© GSMA 2012

RCS – enabling future communications 13th December 2012

Speakers:

Iain McCallum, GSMA

Vishal Mathur, GSMA

Guest: Gernot Rasch, Marketing Director, Vipnet, Croatia

Act now to implement RCS

Today’s objectives

1. Strategic rationale for evaluating RCS

2. Global outlook

3. Implementation options

4. Next steps

1

Currently, it may be that your market still enjoys

messaging revenue growth

S. Korea:

Kakao Talk Effect

90% of

smartphone

market in 1 year

Spain:

Whatsapp Effect

- Has killed SMS

in high end

smartphone

India &

Australia:

SMS growth

(30% & 60%

respectively)

US:

Apple iMessage

effect

Europe:

Overall decline,

but aggressive

messaging

bundles help

Source : Strategy Analytics, www.techcrunch.com

So what : As an operator how do you ensure your services

stay relevant to your consumers?

1 2 3 4

2

The nature of personal communications is changing…

1 2 3 4

Innovative communication services

Consumer opt-in (limited community

reach)

Best effort service principle

Legal intercept questionable

Agile & low operational costs

Perceived ‘free’ Instant Message

Indirect monetization model

Core communication services

Highly interoperable

Reliable customer relationships

Consumers opt out (~6 billion base)

Direct service monetization

Messaging

Voice

APIs

Video in the future

3

Source : GSMA

OTT players are rapidly building communities of messaging

users, primarily because they offer rich services for ‘free’

China : 200 million users (20% of population)

Japan : Line Messenger (Naver) – 60 million users in 14 months

Global : 20 million + users. 6 months ago – 2 billion inbound and outbound Now : 4 billion messages sent daily (out of 10 billion inbound & outbound)

China : QQ : 50% (228M) unique users access QQ IM

Korea : Smartphone penetration is 50%. KakaoTalk took 90% of messaging volumes within 1 year

Source : Strategy Analytics, www.engadget.com (Tony Bates CEO Skype interview), www.techcrunch.com (Skype user base), GSMA research & analysis

Global : 250 million active monthly subscribers; 6 – 10% paying subscribers 50% of traffic is video traffic

Russia : vKontakte.ru – 5 million downloads of IM product 5 – 8x more popular than Facebook in Russia (due to content)

1 2 3 4

4

…which brings clear threats and opportunities for

operators

Threat Opportunity

Loss of strategic relevance to

your end consumers

Downstream loss in core

communications revenues

Mobile Broadband – the

perfect OTT enabler

Evolve your communications

platform to offer relevant services

that your consumers enjoy

Build a platform for future

innovation

Align your services for an IP world

1 2 3 4

5

Source : GSMA

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Smartphone penetration

OTT penetration

Penetration of smartphones and mobile BB is key because of

its strong impact on communication dynamics %

of c

usto

me

r bas

e

2 years 3-6 months

No OTT has

reached a

relevant

penetration/

influence.

SMS is still

charged.

In a very short

period of time,

one OTT app

has experienced

a fast growth.

SMS usage &

ARPU are

declining rapidly

One OTT app

has become a

reference

amongst Mobile

BB users

IM is free.

SMS usage is

residual.

2 years

1 2 3 4

6

Source : GSMA

Global impact of OTT services : swift penetration into

the operator mass market and loss in SMS revenues

€11bn lost

SMS revenue 2011

Innovators Early Adopters

Early Majority

Late Majority

Laggards

Source : Strategy Analytics, Ovum

1 2 3 4

7

€11bn lost

SMS revenue 2011

Innovators Early Adopters

Early Majority

Late Majority

Laggards

€12bn lost revenue

to mobile VOIP by 2015

Projected impact of OTT services : continued penetration into

the operator mass market and loss in voice revenues

1 2 3 4

Source : Strategy Analytics, Ovum 8

Global data TRAFFIC

CAGR - 2013

Global data REVENUES

CAGR - 2013

76% 13%

Weakening customer

relationships

LTE increases danger

Source : Strategy Analytics, Ovum, GSMA

“We’re no SMS killer, we get

people hooked on data”

“I view it from the perspective that

we’re facilitating a broad movement

to data plans and the entities that

provide those plans are the carriers,

so they stand to benefit quite

substantially. It’s all about the data”

Brian Acton,

Co-founder WhatsApp

April 2012

So what: How confident are you that data revenue growth will offset loss in

core voice and messaging?

Mobile data and OTT penetration are directly

correlated

The negative impact on profitability and

customer experience increases

There is a direct correlation between growth in data

and OTT

1 2 3 4

9

We should thank OTTs for opening our eyes to

what consumers are looking for

Source : Context consulting

Consumers want problems solved, not features

The opportunity is to remain relevant to consumers

and offer them what they value

Low Med High

Frequency (qualitative)

Low

M

ed

Hig

h

Imp

ort

an

ce

(

qu

alit

ative

) Important

notification

Video file

Group

notification

Picture, refresh

emotional connection

Picture as info

Live video,

share precious

moment

IM with emoticons,

reinforce bond

Live video,

immediate feedback Group picture,

share a moment

Share location

Audio file

1 2 3 4

10

Whilst OTTs compete amongst each other for consumer attention,

operators have a window of opportunity to close the gap

Voice / video calls Group functions

File share Geo-localisation

1 2 3 4

Operators

playing at the

fringes of IP

Mobile Broadband

VoIP VoLTE

Rich Communications

Voice

Messaging

Circuit switch Packet

Operators need to

innovate in this space

now to compete with

services shown above

A fragmented OTT landscape competing on services and features

11

Source : GSMA

Strategic options for operators

1. Declare the

OTT threat as

irrelevant or

wait and see

2. Partner with

or build your

own OTT

3. Leverage

your strengths

and launch

RCS

1 2 3 4

12

Source : GSMA

Option 1 : be prepared for the worst case

SMS usage in KPN’s Hi brand has fallen in the past year coinciding with

the penetration of WhatsApp among the user base

-20

0

20

40

60

Q2 ’11

57%

-16%

Q1 ’11 Q4 ’10 Q3 ’10 Q2 ’10

% p

en

etr

atio

n o

r g

row

th

Penetration of WhatsApp within customer base

Outgoing SMS growth per customer (y-on-y)

1 2 3 4

13

Source : KPN

Does the consumer truly

benefit if they can only

communicate with those who

are on the same network /

service?

In the case of partnerships,

does the operator really retain

control of the consumer?

Can operators truly compete

against more agile OTTs on

features?

Option 2 : competing head-on on features against

OTTs has its limitations

Partnerships e.g. But…

Operator built e.g.

1 2 3 4

14

Source : GSMA

Option 3 : leverage strengths in ubiquity of service,

network experience and reach

1 2 3 4

15

Source : GSMA

Option 3 : build upon your assets with an open,

industry standard platform

Open industry standard for IP based services

Satisfies consumer needs

Open to 3rd parties / OTT providers

Product / features roadmap

“It’s just there It just works”

= = Consumer Certainty

Note :V1.2.2 denotes the current specification adopted by European and Korean operators

1 2 3 4

Available services

are displayed

Video sharing Instant

Messaging

File sharing

V1.2.2

16

Source : GSMA

RCS adoption will be driven by the promise of a simpler user

experience and an interoperable ubiquitous network

FORM

FEATURES

UBIQUITY & REACH

OTT TELCO

6 billion reach Global interop Billing Lawful intercept Telco grade/QoS

Limited reach Best efforts Lawful intercept

questionable

Its just there, it just works

1 2 3 4

17

Source : GSMA

The business model is based on an evolving joyn B2C

proposition and an API based 2 sided business model

joyn based

services/apps

Enriched call

Chat

File & Video Share

VoLTE

1

3rd party Apps / Developer

Community

Creating a rich world of

Apps

2

B2B2C

Aggregated Open

Standard APIs for Brands

e.g. Coke, Unilever,

Ogilvy etc.

3

Interoperable

MNO / IMS

Aggregated

APIs

Bulk Rich Comms

Voice

SMS

Data

Today 9% of all Web and 5% of all mobile

applications utilize APIs. Expected to

increase to over 68% by the end of 2016

Telecom Network APIs market is expected

to account for nearly $75 Billion in global

revenues worldwide by 2016, growing at a

CAGR of 37% between 2012 and 2016*

2 sided business model

1 2 3 4

18 Source : researchandmarkets.com

RCS Market Launches to date

All 3 operators

have launched joyn

in Spain on

November 28th

Launch by

Vodafone in

Germany, followed

in December by

T-Mobile

Launch by

MetroPCS

in USA in October

All 3 operators

in South Korea

nearing launch in

December

1 2 3 4

19

Source : GSMA

Rich Communications momentum is building

Operators working together

30 other operators in 18

countries have already

given indications to the

GSMA that they are likely

to launch RCS and 12

are actively working on

inter-operator projects to

assist with interoperability

Launched at Mobile

World Congress 2012

and now registered

in 40 countries

1 2 3 4

20

Source : GSMA

Switzerland is a prime example of joint operator

collaboration

Swisscom, Orange

and Sunrise

• Vendor Workshop

• Joint RFP for 3rd

Party-Hosted RCS

Solution

• CEO Summit

• Joint Letter of Intent

• Cross-Operator

Technical & Product

Work-Streams

1 2 3 4

21

Source : GSMA

Croatia is another example of joint working

Vipnet, Croatia

We are still enjoying

SMS revenues, but

OTT impact is real

No credible alternative

strategy against OTTs

To offer our

consumers a full joyn

experience, we need

adjacent markets to

also launch joyn

1 2 3 4

22

Source : GSMA

OEM Ecosystem – excellent collaboration

RCS OEM community members

Working to a common standard

9 out of 10 OEM device manufacturers

5 of the Top 5 infrastructure vendors

And a vendor ecosystem that can provide Full and Partial RCS &

IMS solutions (hosted and non-hosted)

Downloadable clients

1 2 3 4

23

Source : GSMA

Embedded Clients Hardware Model joyn joyn hot fixes

HTC Corporation Z520e

Huawei Technologies Co. Ltd. U8815 Asura

LG Electronics LG-E730

LG Electronics LG-P760

Nokia Corporation Nokia 700

Nokia Corporation Lumia 920

Samsung Electronics Co Ltd Galaxy S2

Samsung Electronics Co Ltd Galaxy S3

SONY Mobile Communications XPERIA J

SONY Mobile Communications XPERIA P

The OEM ecosystem

SONY XPERIA J

SAMSUNG GALAXY S3

SAMSUNG GALAXY S2

NOKIA 700

NOKIA LUMIA 920

LG E730

HUAWEI U8815 ASURA

HTC Z520e

LG P760

1 2 3 4

24 Source : GSMA

SONY XPERIA P

The joyn roadmap

Next version of joyn will be completed this month and includes:

Location sharing

Multi-Device IP Video call

IP Voice call

1 2 3 4

25

Source : GSMA

The all-IP platform for innovation

RCS is a starting point for innovation and evolution

Expose RCS APIs and 3rd party web and app developers will

– drive RCS innovation and adoption

– extend the reach of RCS services to new user segments

– create new monetisation opportunities and business models

Add chat capabilities to apps

without having to maintain

a communication service back-end

RCS enabled multiplayer gaming

Group collaboration

Add video

to customer

care calls

Do you want to see home 4?

1 2 3 4

26

Source : GSMA

Home Subscription Server (HSS)

Database storing subscription profiles

for customers. Profiles are download

to S-CSCF after Authentication.

Application Servers (AS) – Application functionality associated with RCS

specific applications

IM-AS: Provides chat & file transfer intelligence and advanced billing

Options-AS: Enables multi-device

Handset notifications AS: Enables the handset asynchronous notification

Other AS’s may also be included in the IMS domain e.g. VoLTE, Video

Telephony.

Interconnect Session Border Controller

(ISBC)

Manages in-coming and out-going

traffic from and to the IMS

domain, and protects IMS from

external attack.

HSS AS

IMS

Inte

rco

nn

ec

t

inte

rfa

ce

Ac

ce

ss

inte

rfa

ce

Call Session Control Functions (CSCF) – SIP servers responsible for the enforcement of subscription

profiles and authentication of customers.

Proxy CSCF – performs access control

Interrogating CSCF – top level authentication of the customer

Serving CSCF – service control and integration

P-CSCF

I-CSCF S-CSCF

ISB

C

AS

BC

Access Session Border

Controller (ASBC)

Controls the edge of the

IMS network.

IMS functional architecture - basics

1 2 3 4

27

Source : GSMA

Geographic centralisation – the sharing of some or all of the IMS

functions between more than one operation. Options include:

AS centralisation

Multi-operation hub and spoke

Third party hosted IMS

Physical consolidation – clustering together functional elements

into different physical implemented boxes. Options include:

‘RCS in a box’

‘IMS in a box’

Edge-controlled IMS

There are 2 approaches to cost reduction

1 2 3 4

28

Source : GSMA

Permanent or Temporary Solution?

Start in the Cloud Migrate to IMS

Hosted

IMS

1 2 3 4

29

Source : GSMA

Potential Suppliers:

19 responses to GSMA RFI in 3 categories

Full

RC

S S

olu

tion

IMS

Ba

se

d R

CS

Full

RC

S w

ith

IM

S-lik

e

Fun

ctio

nalit

y

Pa

rtia

l

So

lution

Evaluations based upon:

Ability to provide requisite functionality in

a securely via a cloud-based solution

Technical competence to handle service

upgrades, MNO on-boarding etc.

Pricing for 500k, 1M, 5M and 10M subs

Key Learnings:

Many viable solutions in the marketplace

that are worthy of consideration by

operators

It is not necessary for an operator to

purchase IMS to implement RCS

Sample pricing (range):

1M subs = $0.10-$0.30 per sub/month

10M subs = $0.05-$0.18 per sub/month

Start-up cost average range

$50-150k / operator

1 2 3 4

30

Source : GSMA

Next steps (with 13 top tips)

1 2 3 4

Socialise key messages

Internally evaluate

Commit to interoperability

and launch

Interoperable deployment

Launch process

Critical outcomes

Assigned resource

Board approval

Written commitment

& GSMA roundtable

Project resource &

budget

Go to market plan and launch

outcomes

Top Tips to help you

1.Access GSMA collateral (e.g. evaluation pack, case studies)

2.See more at MWC 2013

3.Quiz incumbent vendors, but consider wider ecosystem

4.Talk to other operators about business case options

5.Don’t make RCS pay for IMS investment

6.Consider low cost hosted options as entry option

7.Build Board support for interoperable RCS-e 1.2.2 launch first

8.Consider unilateral versus multi-operator launch to stimulate market

9.Be prepared to work jointly with other operators

10.Get Device requirements to manufacturers asap

11.Understand Interconnect requirements

12.Access learnings from other markets in terms of IOT

13.Access GSMA IOT & Accreditation process

High level process

31

Source : GSMA

Your call to action is:

Follow a high level process to drive towards interoperable RCS launch in your

market asap

Attend Mobile World Congress to hear and see more about RCS / joyn

Summary of key messages

The window for enjoying voice & SMS revenue growth is closing rapidly as Over The

Top (OTT) services advance and exploit your networks and shift your customers away

Only credible strategy is to innovate and leverage your strengths in network

differentiation, ubiquity of service and reach

RCS is the foundation to an open, standard platform for innovation in IP

communications. joyn represents an interoperable consumer proposition, which

includes capability discovery, IP chat, file and video share

The concept of RCS is been around for 5 – 6 years, but now is the time to join the

ecosystem

Irrespective of whether you intend to deploy IMS or not, low cost market entry solutions

for RCS are available on the market

1 2 3 4

32

Source : GSMA

Key to success : ubiquitous availability and full

interoperability

Collaboration leads to country wide

implementations, ubiquitous

availability and full interoperability

1 2 3 4

33 Source : GSMA

© GSMA 2012

Thank you

Questions?