Convergence Business Challenges and Threats

1. Convergence Business Challenges and Threats International Telecommunications Union Convergence Telecommunications Forum Business Challenges and Threats Amman, Jordan 16 July 2002 Khalil ABURIZIK, ITU Arab Regional Office Email: aburizik@itu.int Web: http://www.itu.inthttp://www.ituarabic.org

2. Agenda The new Telecom Market The trend is Convergence The platform is IP The strategy is Alliance The model is Services The future is Mobile From dot.coms to dot.gones

3. The State of the Market • Increasing competition • Around two-thirds of telecom subscribers now have a choice of operator • More than 99 per cent of mobile and Internet subscribers now have a choice of operator • Dominantly private-ownership • 19 out of top 20 top public telecom operators are partially or fully private-owned • Of the top 20 mobile operators, 16 are fully-private, 3 are partially private, 1 is state-owned • Independent regulators • There are currently 115 independent regulators (only 13 in 1990)

4. Selected Trade Principles • Market access • Access to foreign market on reasonable, non-burdensome terms • Access to telecommunication transport networks • Transparency • Rules of the game clear for all players • Most-favoured nation • Preferential market access granted to most favoured nation made available to all signatories • National Treatment • Foreign service providers treated no less favourably than domestic ones

5. Telecom Reform: Creating independent regulators 115 Regulatory agencies, 104 world (cumulative) 93 85 74 55 42 33 30 26 16 13 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: ITU World Telecommunication Regulatory Database.

6. The New Telecom World:Private, competitive, mobile & global • Private • More than half the world has a privatized incumbent operator; > 80% has some form of private participation • Competition • Majority allow mobile & Internet competition • De facto competition in international & local services • Mobile • Surpassing fixed • Globalization • Operators • Multilateral agreements • Services By country By telecom revenue “Most countries have initiated a reform process. Still, much fine-tuning remains to be done.”

7. Getting the recipe right • Assessment of telecom market and telecom development is based on three essential ingredients: • Competition • Private sector participation • Independent regulation

8. Global Tele-Economy: Revenues US$ Billion Source: ITU

9. “Old economy” and “New economy” Networks: What’s the Difference? “Old economy” network • Hybrid analogue/digital • Circuit-switched • Highly regulated • Priced per minute • Distance-sensitive pricing • Generally state-owned and operated • Accounting rate system means cash flows from net traffic generating to net traffic receiving countries “New economy” network • All digital • IP (packet-switched) • Largely unregulated • Priced per megabyte • Distance-insensitive pricing • Generally privately-owned and operated • Peering and transit system means cash flows from net traffic receiving to net traffic generating countries

10. Internet Trends • Phenomenal Growth Projections in all Regions. • New Types of Alliances and Partners. • New Business Models and Revenue Streams. • Core Platform for Convergent Services. • Reduced Set-up Costs for Start-ups.

11. The Trend is Convergence • Convergence is Breaking Industry and Service Barriers • Broadcasting Companies --> Voice and Network Services • Telecom Operators --> data network and financial services • Computing Companies --> Broadcasting (TV services) • Financial Institutions --> Data network access Services • Voice Services provided over data networks (VoIP) • Data Services over broadcasting networks (DVB) • Broadcasting services over data networks (WebTV, Radio) • Voice and Data Services over electrical power lines • TV Stations Using Web as another Distribution Channel

12. The Platform is IP • Rapid Evolution in Several Platforms • Fixed Networks (dial-up, ISDN, Satellite, leased line) • Digital Mobile Data Services (GSM, WAP, I-mode) • Streaming Media (WebTV, VoIP, Cable Modems) • Household Appliances (TVs, Microwaves, Refrigerators) • Wireless Access (PDA + Mobile, Bluetooth) • Broadband (xDSL, DWDM, UWA, 3G Mobile - IMT2000) • Power-line Technology For Internet Access • Fixed Mobile Convergence (WAP)

13. The Strategy is Alliance • No Single entity holds answer to puzzle, traditional carriers and operators are converging to provide the new services: • Broadcasting Companies + Access Providers = TV-based Internet access and e-tailing • Content Providers + Network Carriers = Distributed Content delivery and Hosting • Mobile Operators + Financial Institutions + Software Firms = Mobile e-Payments • Fixed Operators + Broadcasting Companies = Voice Services via TV Networks • Energy Companies + xSPs = Powerline Internet Access • Operators + Financial Companies = ePayment Solutions • And Small Businesses + Big Businesses =Survival

14. The Model is Services • 1- Application Service Provisioning (ASP) • Deploy, Host, Manage, Rent Access to Applications for businesses from a central location with security, availability and performance. • Issue: Finding the Right Position in the ASP Value Chain • 1. Network Access Services (Network Connectivity) • 2. Content Distribution Services • 3. Community and Hosting Services • 4. Business Productivity and Communications Solutions • 5. Application Integration and Work-Group Solutions • Network --> Services --> Applications --> Content --> Portal

15. NSP - Strategies • 2- Network Service/Access Provisioning (NSP) • Reliable, low-cost, high speed access for Businesses and Consumers • Issue: Finding the model for reliable and affordable Internet Access to All. • 1. Determine Appropriate Pricing Policy for Services • 2. Take Advantage of New access Technologies • 3. Forge Strategic Alliances with New Bread of Carriers • 4. Migrate from Traffic to Content Delivery Services

16. Why Change • the rapidrate of change of technologies and its falling costs, • the convergence of technologies, services and industries and the process of globalisation, • the phenomenal growth of the IP networks (e.g. Internet) and the proliferation of pervasive computing, • the emergence digital wireless mobile data services and technologies (Bluetooth, WAP, GPRS and IMT2000), digital TV, voice recognition, Internet appliances and Broadband IP (xDSL, DWDM ) access, • the increase in mergers, alliances and powerful new players, • the breakdown of geographical, time and industry sector barriers, • are perpetuating the phenomenon of e-convergence and introducing new opportunities and challenges to developing countries.

17. E-Business Drivers • Better Shopping Options, Price Comparison, Cost-effective and Rapid Market Expansion. • Drive to Streamline Business Processes and Customer Demands • Search for New Revenue Streams by moving up the value-chain as Profits Margins for Voice Traffic Declines. • Operators Capitalising on Customer-base and Investments.

18. We found the missing link: It’s mobile communications Telephone subscribers & internet users millions 97 countries have more mobile than fixed phones Fixed Internet Mobile 2002:Mobile surpasses fixed “Mobile has raised access to communications to new levels… policy-makers must look to mobile as a way of achieving social policy goals.”

19. One gap closes, another opens up Total telephone subscribers Per 100 inhabitants International Internet bandwidth, Per capita, 2001 x112 x171 x10’327

20. Jordan, Arab Countries and the World

21. M-Commerce Drivers (1) • High growth rate expected due to lower deployment cost and speed of deployment. • Mergers and alliances between mobile operators, equipment manufacturers and service providers creating opportunities for new services. • Convergence to IP as platform is facilitating access to existing IP-based services through WAP and I-mode. • Problems of low speed on 2G platforms and limited WAP services will be resolved as migration from circuit-switched to packet-switched networks continues. • Migration from time-based tariffs to volume-based tariffs will create opportunities for IP-based services and content. • Security (SIM and PIN codes) on Mobile terminals (as PSEs) encourage secure e-payment solutions.

22. M-Commerce Drivers (2) • Falling prices for high speed processors and reduction in their sizes will transform mobile devices to powerful handheld computers. • Global Standards (ITU-T/ITU-R Recommendations) will enable global interoperability, create critical mass and reduce deployment cost. • Pre-paid services will provide low-entry cost for subscribers but might have negative impact on operator revenues as customer loyalty reduces. • These drivers will affect the business models for operators as voice revenues decline. • … But they also present new markets for innovative operators and service providers what can capitalise on the opportunities brought about by these changes.

23. M-Commerce Applications Banking - Accounts, Statements, Bill payments and Fund Transfers Payments - Credit cards, Micro payments and Pre-paid Trading -Stock quotes, Notifications of events. E-Government - E-voting and E-admin, E-payment Retailing – Subscription and Direct sales Entertainment - Interactive TV and Live Music

24. Mobile Commerce Services • Security Services • Access Control • User Authentication • Digital Signatures • Non-repudiation • Data integrity

25. The dot.com euphoria What Happened to the New E-economy? • Building market share and dominance was vital. • Long term future was justification for high share prices. • Cash and profits were secondary. • Technology used as a business rather than enabler. • Unlimited cash injections from Venture Capitaists VCs and Initial Public Offers IPOs. • Business models too complex for VCs and investors. • Having an Internet Strategy was the guaranteed component for success. • More than USD 3 trillion lost when the bubble burst.

26. The dot.com euphoria That was bricks and mortar to bricks and clicks to clicks and clicks to bricks and clicks Can these pitfalls be avoided? Does this affect e-commerce growth?

27. Reinventing Telecoms Thank you, See you at: www.itu.int www.ituarabic.org