Telecommunications in 2015 - It’s a brand new game Rob Van Den Dam 20 Oct. 2011
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The IBM Institute for Business Value report focuses on the significant transformations within the telecommunications industry, highlighting the changing global hierarchy, evolving consumer communication patterns, and the increasing power of consumers. It outlines the need for Communications Service Providers (CSPs) to adapt to new competitive landscapes, particularly from over-the-top (OTT) communications providers, and to cater to a more demanding consumer base. The report also presents future scenarios for the industry by 2015, emphasizing shifts in technology, consumer behavior, and economic pressures.
Telecommunications in 2015 - It’s a brand new game Rob Van Den Dam 20 Oct. 2011
- 1. IBM Institute for Business Value Telecommunications in 2015 It‟s a brand new game Rob van den Dam Global Telecommunications Sector Leader IBV © 2011 IBM Corporation
- 2. IBM Institute for Business Value Agenda Introduction It is a brand new game Four industry scenarios for CSPs Smarter consumers, industries, CSPs 2 © 2011 IBM Corporation
- 3. IBM Institute for Business Value Telecommunications is IBM‟s #1 research focus Telecom Research TSL Russia Mobile Web Labs (Moscow Satellite TSL) Services TSL China & Telecom Research Lab TSL Israel & (Beijing) TSL Europe Telecom Research Lab (La Gaude & (Haifa Satellite TSL) Japan Montpellier, France) (Tokyo Satellite TSL) TSL North America Telecom Research Lab (Austin, Texas) (New Delhi) TSL India ASEAN (Bangalore Satellite TSL) (Kuala Lumpur Satellite TSL) TSL LATAM (Sao Paulo, Centers of Institute for Brazil Satellite TSL) Worldclass Excellence Business Africa South Partner Value (Johannesburg, Satellite TSL) Ecosystem Telecommunications Solutions Lab (TSL) Telecommunications Research Lab 3 © 2011 IBM Corporation
- 4. IBM Institute for Business Value The IBM Institute for Business Value creates fact based thought leadership that help clients realize business value Future Value Realization CXO Agendas Studies Surveys 3 to 10 year industry outlook In-depth assessment of today‟s Chief Officiers studies – CEO, with action oriented next steps critical issues, opportunities, etc CIO, CMO, CFO, CHRO, etc. 4 © 2011 IBM Corporation
- 5. IBM Institute for Business Value Primary research includes Face-to-Face interviews with Executives from the Telecommunications industry and Consumer Surveys Customer Spending Customers’ Adoption of, Customer Sources of priorities for 2011 – Experience with, comms Information for communi- 2013 products and services cation products/ services Customers’ Attitudes Customer Advocacy Adjacent Market towards CSPs and Antagonism Opportunities Most recent Consumer Survey mid 2011 in 24 countries 5 © 2011 IBM Corporation
- 6. IBM Institute for Business Value Communications Service Providers (CSPs) are experiencing significant change as the industry playing field transforms It is a brand new game Changes in the global hierarchy Shifts in the way consumers communicate Increasing power of the consumer 6 © 2011 IBM Corporation
- 7. Changes in the global hierarchy IBM Institute for Business Value The global hierarchy is changing Mobile Cellular Subscriptions Total: Total: Total: 719 million 2.2 billion 5.4 billion 2000 2005 2010 France; 46 Mexico; Nigeria;84 UK; 68 Italy; 90 88 China; Italy; 71 Germany;107 China; Top 10 375 India; 75 Japan; 116 833 Mobile markets Germany; 79 Brasil;195 worldwide (M subs) Russia; Brasil; 86 217 Japan; 90 USA; 208 USA; 297 India; Russia; 126 688 © 2011 IBM Corporation 7 Source: ITU statistics database; Global Wireless Matrix Q211, Merrill Lynch, IBM Institute for Business Value (IBV)
- 8. Changes in the global hierarchy IBM Institute for Business Value The communications industry is increasingly being driven by emerging countries The Americas 1. Mobile Revenue YoY growth 1Q11 160% Colombia Brazil – Western Europe: - 2.5% 140% Argentina – Japan: - 0.6% Mexico – North America: + 6.4% 120% US 100.2% – Emerging Asia: + 11.6% Canada June 2011 100% – Latin America: + 10.9% – Brazil: + 10.9% – Colombia: + 12.7% 80% – Argentina: + 19.6% 60% 40% 2. The emergence of new GIANTS: 20% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 © 2011 IBM Corporation 8 Source: Global Wireless Matrix Q211, Merrill Lynch, IBM; Institute for Business Value (IBV)
- 9. Changes in the global hierarchy IBM Institute for Business Value In the emerging markets consumer sentiment is generally higher than in mature ones Consumer Spending Changes 2011- 2014 Net Increase/ Decrease Net Increase/ Decrease Holidays Holiday/vacation 29% Utilities Utilities 2% Food && drinks Food drinks 27% Mobile Telephony Mobile Telepony -8% Clothing Clothing 27% Transportation Transportation -9% Going out Going out 25% Food&& drinks Food drinks -10% Mobile Telephony Mobile Telephony 20% Mobile Broadband Mobile broadband -12% Mobile Broadband Mobile Broadband 14% Pay television Pay television -17% Transportation Transportation 13% Fixed Telephony Fixed Telephony -17% Pay television Pay television 12% Clothing Clothing -19% Electrical Utilities Utilities 11% Elect. Appliances appliances -20% Electrical Elect. Appliances appliances 8% SportsSports -21% Sports Sports 1% Holidays Holiday/vacation -26% Fixed Teleph. -2% Fixed Telephony Going out -37% Going out © 2011 IBM Corporation 9 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?
- 10. Changes in the global hierarchy IBM Institute for Business Value For spending on communication services, CSPs in emerging Communications spending countries face better times than those in mature markets USA Mobile 1 Mobile Mobile telephony Telephony 20% 1 Mobile Telephony Telephony -8% Mobile 2 Mobile Mobile broadband Broadband 14% 2 Mobile Broadband broadband -12% 3 Pay television Pay television 12% 3 Pay television television Pay -17% Brazil 4 Fixed Telephony Fixed telephony 4 Fixed TelephonyFixed telephony -17% Canada 1 Mobile Telephony Mobile telephony 22% Mobile 1 Mobile Telephony telephony -4% 2 Fixed Telephony Fixed telephony 10% Mobile Mobile Broadband 2 broadband -6% 3 Mobile Broadband Mobile broadband 9% 3 Fixed Fixed Telephony telephony -16% Mexico 4 Pay television television Pay 9% 4 Pay television Pay television -18% © 2011 IBM Corporation 10 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?
- 11. Shifts in the way consumers communicate IBM Institute for Business Value People are increasingly communicating over-the-top: email, IM, Chat, Internet Video streaming, Social Networks, VoIP Brazil Daily Mexico Daily Usage Usage Email/IM/Chat 82% Email/IM/Chat 85% Mobile Telephony 75% Mobile Telephony 80% Fixed Voice 69% Fixed Voice 72% Social Networking 59% Social Networking 64% Video Streaming 53% ABOVE 25s Video Streaming 38% VoIP 33% VoIP 24% Email/IM/Chat 84% Email/IM/Chat 92% Mobile Telephony 79% Mobile Telephony 78% Social Networking 76% Social Networking 74% Fixed Voice 59% Video Streaming 61% Video Streaming 54% UNDER 25s Fixed Voice 49% VoIP 20% VoIP 29% 11 © 2011 IBM Corporation Source: 2011 IBM Global Telecom Consumer Survey, Global N= 12848; S06 How often do you use the following communications services?
- 12. Shifts in the way consumers communicate IBM Institute for Business Value The trend is towards many-to-many communications, increasingly taken place over the mobile, augmented with videos, photos & other content Many to Many Gated Communities Shared Social Space Mobile Social Networking / Telco Communication Pattern Walled Gardens The AppStore Traditional Open and Free USA Communications +56% Mobile Social Fixed Voice E-Mail Networking is the fastest Dec ‘09 Dec ‘10 Mobile growing SMS Voice Shift Mobile Content 1:1/1:N category Provider Communication Environment Open Controlled Internet © 2011 IBM Corporation 12 Source: IBV report: “The changing face of communications”. May 2010
- 13. Shifts in the way consumers communicate IBM Institute for Business Value In Colombia, Social Networking is ranked as top category by share of minutes with one-third of web time spent on social networking sites… COLOMBIA Social Network sites Monthly hours spent on Instant Messengers Photo Sites Reach Reach (Dec 2010) Social Networks (June 11) Reach (Dec 2010) (Dec 2010) WW 71% WW 35% WW 53% WW 5,4 Israel 11,8 Asia Pacific 19% Asia Pacific 29% Asia Pacific 48% Russia 10,6 Europe 84% Europe 41% Europe 67% Argentina 10,0 North-America 90% Turkey 9,3 North-America 29% North-America 75% Chile 8,7 Latin America 88% Latin America 68% Latin America 66% Philippines 8,4 Colombia 89% Colombia 8,4 Colombia 65% Colombia 80% IM Usage in Latin America is the highest in the world With 89.5% reach, Colombia ranked as 5th most highly penetrated Facebook market Colombians lead Latin America region in Online Dating © 2011 IBM Corporation 13 Source: Comscore: A rise of Social Networking in latin America, Sept 2011, Comscore: Digital Year in review: Latin America. March 2011
- 14. IBM Institute for Business Value …and many activities are moving to the mobile Mobile Fixed Mobile Location Internet Internet Internet At home 56% 74% At work place 32% 35% Fixed On the street 6% 18% Internet Internet café 37% 5% At friend 3% 4% At college 12% 10% Take photos or videos Download or listen to music Upload or download photos and / or videos Download or watch videos/television/ movies Check e-mail Which of the Use messenger following Go to personal page (Facebook, Twitter, activities you etc.) Use online services your bank usually do Online shopping with the Consult / seek information on vehicular traffic phone? © 2011 IBM Corporation Source: CINTEL, InteracTIC: Panorama mercado del sector TIC en Colombia, 2010
- 15. Shifts in the way consumers communicate IBM Institute for Business Value Industry transformation is increasingly evoked by new market entrants competing with traditional telecom providers over the open Internet 76% of CSP‟s identify OTT comms providers as their greatest competitive threat OTT Comms providers (e.g. 76% Google, Facebook, Microsoft) Cable/satellite providers 34% Mobile Device Manufacturers 29% Over-the-top aggregator 26% IT application 24% „Next-gen” Messaging System “It’s not email, it’s everything” WiMAX operators 16% Entrants from new industries (e.g. Banking) 16% Acquisition Skype “Together we will create the future NEPs 9% of real-time communications” Consumer Electronics 5% Buys Motorola Mobility ($12.5bn) Electric utility providers 3 Google MVNO launches in Spain 15 © 2011 IBM Corporation 2009 IBM Institute for Business Value Telecom Industry Executive Survey N=61
- 16. Increasing power of the consumer IBM Institute for Business Value The new consumer reality has created an impulse economy, characterised by immediacy, frivolity, and transience ALWAYS ON NO TIME! I AM LOYAL TO ME! FREE I HAVE NO LIMITS I AM TRANSPARENT CONNECTED http://www.flickr.com/photos/trashd/1102373625 16 © 2011 IBM Corporation
- 17. Increasing power of the consumer IBM Institute for Business Value Internet Search, Friends/Family, and Social Media have become the preferred sources of information Q19 What are your preferred sources of information when you are looking for communications products and services? 76% Internet Search 70% 70% 65% Recommendations/ advice 64% 62% 53% Social Media 51% 48% 35% Websites communication providers 45% 37% 30% Traditional advertising 31% 43% 29% Emails/ promotional offers 22% 18% Emerging 17% Brazil Retail stores 19% 14% Countries Mexico Shopping portals/ auctions 17% 10% 17% 0% 20% 40% 60% 80%0% 20% 40% 60% 80% 17 © 2011 IBM Corporation Source: 2011 IBM Global Telecom Consumer Survey
- 18. Increasing power of the consumer IBM Institute for Business Value As consumers encounter new products, services and experiences on virtually a daily basis, they fell less loyalty towards specific brands Telecommunications Global (24 countries) average of advocacy levels in Telecommunications industry 18% 22% 60% Advocates Apathetics Antagonists Comparison of advocacy levels in Retail and Telecommunications industry Mexico Brazil US UK Germany Canada Italy France Retail 52% 51% 39% 34% 33% 32% 25% 26% Telecom 24% 17% 20% 20% 16% 13% 17% 21% 18 © 2011 IBM Corporation Source: 2011 IBM Global Telecom Consumer Survey & 2010 IBM Global Retails Survey
- 19. IBM Institute for Business Value Vast majority of the CSP CEOs therefore sense the new environment as more volatile, complex, structurally different and uncertain Changes in the global hierarchy Shifts in the way consumers communicate The New Economic Environment Increasing power of the consumer 13 19% 68% More volatile Deeper/faster cycles, more risk 12 23% 65% More uncertain Less predictable 25% 29% 46% More complex Multi-faceted, interconnected 35% 28% 36% Structurally different Sustained change Not at all/to a limited extent To some extent To a large/very large extent Source: Q7 To what extent is the new economic environment different? Volatile n=1514; Uncertain n=1521; Complex n=1522 ; Structurally different 19 n=1523; Telco n=73 © 2011 IBM Corporation
- 20. IBM Institute for Business Value The telecom industry has undergone significiant structural changes over the last decade How will it evolve over the coming years? 20 © 2011 IBM Corporation
- 21. IBM Institute for Business Value Giving the ongoing uncertainties, IBM undertook scenario envisioning, that enables the industry to assess alternative contrasting futures What are the trends: Revenue and Profitability - Certainties (high degree of consensus) outlook for each scenario - Uncertainties (multiple outcomes) Future 2008 Survivor Consolidation Market Shakeout Clashof Giants Generative Bazaar Scenario C Scenario D Scenario A Present Scenario B Major economic, competitive Critical Success Attributes: and technological events that - Scenario-specific trigger a particular scenario - Cross-scenario 21 © 2011 IBM Corporation
- 22. IBM Institute for Business Value IBM analyzed the forces shaping the future of the telecommunications industry into 2015… services PSTN decline accelerates VOIP (incl. mobile VOIP) grow usage Ubiquitous and seamless access USAGE/ High digital content consumption SERVICES Communication remains fragmented INDUSTRY FORCES SHAPING STRUCTURE AND FUTURE OF ACCESS Broadband pervasive as TV REGULATION TELECOM Mobile broadband favors LTE New infrastructure Ultra low-cost devices grow competition from One in three devices is government, municipality smartphone, MID, or Netbook Net Neutrality remains Mobile and fixed termination converge Pure plays disappear BUSINESS MODEL Voice monetized as a feature of connectivity Green Telecom revenues 3rd – party revenues Cost structures changes 22 © 2011 IBM Corporation
- 23. IBM Institute for Business Value ….and potentially high-impact variables (13) that can have 2, 3 or 4 alternative outcomes…… Telco 2015 SCENARIOS Addressable Market/ Industry / Growth Areas Integration Model Demand for Voice Open versus closed communications devices Expanding SCENARIO 3 SCENARIO 4 Premium Silo vs. unified Network sharing vs. /Enriched communications Outsourcing Connectivity Machine-to- OTT vs. Network Vertical vs. Addressable machine (M2M) optimized content Horizontal Integration communications market Service Pricing User vs. 3rd Party New Verticals Model / ad funded Declining/ Ultra-fast Stagnant SCENARIO 1 SCENARIO 2 Broadband Regulatory Availability Uncertainty Concentrated/ Fragmented/ Vertical Horizontal 13 high-impact uncertainties that can Dominant Industry / have 2, 3 or 4 alternative outcomes integration model 23 © 2011 IBM Corporation
- 24. IBM Institute for Business Value …and developed most likely scenarios, within the sphere of possible futures, for the telecommunications industry in 2015 Telco 2015 SCENARIOS • • Disaggregation of Carrier collaboration Carrier Assets and alliances • • Involvement Govern- End-to-end Vertical Expanding CLASH OF GENERATIVE ment, Municipalities Market solutions GIANTS • BAZAR Fragmentation • Mega Carriers • • Emerging Brands in Driven by Carriers Mature markets Addressable market • Reduce Spending Consumers SURVIVAL • MARKET ARPU Erosion Declining / Stagnant CONSOLIDATION • SHAKEOUT Investor Loss of Confidence • Cash Crisis Concentrated / Vertical Fragmented / Horizontal Dominant Industry / integration model 24 © 2011 IBM Corporation
- 25. IBM Institute for Business Value The Generative Bazaar is characterized by pervasive and open intelligent access for any person, object and device Two-sided Business Stimulate a Model range of new and Deploy exciting next gen Services ultra-fast by OPEN INNOVATION such as telemedicine and broadband immersive learning applications. Shift to a more connected world: Connecting anything and everything © 2011 IBM Corporation 25
- 26. IBM Institute for Business Value 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 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 26 © 2011 IBM Corporation
- 27. IBM Institute for Business Value IBM‟s IBV study identified scenario-specific critical success attributes and cross-scenario ones Telco 2015 SCENARIOS CLASH OF Common Critical GENERATIVE Expanding GIANTS Success Attributes BAZAR Cost-effective ultra-fast broadband strategy Agile, flexible, reconfigurable processes & infrastructure Addressable market Culture of innovation and collaboration Network /customer insights to optimize experience & cost Cost containment Declining / Stagnant SURVIVAL MARKET CONSOLIDATION SHAKEOUT Concentrated / Vertical Fragmented / Horizontal Dominant Industry / integration model 27 © 2011 IBM Corporation
- 28. IBM Institute for Business Value Our world is changing and becoming smarter It is becoming increasingly INSTRUMENTED By 2010, 30 billion RFID tags will be embedded into our world and across entire ecosystems It is becoming more INTERCONNECTED 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” Systems are becoming more INTELLIGENT Every day, 15 petabytes of new information are being generated. This is 8x more than the information in all U.S. libraries 28 © 2011 IBM Corporation
- 29. IBM Institute for Business Value The consumer is becoming smarter Instrumented Interconnected Intelligent They have They use multiple They have clearly instantaneous access to technologies to defined expectations information about interact with other of what they want from communication consumers and with their provider now and products, services, communication in the future provider and other providers consumers’ experiences through technology 29 © 2011 IBM Corporation
- 30. IBM Institute for Business Value Smarter CSPs can profit from the Big Data from their network and other customer information to enhance the customer experience Data Deliver Customer Data Ingestion Transformation Experience Transactional Data Transactional Data Historical Data Referential Data Referential Data Sets Historical Data Network/Customer insight to deliver a distinctive customer experience which goes beyond satisfaction and creates an emotional engagement with their CSP 30 © 2011 IBM Corporation
- 31. IBM Institute for Business Value Industries are becoming smarter, and Communications Service Providers can play a crucial role on enabling smarter industries Smarter energy Smarter Smarter Smarter Smarter solutions and utilities government healthcare transportation for retail Smarter banking Smarter insurance Smarter Smarter Smarter telecommunications chemical and electronics petroleum 31 © 2011 IBM Corporation
- 32. IBM Institute for Business Value To respond to these challenges and strengthen critical success attributes, CSPs must think and act differently – become smarter TELECOM INDUSTRY Cloud Customer experience Adjacent Industries Smart Analytics Smarter Smarter Smarter Smarter Smarter energy and governm healthca transporta solutions utilities ent re tion for retail Smarter Smarter Smarter banking insurance telecommun Smarter Smarter ications chemical and electronics petroleum New Business Models © 2011 IBM Corporation 32
- 33. IBM Institute for Business Value Ultimately, the opportunity is for telecommunications to become “the middleware for the smarter planet” LOGISTICS GOVERNMENT MEDIA & ENTERTAINMENT RETAIL L IT G R M I C H F E CONSUMER ELECTRONICS ENERGY & UTILITIES HEALTHCARE M FINANCIAL MANUFACTURING 33 © 2011 IBM Corporation
- 34. IBM Institute for Business Value Muchas Gracias Rob van den Dam Global Telecom Industry Lead IBM Institute for Business Value www.ibm.com/iibv [email protected] 34 © 2011 IBM Corporation