the second derivative: new opportunities in telecom
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Stratus World 2006 – Las Vegas. The Second Derivative: New Opportunities in Telecom. Roderick K. Randall Senior Managing Director Vesbridge Partners. Why Start or Invest in a Telecom Company?. Why do you rob banks, Willy? “Cause that’s where the money is” Willy Sutton - PowerPoint PPT PresentationTRANSCRIPT
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The Second Derivative:New Opportunities in Telecom
Roderick K. RandallSenior Managing Director
Vesbridge Partners
Stratus World 2006 – Las Vegas
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Why Start or Invest in a Telecom Company?
• Why do you rob banks, Willy?
“Cause that’s where the money is”
Willy Sutton
Bank Robber
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Where are the New Opportunities?
• Answer:
The Second Derivative
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Second Derivative Plays
• The Base
Internet infrastructure
Starting with narrowband and moving to broadband.
• The First Derivative opportunities
Internet based companies such as AOL, Amazon, Yahoo, Google, eBay, and others
• The Second Derivative Plays
Skype - $4 Billion!
Moogle, MeBay, Mamazon, Metc.
Mass Personalization and Citizen Media
MediaCos (not Telcos or CableCos, but Network TV without the Network)
Voogle – Video Search Based TV Ad Delivery
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A Network Carol
• The Ghost of Christmas Past
• The Ghost of Christmas Present
• The Ghost of Christmas Future
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The Ghost of Christmas Past
• Telecom was the most valuable and profitable industry in the world
When I joined AT&T Bell Labs in 1981 it was the worlds largest company and its most valuable
• We’ve since seen Divestiture and Trivestiture, (and now reassembly!) along with a tremendous growth in the competitive environments…
• Along with a dramatic surge in capacity and capability in the following 25 years..
• Spurring in turn a tremendous surge in innovations, not the least of which included the internet and the web
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LGNs: Last Generation Networks
• Voice and Connectivity
• Local and Long Distance
• Bandwidth in $/Minute, $/Mile,
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Worldwide Telecom Service Revenues$1.4 Trillion in 2005
Source: IDC
$1.0 Trillion
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The Ghost of Christmas Present
• Strong demand for higher and higher bandwidth
• Increasingly Pervasive “always on” Broadband
• Enabling the 1st derivative business models to enormously prosper such as those of Amazon, Yahoo, eBay, and Google
• Google is now worth over $100 Billion, which is more than any telecom operator in the world, except for Vodafone Group, which has grown by acquiring over 26 operators
• Skype was already acquired for $4 Billion by eBay
• P2P traffic from a small percentage of subscribers dominates the internet backbone
• All telcos are planning some form of IPTV in a triple play with 10s of Mbps of BB BW
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The Ghost of Christmas Future
• A number of potential futures
• One is where telcos ride the new wave of opportunity by radically transforming their business models to meet the new challenge
• Another where telcos are ridden by the new 2nd derivative players, some of which are the 1st derivative players who have evolved and are now gear-shifting into overdrive
• Let’s look at the second one first, because that’s what Dickens would do
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Key Catalysts
• Plentiful Consumer Broadband in capacities un-dreamed of 10 years ago…
• Driven by the MAD Winner-Take-All competitive threat of The Triple Play …
• Driven by the push to mix Entertainment Delivery with Telecom…
• Digitally using IP…
• At low costs…
• Even free…
• Or “apparently” free to the consumer…
• Using a new advertiser supported business model…
• Which is no longer broadcast based…
• And everything is stored on increasingly abundant cheap storage, and instantly retrievable by anyone anywhere
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What Do You Call 1,024 Petabytes?
• And the answer is…
An Exabyte• How many Petafiles could a woodchuck chuck, if a wood
chuck could chuck wood?
• Terabytes of Storage will become common place in the average broadband consumer home within 5 years
• As the tendency to keep rather than discard data increases, along with more sources
• What is a Googabyte?
1 with 100 Zeroes of bytes
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Magnetic Disk Storage Cost:Declining at a Rate of 45% Annually
Cost of 1G Byte of CapacityCost of 1G Byte of Capacity
1992 1994 1996 1998 2000 2002 2004 2006 2008
$1,000.00
$303.00
$92.00$28.00
$8.37 $2.53 $0.77 $0.23 $0.07
$1,000.00
$100.00
$10.00
$1.00
$0.10Source: Berghell Associates, 2001
Cost of 1GigaByteof Hard Disk Storage
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A New $1 Trillion Industry…
• It will be made up from the convergence and collision of three different industries
Entertainment: $72 Billion
$12 Billion Music
$60 Billion Movies
Advertising: $600 Billion
Telecom Services:$1.4 Trillion
• The Tail may be wagging the Dog
• Net Net: $2 Trillion $1 Trillion
• But, there will be a different set of winners and losers
• Key Catalysts: Read on…
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Enter Googlezon
• EPIC 2014, a short film by Matt Thompson and Robin Sloan
• Ads move from broadcast TV, newspapers, print, billboards, other, to Online
NY Times shuts down, unable to support its printing costs
• Mass personalization makes advertising much more compelling both to advertisers and potential customers
• Google buys Amazon to create Googlezon
• Everything that’s bought begins with a search
• With personalized, search driven, real-time inserted, online Ads…
People get ads that they actually want to watch,
Related to something they are interested in purchasing,
Rather than are annoyed by and seek to skip
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Which Becomes Googlezonage
• TV is offered for free, again, this time Pointcast over IP, not broadcast All supported by a real-time hyperlinked Mass Personalized Ad model NBC, ABC, CBS shut down, replaced by Bloggers MTV, Fox, and Craig’s List survive as the new Ad Aggregators (a la
Overture)
• Telephony rides for free on IP, leading to financial crisis in network operators
• All telcos learn to operate within bankruptcy like the airline industry
• Google buys SBC (out of bankruptcy) and Vonage to keep the broadband pipes flowing
• Wireless is the only surviving stand alone network business But its threatened by Googlezonage’s new Global WiFiMAX FreeNet Enter Googlezonage Mobile
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It’s a MAD MAD World
• M.A.D.: Mutually Assured Destruction for telcos and cable operators
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But, There’s An Alternative Future
• Telcos and Cablecos not only offer IPTV, but get involved in Internet TV
• They add intelligence in their networks to make sure they are paid for the value of connection in order to keep the pipes alive
• Nobody unsustainably gives valuable network connections away for free without someone paying the operators
• The new business models that are created involve a true payment methodology for QoS that reflects value, but that could be paid by sponsors such as advertisers
• New applications are spawned, which further institutionalize the network providers into the value chain, rather than Skype them out
• Connection will continue to be valued and paid for
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The Stupid Network is a Stupid Idea
• Stupid Networks lead to stupid and unsustainable Business Models
• Stupid Networks would ultimately only have price/bit as differentiation…
• Leading to rapid commoditization…
• Which drives profitability out of all competitors…
• Which makes the business un attractive…
• Which makes it un-finance-able…
• Which makes it un-staff-able with top talent
• Which leads to collapse
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Dimensions Of Network Intelligence
Signaling and Control Control
ManagementPSTN
ContentContent• Instant Messaging
• Multimedia messaging• Network Based Security• Parental Control• Spam Filtering• Intelligent Content Delivery & Management
• AIN Services•800/900, Caller ID/Name•Voice Mail, IVR
• Mobility• SMS• SIP• Fixed/Mobile Convergence
• DNHR• Self Healing Networks• Flow Through Provisioning• MPLS
Management
IP Enhanced3-D Intelligence
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IP
BSCRAN
SMSCHLR VLR Pre-Paid
U-AP
L-AP
M-AP
L-APPico Cellular
WiFi
Bluetooth
WiMax
WLAN GWY
IP
MF
W
WBSC
WiFi/SIPBSC
PSTN
SS7 HLRHLRHLRVLR
MG
SG
SS/MM
VLR
IMSHosted VoiceSvc Provider
SS
MS
MG
SG
A-Interface
GSMCDMA
WCDMA1x-RTT/EV-DO
HSDPAMSC MSC
Fixed-Mobile Convergence Architectural Environment
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IP
BSCRAN
SMSCHLR VLR Pre-Paid
U-AP
L-AP
M-AP
L-APPico Cellular
WiFi
Bluetooth
WiMax
WLAN GWY
IP
MF
W
WBSC
WiFi/SIPBSC
PSTN
SS7 HLRHLRHLRVLR
MG
SG
SS/MM
VLR
IMSHosted VoiceSvc Provider
SS
MS
MG
SG
A-Interface
GSMCDMA
WCDMA1x-RTT/EV-DO
HSDPAMSC MSC
SIP PBX
Fixed-Mobile Convergence Architectural Environment
MG
PBX
Residences
RemoteOffices
Broadband
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Fixed-Mobile ConvergenceFT Server Opportunities
SIP PBX
IP
BSCRAN
SMSCHLR VLR Pre-Paid
U-AP
L-AP
M-AP
L-APPico Cellular
WiFi
Bluetooth
WiMax
WLAN GWY
IP
MF
W
WBSC
WiFi/SIPBSC
PSTN
SS7 HLRHLRHLRVLR
MG
SG
SS/MM
VLR
IMSHosted VoiceSvc Provider
SS
MS
MG
SG
A-Interface
GSMCDMA
WCDMA1x-RTT/EV-DO
HSDPAMSC MSC
MG
PBX
Residences
RemoteOffices
Broadband
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Intelligent Content DistributionEvery Song, Artist, Video, or Film Ever Recorded… On Demand
Home Media Server
Guest Room Master Bedroom
Home Theatre
DSL/CableModem
EthernetSwitch
DSL
Fiber
Cable Network EdgeNetwork Core
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Intelligent Content DistributionContent Replication and Pre-Caching
Home Media Server
Guest Room Master Bedroom
Home Theatre
DSL/CableModem
EthernetSwitch
DSL
Fiber
Cable
Local DVRs
• Store most recent tv shows
• Favorites
Home Media Server
• Store all purchased and downloaded content
Movies
TV shows
Pictures
MP3s
Etc.
Network Edge DVR
• Store the most popular content:
Most downloaded movies
New releases
Most popular MP3s
Network Core DVR
• Store all content:
All movies available for download
All Music available for download
All Video...
Network EdgeNetwork Core
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Intelligent Content DistributionPolicy Control Servers Control Network Enforcement
Home Media Server
Guest Room Master Bedroom
Home Theatre
DSL/CableModem
EthernetSwitch
DSL
Fiber
Cable
Local DVRs
• Store most recent tv shows
• Favorites
Home Media Server
• Store all purchased and downloaded content
Movies
TV shows
Pictures
MP3s
Etc.
Network Edge DVR
• Store the most popular content:
Most downloaded movies
New releases
Most popular MP3s
Network Core DVR
• Store all content:
All movies available for download
All Music available for download
All Video...
Network EdgeNetwork Core
Policy EnforcementPoint
Real Time Billing Policy Server
BW/QoSPolicy Server
PCS PCS
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Intelligent Content DistributionSearch Based Personalized Real Time Ad Insertion
Home Media Server
Guest Room Master Bedroom
Home Theatre
DSL/CableModem
EthernetSwitch
DSL
Fiber
Cable
Local DVRs
• Store most recent tv shows
• Favorites
Home Media Server
• Store all purchased and downloaded content
Movies
TV shows
Pictures
MP3s
Etc.
Network Edge DVR
• Store the most popular content:
Most downloaded movies
New releases
Most popular MP3s
Network Core DVR
• Store all content:
All movies available for download
All Music available for download
All Video...
Network EdgeNetwork Core
Policy EnforcementPoint
PCS PCS
Entitlement & DRM
Search based Personalization
Real Time Ad Insertion
PCS PCS
P2P Swarm Controller
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Intelligent Content DistributionControlled Peer-To-Peer Swarmcasting
Home Media Server
Guest Room Master Bedroom
Home Theatre
DSL/CableModem
EthernetSwitch
DSL
Fiber
Cable
Local DVRs
• Store most recent tv shows
• Favorites
Home Media Server
• Store all purchased and downloaded content
Movies
TV shows
Pictures
MP3s
Etc.
Network Edge DVR
• Store the most popular content:
Most downloaded movies
New releases
Most popular MP3s
Network Core DVR
• Store all content:
All movies available for download
All Music available for download
All Video...
Network EdgeNetwork Core
Policy EnforcementPoint
Entitlement & DRM
Search based Personalization
Real Time Ad Insertion
PCS PCS PCS PCS
P2P Swarm Controller
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Intelligent Content DistributionFT Server Opportunities
Home Media Server
Guest Room Master Bedroom
Home Theatre
DSL/CableModem
EthernetSwitch
DSL
Fiber
Cable
Local DVRs
• Store most recent tv shows
• Favorites
Home Media Server
• Store all purchased and downloaded content
Movies
TV shows
Pictures
MP3s
Etc.
Network Edge DVR
• Store the most popular content:
Most downloaded movies
New releases
Most popular MP3s
Network Core DVR
• Store all content:
All movies available for download
All Music available for download
All Video...
Network EdgeNetwork Core
Policy EnforcementPoint
Entitlement & DRM
Search based Personalization
Real Time Ad Insertion
PCS PCS PCS PCS
P2P Swarm Controller
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$1 Trillion Market Grows to $3 Trillion
• Oops, what’s that ringing sound?
• Was that the alarm clock waking me up from this dream, or is it a nightmare???
• You be the judge
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Thank You!
www.vesbridge.com