Er det penger i bredbånds-telefoni? Arild Nilsen, CEO Telio Holding AS

1. Er det penger i bredbånds-telefoni?Arild Nilsen, CEO Telio Holding AS

2. Who and what is Telio • Founded 2003 by VoIP veterans • Management and advisory board include many of the worlds pre-eminent SIP and VoIP experts • The leading access independent “primary line replacement” VoIP provider in Europe. • Adjusted for market size, fastest growing VoIP provider in the world • The first and largest Internet Premium Services Operator in Norway • Serving close to 90.000 end users in Norway, Denmark and Holland • Profitable from first year of commercial operations.

3. Er det penger i bredbånds telefoni? • TJA?

4. Hvem tjener penger i bredbåndstelefoni? • I USA er det mer enn 1100 VoIP operatører • FÅ ELLER INGEN HAR OVERSKUDD • I Norge er det ca 35 VoIP operatører • KANSKJE BARE TELIO SOM HAR OVERSKUDD?

5. Hvorfor er det slik? • Telio halverte den årlige snittprisen for en vanlig telekomkunde når vi startet • Fra ca 4600 kr/år til ca 2300 kr /år • Satte standard for nye aktører • Valg av forretningsmodell er kritisk • Modell med 0 fastavgift dømt til å mislykkes • Ingen fastavgift til å drive organisasjonen • Attraherer de som ringer lite • Modell med høy fastavgift og gratis ringing fungerer • Gir fastavgift til å drive organisasjonen • Attraherer de som ringer mye og de får høy verdi

6. Er det mulig å tjene penger fremover? • Ikke trivielt, men umulig med feil forretningsmodell • Men, ikke nok med riktig forretningsmodell • Krever god execution dvs både godt management og dyktige ansatte • Med en ekstremt lean and mean organisasjon • God forståelse av hvor bransjen går og hvilke muligheter/trusler • som IP kommunikasjon gir… • …og evne til å implementere endringer raskt • Telio tilfredstiller disse kriteriene • Over 30 VoIP operatører i Norge • De fleste vil dø ut … • …eller fusjoneres inn i større selskap fordi de ikke behersker alle kriterier

7. Hva tror Telio fremover? • Er VoIP bare reduserte priser på fasttelefoni? • Eller er det den fullkomne deregulering av telekom? • Og har vi bare sett starten på endringene?

8. The key drivers of growth of IP • Technology :IP fundamentally changes how the different components of a communications network relate and interact with each other. • Money : Old network structures were “natural monopolies”. Economic benefits to consumers of moving to the open, competitive structure of IP are ENORMOUS.

9. “NEW WORLD” “OLD WORLD” IP TV/VIDEO ON DEMAND VOICE (fixed AND mobile) GAMING WLAN Radio Ethernet Fiber PPPoE Copper Ethernet Cable Ethernet Fiber Cable TV TV broad- casting Mobile voice POTS Service (> Layer 3) GSM (UMTS) Data (Layer 2) UHF Frequency switching PSTN Access Physical (Layer 1) Copper Radio Radio Cable Internet fundamentally changes howthe parts of a network relate to each other This is NOT “just another telecom technology shift”

10. 100 years ago a similar shift happenedin another communication network!

11. Consumers’ constant search for “cheaper and better” is the engine of change • Voice revenues globally are more than 1000 (one thousand !) billion USD per year • In Norway, Telio’s pricelist applied on fixed and mobile networks would give 10 billion NOKs back to the consumer, reducing voice revenues in Norway from 30 to 20 Bn NOKs • Worldwide, this would reduce voice revenues by some 30%

12. The implications for incumbents ?

13. No, not the apocalypse, but.... • It is the end of service providers as “signaling and transport providers” • Internet is the transport provider • With “peer-to-peer SIP” even the signaling move to the edges • Success in an “open” IP based world will come to those able to best define the new natural value adding roles in different market segments. • Value add potentials will differ by customer segment and evolve over time. • Customer loyalty must constantly be re-earned • Being perceived as “fair” and “caring” is paramount • Maximizing ARPU may even destroy value !!!

14. The business implications of IP going wireless will be dramatic • The distinction between fixed and wireless voice become meaningless • Nearly triples available market size • Make it obvious for consumer that VoIP limited to POTS replacement become inferior product • Make it clear that bundling voice with fixed broadband access may not be most “natural bundle • Enhanced competitiveness of access independent VoIP providers because separation of access and service is “built into the genes” • May force cellular carriers to transform themselves to wireless ISPs

15. IP Phase 4 : All IP Distinction between fixed and mobile meaningless Wimax Radio 802.20 Radio HSDPA Radio Ethernet Fiber PPPoE Copper WLAN Radio Ethernet Fiber Ethernet Cable Fixed voice FMC technology Mobile voice GSM (UMTS) PSTN Phase 1 : Fixed line replacement Phase 3 : MVNO Partial convergence at production level Radio Copper Phase 2 : VMO Integrated billing & support The roadmap to an all-IP world “OLD WORLD” “NEW WORLD” MVNO VMO All IP voice - fixed and mobile PSTN replacement + xtra IP features VOICE

16. Fixed mobil convergence critical part of long term strategic positioning “All IP” fixed-mobile convergence “Good Vibrations” “The sun always shines on IP” Fixed line replacement “Desperado” “Born to run” International Norway Markets

17. and the convergence between historically disparate services will not stop.. • Media convergence • Convergence between voice, video and text • Presence awareness • GPS combined with call screening/status info • Find me/follow me services • “The network becomes your secretary”

18. But what about quality of service (QoS)... • Applications specific QoS issues should be solved at the endpoints/in software. • Network based QoS techniques are all variations of emulating circuit switching in a packet network! How does that make sense ? • The cheapest, best and most scalable approach to network based QoS is increased bandwidth!

19. and what about stricter regulation...... • Regulation of VoIP sold as replacement service is a good thing! • Telecom is “mission critical” society infrastructure • “VoIP is many things” and consumers easily confused about “what is what” • but... • Important that the regulation of VoIP does not inhibit innovation • Blueprint of PSTN regulation is “bad idea”, especially with regard to emergency services

20. On IP, one business model does not fit all • If you try to be something for everyone, you risk being nothing to anyone => Know your target customers ! • Substitute product requirements very different from supplement product requirements. • An attractive offer for a “high volume” user very different than an offer for a “low volume” user. • Important features for a “tech savvy” user very different from a regular “John Doe”.

21. …Successfully attracting high volume callers Minutes usage per day (in and outgoing)

22. No longer : “One ring to rule them all” But instead : “Small Pieces Loosely Joined” In short : “The world order” has changed

23. Successful execution not easy going forward • Superior understanding of the technological opportunities and challenges of VoIP • Superior understanding of the market opportunities created by IP-networks • Superior understanding of the threats and challenges of moving VoIP to replacement product • Superior understanding of the sources of revenues and costs in both a VoIP and telecom operation • Extremely targeted market approach : ”100 % better for 20 % of market preferable to 20 % better for 100 % of market.” • A managed network • A “no frills” low cost operation • A superior team to execute the above !!!