Disruptive Analysis - The threat from UTF (Under the Floor) Players

Business Model Flexibility & the threat of “Under the Floor” players

Network Sharing, London, 25th May 2011

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Copyright Disruptive Analysis Ltd 2011May 2011

About Disruptive Analysis Analyst house & strategic consulting firm Founded by Dean Bubley Blog at disruptivewireless.blogspot.com

Twitter @disruptivedean & also on LinkedIn and Quora Covering mobile VoIP since 2004, pico/femtocells since 2001 Regular focus on the links between innovative mobile network

technologies & the impact on devices and applications Partnered with Telco 2.0, Diffraction Analysis & Martin Geddes Consulting Coined the term “Happy Pipe” to describe profitable broadband strategies

Also “Tyranny of the SIM card”, “Mobile data offload” & “Under the floor player” Recent reports on Mobile Broadband Traffic Management & RCS Upcoming study on Telco-OTT services Masterclasses on “Future of Voice”.

SF event June 30th, London event on July 14th

Copyright Disruptive Analysis Ltd 2011

Potential risks of 3G/4G outsourcing•Ne

w business models network-based

•Unanticipated challenges for data

Flexibility

•Connectivity is the basis for revenue

•Most telco “services” are vulnerable

Value

•Immediate cost-savings tempting

•But 3G/4G cost profile changing fast

Cost

May 2011


Telcos face encroachment from all sides

May 2011

Source: STL PartnersStrategy Report “The Roadmap to new Telco 2.0 Business Models”


Operators need new sources of revenue

May 2011

Source: STL PartnersStrategy Report “The Roadmap to new Telco 2.0 Business Models”


Towards two-sided business models?

May 2011

Telco End users

Other Telco

Whole-sale

$$$$

$

Devel-opers

Govern-ment

Media &

content

Brands & adver -tisers

Web players

IT shops

Possible payment for QoS, voice API access, ads, customer info etc

But “not as easy as it looks” to achieve. Platforms, SLAs, IT, sales…


Mobile data: the network is the differentiator

Basic retail data plans

Policy-driven retail

data

Two-sided data, QoS & smart pipe

Enhanced wholesale, M2M, cloud

May 2011

Mobile broadband, advanced infrastructure & wholesale data services are showing most promise for operator services revenue uplift

SMS

impacted by

WhatsApp

Telephony

challenged

by VoIP

FB owns

social

networks

Content

mostly O

TT

Despite the rhetoric, higher-level services & applications are proving very difficult to differentiate in. Core voice & messaging are looking vulnerable

Dumb pipe, or happy piper?


Should telcos be more scared of “under-the-floor” players than “over-the-top?”


Wolves in sheeps’ clothing?

May 2011

Complex broadband traffic & policy decisions


Local offload(WiFi / Femto)

Transport / coreoffload

Core

Policy-based traffic-shaping

Compression & transcoding

InternetInternet

Macro radio network

upgrades & optimisation

Device-based solutions

Caches / CDNs

Congestion APIs & monitoring

Tuning TCP/IP & contention

mgmt

X….Y….Z…

Dynamic situation – how does outsourcing fit with holistic policy management?

If neutrality laws change – who is in control?

Controversial

Arguable

Accepted

• Blocking or degrading 3rd-party apps (eg Skype, femto IPsec)

• Upstream-paid web priority• Modifying content (eg ad insertion)

• Operator’s VoIP & IPTV priority• Limiting P2P throughput• User-chosen priority (eg VPN)• Throttling to lower IP transit cost

• Anti-DDoS / severe congestion• Illegal content• Emergency / health traffic


QoS vs. QoE: any real value in network QoS?


Network QoS

Radio

NNI

Mashup

Operator B

End-to-End QoS

Quality of Experience


Managing the shifting metrics

May 2011

Need for more sophisticated metrics:• uplink vs. downlink• signalling traffic• busy cell / busy hour• device & user• application / use-caseTime

IndexMobile broadband

traffic

Revenue

Oversimplified analysis

Yesterday’s metrics don’t tell the whole story. Signalling load kills 3G networks, not data “tonnage”. Outsourcing contracts need to cope with the

unexpected.

Verticals & M2M: inherent need for smart pipes?


Smart meters: need for extra security, priority, ease of provisioning, multi-

network access etc

Mobile healthcare: security, privacy, 2-sided payments by 3rd parties (eg

insurance companies). End-to-end QoS

Video tablet: subscriber data for adverts, prioritisation & QoS, cacheing, content

control, DRM etc

Sensors: Numbering/HLR offload, power management as a service, meshing etc


Clearwire / Ericsson deal embodies flexibility

"In short, while we have entered into an agreement with a company whose core competency is network excellence, Clearwire will continue to own our 4G network and remain responsible for network design, network strategy, vendor selection and long-term investment decisions," Clearwire said in a blog post. "Our network is still ours--Ericsson is just managing it--allowing us to streamline the business and deliver a high-quality mobile broadband experience to our customers."

May 2011


Conclusions

Network operations can account for 20% of telco OpEx Strong impetus for controlling this via outsourcing

But in developed markets, both business model & technical flexibility remain key sources of value & differentiation New & unpredictable trends in devices, applications & user behaviour Ongoing regulatory changes (Net Neutrality, Internet universal service) Experimentation with new business models Extra variables brought in with LTE

Two-sided models, future wholesale, novel approaches to broadband traffic management all add complexity

Outsourcing can reduce costs, but may also limit future opportunities to increase revenues

Don’t let Under The Floor players push you into the hands of the OTTs

May 2011

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Disruptive Analysis - The threat from UTF (Under the Floor) Players