STL Partners - business model innovation in the TMT sector

Four End Game Scenarios for Fixed and Mobile Access

Future Broadband Business Models Series

This report shows four possible end-game scenarios for Telcos and other Broadband Service providers (BSPs):

  • "Telco 2.0 Broadband Player"
  • "Happy Dumb Pipe"
  • "Government Department"
  • "Marginalised"

It shows the roadmap and strategies that could lead to each scenario and profiles the consequences of each in terms of growth potential, industry positioning and profitability.

The report is a 'must read' for CxOs, strategists and product managers seeking to develop their business strategies and position their products, both within Telcos and BSPs and for the community of business partners and vendors.

  • 100+ pages
  • Manuscript fomat
  • Detailed outline and contents outline below
  • Publication date: October 2009

For further information or to pre-order email contact@telco2.net or call +44 (0) 20 7247 5003 for details.

Background

Broadband continues to grow in both market penetration and sophistication, with the addition of fibre and mobile access looking certain to generate continued change in years to come. However, while speeds and mobility are improving, there are complex challenges to the business model for service providers.

Massive growth of online video traffic, competition in content and value-add services from Internet players, shifting regulatory constraints and volatile consumer behaviour all represent obstacles to profitability. Industry structures are changing with recession-led consolidation, as well as with the entry of new horizontal market participants like CDNs (content delivery networks).

The changing environment contains both opportunities and threats. How Telcos and other Broadband Service Providers (BSPs) and their partners anticipate and respond will determine in large measure their future success.

Report Abstract

Fixed and mobile broadband are going to continue to grow but new business models will be necessary to help justify extra infrastructure investment - unless governments decide to subsidise commodity broadband for wider political and macroeconomic reasons

Figure 1: Forecast Growth in Global Mobile Broadband Computing Users

source: telco 2.0, disruptive analysis

some of the new business revenue will come from "retail" enhancements (e.g.s pricing and bundling innovations), and there are already some good examples of this. however the really large and attractive numbers involve wholesale and two-sided propositions.

these propositions are based on the 'two-sided' telecoms business model theory that broadband capacity can be sliced and diced and sold to "upstream" media or application providers. the report examines theoretical use cases and some compelling potential business models.

Figure 2: the Two-Sided Telecoms Business Model

Two-Sided Telecoms Business Model

As ever, the art is in the execution, and there are significant complicating factors. For example, some arguments in the regulatory environment are highly controversial (e.g. net neutrality) and need to be resolved.

The current technologies, e.g. DPI, are far from perfect, and the Internet players have plenty of competitive and technical weapons at their disposal. Many telcos also have huge legacies of technology and entrenched attitudes, as well as inflexible organisations.

Last, but by no means least, many customers currently quite like Telcos to behave like dumb pipes - providing they work.

Differential Quality of Service (QoS) has been the subject of a lot of hype, while some in the Telco community remain ever hopeful of the ability to charge for certain services, but whether this is a reality remains to be seen.

The report examines some successful win-win models, working on the principle that this is more likely to find success than attempts to "tax" independent application providers.

Some telcos will make the transition to multi-layer Telco 2.0 style business models. Others will be happy to be profitable pipes. Still more will procrastinate or over-reach themselves, and fall at the hands of government, customers, Internet players or their more competitive peers.
The report highlights the opportunities - and the pitfalls, and makes recommendations about walking the tightrope.

Who is it for?

  • Telco strategy departments
  • Central Telco libraries & market research functions
  • Broadband services marketing departments (fixed, cable and mobile)
  • Vendor audiences, typically marketing / business development / strategy
    • Fixed broadband access equipment vendors
    • Wireless network radio & transport vendors
    • IP core suppliers
    • Fixed-broadband terminal suppliers
    • Mobile broadband device suppliers
    • Policy management, DPI & control specialists
    • Billing & OSS suppliers
    • Silicon and "enabler" providers
  • Regulators and other Government departments
  • Investors
  • Consultants & integrators

Please email contact@telco2.net or call +44 (0) 20 7247 5003 for more details or to pre-order.

Draft Chapter Outline

Introduction

  • Business model innovation
  • The framework
  • Telco 2.0 philosophy and two-sided markets

Recommendations

  • For fixed BSPs
  • For mobile BSPs
  • For broadband infrastructure vendors
  • For software & BSS/OSS suppliers
  • For Internet application providers
  • For devices & PC vendors
  • For regulators
  • For investors

Today's broadband market landscape

  • Trends in adoption, penetration & usage
  • The rise of mobile broadband
  • Overall market statistics
  • Typical usage models & applications
  • Fit with adjacent markets
  • Towards fibre
  • The political background - stimulus packages, economic & social goals etc
  • The core issue: monetising the pipe
  • The vendor landscape

Fixed broadband - new retail models:

  • Triple-play / Quad-play
  • Incremental services (eg online storage & backup, security etc)
  • Prepay fixed broadband
  • Cable vs ADSL vs Fibre - same models, or fundamentally different?
  • Video providers: the power-brokers?
  • Examples of best/worst practice

Mobile broadband - from empty spectrum to capacity crunch

  • Review of marketplace - dongles, iPhone, flat rate etc
  • Golden goose or trojan horse?
  • An even bigger problem than fixed broadband - physical limitations vs. revenues
  • Will new technology help? LTE, WiMAX, femtocells...
  • New retail models

Applying distribution & wholesale models to broadband - the theory

  • Is distribution an appropriate model? Or is it too one-directional?
  • Non-telecom distribution networks (eg financial, shipping, energy)
  • Fit with CDNs
  • Where analogies break down

Advanced broadband wholesale propositions: Use cases and the real world

Note: this chapter to include one full Use Case plus snapshots / descriptions of various other potential scenarios. ("Mini use cases"). It will discuss general business models for wholesale (eg free-to-user sponsored data/content, application-embedded etc.) before drilling into specific examples.

  • Where are we today? What is changing?
  • Wholesale in the context of broadband access
    • Transport wholesale vs. other capabilities
    • Virtual network operators
  • Classifying wholesale / 2-sided business models
    • 3rd-party ("sender") pays data
    • Platforms vs. individual contracts
    • Value-added service options
  • Region / country considerations
  • Detailed use case: TBD but probably something around video distribution, or YouTube-on-TV type proposition. Maybe online backup. Probably fixed as more real-world
  • Other use cases:
    • Government & public sector (municipal authorities, social inclusion, digital divide)
    • Advertising & marketing (customer data etc)
    • Content providers (3rd-party paid data etc)
    • Utility companies (smart grid etc)
    • Other

Net neutrality vs. differential QoS and charging

  • Framing the debate - current legal & commercial status
  • The vision: Telcos in a stronger position to negotiate with 3rd party content/service providers
  • The technology - DPI, policy management and related architectures
  • The legal and regulatory environment
  • Mobile QoS - an order of magnitude more difficult
  • Devil's advocate - can it really work, or are there insurmountable technical & commercial obstacles?
  • Realistic use cases & deployment scenarios, timelines, other variables

Forecasts and future trends

  • Modelling the future of broadband access
  • Baseline numbers (customers, devices, etc)
  • Scenarios and sensitivities (e.g. economy, government initiatives)
  • Sources of value - wholesale, retail, VAS

Please email contact@telco2.net or call +44 (0) 20 7247 5003 for more details or to pre-order.

Fit with other Broadband Reports

This report is one of the Future Broadband Business Models Report Series of in-depth analyses of the Broadband market.

This completely new report focuses specifically on the evolution of fixed and mobile broadband access in the light of recent trends in mobile broadband deployment, expected fibre rollouts, and a shift towards new wholesale & VAS models.

It looks at the potential for Telco 2.0 type revenues, in particular 'new wholesale'; broadband revenues, in the light of real-world market developments, the economy and technology & regulatory evolution. The report will also include some brief information on key vendors and regional differences.

Companion Reports:

  • "Beyond bundling: winning the new $250Bn delivery game" examines the structural opportunities and potential technical strategies for the next 10 years, including the more infrastructure-oriented aspects of wholesale such as IP data transit, renting-out of fibre/towers and local-loop unbundling, and identifies an overall $250Bn opportunity over this period.
  • "The impact of video on broadband business models" analyses the development of online video, identifies possible market winners and losers, and sets out three interlocking scenarios depicting the evolution of the market. In each scenario, the role of Broadband Service Providers is examined, possible threats and opportunities revealed, and strategic options are discussed.

NB We also offer packages of reports - please email contact@telco2.net or call +44 (0) 20 7247 5003 for details.

 

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Updated 17 August 2009