators are already exploring an early manifestation of this trend with the cloud RAN, whereby the processing elements of the mobile base station are split from the antenna and co-located at a central hub. This allows the mobile network to assign capacity to areas where traffic is high, or even reduce it in quiet areas, enabling the operator to deploy a much more efficient and lean network. Early experience of SDNs will provide the foundation for a potentially more radical move toward approaches such as network running in a cloud, or network/infrastructure-as-a-service. Freed from the physical limitations of todays autonomous network model, operators will be able to use the virtualized network to create new, more compelling offerings for their consumer and business customers. SDN and virtualization might also enable mobile operators to offer networking services to new customers in adjacent markets. An operator could, for example, let an Internet-based company use operator infrastructure and APIs to enable communication services for its platform. Although these two-sided business models have not been very successful in the past, virtualization and SDN allow for a much easier and flexible implementation. In short, SDN and virtualization promise to make the business of mobile telecoms and not just the infrastructure more dynamic, efficient and open than ever before (see fig.).

Opportunities and challenges for operator-virtualized networks

Opportunities

Challenges

Simplied network Capacity on demand allowed New partners permitted Flexible access to other resources Natural overlap with operator cloud oerings

Questionable protability Unclear business model (currently) OTT competition Radical deployment model

SOURCE: Informa Telecoms & Media

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Alica Brlajova Informa Telecoms & Media alica.brlajova@informa.com +44 (0) 20 7017 4994 www.informatandm.com

Dimitris Mavrakis is a Principal Analyst with Informa Telecoms & Media, covering mobile-access-network technologies, IMS, femtocells, backhaul and network APIs. dimitris.mavrakis@informa.com @dmavrakis www.informatm.com/linkedin www.twitter.com/informatm www.informatm.com/connect

2012 INFORMA UK LTD. ALL RIGHTS RESERVED.

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