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Coping with OTT

Coping with OTT. Richard Jones richard@venturateam.com. OWNERSHIP AND LEARNING. RETAIL TRIPLE-PLAY OPERATOR (FTTH/B/xDSL) Rated number 4 in the World for service value. SWEDISH COMMUNICATIONS OPERATOR The clear market leader in Swedish open access network automation and management space.

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Coping with OTT

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  1. Coping with OTT Richard Jones richard@venturateam.com

  2. OWNERSHIP AND LEARNING RETAIL TRIPLE-PLAY OPERATOR (FTTH/B/xDSL) • Rated number 4 in the World for service value SWEDISH COMMUNICATIONS OPERATOR • The clear market leader in Swedish open access network automation and management space. • 20 networks managed with 200 service providers STRATEGY, TECHNICAL AND REGULATORY CONSULTING • World’s first gigabit everywhere network for an incumbent • Detailed planning support for $3 billion network investment • Creation of mini-NBN in Oman (FTTH) GLOBAL COMMUNICATIONS OPERATOR • World leading experience in running ultra-efficient open access and exclusive networks • Targetting smart cities, campuses, alt nets

  3. Times are changing…

  4. Only 16% of mobile operators think overall revenues will go up due to OTT* Times are changing… Source Mobile Squared report

  5. Cooper’s Law is now broken…. Lasted 100 years… now broken Radio capacity doubles every 2.5 years 1G – 2G was 1000x increase in capacity 2G – 3G was 1000x increase in capacity

  6. Consumer demand for faster fixed broadband will continue to grow Source: Ventura Team study for FTTH Council Europe

  7. Beta results from Ventura’s European model support the view that you have to select FTTH locations carefully Only 50%-70% homes are economic anywhere (at most)

  8. Bandwidth costs can be a killer • If you assume an unlimited broadband service then you can look at the monthly costs per user of providing IP transit • You clearly cannot afford to pay some of these prices so you may have to: • limit bandwidth use per user • find ways to reduce your IP transit charges (tricky if you don’t have your own gateway)

  9. How much more are they prepared to pay for double the speed? Source: Ofcom

  10. …and the challenges can be extreme • In one country, payback would take 500 years to renew a particular customer’s line • The incumbent would rather give them a mobile contract and an iPad to go away

  11. The fibre business case is challenging…

  12. …and LTE is clearly easier

  13. The impact of Internet content is clear…

  14. …but it’s not TV versus computer any more

  15. The OTT attack comes in many forms Netflix users average 30 Gbytes per month and xbox 360 users taking 80 gigabytes* 25% of international voice minutes on Skype 5% of messaging now on WhatsApp Not to mention… security, pure back up, etc. Source Ventura Team LLP and *Sandvine

  16. The OTT attack comes in many forms Nawras (mobile operator in Oman) saw $43 million of SMS “Vaporised” in 2012 by WhatsApp Ross Cormack - CEO Not to mention… security, pure back up, etc. Source Ventura Team LLP and *Sandvine

  17. Net neutrality under threat and unusual consequences Free blocking Google ads (and being hit by the regulator) Mobilink Pakistan CAUSE: YouTube was blocked for blasphemous content. EFFECT: Overall net was down from 2.3 Gig to 1.6 Gig. UNEXPECTED CONSEQUENCE: YouTube is cached locally and users started searching for the same content from DailyMotion etc. – sites which are not cached RESULT: Net traffic went up

  18. So what can be done?

  19. For media services Minimise the impact of… • Cord cutting – cancelling pay TV subscription • Cord shaving – reducing pay TV subscription By… • securing or maintaining access to premium content • bundling OTT with traditional pay-TV business models to ‘cover bases’

  20. Create strategic partnerships to stay ahead of the competition Vodafone + Facebook = 20% gain in data subscribers 3UK + Skype = lowered churn (as competitors such as Orange block Skype) Google + Sprint = unique features (e.g. MMS) for Sprint users = more subscribers

  21. Virtualise the Set Top Box • Telecom Italia’s Cubovision will work on speeds as low as 1.5 Mbps • Radically improves coverage potential • Note - Some territories don’t have the networks to support this type of service

  22. If you can’t beat the OTT threat… If you can’t beat them… join them • 3 in the UK working with Skype – balancing voice revenue decline on international versus market share increase If you can’t beat them… stop them • The number of mobile operators blocking OTT services has almost doubled from 5.4% in 2011 to 10.5% in 2012, and the number of operators imposing surcharges has trebled from 5% to 15.8%* • In the long run – unlikely to work If you can’t beat them… make them pay • Operators looking to provide CDN services (e.g. AT&T provide CDN’s for Facebook) but in 2011, 2% of fixed broadband customers used > 250 GB per month • Mobile operators can monetise the OTT challenge through data charges but the traditional cash cows of voice and SMS will decline *Source Mobile Squared report

  23. If you can’t beat the OTT threat… However…with YouTube now uploading 72 hours of video each minute Operators like dU thinking about monetising this… There is value for big content providers and retailers in localisation Reducing page load time for ‘major’ sites such as Facebook by 2 seconds reduces lost page views by 16% = impact on customer satisfaction Tagman researched impact of page load time on Glasses Direct conversion rate (right). http://blog.tagman.com

  24. Some operators actually are doing worse than they need to… …Increase their paying subscribers by 9.8%? OR Reduce their network usage by 9%? How much do they need to pay for that?

  25. Thank you… • Market Experience • Egypt • Qatar • Oman • Saudi Arabia • Bahrain • UAE • Poland • Ireland • UK • German • Mali • Sweden • Hungary • Greece • France • Rwanda • Estonia • Operator Experience Includes: • Telecom Egypt • Vodafone (various operations) • Atheeb Consortium (Saudi) • Millicom International Cellular • Batelco • Colt Communications • BT • STC • Pipex • Riksnet • Cable and Wireless • Eircom • Turk Telekom • Bulgarian Telecom • Invitel+Pantel • Neuf Telecom • Deutsche Telekom • MLL Telecom • Richard Jones - Partner • richard@venturateam.com • mobile: +44 7811 166033

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