a look into the future of telecom future world trends summit

© 2012 IBM Corporation

IBM Institute for Business Value

A Look into the Future of Telecom

Rob van den Dam Global Telecommunications Industry Leader




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.

2



3

Agenda

Key Technology Trends

Four Future Scenarios

A short Look Back

Disruptive Forces

The Middleware for a Smarter Planet



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

19

99

20

01

20

03

20

05

20

07

20

09

20

11

Mobile subscriptions

Internet Users

Fixed Telephone lines

Fixed BB Subscriptions

Mobile BB Subscriptions

1999: Access to

telephone

of any kind

± 15%

2011: Mobile-

cellular

subscriptions

± 85%

Over the past decade global communications penetration - and

mobile cellular telephony specifically - has been phenomenal

Telecom Penetration 1999 - 2011

4



CSPs* in developing markets have proven they can grow and

generate high levels of profit from low ARPU customers….

0%

20%

40%

60%

80%

100%

120%

140%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Developed

Developing

2,1

6,05,0

2,7

4,5

8,2 8,1

9,3

54%

23%34%

43% 46%

33%

65%60%

0

2

4

6

8

10

0%

10%

20%

30%

40%

50%

60%

70%

(USD/ month) ARPU

Bangladesh India Indonesia Pakistan Philippines Algeria Ukraine Peru

Emerging Markets mobile ARPU and

EBITDA margin (2010)

Telecom Penetration

2001

2011

Total 719

million

Mobile Cellular Subscriptions

Total 6

billion

EBITDA margin *Communications Service Provider 5



….and they were even leading the way in adoption of the SMS-

based data lifestyle applications

Indian operator Tata’s service

‘mKrishi’ allows farmers to send

queries and receive

personalizes services

M-Pesa allows users to

deposit, withdraw, and transfer

money easily with a mobile

device. It is a system of

microfinancing that is widely

used in Kenya and Tanzania.

China Mobile offers ‘Nong Xin

Tong’ for farmers to provide

news, weather information and

details of farming-related

government policies (50 million

users)

Mobile messaging-based applications to deliver public information, advisory,

mobile payment, money transfer and basic banking services to rural communities

6



Then came the era of mobile internet, data, a mass of applications, and

the ability to also send images/video from everyone to everywhere

Nbr applications:

- iPhone Apps > 500K

- Android Apps > 600K

- Window Phone > 100K

App Stores

Mobile internet subscriptions Q3 2011

Voice

Data

Mobile data

In 2011 sold:

- 490 Mio Smartphones

(63% 10/11 growth)

- 210 Mio Notebooks

(7.5% 10/11 growth)

- 63 Mio Tablets

(274% 10/11growth)

Smartphones/Tablets

0%

10%

20%

30%

40%

50%

20

07

20

08

20

09

20

10

20

11

Developed

Developing

7



The communications ecosystem continues to evolve

“NEC to buy Convergys

business support ops…”

(March 22, 2012)

“AOL sells patents to Microsoft in

$1.056 billion deal”

(April 9, 2012)

“Smartphone sales forecast to hit 1B

in 2014”

(April 13, 2012)

“DoCoMo mulls increasing stake in

Indian mobile network”

(March 26, 2012)

“Vodafone’s Australian

operation put on the market”

(March 16, 2012)

“Nokia rating cut to one level above

junk”

(April 16, 2012)

“BYOD: The inmates

of the asylum have

control”

(Apr 17, 2012)

“Millennials are leading the social media explosion”

(April 13, 2012)

“Vodafone buys Cable & Wireless

in ‘major step up’ ”

(April 24, 2012)

“T-Mobile Announces Q4

2011 Results, Loss of over 700,000

Customers”

(February 23, 2012)

8

http://www.mobilebusinessbriefing.com/?elq=c5681ce457c347c197a765a520320223



Dramatic forces are radically altering the telecommunications land-

scape, confronting CSPs with both major challenges and opportunities

Disruptive Over-

the-Top (OTT)

Competitors

Rise of Social

Media

Explosion of

Mobile Data

Empowerment of

Consumer

Active Government

Involvement

Change in Global

Hierarchy

9



OTT providers – in particular the top 4 – are expanding their

dominant position in the communications landscape

10

= 1/2

The massive shift in value continues towards the OTTs as capital markets

prize the direct customer relationship and value provided by OTTs,

>>>>>>> reducing the CSP valuation back to utility status!

70% of market cap

Market Value

Market

Value of

Top 25

drivers

of

Internet

traffic

Market

Value of

Top 150

Telecom

Providers

10



Mature

Emerging

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237;

Social Networking has become a key communication channel

for many people as alternative for traditional communication

81%

68%

67%

66%

64%

64%

63%

63%

60%

60%

53%

51%

49%

47%

46%

46%

45%

44%

42%

41%

40%

34%

24%

36%

South Africa

India

Greece

Mexico

UAE

Sweden

Brazil

Russia

Portugal

China

South Korea

Poland

Italy

Canada

UK

Spain

Czech Republic

US

Australia

Germany

France

Netherlands

Belgium

Japan

Daily Access to

SOCIAL NETWORKING SITES

72% 67%59%

53%43%

20%23%

24%30%

35%

7% 10%16% 17%

22%

0%

20%

40%

60%

80%

100%

Below 25 25-34 35-39 40-49 Above 50

66%57%

44% 42%

26%

22%

26%

29% 29%

30%

12% 17%27% 29%

45%

0%

20%

40%

60%

80%

100%

Below 25 25-34 35-39 40-49 Above 50Daily Weekly Occasionally

Mature

markets

11



Mobile data (really video) explodes, causing significant capex

and opex pressures on CSPs

597

2379

4215

6896

10804

1252

2011 2012 2013 2014 2015 2016

Middle East & Africa

Central & Eastern Europe

Latin America

North America

Western Europe

Asia Pacific

59 7

12 52

2 3 79

4 2 15

6 8 9 6

10 8 0 4

2011 2012 2013 2014 2015 2016

Mobile VoIP

Mobile Gaming

Mobile File Sharing

Mobile M2M

Mobile Web/Data

Mobile Video

Global Mobile Data Traffic, 2011–2016 (TB x 1000/ month)

70.5

%

20%

40%

23%

18%

2011

• Global mobile data grew 2.3-fold

• Mobile video traffic exceeded 50%

• Average smartphone usage tripled

78% CAGR

Source: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011–2016.

2016

• Mobile data traffic will increase 18-fold

• 2/3 of mobile data traffic will be video

12



Consumers now have unprecedented power to build & demolish

brand strength as they blog, text and comment via Social Media

Greetings,

I am disappointed to learn that Verizon Wireless

plans to institute a new $2 fee for paying bills

online…. Your company should not assume that

it can do anything to your customers and

that we will allow it to happen…

Within 24 hours, more than 100,000

people had signed a online petition:

12/30/11 Press Release:

“Verizon Wireless has decided it will not institute

the fee for online or telephone single payments that was announced earlier this week.

The company made the decision in response to

customer feedback about the plan…”

77% Tell friends/

family bout

their poor

experience

81% Avoid

Providers

with poor

experience

48%

9%

10%

44%

51%

56%

31%

7%

19%

23%

41%

45%

65%5%

16%

25% 56%

61%

Attempt to

redial/reconnect

Avoid providers with

whom friends had bad

experiences

Tell friends about my

poor experience

Contact customer

service

Switch providers, -

e.g. use a different SIM

My provider proactively

contact me

What happens when being disconnected?

Always Most/ sometimes Never

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237

12/29/11 Press Release: “Starting January 15, a new $2 payment

convenience fee will be instituted for

customers who make single bill

payments online or by telephone”

13



Active government involvement means increasing

regulations

EU

“The EU’s long-term

vision is to reduce

mobile terminating

rates in member states

to levels comparable to

fixed termination. EU

roaming regulations …”

“put broadband under

an existing set of rules

governing telephone

services rather than its

current status as a

lightly regulated

information service”

Small government, light

regulation Move or return to unrestrained

market with limited state

ownership or regulatory reform

Big government, heavier

regulation Greater government involvement,

more regulation and government

as a stakeholder in strategic

businesses

14% 16% 70%

70% of Telecom CEOs

anticipate heavier

regulations ahead

2010

Global

CEO Study

14

http://www.google.nl/imgres?imgurl=http://www.atcb.com/images/FCC-logo.gif&imgrefurl=http://www.atcb.com/documents.asp&usg=__wGnk5lOhmavKZBxEj_wu4tTp1p0=&h=467&w=648&sz=11&hl=nl&start=3&um=1&itbs=1&tbnid=Aei55tZpdhwZeM:&tbnh=99&tbnw=137&prev=/images%3Fq%3DFCC%2Blogo%26um%3D1%26hl%3Dnl%26sa%3DN%26rlz%3D1G1GGLQ_NLNL350%26tbs%3Disch:1



Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237

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?

The global hierarchy is changing as we see a shift of economic

power from mature to emerging markets

40%

30%

22%

21%

16%

7%

6%

6%

3%

2%

-7%

-10%

Utilities

Food & drinks

Transportation

Mobile Telephony

Clothing

Holiday/vacation

Mobile Broadband

Pay television

Electrical appliances

Fixed Telephony

Going out

Sports

Mobile Telephony

Mobile Broadband

Transportation

Pay television

Utilities

Elect. Appliances

Fixed Telephony.

Net Increase/Decrease

Holidays

Food & drinks

Clothing

Going out

Sports

4%

-3%

-6%

-10%

-14%

-16%

-18%

-19%

-19%

-23%

-32%

-24%

Utilities

Food & drinks

Transportation

Mobile

broadband

Mobile Telepony

Pay television

Sports

Fixed Telephony

Clothing

Holiday/vacation

Electrical

appliances

Going out

Mobile Telephony

Mobile Broadband

Pay television

Fixed Telephony

Holidays

Clothing

Going out

Sports

Net Increase/Decrease

Transportation

Utilities

Food & drinks

Elect.Appliances

Mature Mature

markets

Q4 2011 Mobile Operators

Service Revenue Growth YoY: 9.7%

Q4 2011 Mobile Operators Service Revenue Growth YoY: 0.6%

Expected Consumer Spending Expected Consumer Spending



16

CSPs are confronted with a number of uncertainties whose contrasting

outcomes signal distinctly different scenarios for the future

Vertical vs. Horizontal Integration ?

Regulation ?

Network sharing vs. Outsourcing ?

Open vs. closed

devices ?

User vs. 3rd Party /

ad funded ?

Addressable

Market Growth

Competition/

Integration Structure

OTT vs. Network

optimized content ?

Silo vs. unified

communications ?

The Future of

Voice ?

Expansion into

Adjacent Verticals ?

Premium

Connectivity ?

Source: IBM Institute for Business Value (IBV) and IDATE Analysis

Service Pricing

Model ? M2M

communications ?

Ultra-fast BB

Availability ?



Giving the ongoing uncertainties, IBM undertook scenario envisioning,

that enables the industry to assess alternative contrasting futures

17

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



Mapping the extremes of the possible outcomes related to the

uncertainties reveals four contrasting scenarios

18

Telco 2015 SCENARIOS

Dominant Industry / integration model

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

• Co-op of

infrastructure

providers

• Open & Affordable

connectivity to

any person/object

GENERATIVE

BAZAR



The study further identifies scenario-specific critical success attributes

and cross-scenario ones

19

Telco 2015 SCENARIOS

Dominant Industry / integration model

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



Advances in network technology, analytics, cloud computing, social

collaboration tools and security help CSPs to prepare for the future

20

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

Networks Faster/Smarter

Networks Analytics

Advanced

Analytics

Cloud

Computing

Cloud

Computing

Social

Collaboration

Social

Collaboration Security Security

Technology

Ultra-fast

Low Capex

Wireless optimization

Sensory-based (support M2M)

Intelligent site operations

Self-organizing

Etc.

Big data

Embedded

Predictive

Unstructured

Intelligent decision-making

Customer experience

Etc

Maturation/past the hype

Private/Public/ Hybrid

Efficiency improvement

New cloud services/models

Value creation

Etc.

Collaboration with partners, employees, consumers

Product/Service innovation

Social Tools

Consumer sentiment

Etc..

Threats (malware, cybercrime, etc)

Disaster recovery

Fraud control

Trusted identity

Data protection

Etc.



The industry has decided in favor or FTTx and LTE for ultra-broadband

access, in combination with WiFi mobile offload and femtocells

71%

67%

44%

43%

27%

20%

8%

27%

33%

48%

48%

39%

42%

38%

2%

7%

9%

34%

38%

54%

0% 20% 40% 60% 80% 100%

FTTx

4G/ LTE

3G

xDSL

CATV

2G

WiMAX

Critical to Success Neither Not Critical to Success

Which of the following access technologies are

going to be critically important to the success of

your business over the next 5 -10 years?

Telco 2015 Telecom Industry Survey N=61 (IBV Survey) Idate Yearbook 2012

0

50

100

150

200

2009 2010 2011 2012 2013 2014 2015

Rest of the World

Asia/Pacific

Europa

North America

0

100

200

300

400

500

2012 2015

MEA

Latan

Asia/Pacific

CEE

Western Europe

North America

Million

subscribers

Million

subscribers


Networks

FTTx

WiF

i

WiFi

Mobile

Data

Offload



Governments can become a major catalyst for bringing communication

infrastructure to the population and to spur economic growth

22

A nationwide ultra high speed fiber access infrastructure and a

complementary pervasive wireless network in Singapore to

• support the needs of the users and to allow them to thrive in

the global environment

• spur innovation in the various vertical sector economies

• enhance Singapore's global competitiveness

The Australian government setup a National Broadband Network as

a ‘game changer’ for consumers and international competitiveness:

- Fiber with speeds > 100 Mbps with 90% coverage

- NGN Wireless with speeds > 12 Mbps

The Vive Digital Plan, including a national fiber optic infrastructure, in

Columbia to bring technology in the life of every Colombian to:

• reduce poverty

• generate employment

• improve international competitiveness

• achieve prosperity for all


Networks



23

Advanced analytics will help CSPs to gain customer insight from the

Big Data in their network, social media and other customer information

Data

Transformation

Transactional Data

Referential Data

Transactional

Data

Historical

Data

Referential

Data Sets

Historical Data

Data Ingestion Network &

Customer Insight

Social Media Social

Media

Imp

roved

Cu

sto

mer

Exp

eri

en

ce

Analytics Advanced Analytics



Advanced analytics holds enormous potential to create personal

experiences that adapt to subtle changes in user-defined context

24

Customers

Operations

Sales

Markets and competitors

Human resources

Risk management

Financials

Supply chain

83%

55%

67%

47%

39%

32%

25%

40%

Draw Insight

from data Acces to data

Translate Insight

into Decisions

Telecom Industry CEOs identify customer

insights as the most critical investment

area (Global CEO Study 2012)

In which areas do you plan to improve your ability to draw

meaningful and executable insights from available information?”

Watson can sift through an equivalent of

about 1 million books or roughly 200

million pages of data, and analyze this

information and provide precise answers

in less than 3 seconds

Analytics Advanced Analytics



25

Healthcare Community

Online

Performing current

business more

efficiently and

effectively

Deliver horizontal and

vertical Cloud-based

applications based on

new business models

Develop radically

different value

propositions, or create

new customer needs

E.g. Cloud Telephony E.g. Cloud-based eHealth systems E.g. Cloud TV

The evolution in Cloud has now reached a tipping point where it can create and deliver business value for CSPs

On the back of Cloud technologies CSPs will play a key role

in value creation

Cloud

Computing

Cloud Computing



Cloud computing will increasingly be used in partnerships and in new

and innovative ways to transform business models

Cloud

Computing

Cloud Computing



Social Collaboration will increasingly involve employees, partners

and customers to develop innovative products and services

27

leading the conversations that

define brands

self-forming teams around

fast moving opportunities

becoming on-demand

extensions of the enterprise

Employees Customers Partners

11%

73%

In 3 to

5 years

Today

Global CEO Study 2012: Social Media to engage customers

Social business enables the flow of new ideas for new products and services

regardless of their location inside and outside the organization

Social

Collaboration

Social

Collaboration



Advances in security technology must secure protection against threats

to personal, national and global security from cyber criminality

28

Drivers for addressing security

• Applications are migrating towards the Cloud

• BYOD – employees want to use their own device

• Growth in mobile

• Need for secure virtualized environment

• Increased threats, including malware, cybercrime, phishing

• Business continuity and disaster recovery

• Compliance with regulations (fraud / data privacy)

• Identity theft

• Brand damage

Security Security

Technology

“Cybersecurity is one of the most serious

economic and national security challenges we

face as a nation, but one that we as a

government or as a country are not adequately

prepared to encounter”



29

Billions of camera phones, billions of RFID tags embedded into our world and across entire ecosystems

At the end of 2011 2.3 billion people were on the Web …. and a trillion connected objects – cars, appliances, camera, roadways, pipelines – will comprise the “Internet of Things”

90% of the world’s data was created in the past 2 years. 2.5 quintillion bytes of data created every day

It is becoming increasingly

INSTRUMENTED

It is becoming more

INTERCONNECTED

Systems are becoming more

INTELLIGENT

Our world is changing and becoming smarter



30

Industries are becoming smarter, and CSPs can play a crucial role in enabling smarter industries, …..

Smarter energy and utilities

Smarter

government Smarter

healthcare Smarter

transportation Smarter solutions

for retail

Smarter banking Smarter

insurance Smarter

education

Smarter

chemical and petroleum

Smarter

electronics



….in providing smarter services to consumers in mature

markets, and…..

Retail/Shopping Banking/Insurance Healthcare

Public Services Utilities Travel & Transport

Nbr 1: Receive Mobile

coupons/Discounts (46%)

Nbr 1: Location-based

insurance claims (48%)

Nbr 1: Reminders for

medications/appointments (55%)

Nbr 1: Find nearest

public/government agencies

(37%)

Nbr 1: Time table for public

transportation (46%)

Nbr 1: Receive notifications of

electric/gas/water service

outages (46%)

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237; Mature Countries N=8865; 31

Mature Mature

markets

Vert

ical

Mark

et

ap

plic

ati

on

s r

an

ke

d a

s #

1 b

y

co

ns

um

ers

su

rve

ye

d i

n m

atu

re c

ou

ntr

ies



…. to consumers in emerging markets

Retail/Shopping Banking/Insurance Healthcare

Public Services Utilities Travel & Transport

Nbr 1: Receive Mobile

coupons/Discounts (40%)

Nbr 1: Manage bank

accounts through mobile

device (50%)

Nbr 1: Reminders for

medications/appointments (61%)

Nbr 1: Pay for local services

(e.g. car parking) (47%)

Nbr 1: Pay for public

transportation (56%)

Nbr 1: Alert when monthly usage

reaches pre-set threshold (60%)

Source: 2011 IBM Global Telecom Consumer Survey, Global N= 13237; Emerging Countries N=4372 32

Vert

ical

Mark

et

ap

plic

ati

on

s r

an

ke

d a

s #

1 b

y

co

ns

um

ers

su

rve

ye

d i

n E

ME

RG

ING

co

un

trie

s



The opportunity for telecommunications is to become “the middleware

for the smarter planet”. …..

33

R L

M

C E H M

I G

F

RETAIL

LOGISTICS MEDIA &

ENTERTAINMENT

CONSUMER

ELECTRONICS ENERGY & UTILITIES

HEALTHCARE

MANUFACTURING

IT

FINANCIAL

GOVERNMENT



…and to stimulate economic development and prosperity, and

improve lifestyle for people in both mature and emerging countries

34



35

Thank you

Rob van den Dam

Global Telecom Industry Leader


[email protected] www.ibm.com/iibv

a look into the future of telecom future world trends summit

Documents

ibm corporation5

business valueover

business valueagenda

business valuethen

business valuecsps

business value ott providers

mobile payment

business valuedramatic