Martin Geddes's presentation at eComm 2008

The Two-sided Telecoms Business Model

Re-thinking the phone company14 March 2008

Martin Geddes, Chief Analyst, STL [email protected]

- 2 -© STL Limited • Proprietary and Confidential

Before we begin…


Telecoms is a freight business for bits

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Voice, video,

web, messages


Container shipping: precedent

Containers vs.

IP packets


Container shipping lessons

Value-based pricing of the

containers doesn’t work

#1



New technology and lowered costs are not

enough

#2



Increasing returns to scale for

infrastructure

#3



The ports get the money, not

the shipping lines

#4



People pay most for logistics solutions

#5


One sidedmarket

Multi-sidedmarket

…with a twist


Limits to retail growth


Voice & Data Core Service Pressures

2017

% of Total Mobile Voice Minutes, Europe

2007 2012

Traditional Telephony

IP-Enhanced Carrier Telephony

Private Voice Apps & Handsets

Other


The telephony interaction pyramid

Comm-unities

Relationships

Conversations

CallsRendezvous

VO

LU

ME

TE

LE

PH

ON

Y

SO

CIA

L N

ET

WO

RK

ING


Telcos: still not product innovation businesses

How well do we as an industry understand what additional needs users have for voice and

messaging products, over and above what they have today?


Revenue opportunities

OPEN APIsPRIVACY

FEATURESREAL-TIMESERVICES

CALLINGFEATURES

StronglyAgree

Agree

N=83

INTERNALLY-DRIVEN INNOVATIONEXTERNALLY-DRIVEN

INNOVATION


Yes, but…

What’s the business model?


Introducing 2-sided markets


Today: Revenue only from 1 Side

Content, Apps, Devices

Network & Termination

Interconnect & Storage

Consumers

$ $Enterprises

SMEs

Multi-Nationals

Suppliers = Costs

End Users = Revenue

Telco

Products (partners’)

Products (own)

Packets & Platters


Tomorrow: Revenue from 2 sides

$

‘Upstream’ Customers ‘Downstream’ Customers

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco – Retail

Millions of Customers

Thousands of Segments

Content Owners

Telco$


Telcos have many valuable but latent data assets

MY PERSONAL DATA

MY STUFFMY IDENTIFIERS

MY INTERACTIONS

MY RELATIONSHIPS

MY CONTEXT

MY DEVICES

Name

Address Gender

ProfilePreferences

SIM SoftSIM

Serial NumberDevice details

Location Presence

On/OffRoaming

Pictures Videos

CalendarAddress Book

Bank School

FriendsWorkplace

Browsing History

.mobi domains QR Codes

MY CREDIT

Bad debt Demographics

Average balance

Number SIP address

IP AddressEmail


Google Envies Operators in Key Areas

1. Sub-Scale in:

1. Voice & Messaging

2. Billing & Payments

3. Retail sales and customer care

4. Interoperability

2. Limited Knowledge of Customer

Google increasingly paying for inventory, skills & data

MY PERSONAL DATA

MY STUFFMY IDENTIFIERS

MY INTERACTIONS

MY RELATIONSHIPS

MY CONTEXT

MY DEVICES

Weak!

MY CREDIT


Telco Future: 3 x business models

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco (Retail)

$$

Telco Retail

Telco Wholesale

$$$$

$$

Up

stre

am P

artn

ers

Do

wn

stream E

nd

Users

Telcos

Payments between telcos



Telco Platform

Payments between telcos


Examples of2-sided markets


Learning from the master


Google: Lowers transaction costs

HUGE SCALE

FREE products for end users

CHEAP advertising for brands=

+

LOW COST per transaction

+

Massive investment in Google platform


Betfair: Stock Exchange for Gamblers

Bookie Punter‘To Win the Champions

League’


Strong Growth from Big Scale Platform

• Explodes in 2003 following launch of open API for bookies

• More transactions than all European stock exchanges COMBINED


A New Telco Proposition?


Additional Telco Value Proposition

Now:Bundled voice,

messaging, video and

internet access

Next:

PersonalisedLogistics Services

for Data


Logistics Services in the Physical world

1. DistributionCollectionMulti-Modal TransportDelivery

2. B2B VASTax & Duty ManagementDocumentation ManagementDenied Party ScreeningScheduling & Supply Chain ManagementSystems IntegrationTracking & Monitoring


‘Personalised Logistics Services … for Data’

1. DistributionOrigination & CaptureMulti-Modal TransportTermination & Display

2. B2B2C VASIdentity, Authentication, SecurityAdvertising, Marketing ServicesEcommerceOrder FulfilmentBilling & PaymentsCustomer Services

Telco (2.0)


1. Distribution Platform


New Types of Wholesale Products

Video

Content delivery

networks for 3rd parties

Data

“Postage and packing

included!” – for data

Become supplier for 3rd

party voice services

Voice

+


2. B2B2C Value Added Services

Platform


Current Approach: Media & Advertising…

TelcoBrand Advertisers

Consumers

$ $Enterprises

SMEs

Multi-Nationals

Upstream Customers Revenue Side 1

Downstream Customers Revenue Side 2


…but market is too small!

Revenue, $ Billions

20062010

$2,000bn

$2,490bn

$425bn $533bn

$30bn $62bn

Fixed and MobileTelecoms

Global advertising

On-line and mobileadvertising


Open Up More Markets for Telco Platform

$

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco – Retail



Content Owners

Telco Platform$

B2B2C VAS

Distribution

Upstream Customers Downstream Customers


VAS: Help Customers Interact More Easily

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco – Retail

Customers – Revenue Side 1

Customers – Revenue Side 2Barriers

Identifying Other Party, Authorisation & Security

Promoting Offer

Conducting transaction

Fulfilling Order

Billing & Payment

Service & Support




VAS: Telcos assets well suited

Developers

Retailers

Government

Brand Advertisers

Content Owners

Telco – Retail

Customers – Revenue Side 1

Customers – Revenue Side 2Barriers

Identifying Other Party, Authorisation & Security

Promoting Offer

Conducting transaction

Fulfilling Order

Billing & Payment

Service & Support

Telco Capabilities &

Assets




Value of the opportunity


Potential Market of $350+ billion?


Making it happen


Five things to get right

ScalePackaging

Rewards

PrivacyReliability

The Two-sided Telecoms Market Opportunity

THANK YOUMore info at www.telco2.net/blog

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