global trends in broadband - combining technology...
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Global Trends in Broadband -
Combining technology and marketing for success
Julie Kunstler, Principal Analyst
Alcatel-Lucent’s Ultra-Broadband Symposium - 19 November 2014 - Hong Kong
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The grass is not greener on the wireless side
LTE was meant to be a premium service.
Orange - October 2012 - “There will be an
LTE premium… We want to accelerate the
LTE rollout in France to get ahead of the
competition.
Orange - December 2013 - “Sosh, the
digital commitment-free brand, will include
4G in its €24.99/month mobile package,
which features 5G of mobile internet.”
Orange - April 2014 - “Prices have reached
floor level in France -- there can still be
wars, but not on tariffs…operators are
coming back to a more classic approach,
fighting on promotions, marketing and
costs.”
Monthly mobile traffic continues to grow:
Which leads to continuous growth (and cost) of
mobile data backhaul traffic.
M2M/IoT increases # of connected devices but does it
increase profit margins for communications service
providers?
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Consumers:
Want content all the time.
Want content everywhere.
Want multiple sources for content.
Want to pay less.
Are very sensitive to quality.
Some like bundling, some not so
much.
Do not think in terms of loyalty.
CSPs are responding:
Wireless - wireline acquisitions for
everywhere services.
Partnering with OTTs - benefit from
adversaries.
Moving to all-IP networking to reduce
capex and improve flexibility.
Building their own DCs to support
consumer and enterprise services.
Many moving away from “NIH”.
Owning subscribers requires improving the experience
Transforming from a pipe operator to a service provider means supporting subscribers with quality applications,
the ability to add/drop applications quickly and fast network resizing on-demand.
Wireline broadband solutions are abundant. Prices are continuing to decline.
Transformation requires intense cooperation between the pipe team and the marketing team.
SMBs and Enterprises:
• Want flexible networks to meet fast
changing requirements.
• Want managed services.
• Want seamless international services
at reasonable price points.
• Want secure, cloud-based services
with ability to quickly add/drop
services and applications.
• See CSPs as strategic business
partners rather than just necessity.
• Are very sensitive to quality.
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2014 - strong year for wireline broadband access equipment shipments
• 3Q14 preliminary data - shipments remain
high:
• Several vendors, including Alcatel-
Lucent, reached record levels.
Source: Ovum quarterly market share report
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Case studies: Vodafone - aiming for FMC (fixed mobile convergence)
AT&T - overcoming xenophobia
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Vodafone - buying into wireline
Acquisitions include:
August 2014 - Greece - Hellas Online
Vodafone agreed to acquire 72.7% for €72.7 million,
following its strategy to buy fixed network assets in markets
where it already provides mobile services.
March 2014 - Spain - Ono
Vodafone agreed to buy cable operator Grupo Corporativo
Ono in a €7.2 billion deal to boost TV and broadband
offerings.
June 2013 - Germany - Kabel Deutschland
Vodafone agreed to buy Germany’s largest cable operator,
Kabel Deutschland, for €7.7 billion adding TV and fixed-line
services to defend against mounting competition in
Germany.
2012 - UK - Cable and Wireless
Vodafone acquires Cable and Wireless for £1.044bn. Cable
& Wireless operates 20,500km of fibre-optic cables in UK.
Vodafone investor presentation on Kabel
Deutschland acquisition
Vodafone will use DT’s VDSL network under a bitstream (layer 3) agreement.
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Vodafone - power of fixed + mobile, expand revenues, save costs
Why acquire fixed networks? First stage of FMC - “relatively” simple:
Use acquired fiber networks for mobile
backhaul:
Save on leasing fiber, leading to lower
opex.
Lease fiber to other CSPs, leading to
increased revenues.
Offer quad-play services to consumers:
Support content everywhere.
Increase ARPU.
Reduce churn which saves on marketing
costs.
Use acquired data centers:
Offer data center services to customers,
leading to increased revenues.
Continue expansion of SaaS partnerships.
Strengthen financials
and competitive positioning
Quad play services for consumers
Expand into data center business
Use wireline network for
MBH (reduce leasing costs)
Expand services for enterprise customers
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Vodafone - managing many services, across many countries
Second stage of FMC - more complex, many variables:
Networks and operations in each country.
Revenues, earnings, subscriber forecasts by country.
Vodafone Group’s financial situation and macro-economics.
Vodafone Carrier Services - launched in May 2013
Grown its capabilities and credibility, has become a
leading player in the international wholesale
market, with one of the largest footprints in the
world.
Cutting cost was primary focus by bringing
Vodafone Group traffic on-net. Growing the group’s
international wholesale business is secondary goal.
Cloud-based offerings - just a few:
Vodafone Italia - JV with Artax Consulting for cloud-
based FMC solutions as well as Microsoft Office
365.
Vodafone Romania - storage, backup and restore.
Vodafone Qatar - mobile device management to
enterprises including GPS location, managed apps.
Vodafone UK - Vodafone and BAE signed a five
year partnership to supply businesses with secure
communications products and services.
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Vodafone - will need to expand OTT partnerships to wireline
Vodafone has expertise in building OTT partnerships for mobile delivery, a few
examples: Nov-13 Vodafone Ireland partnered with Spotify to offer Spotify services as part of its high-data plans. For Vodafone,
Spotify becomes a key brand attraction, making their smartphones instantly-enabled mobile music
machines. Subscribers can choose from a range of plans which include RED plan, Spotify Premium plus
250MB extra data for €5.99 per month, and Spotify Premium to ones existing bill pay plan for €9.99 per
month.
Ireland Spotify Music services
Sep-13 Dutch operator Vodafone began offering three months of free video-on-demand streaming via HBO Go with
its Red plans, as a campaign running until year-end to promote its 4G launch. At the end of the three-month
period, HBO Go access will revert to its usual price of €14.95 (US$19.70) a month.
Netherlands HBO Video service
Sep-13 Vodafone Ghana launched a promotion for the Nokia Asha device, under which prepaid subscribers who
buy a Nokia Asha 210, 302 or 206 will receive free access to WhatsApp for 30 days.
Ghana WhatsApp Messaging
Sep-13 Vodafone Ghana announced its plans to provide a 30-day trial of free access to WhatsApp on Nokia mobile
phones.
Ghana WhatsApp Messaging
Aug-13 Vodafone plans to bundle free access to pay-TV service Sky Go into its forthcoming Red subscription plans
for 4G. Free access will be for upto 2 years, depending on the plan.
UK BSkyB Video service
Aug-13 Vodafone plans to bundle free access to music streaming service Spotify into its forthcoming Red
subscription plans for 4G. Free access will be for up to 2 years, depending on the plan.
UK Spotify Music services
Jul-13 Vodafone India partnered with Twitter to provide the OTT service to its subscribers for free for a span of three
months. As per the agreement, the subscribers can access Twitter and tweet without being charged for data
usage.
India Twitter Social media
Jul-13 Vodafone Greece signed a partnership with Napster. The deal gives Vodafone Greece subscribers access
to a huge list of Greek and international music tracks. The service is offered free of charge for the initial three
months to both prepaid and postpaid customers. After the trial period, the users can access the service with
selected Vodafone products.
Greece Napster Music services
May-12 Vodafone Romania and Shazam signed a deal to offer Shazam to the operators prepaid customers. The
service is available at €5, €7, and €9 per month.
Romania Shazam Music services
Strong base in
mobile OTT
partnerships.
Must
extend/expand
service
offerings to
wireline
subscriber
base.
Source: Ovum OTT partnership tracker
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AT&T - the US leader has to evolve…and it won’t be easy
AT&T - 2nd largest wireless in US (behind Verizon), 2nd largest wireline (behind Comcast).
• November 2014 - AT&T plans to
acquire Mexican wireless company
Iusacell for $2.5 billion.
• AT&T will acquire all of Iusacell’s
wireless properties, including licenses,
network assets, retail stores and
approximately 8.6 million subscribers.
• Iusacell offers wireless service under
both the Iusacell and Unefón brand
names with a network that today covers
about 70% of Mexico’s approximately
120 million people.
• AT&T plans to expand Iusacell’s
network to cover millions of additional
consumers and businesses in Mexico.
• “Our acquisition of Iusacell is a direct
result of the reforms put in place by
President Peña Nieto to encourage
more competition and more investment
in Mexico. Those reforms together with
the country’s strong economic outlook,
growing population and growing middle
class make Mexico an attractive place
to invest,” said AT&T chairman & CEO.
Source: Ovum
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AT&T - success with bundles, acquiring Latin America TV market
Plans to acquire DIRECTV:
Drives AT&T’s ability to compete in
TV sector beyond current 22 state
area.
Drives AT&T as a leading pay TV
provider in Latin America where
DIRECTV has more than 18 million
subscribers.
Drives AT&T’s strategy to provide
video across all screens - laptops,
tablets, connected cars, airplanes.
Successful bundled-services strategy:
U-verse has more than 11 million subscribers, more than 2/3rds
take three or more services.
ARPU of $170 triple-play services (voice, video, data).
Primarily FTTN (node) but this year announced GigaPower -
expand ultra-fast fiber network - up to 100 candidate cities.
Source: AT&T and news reports
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AT&T - driving services, driving services and driving services
High-speed Internet Service for Fiber-Ready Buildings –
launching AT&T Business Fiber, a new U-verse High Speed
Internet solution for businesses. It is now available to
companies in AT&T Fiber Ready buildings in six markets.
Gives businesses access to AT&T’s high-speed fiber
backbone with available upload and download speeds of 300
Mbps, with future plans to offer speeds up to 1 Gbps.
Highly Secure, On-demand Access to IBM Cloud via
AT&T NetBond – Customers will be able to extend their
VPN to SoftLayer, an IBM Company. As a highly-secure on-
ramp to the cloud, AT&T NetBond also dynamically allocates
VPN bandwidth, allowing customers to use as much or as
little as they need. SoftLayer is the latest addition to growing
cloud services in the NetBond ecosystem, which includes
IBM, Microsoft, HP, CSC, Equinix, salesforce.com™,
VMWare and Box.
New API Platform for Resellers – AT&T announced a new
API that will help speed cycle times for select AT&T products
and give more control of the quoting and ordering experience
to solution providers participating in the company’s AT&T
Partner ExchangeSM reseller program.
Digital Life - AT&T has entered the home-automation segment
with its Digital Life service, which merges home-security
monitoring with functions such as motion sensing and energy
monitoring.
The company’s intent is to provide an ecosystem and a platform,
meaning users don’t have to deal with multiple apps to control
multiple devices in their home.
Digital Life is an alternative to Pulse, from home-security company
ADT. However, it is vulnerable to cheaper, DIY home-monitoring
solutions, such as Dropcam.
Package Monthly
price
Description
Simple Security $29.99 Professional installation and monitoring; access via PC and
mobile; wireless communication
Smart Security $39.99 Same as Simple Security, plus ability to add automation
packages
Add-on automation packages
Video-camera package $9.99 One outdoor camera; live or recorded video; motion sensing
Door package $4.99 Garage-door controller, pushbutton-door lock, or touch-screen
door lock; control locks/openers from mobile device or P;, keyless
entry
Energy package $4.99 Light-switch control, smart plug, thermostat; adjust lights and
temperature from mobile device or on set schedule
Water detection $4.99 Three temperature and water sensors; leak notifications and
ambient temperature monitoring
Water control $9.99 Water controller, three temperature and water sensors; same as
water-detection package, plus ability to turn off water remotely
Sources: AT&T and Ovum
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AT&T - SDN and IP plans underway, regulator issues continue
Network On Demand SDN
(announced September, 2014):
Will enable companies to order,
add, and alter their own network
services on the fly using a self-
service online portal.
The service will launch
commercially in Austin (Texas) in
late November.
AT&T intends to expand the rollout
to select U.S. markets in 2015.
Benefits include provisioning new
communications ports in days
compared to weeks.
AT&T wants to shut-down its PSTN and move to an all IP
network. Goal is to do so by 2020.
AT&T is working with the FCC (Federal Communications
Commission).
Major issues concern rural telephony and emergency call
services.
March 2014, AT&T filed a petition to trial an all-IP phone
network in two cities. It noted:
In the 22 states where AT&T is the legacy ‘phone company,’
more than 70% of residential consumers have abandoned
legacy phone service choosing instead to go with wireless
services or VoIP services.
Number of housing units still connected to circuit-switched
services provided by the legacy phone company has dropped
below 20 percent in some areas.
Cannot sustain a shrinking TDM network in parallel with a
growing IP network.
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M2M and IoT - an older Informa report on Vodafone’s M2M business
• Vodafone is a major
competitor in both
national and
international M2M
markets.
• Vodafone is known to
acquire companies with
specialist M2M
knowledge.
• Vodafone provisions all
Amazon Kindles that
are sold outside of
North America.
(2012 data)
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M2M and IoT - revenues yes but what about profitability?
Total Cellular M2M Service Provider Revenues by Service Layer -
Global
Global cellular M2M service revenues reached $25bn in 2013 and will
rise to $66bn by year-end 2019, for a CAGR of 18%.
Where is there profitability for CSPs?
Likely in managed connectivity for
SMBs and enterprises.
Vodafone’s “Project Spring” plan:
Development of enterprise products
and services: extending our M2M
reach to 75 countries.
AT&T’s M2M solution:
M2M Control Center
M2M Application Platform
Pre-configured M2M Applications
Global SIM
Source: Ovum
Sources: Vodafone and AT&T websites and press releases.
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Summary thoughts…
From the wireline network
perspective - the broadband
solution toolbox is robust
(finally).
The challenge is how to use
the tools to develop strategic
and profitable products for a
wide range of customers.
And many customers operate
over numerous geographies.
And many customers have
numerous choices regarding
service providers.
Paragon Innovations - 2005
And while we are not building a swing, many challenges
remain the same.
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