Turning knowledge into action Coping with OTT Richard Jones [email protected]

turning knowledge into action

Coping with

OTT

Richard [email protected]

All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 2 [email protected]

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)

RETAIL TRIPLE-PLAY OPERATOR (FTTH/B/xDSL)Rated number 4 in the World for service value

SWEDISH COMMUNICATIONS OPERATORThe clear market leader in Swedish open access

network automation and management space.20 networks managed with 200 service providers

GLOBAL COMMUNICATIONS OPERATORWorld leading experience in running ultra-

efficient open access and exclusive networksTargetting smart cities, campuses, alt nets

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Times are changing…


Only 16% of mobile operators think overall revenues will go up due to OTT*

Times are changing…

Source Mobile Squared report


Cooper’s Law is now broken….

Lasted 100 years… now brokenRadio capacity doubles every 2.5 years

1G – 2G was 1000x increase in capacity

2G – 3G was 1000x increase in capacity


Consumer demand for faster fixed broadband will continue to grow

CAGR Compound over 10 years

Nielsen Bandwidth 50% 57x

Moore Computing 60% 100x

Source: Ventura Team study for FTTH Council Europe


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)


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 userfind ways to reduce your IP transit charges (tricky if you don’t have your own gateway)

Europe GCC Africa

Cost per megabit/s/month ~1 € ~150 € 1000’s €

Cost per user per month 0.25 – 1 € 10 – 20 € 100 – 200 €


How much more are they prepared to pay for double the speed?

Source: Ofcom


…and the challenges can be extreme

In one country, payback would take 500 years to renew a particular customer’s lineThe incumbent would rather give them a mobile contract and an iPad to go away

All Rights Reserved - Copyright Ventura Team LLP 2008 - 2011 – Page 11 [email protected]

The fibre business case is challenging…


…and LTE is clearly easier


The impact of Internet content is clear…


…but it’s not TV versus computer any more


The OTT attack comes in many forms

TYPE OF SERVICE PLAYERS

LEGAL

FIXED

Live streamsCatch up TV BBC iPlayer, 4oD VOD (from pay-TV players)STB Virtualisation - TV on devices Sky Go VOD (subscription based) Netflix, New Sky serviceVOD free TED, Bloomberg, ivi.ruData storage/sharing Dropbox

MOBILE

Instant message WhatsappVOIP calling Skype, Google TalkIP TV Sky GoVoD YouTube, Vimeo

ILLEGALPeer to peer torrents Pirate Bay, Cyberlocker mega.co.nzAccess hacking Dreambox

Not to mention… security, pure back up, etc.

5% of messaging now on WhatsApp

25% of international voice minutes on Skype

Netflix users average 30 Gbytes per month and xbox

360 users taking 80 gigabytes*

Source Ventura Team LLP and *Sandvine


The OTT attack comes in many forms

TYPE OF SERVICE PLAYERS

LEGAL

FIXED

Live streamsCatch up TV BBC iPlayer, 4oD VOD (from pay-TV players)STB Virtualisation - TV on devices Sky Go VOD (subscription based) Netflix, New Sky serviceVOD free TED, Bloomberg, ivi.ruData storage/sharing Dropbox

MOBILE

Instant message WhatsappVOIP calling Skype, Google TalkIP TV Sky GoVoD Youtube, Vimeo

ILLEGALPeer to peer torrents Pirate Bay, Cyberlocker mega.co.nzAccess hacking Dreambox

Not to mention… security, pure back up, etc.

Nawras (mobile operator in Oman) saw $43 million of SMS

“Vaporised” in 2012 by WhatsApp

Ross Cormack - CEO

Source Ventura Team LLP and *Sandvine


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


So what can be done?


For media services

Minimise the impact of…Cord cutting – cancelling pay TV subscriptionCord shaving – reducing pay TV subscription

By…securing or maintaining access to premium contentbundling OTT with traditional pay-TV business models to ‘cover bases’


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


Virtualise the Set Top Box

Telecom Italia’s Cubovision will work on speeds as low as 1.5 MbpsRadically improves coverage potential

Note - Some territories don’t have the networks to support this type of service


If you can’t beat the OTT threat…

If you can’t beat them… join them3 in the UK working with Skype – balancing voice revenue decline on international versus

market share increaseIf 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 workIf 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


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…

http://blog.tagman.com

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).


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?


Operator Experience Includes:Telecom EgyptVodafone (various operations)Atheeb Consortium (Saudi)Millicom International CellularBatelcoColt CommunicationsBTSTCPipexRiksnetCable and WirelessEircomTurk TelekomBulgarian TelecomInvitel+PantelNeuf TelecomDeutsche TelekomMLL Telecom

Market ExperienceEgypt

Qatar

Oman

Saudi Arabia

Bahrain

UAE

Poland

Ireland

UK

German

Mali

Sweden

Hungary

Greece

France

Rwanda

Estonia

Thank you…

Richard Jones - Partner

[email protected] mobile: +44 7811 166033

Documents

Turning knowledge into action Coping with OTT Richard Jones [email protected]