Who is paying for the future internet?

Norwegian University of Science and Technology

Who is paying for next generation of

Internet and Internet services?

12. Sept. 2014 - Thomas Jelle

Assistant Professor NTNU, Department of Telematics

CEO Trådløse Trondheim, CEO MazeMap

Norwegian University of Science and Technology 2

Increased need for

- capacity

- coverage

- reliability


Capasity

Increased number of services

2011:

Globally, IP traffic will grow 4x from 2011 to 2016 http://www.cisco.com/web/solutions/sp/vni/vni_forecast_highlights/index.html

2014:

Global mobile data traffic will increase nearly 11-fold between 2013 and 2018 http://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/white_paper_c11-520862.html

http://www.cisco.com/web/solutions/sp/vni/vni_forecast_highlights/index.html

http://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/white_paper_c11-520862.html















Coverage

Source: Limit Values for Downlink Mobile Telephony in Denmark

Aalborg University


Reliability- More critical services


Increased coverage, capacity and

reliability

1) Traffic growth due to services

2) Apps increase signaling traffic

3) We build larger, more complex and radio shielded buildings

4) Poorer antennas on smart phones

5) More critical services


Who do you think should pay?


Principle of network neutrality

• Internet user have a right to an internet connection that gives access to • Receive and send content at their own desire

• Use services and application at their own desire

• To connect any equipment and use applications which doesn’t harm the network, after own desire

• Internet users have the right to a internet connection free of discrimination of applications, application types, services type of services, type of content and whom is the sender or receiver

• Examples of breach of principle of network neutrality: • NextGenTel’s attempt to limit the bandwidth of users of NRK’s Web-TV in the summer

of 2006

• Deutche Telekom – blocking of Skype in the spring of 2009


History…


Telecom today

Infrastrukturtilbyder Internett

leverandør

Tjeneste- og innholds

leverandører Terminal

Tjenesten Reklame Generere trafikk for

andre Freemium


Telecom industry's concern

• How to avoid commodity?

• How should they be able to differentiate their services

and still comply with the Principal of network neutrality?

• How to finance the accelerating demand for capacity in

different networks?




Media Industry


Convergence of channels

Internet


Who is paying for the increasing demand

in coverage and capacity?

• Why shouldn’t the media industry pay?

• They are the one that require the capacity and coverage to

deliver their services

• Previously they had cost for distribution of TV, radio and paper,

why should someone else pay the cost now?


Media industry

• Before • Controlling all parts of the value chain (paper, radio og TV)

• Monopoly on both content/information and adds

• Now • No control of the value chain

• Everything becomes digital the entry barriers will be minimized

• Several challengers of content and information • International media aggregators

• User generated content: YouTube

• Challengers on advertising • Google, Facebook, Groupon



Media industry's concern

• Trends • «Everything» on Internet is «free»

• How can the media industry get paid for digital journalistic content?

• Users want to contribute, how should the challenge with user generated content be meet?

• More efficient advertising channels are appearing which doesn’t require local presence

• Global competition on content and advertising • Technology, volume and scaling advantages is crucial


Turnover in Norway 2010

700 millioner NOK

700 millioner NOK

Same turnover, the difference is that Adresseavisen spent 250 years building this revenues, Google spent 5…


Scenario: Media industry is paying

• Media industry in Norway is paying to telecom operators to build sufficient capacity and coverage

• Not allowed to discriminate content (The principal of network neutrality)

• The terms for competition is changed

• Norwegian media players gets a huge competitive disadvantage towards the global players that won’t

• Local content becomes even more expensive

• Traffic volume and advertising money goes to the global players Local media players can’t afford to pay to telecom operators and no one can afford to build network infrastructure – Norway is eventually set back to the digital stone age


Scenario: Telecom industry is paying

• As of today fiber infrastructure is paid through bundling of services like e.g. Altibox

• If all services can be delivered through Internet, including TV, bundling of services is no longer necessary and telecom players have only one service to sell a «bit pipe»

• Consequences: Lower margins, higher risks for building of new infrastructure less incentives and «rollout speed»


Scenario: Aggregator and distributor is

paying

• Media industry claims that Google and other aggregators

steal their content and that Google must pay for this

http://www.reuters.com/article/2013/02/01/us-france-google-idUSBRE91011Z20130201














So what kind of investments are we

talking about?



Google’s revenues in 2012: 12,7 Billion USD

Google’s global revenues is not enough to cover

the yearly investments for a large US Telecom

operator


Money in - money out

Commodity

Huge Investments needed

Free distribution - low

investments needed

Huge potential for profit


Money in - money out

Commodity

Huge Investments needed

Free distribution - low

investments needed

Huge potential for profit


Todays business model of internet is

changing how the world works




Is today’s solution sustainable?


What happens to the ecosystem if

we change who is paying?



Internet?

• We need incentives both build coverage and capasity and to develop local journalistic content

• The Principle of network neutrality: freedom to choose and competition on content

• How fare should the principle go? Today there is a volume limit on mobile broadband…

• The Principle of network neutrality could be bypassed with price models?

• The entry barriers in the media industry is dramatically reduced

• The entry barriers in the telecom industry is increasing



Internet

• Conclusion

– The largest threat is the global players with technology and scale advantages

– A question of influence of the user

– Need for cooperation and innovation to develop sustainable business models


A tool that can help you do the analytics

• http://www.youtube.com/watch?v=2FumwkBMhLo

• http://www.youtube.com/watch?v=xTtvwAmjais

http://www.youtube.com/watch?v=2FumwkBMhLo



http://www.youtube.com/watch?v=xTtvwAmjais


Osterwalder Business Model Canvas


Homework

• 1) How does the Osterwalder business model look like for

• a) A mobile operator, e.g. Telenor

• b) Media house e.g. Adresseavisen

• c) Google

• 2) Does CDN (Content Distribution Network) players have a role in

the debate of The Principle of Network Neutrality?

• 3) «Innovation in zero's» - Jonas Kjellberg – https://www.youtube.com/watch?v=G3a2NX2kIb0

https://www.youtube.com/watch?v=G3a2NX2kIb0

https://www.youtube.com/watch?v=G3a2NX2kIb0