Global Telecoms

Megatrends

BMI-T Breakfast Briefing

14th October 2014

Brian Neilson

brian@bmi-t.co.za

@brianbmit

Themes for today

State of the global market

Telecoms – mature and yet growing

What’s hot and what’s not (Chilli chart)

TLAs (like OTT)

Telecom company strategies

Industry convergence

Vertical sectors, disruption and enablement

Does Cloud make Rain? – user adoption

Telco evolution

The network is part

of the fabric of

IT…

Global Telegraphy Network in 1891

Price trend example: fixed broadband services

Source: ITU, 2013

Developing

World

Developed

Impact of

competition …

80% decline in 4

years

Developed

Mobile traffic growth outstrips forecasts – by a mile

http://www.itu.int/net/newsroom/wrc/2012/features/imt.aspx

ITU: Assessment of the global

mobile broadband deployments

and forecasts for IMT

Actual data traffic in 2010 was more

than 5 times greater than some of

the estimates prepared for a

previous report.

Not only that, but in 2011 some

operators even experienced a higher

level of actual traffic than a previous

report forecast for 2020.

Applications converge, but … most traffic is still fixed line!

Note difference in

scale!

What’s hot … and what’s not?

8

Vid

eo e

xp

losion

, In

tern

et of

thin

gs, C

loud

com

put

ing

...

Significantly cheaper smartphones ... most phones are smart

Banks as telco players

Passé - lingering 2014 Beyond

Downloading …........ ‘Internet TV’

Ongoing price wars …… significantly cheaper data …

OTT content App stores

Digital TV

Media consolesVOD

?

?

Streaming media

Wearable technology

Social media Search, video

Advertising

Wi-Fi Off-loading

LTE, VDSLFree WiFiNetwork capacity management,‘Customer stickiness’

Next generation applications

?

Pervasive devices & databases

Telcos as banks … M-payments

FTTH, Triple play

Chilli ind

ex –

ma

rket im

pa

ct

Voiceover WiFi

?

9

Vid

eo e

xp

losion

, In

tern

et of

thin

gs, C

loud

com

put

ing

...

Significantly cheaper smartphones ... most phones are smart

Banks as telco players

Passé - lingering 2014 Beyond

Downloading …........ ‘Internet TV’

Ongoing price wars …… significantly cheaper data …

OTT content App stores

Digital TV

Media consolesVOD

?

?

Streaming media

Wearable technology

Social media Search, video

Advertising

Wi-Fi Off-loading

LTE, VDSLFree WiFiNetwork capacity management,‘Customer stickiness’

Next generation applications

?

Pervasive devices & databases

Telcos as banks … M-payments

FTTH, Triple play

Chilli ind

ex –

ma

rket im

pa

ct

Voiceover WiFi

?

Next industries to be disrupted: education,

transport, retail, medicine (Prof. Michiu

Kaku)

Globally connectivity will make up only 8% of the total $1200bn M2M market in 2022, traffic even less

$39bn – for connectivity services

Most is devices & installation (2/3) and the ‘service wrap’ (1/3)

Transmission is just the tip of the iceberg – most of the revenue lies in other layers of the value chain –including the service delivery platform

Automotive the next big industry

M2M is still relatively small in the local market

Global M2M connectivity revenue, 2022

0

5

10

15

20

25

30

35

40

Connectivityservices

Serviceenablement

platform

Connectivity Connectivitysupportplatform

Mobilenetworktraffic

M2M

connect

iity

serv

ices

revenue (

$bn)

Source: Machina Research, 2012

Are you ADD OCD OTT?

The ‘GoogleAmazonification of

everything

Telcos fight back – by

embracing OTT

A melange of TLAs

Are you

B2B

or

B2C?

or

B

B

C

2

2

OTT

Poss

ibly

with

SalesForce

Google Ad-words

YouTube

Social media …

Telco 2.0

Wi-Fi 2.0: Taking the market by stealth?

Private Wi-Fi (user owned APs)

• Already being exploited for the Wi-Fi offload

Public Wi-Fi (HotSpots)

• Opportunity for the carriers to partner to provide the service.

Carrier class Wi-Fi (carrier APs)

• Open for the carrier to leverage with the goal to improve customer experience, to lower the capital unit cost, and to improve ARPU.

Wi-Fi offload solutions – fixed line strikes back

Source: Wireless Spectrum Needs Vs. Wi-Fi Offload Solutions, Dr. Hossein Eslambolchi, 2013

Reasons for carrier Wi-Fi and offload

Basic service

Public spaceCommercial

space

Content / advertising

/ Serviceopportunity

Commercial service

Carrierextension

Public Wi-Fi models (hotspots and hotzones)

Source: BMI-T, WiFi 2.0: Global and South African Market Impact - taking the market by stealth, 2014

Differences by vertical

http://www.huawei.com/minisite/gci/en/index.html?utm_campaign=GCI2014&utm_medium=HWsites&utm_source=de

Industry Competitiveness Index

Huawei surveyed over 1,000 executives from 10 industries as to their ICT investment plans and the benefits they have seen

Some industries are innovating more rapidly than others

While some are in danger of being the next ones to experience serious disruption …

Education, transportation, retail, medicine (Prof. Michiu Kaku)

Vertical focus

One of the things all operators

need to do

Fill niches with tailor-made

connectivity solutions

Operators are still the best in town

at connectivity

They are also leading players in

Data Center-based services

What telcos are doing – Europe

What else

Operational transformation

Value-based pricing

New services

“Telcos are well placed to expand into

cloud and act as the primary sales

channel”

Source: A report for European Telecommunications Network Operators’ Association (ETNO), A.T. Kearney

Revenue growth for telcos (is there any?)

Revenue growth vs

traffic growth

Different drivers

Telcos have to be

intimately involved in

applications – either

directly or indirectly – in

both consumer and B2B

markets

Cloud services will

comprise up to 5% of

telco revenues

Source: A report for European Telecommunications Network Operators’ Association (ETNO), A.T. Kearney

Gartner Says Worldwide Public Cloud Services Market to

Total $131 Billion

http://www.gartner.com/newsroom/id/2352816

Strong demand is anticipated

for all types of cloud services

offerings.

5 global players gravitating to: Amazon, Rackspace, VMWare, Google, Microsoft

Comms-aaS still the largest SaaS market

CRM moves to cloud.

IaaS fastest growing globally, and where many start their journey in SA.

Public Cloud $27bn (excl. advertising, BPaaS) Up 18% in 2013; IaaS up by 47%. BMI-T forecasts R4bn market in SA.

Advertising48%

BPaaS28%

SaaS15%

IaaS 5%

Security3%

PaaS1%

Direct marketing using Big Data

Online Video – marketing and more

What is real? – user adoption

‘Five characteristics of cloud’:

Shared, virtualized infrastructure

Self-service access

Elastic resource pools

Consumable output

User-based usage tracking.

“Communications-as-a-Service” is already widely adopted

Managed firewalls, email and web content filtering, virus and spam detection, fax-to-email …

Offer enhanced security

CRM, best typified by Salesforce and MS Dynamics

Does Cloud make Rain?

‘Hybrid cloud’

approach suits

larger companies:

First implement

applications in a private cloud

environment, getting familiar with the

architecture

Then gradually or selectively implement

some elements in the public cloud

environment – not a case of “all or

nothing”.

Over time you may elect to expand the

range of applications or implement a

hybrid solution, which allows bursting into

public cloud when the situation demands.

What else … out of the Data Centre?

Datacentres become ecosystems: Cloud datacentres will “become much like a breathing and living organism with different

states”.

UC&C in South Africa

According to BMI-T’s research into

cloud computing most of the revenues

from Cloud locally are in Comms-aaS

– hosted Exchange, email & web

filtering, fax etc.

It depends what you count

Unified communication is an umbrella term for

many different elements.

Video conferencing and messaging are strong

performers but most of the attention still focusses

around voice.

Including Comms-aaS … R500m (and

growing)

Counting the UC revenues of Microsoft, Cisco

and PBX vendors … another few hundred

million.

Audio & Videoconferencing … a further

R100m

You could also count SIP trunks … R1.5bn

So at almost R2.5bn … this is real

27

Telco evolution

SDN … because today’s static architecture is ill-suited to the dynamic computing and storage needs including:

Changing traffic patterns

The “consumerization of IT” (and BYOD)

The rise of cloud services

“Big data” means more bandwidth

Challenges faced by network designers:

Complexity that leads to stasis

Inability to scale

Vendor dependence

Computing Trends are Driving Network Change

www.opennetworking.org

To win in the highly competitive and rapidly evolving connectivity market, service providers must differentiate their portfolios with richer Service Level Agreements (SLAs) that address today’s and tomorrow’s requirements.

Service providers must also adopt go-to-market techniques that tailor IT and connectivity services to specific enterprise verticals, shifting the emphasis from the network to the end-customer’s business requirements.

Vertical focus

Value proposition in the higher education vertical might speak to collaborative multi-site research, or community cloud, and the corresponding Data Centre Connect managed service.

Likewise, a bundled service in the financial sector would speak to the need for ultra-low-latency connectivity between trading locations.

http://www.ciena.com/resources/white-papers/Monetizing-Networks-in-the-Cloud-Era.html?src=PR

Convergence and disruption are impacting on all businesses

Computing Trends are Driving Network Change

Dynamic nature of IT requires a fresh look at the network… and a fresh approach to using telecoms services

Vertical solutions (and value chains) are a key part of operator strategies

Telcos need to be involved in content and applications, one way or another

Cloud is one of the “Next Big Things”

Telcos are well positioned to deliver Cloud services

They need to embrace OTT and partner / enable

The value chain of “Next Big Things” consists of much more than connectivity

Case in point: M2M and the Internet of Things

Summary

32