Telco plays in live entertainment

Enhancing live entertainment

Live entertainment spans everything from a handful of people enjoying stand-up comedy in a pub to a football match attended by 100,000 fans. Although there are many different forms and formats of live entertainment, they share three inter-related characteristics – immediacy, interactivity and immersion. The performers make things happen and people tend to react, by clapping, shouting, singing or gesticulating at the performers or by interacting with each other. A compelling event will also be immersive in the sense that the spectators will focus entirely on the action.

For telcos, live events present specific challenges and opportunities. Simultaneously providing millions of people with high quality images and audio from live events can soak up large amounts of bandwidth on networks, forcing telcos to invest in additional capacity. Yet, it should be feasible to make a return on that investment: live events are an enormously popular form of entertainment on which people around the world are prepared to spend vast sums of money. This is a market where demand often outstrips supply: tickets for top tier sports events or music concerts can cost US$150 or more.

With the advent of 5G and Wi-Fi 6E, telcos have an opportunity to improve spectators’ enjoyment of live events both within a venue and in remote locations. Indeed, telcos could play a key role in enabling many more people to both participate in and appreciate live entertainment, thereby helping them to enjoy more fulfilling and enriching lives.

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The opportunities to use new technologies to enhance live events

Live entertainment

Source: STL Partners

More broadly, telecoms networks and related services have become fundamental to the smooth running of our increasingly digital economy. Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of live entertainment, telcos can help people to make better use of their leisure time – a precious and very finite resource for most individuals.

This report begins by providing an overview of the live entertainment opportunity for telcos, outlining the services they could provide to support both professional and amateur events. It then considers the growing demand for high-definition, 360-degree coverage of live events, before discussing why it is increasingly important to deliver footage in real-time, rather than near real-time. Subsequent sections explore the expanding role of edge computing in facilitating live broadcasts and how augmented reality and virtual reality could be used to create more immersive and interactive experiences.

This report draws on the experiences and actions of AT&T, BT, NTT and Verizon, which are all very active in the coverage of live sports. It also builds on previous STL Partners research including:

Contents

  • Executive Summary
  • Introduction
  • Opportunities to enhance live entertainment
    • Amateur entertainment – a B2C play
  • Delivering high-definition/360-degree video
    • New broadcast technologies
    • Real-time encoding and compression
    • Traffic management and net neutrality
  • Real real-time coverage and stats
    • More data and more stats
    • Personalised advertising and offers
  • Edge computing and the in-event experience
    • Refereeing automation/support
    • In-venue security and safety
    • Wi-Fi versus 5G
  • Augmented reality – blurring the lines
  • Conclusions
    • Tech can enrich people’s experience of live events
    • The role of telcos
  • Index

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Stakeholder model: Turn growth killers into growth makers

Introduction: The stakeholder model

Telecoms operators’ attempts to build new sources of revenue have been a core focus of STL Partners’ research activities over the years. We’ve looked at many telecoms case studies, adjacent market examples, new business models and technologies and other routes to explore how operators might succeed. We believe the STL stakeholder model usefully and holistically describes telcos’ main stakeholder groups and the ideal relationships that telcos need to establish with each group to achieve valuable growth. It should be used in conjunction with other elements of STL’s portfolio which examine strategies needed within specific markets and industries (e.g., healthcare) and telcos’ operational areas (e.g., telco cloud, edge, leadership and culture).

This report outlines the stakeholder model at a high level, identifying seven groups and three factors within each group that summarise the ideal relationship. These stakeholder and influencer groups include:

  1. Management
  2. People
  3. Customer propositions
  4. Partner and technology ecosystems
  5. Investors
  6. Government and regulators
  7. Society

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1. Management

Growth may not always start at the top of an organisation, but to be successful, top management will be championing growth, have the capabilities to lead it, and aligning and protecting the resources needed to foster it. This is true in any organisation but especially so in those where there is a strong established business already in place, such as telecoms. The critical balance to be maintained is that the existing business must continue to succeed, and the new growth businesses be given the space, time, skills and support they need to grow. It sounds straightforward, but there are many challenges and pitfalls to making it work in practice.

For example, a minor wobble in the performance of a multi-billion-dollar business can easily eclipse the total value of a new business, so it is often tempting to switch resources back to the existing business and starve the fledgling growth. Equally, perceptions of how current businesses need to be run can wrongly influence what should happen in the new ones. Unsuitable choices of existing channels to market, familiar but ill-fitting technologies, or other business model prejudices are classic bias-led errors (see Telco innovation: Why it’s broken and how to fix it).

To be successful, we believe that management needs to exhibit three broad behaviours and capabilities.

  1. Stable and committed long term vision for growth aligned with the Coordination Age.
  2. Suitable knowledge, experience and openness.
  3. Effective two-way engagement with stakeholders. (N.B. We cover the board and most senior management in this group. Other management is covered in the People stakeholder group.)

Management: Key management enablers of growth

management-leadership-vision-growth-indicators

Source: STL Partners

Stable and committed long-term vision for growth

The companies that STL has seen making more successful growth plays typically exhibit a long-term commitment to growth and importantly, learning too.

Two examples we have studied closely are TELUS and Elisa. In both cases, the CEO has held tenure in the long-term, and the company has demonstrated a clear and well managed commitment to growth.

In TELUS’s case, the primary area of growth targeted has been healthcare, and the company now generates somewhere close to 10% of its revenue from the new areas (it does not publish a number). It has been working in healthcare for over 10 years, and Darren Entwistle, its CEO, has championed this cause with all stakeholders throughout.

In Elisa’s case, the innovation has been developed in a number of areas. For example, how it couples all you can use data plans and a flat sales/capex ratio; a new network automation business selling to other telcos; and an industrial IoT automation business.

Again, CEO Veli-Matti Mattila has a long tenure, and has championed the principle of Elisa’s competitive advantage being in its ability to learn and leverage its existing IP.

…aligned with the Coordination Age

STL argues that the future growth for telcos will come by addressing the needs of the Coordination Age, and this in turn is being accelerated by both the COVID-19 pandemic and growing realisation of climate change.

Why COVID-19 and Climate change are accelerating the Coordination Age

COVID-19-and-Climate-change-Coordination-Age-STL

 

Source: STL Partners

The Coordination Age is based on the insight that most stakeholder needs are driven by a global need to make better use of resources, whether in distribution (delivery of resources when and where needed), efficiency (return on resources, e.g. productivity), and sustainability (conservation and protection of resources, e.g. climate change).

This need will be served through multi-party business models, which use new technologies (e.g. better connectivity, AI, and automation) to deliver outcomes to their customers and business ecosystems.

We argue that both TELUS and Elisa are early innovators and pathfinders within these trends.

Suitable knowledge, experience and openness

Having the right experience, character and composition in the leadership team is an area of constant development by companies and experts of many types.

The dynamics of the leadership team matter too. There needs to be leadership and direction setting, but the team must be able to properly challenge itself and particularly its leader’s strongest opinions in a healthy way. There will of course be times when a CEO of any business unit needs to take the helm, but if the CEO or one of the C-team is overly attached to an idea or course of action and will not hear or truly consider alternatives this can be extremely risky.

AT&T / Time Warner – a salutary tale?

AT&T’s much discussed venture into entertainment with its acquisitions of DirecTV and Time Warner is an interesting case in point here. One of the conclusions of our recent analysis of this multi-billion-dollar acquisition plan was that AT&T’s management appeared to take a very telco-centric view throughout. It saw the media businesses primarily as a way to add value to its telecoms business, rather than as valuable business assets that needed to be nurtured in their own right.

Regardless of media executives leaving and other expert commentary suggesting it should not neglect the development of its wider distribution strategy for the content powerhouse for example, AT&T ploughed on with an approach that limited the value of its new assets. Given the high stakes, and the personalised descriptions of how the deal arose through the CEOs of the companies at the time, it is hard to escape the conclusion that there was a significant bias in the management team. We were struck by the observation that it seemed like “AT&T knew best”.

To be clear, there can be little doubt that AT&T is a formidable telecoms operator. Many of its strategies and approaches are world leading, for example in change management and Telco Cloud, as we also highlight in this report.

However, at the time those deals were done AT&T’s board did not hold significant entertainment expertise, and whoever else they spoke with from that industry did not manage to carry them to a more balanced position. So it appears to us that a key contributing factor to the significant loss of momentum and market value that the media deals ultimately inflicted on AT&T was that they did not engineer the dynamics or character in their board to properly challenge and validate their strategy.

It is to the board’s credit that they have now recognised this and made plans for a change. Yet it is also notable that AT&T has not given any visible signal that it made a systemic error of judgement. Perhaps the huge amounts involved and highly litigious nature of the US market are behind this, and behind closed doors there is major change afoot. Yet the conveyed image is still that “AT&T knows best”. Hopefully, this external confidence is now balanced with more internal questioning and openness to external thoughts.

What capabilities should a management team possess?

In terms of telcos wishing to drive and nurture growth, STL believes there are criteria that are likely to signal that a company has a better chance of success. For example:

  • Insight into the realistic and differentiating capabilities of new and relevant markets, fields, applications and technologies is a valuable asset. The useful insight may exist in the form of experience (e.g. tenure in a relevant adjacent industry such as healthcare, or delivery of automation initiatives, working in relevant geographies, etc.), qualification (e.g. education in a relevant specialism such as AI), or longer term insight (which may be indicated by engagement with Research and Development or academic activities)

[The full range of management capabilities can be viewed in the report…..] 

 

2. People…

 

Table of Contents

  • Executive Summary
  • Introduction
  • Management
    • Stable and committed long-term vision for growth
    • …aligned with the Coordination Age
    • Suitable knowledge, experience and openness
    • Two-way engagement with stakeholders
  • People
    • Does the company have a suitable culture to enable growth?
    • Does the company have enough of the new skills and abilities needed?
    • Is the company’s general management collaborative, close to customers, and diverse?
  • Customer propositions
    • Nature of the current customer relationship
    • How far beyond telecoms the company has ventured
    • Investment in new sectors and needs
  • Partner and technology ecosystems
    • Successful adoption of disruptive technologies and business models
    • More resilient economics of scale in the core business
    • Technology and partners as an enabler of change
  • Investors
    • The stability of the investor base
    • Has the investor base been happy?
    • Current and forecast returns
  • Government and regulators
    • The tone of the government and regulatory environment
    • Current status of the regulatory situation
    • The company’s approach to government and regulatory relationships
  • Society
    • Brand presence, engagement and image
    • Company alignment with societal priorities
    • Media portrayal

Related research

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Why and how to go telco cloud native: AT&T, DISH and Rakuten

The telco business is being disaggregated

Telcos are facing a situation in which the elements that have traditionally made up and produced their core business are being ‘disaggregated’: broken up into their component parts and recombined in different ways, while some of the elements of the telco business are increasingly being provided by players from other industry verticals.

By the same token, telcos face the pressure – and the opportunity – to combine connectivity with other capabilities as part of new vertical-specific offerings.

Telco disaggregation primarily affects three interrelated aspects of the telco business:

  1. Technology:
    • ‘Vertical’ disaggregation: separating out of network functions previously delivered by dedicated, physical equipment into software running on commodity computing hardware (NFV, virtualisation)
    • ‘Horizontal’ disaggregation: breaking up of network functions themselves into their component parts – at both the software and hardware levels; and re-engineering, recombining and redistributing of those component parts (geographically and architecturally) to meet the needs of new use cases. In respect of software, this typically involves cloud-native network functions (CNFs) and containerisation
    • Open RAN is an example of both types of disaggregation: vertical disaggregation through separation of baseband processing software and hardware; and horizontal disaggregation by breaking out the baseband function into centralised and distributed units (CU and DU), along with a separate, programmable controller (RAN Intelligent Controller, or RIC), where all of these can in theory be provided by different vendors, and interface with radios that can also be provided by third-party vendors.
  2. Organisational structure and operating model: Breaking up of organisational hierarchies, departmental siloes, and waterfall development processes focused on the core connectivity business. As telcos face the need to develop new vertical- and client-specific services and use cases beyond the increasingly commoditised, low-margin connectivity business, these structures are being – or need to be – replaced by more multi-disciplinary teams taking end-to-end responsibility for product development and operations (e.g. DevOps), go-to-market, profitability, and technology.

Transformation from the vertical telco to the disaggregated telco

3. Value chain and business model: Breaking up of the traditional model whereby telcos owned – or at least had end-to-end operational oversight over – . This is not to deny that telcos have always relied on third party-owned or outsourced infrastructure and services, such as wholesale networks, interconnect services or vendor outsourcing. However, these discrete elements have always been welded into an end-to-end, network-based services offering under the auspices of the telco’s BSS and OSS. These ensured that the telco took overall responsibility for end-to-end service design, delivery, assurance and billing.

    • The theory behind this traditional model is that all the customer’s connectivity needs should be met by leveraging the end-to-end telco network / service offering. In practice, the end-to-end characteristics have not always been fully controlled or owned by the service provider.
    • In the new, further disaggregated value chain, different parts of the now more software-, IT- and cloud-based technology stack are increasingly provided by other types of player, including from other industry verticals. Telcos must compete to play within these new markets, and have no automatic right to deliver even just the connectivity elements.

All of these aspects of disaggregation can be seen as manifestations of a fundamental shift where telecoms is evolving from a utility communications and connectivity business to a component of distributed computing. The core business of telecoms is becoming the processing and delivery of distributed computing workloads, and the enablement of ubiquitous computing.

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Telco disaggregation is a by-product of computerisation

Telco industry disaggregation is part of a broader evolution in the domains of technology, business, the economy, and society. This evolution comprises ‘computerisation’. Computing analyses and breaks up material processes and systems into a set of logical and functional sub-components, enabling processes and products to be re-engineered, optimised, recombined in different ways, managed, and executed more efficiently and automatically.

In essence, ‘telco disaggregation’ is a term that describes a moment in time at which telecoms technology, organisations, value chains and processes are being broken up into their component parts and re-engineered, under the impact of computerisation and its synonyms: digitisation, softwarisation, virtualisation and cloud.

This is part of a new wave of societal computerisation / digitisation, which at STL Partners we call the Coordination Age. At a high level, this can be described as ‘cross-domain computerisation’: separating out processes, services and functions from multiple areas of technology, the economy and society – and optimising, recombining and automating them (i.e. coordinating them), so that they can better deliver on social, economic and environmental needs and goals. In other words, this enables scarce resources to be used more efficiently and sustainably in pursuit of individual and social needs.

NFV has computerised the network; telco cloud native subordinates it to computing

In respect of the telecoms industry in particular, one could argue that the first wave of virtualisation (NFV and SDN), which unfolded during the 2010s, represented the computerisation and digitisation of telecoms networking. The focus of this was internal to the telecoms industry in the first instance, rather than connected to other social and technology domains and goals. It was about taking legacy, physical networking processes and functions, and redesigning and reimplementing them in software.

Then, the second wave of virtualisation (cloud-native – which is happening now) is what enables telecoms networking to play a part in the second wave of societal computerisation more broadly (the Coordination Age). This is because the different layers and elements of telecoms networks (services, network functions and infrastructure) are redefined, instantiated in software, broken up into their component parts, redistributed (logically and physically), and reassembled as a function of an increasing variety of cross-domain and cross-vertical use cases that are enabled and delivered, ultimately, by computerisation. Telecoms is disaggregated by, subordinated to, and defined and controlled by computing.

In summary, we can say that telecoms networks and operations are going through disaggregation now because this forms part of a broader societal transformation in which physical processes, functions and systems are being brought under the control of computing / IT, in pursuit of broader human, societal, economic and environmental goals.

In practice, this also means that telcos are facing increasing competition from many new types of actor, such as:

  • Computing, IT and cloud players
  • More specialist and agile networking providers
  • And vertical-market actors – delivering connectivity in support of vertical-specific, Coordination Age use cases.

 

Table of contents

  • Executive Summary
    • Three critical success factors for Coordination Age telcos
    • What capabilities will remain distinctively ‘telco’?
    • Our take on three pioneering cloud-native telcos
  • Introduction
    • The telco business is being disaggregated
    • Telco disaggregation is a by-product of computerisation
  • The disaggregated telco landscape: Where’s the value for telcos?
    • Is there anything left that is distinctively ‘telco’?
    • The ‘core’ telecoms business has evolved from delivering ubiquitous communications to enabling ubiquitous computing
    • Six telco-specific roles for telecoms remain in play
  • Radical telco disaggregation in action: AT&T, DISH and Rakuten
    • Servco, netco or infraco – or a patchwork of all three?
    • AT&T Network Cloud sell-off: Desperation or strategic acuity?
    • DISH Networks: Building the hyperscale network
    • Rakuten Mobile: Ecommerce platform turned cloud-native telco, turned telco cloud platform provider
  • Conclusion

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AI is starting to pay: Time to scale adoption

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AI adoption yields positive results

Over the last five years, telcos have made measurable progress in AI adoption and it is starting to pay off.  When compared to all industries, telcos have become adept at handling large data sets and implementing automation. Over the last several years the telecoms industry has gone from not knowing where or how to implement AI, to having developed and implemented hundreds of AI and automation applications for network operations, fraud prevention, customer channel management, and sales and marketing. We have discussed these use cases and operator strategies and opportunities in detail in previous reports.

For the more advanced telcos, the challenge is no longer setting up data management platforms and systems and identifying promising use cases for AI and automation, but overcoming the organisational and cultural barriers to becoming truly data-centric in mindset, processes and operations. A significant part of this challenge includes disseminating AI adoption and expertise of these technologies and associated skills to the wider organisation, beyond a centralised AI team.The benchmark for success here is not other telcos, or companies in other industries with large legacy and physical assets, but digital- and cloud-native companies that have been established with a data-centric mindset and practices from the start. This includes global technology companies like Microsoft, Google and Amazon, who increasingly see telecoms operators as customers, or perhaps even competitors one day, as well as greenfield players such as Rakuten, Jio and DISH, which as well as more modern networks have fewer ingrained legacy processes and cultural practices to overcome.

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Telecoms has a high AI adoption rate compared with other industries

AI pays off

Source: McKinsey

In this report, we assess several telcos’ approach to AI and the results they have achieved so far, and draw some lessons on what kind of strategy and ambition leads to better results. In the second section of the report, we explore in more detail the concrete steps telcos can take to help accelerate and scale the use of AI and automation across the organisation, in the hopes of becoming more data-driven businesses.

While not all telcos have an ambition to drive new revenue growth through development of their own IP in AI, to form the basis of new enterprise or consumer services, all operators will need AI to permeate their internal processes to compete effectively in the long term. Therefore, whatever the level ambition, disseminating fundamental AI and data skills across the organisation is crucial to long term success. STL Partners believes that the sooner telcos can master these skills, the higher their chances of successfully applying them to drive innovation both in core connectivity and new services higher up the value chain.

Contents

  • Executive Summary
  • Introduction
  • Developing an AI strategy: What is it for?
    • Telefónica: From AURA and LUCA to Telefónica Tech
    • Vodafone: An efficiency focused strategy
    • Elisa: A vertical application approach
    • Takeaways: Comparing three approaches
  • AI maturity progression
    • Adopt big data analytics: The basic building blocks
    • Creating a centralised AI unit
    • Creating a new business unit
    • Disseminating AI across the organisation
  • Using partnerships to accelerate and scale AI
    • O2 and Cardinality
    • AT&T Acumos
  • Conclusion and recommendations
  • Index

Telco edge computing: How to partner with hyperscalers

Edge computing is getting real

Hyperscalers such as Amazon, Microsoft and Google are rapidly increasing their presence in the edge computing market by launching dedicated products, establishing partnerships with telcos on 5G edge infrastructure and embedding their platforms into operators’ infrastructure.

Many telecoms operators, who need cloud infrastructure and platform support to run their edge services, have welcomed the partnership opportunity. However, they are yet to develop clear strategies on how to use these partnerships to establish a stronger proposition in the edge market, move up the value chain and play a role beyond hosting infrastructure and delivering connectivity. Operators that miss out on the partnership opportunity or fail to fully utilise it to develop and differentiate their capabilities and resources could risk either being reduced to connectivity providers with a limited role in the edge market and/or being late to the game.

Edge computing or multi-access edge computing (MEC) enables processing data closer to the end user or device (i.e. the source of data), on physical compute infrastructure that is positioned on the spectrum between the device and the internet or hyperscale cloud.

Telco edge computing is mainly defined as a distributed compute managed by a telco operator. This includes running workloads on customer premises as well as locations within the operator network. One of the reasons for caching and processing data closer to the customer data centres is that it allows both the operators and their customers to enjoy the benefit of reduced backhaul traffic and costs. Depending on where the computing resources reside, edge computing can be broadly divided into:

  • Network edge which includes sites or points of presence (PoPs) owned by a telecoms operator such as base stations, central offices and other aggregation points on the access and/or core network.
  • On-premise edge where the computing resources reside at the customer side, e.g. in a gateway on-site, an on-premises data centre, etc. As a result, customers retain their sensitive data on-premise and enjoy other flexibility and elasticity benefits brought by edge computing.

Our overview on edge computing definitions, network structure, market opportunities and business models can be found in our previous report Telco Edge Computing: What’s the operator strategy?

The edge computing opportunity for operators and hyperscalers

Many operators are looking at edge computing as a good opportunity to leverage their existing assets and resources to innovate and move up the value chain. They aim to expand their services and revenue beyond connectivity and enter the platform and application space. By deploying computing resources at the network edge, operators can offer infrastructure-as-a-service and alternative application and solutions for enterprises. Also, edge computing as a distributed compute structure and an extension of the cloud supports the operators’ own journey into virtualising the network and running internal operations more efficiently.

Cloud hyperscalers, especially the biggest three – Amazon Web Services (AWS), Microsoft Azure and Google – are at the forefront of the edge computing market. In the recent few years, they have made efforts to spread their influence outside of their public clouds and have moved the data acquisition point closer to physical devices. These include efforts in integrating their stack into IoT devices and network gateways as well as supporting private and hybrid cloud deployments. Recently, hyperscalers took another step to get closer to customers at the edge by launching platforms dedicated to telecom networks and enabling integration with 5G networks. The latest of these products include Wavelength from AWS, Azure Edge Zones from Microsoft and Anthos for Telecom from Google Cloud. Details on these products are available in section.

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From competition to coopetition

Both hyperscalers and telcos are among the top contenders to lead the edge market. However, each stakeholder lacks a significant piece of the stack which the other has. This is the cloud platform for operators and the physical locations for hyperscalers. Initially, operators and hyperscalers were seen as competitors racing to enter the market through different approaches. This has resulted in the emergence of new types of stakeholders including independent mini data centre providers such as Vapor IO and EdgeConnex, and platform start-ups such as MobiledgeX and Ori Industries.

However, operators acknowledge that even if they do own the edge clouds, these still need to be supported by hyperscaler clouds to create a distributed cloud. To fuel the edge market and build its momentum, operators will, in the most part, work with the cloud providers. Partnerships between operators and hyperscalers are starting to take place and shape the market, impacting edge computing short- and long-term strategies for operators as well as hyperscalers and other players in the market.

Figure 1: Major telco-hyperscalers edge partnerships

Major telco-hyperscaler partnerships

Source: STL Partners analysis

What does it mean for telcos?

Going to market alone is not an attractive option for either operators or hyperscalers at the moment, given the high investment requirement without a guaranteed return. The partnerships between two of the biggest forces in the market will provide the necessary push for the use cases to be developed and enterprise adoption to be accelerated. However, as markets grow and change, so do the stakeholders’ strategies and relationships between them.

Since the emergence of cloud computing and the development of the digital technologies market, operators have been faced with tough competition from the internet players, including hyperscalers who have managed to remain agile while building a sustained appetite for innovation and market disruption. Edge computing is not an exception and they are moving rapidly to define and own the biggest share of the edge market.

Telcos that fail to develop a strategic approach to the edge could risk losing their share of the growing market as non-telco first movers continue to develop the technology and dictate the market dynamics. This report looks into what telcos should consider regarding their edge strategies and what roles they can play in the market while partnering with hyperscalers in edge computing.

Table of contents

  • Executive Summary
    • Operators’ roles along the edge computing value chain
    • Building a bigger ecosystem and pushing market adoption
    • How partnerships can shape the market
    • What next?
  • Introduction
    • The edge computing opportunity for operators and hyperscalers
    • From competition to coopetition
    • What does it mean for telcos?
  • Overview of the telco-hyperscalers partnerships
    • Explaining the major roles required to enable edge services
    • The hyperscaler-telco edge commercial model
  • Hyperscalers’ edge strategies
    • Overview of hyperscalers’ solutions and activities at the edge
    • Hyperscalers approach to edge sites and infrastructure acquisition
  • Operators’ edge strategies and their roles in the partnerships
    • Examples of operators’ edge computing activities
    • Telcos’ approach to integrating edge platforms
  • Conclusion
    • Infrastructure strategy
    • Platform strategy
    • Verticals and ecosystem building strategy

 

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Telco ecosystems: How to make them work

The ecosystem business framework

The success of large businesses such as Microsoft, Amazon and Google as well as digital disrupters like Airbnb and Uber is attributed to their adoption of platform-enabled ecosystem business frameworks. Microsoft, Amazon and Google know how to make ecosystems work. It is their ecosystem approach that helped them to scale quickly, innovate and unlock value in opportunity areas where businesses that are vertically integrated, or have a linear value chain, would have struggled. Internet-enabled digital opportunity areas tend to be unsuited to the traditional business frameworks. These depend on having the time and the ability to anticipate needs, plan and execute accordingly.

As businesses in the telecommunications sector and beyond try to emulate the success of these companies and their ecosystem approach, it is necessary to clarify what is meant by the term “ecosystem” and how it can provide a framework for organising business.

The word “ecosystem” is borrowed from biology. It refers to a community of organisms – of any number of species – living within a defined physical environment.

A biological ecosystem

The components of a biological ecosystem

Source: STL Partners

A business ecosystem can therefore be thought of as a community of stakeholders (of different types) that exist within a defined business environment. The environment of a business ecosystem can be small or large.  This is also true in biology, where both a tree and a rainforest can equally be considered ecosystem environments.

The number of organisms within a biological community is dynamic. They coexist with others and are interdependent within the community and the environment. Environmental resources (i.e. energy and matter) flow through the system efficiently. This is how the ecosystem works.

Companies that adopt an ecosystem business framework identify a community of stakeholders to help them address an opportunity area, or drive business in that space. They then create a business environment (e.g. platforms, rules) to organise economic activity among those communities.  The environment integrates community activities in a complementary way. This model is consistent with STL Partners’ vision for a Coordination Age, where desired outcomes are delivered to customers by multiple parties acting together.

Characteristics of business ecosystems that work

In the case of Google, it adopted an ecosystem approach to tackle the search opportunity. Its search engine platform provides the environment for an external stakeholder community of businesses to reach consumers as they navigate the internet, based on what consumers are looking for.

  • Google does not directly participate in the business-consumer transaction, but its platform reduces friction for participants (providing a good customer experience) and captures information on the exchange.

While Google leverages a technical platform, this is not a requirement for an ecosystem framework. Nespresso built an ecosystem around its patented coffee pod. It needed to establish a user-base for the pods, so it developed a business environment that included licensing arrangements for coffee machine manufacturers.  In addition, it provided support for high-end homeware retailers to supply these machines to end-users. It also created the online Nespresso Club for coffee aficionados to maintain demand for its product (a previous vertically integrated strategy to address this premium coffee-drinking niche had failed).

Ecosystem relevance for telcos

Telcos are exploring new opportunities for revenue. In many of these opportunities, the needs of the customer are evolving or changeable, budgets are tight, and time-to-market is critical. Planning and executing traditional business frameworks can be difficult under these circumstances, so ecosystem business frameworks are understandably of interest.

Traditional business frameworks require companies to match their internal strengths and capabilities to those required to address an opportunity. An ecosystem framework requires companies to consider where those strengths and capabilities are (i.e. external stakeholder communities). An ecosystem orchestrator then creates an environment in which the stakeholders contribute their respective value to meet that end. Additional end-user value may also be derived by supporting stakeholder communities whose products and services use, or are used with, the end-product or service of the ecosystem (e.g. the availability of third party App Store apps add value for end customers and drives demand for high end Apple iPhones). It requires “outside-in” strategic thinking that goes beyond the bounds of the company – or even the industry (i.e. who has the assets and capabilities, who/what will support demand from end-users).

Many companies have rushed to implement ecosystem business frameworks, but have not attained the success of Microsoft, Amazon or Google, or in the telco arena, M-Pesa. Telcos require an understanding of the rationale behind ecosystem business frameworks, what makes them work and how this has played out in other telco ecosystem implementations. As a result, they should be better able to determine whether to leverage this approach more widely.

Table of Contents

  • Executive Summary
  • The ecosystem business framework
  • Why ecosystem business frameworks?
    • Benefits of ecosystem business frameworks
  • Identifying ecosystem business frameworks
  • Telco experience with ecosystem frameworks
    • AT&T Community
    • Deutsche Telekom Qivicon
    • Telecom Infra Project (TIP)
    • GSMA Mobile Connect
    • Android
    • Lessons from telco experience
  • Criteria for successful ecosystem businesses
    • “Destination” status
    • Strong assets and capabilities to share
    • Dynamic strategy
    • Deep end-user knowledge
    • Participant stakeholder experience excellence
    • Continuous innovation
    • Conclusions
  • Next steps
    • Index

Telco edge computing: What’s the operator strategy?

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Edge computing can help telcos to move up the value chain

The edge computing market and the technologies enabling it are rapidly developing and attracting new players, providing new opportunities to enterprises and service providers. Telco operators are eyeing the market and looking to leverage the technology to move up the value chain and generate more revenue from their networks and services. Edge computing also represents an opportunity for telcos to extend their role beyond offering connectivity services and move into the platform and the application space.

However, operators will be faced with tough competition from other market players such as cloud providers, who are moving rapidly to define and own the biggest share of the edge market. Plus, industrial solution providers, such as Bosch and Siemens, are similarly investing in their own edge services. Telcos are also dealing with technical and business challenges as they venture into the new market and trying to position themselves and identifying their strategies accordingly.

Telcos that fail to develop a strategic approach to the edge could risk losing their share of the growing market as non-telco first movers continue to develop the technology and dictate the market dynamics. This report looks into what telcos should consider regarding their edge strategies and what roles they can play in the market.

Following this introduction, we focus on:

  1. Edge terminology and structure, explaining common terms used within the edge computing context, where the edge resides, and the role of edge computing in 5G.
  2. An overview of the edge computing market, describing different types of stakeholders, current telecoms operators’ deployments and plans, competition from hyperscale cloud providers and the current investment and consolidation trends.
  3. Telcos challenges in addressing the edge opportunity: technical, organisational and commercial challenges given the market
  4. Potential use cases and business models for operators, also exploring possible scenarios of how the market is going to develop and operators’ likely positioning.
  5. A set of recommendations for operators that are building their strategy for the edge.

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What is edge computing and where exactly is the edge?

Edge computing brings cloud services and capabilities including computing, storage and networking physically closer to the end-user by locating them on more widely distributed compute infrastructure, typically at smaller sites.

One could argue that edge computing has existed for some time – local infrastructure has been used for compute and storage, be it end-devices, gateways or on-premises data centres. However, edge computing, or edge cloud, refers to bringing the flexibility and openness of cloud-native infrastructure to that local infrastructure.

In contrast to hyperscale cloud computing where all the data is sent to central locations to be processed and stored, edge computing local processing aims to reduce time and save bandwidth needed to send and receive data between the applications and cloud, which improves the performance of the network and the applications. This does not mean that edge computing is an alternative to cloud computing. It is rather an evolutionary step that complements the current cloud computing infrastructure and offers more flexibility in executing and delivering applications.

Edge computing offers mobile operators several opportunities such as:

  • Differentiating service offerings using edge capabilities
  • Providing new applications and solutions using edge capabilities
  • Enabling customers and partners to leverage the distributed computing network in application development
  • Improving networkperformance and achieving efficiencies / cost savings

As edge computing technologies and definitions are still evolving, different terms are sometimes used interchangeably or have been associated with a certain type of stakeholder. For example, mobile edge computing is often used within the mobile network context and has evolved into multi-access edge computing (MEC) – adopted by the European Telecommunications Standards Institute (ETSI) – to include fixed and converged network edge computing scenarios. Fog computing is also often compared to edge computing; the former includes running intelligence on the end-device and is more IoT focused.

These are some of the key terms that need to be identified when discussing edge computing:

  • Network edge refers to edge compute locations that are at sites or points of presence (PoPs) owned by a telecoms operator, for example at a central office in the mobile network or at an ISP’s node.
  • Telco edge cloud is mainly defined as distributed compute managed by a telco  This includes running workloads on customer premises equipment (CPE) at customers’ sites as well as locations within the operator network such as base stations, central offices and other aggregation points on access and/or core network. One of the reasons for caching and processing data closer to the customer data centres is that it allows both the operators and their customers to enjoy the benefit of reduced backhaul traffic and costs.
  • On-premise edge computing refers to the computing resources that are residing at the customer side, e.g. in a gateway on-site, an on-premises data centre, etc. As a result, customers retain their sensitive data on-premise and enjoy other flexibility and elasticity benefits brought by edge computing.
  • Edge cloud is used to describe the virtualised infrastructure available at the edge. It creates a distributed version of the cloud with some flexibility and scalability at the edge. This flexibility allows it to have the capacity to handle sudden surges in workloads from unplanned activities, unlike static on-premise servers. Figure 1 shows the differences between these terms.

Figure 1: Edge computing types

definition of edge computing

Source: STL Partners

Network infrastructure and how the edge relates to 5G

Discussions on edge computing strategies and market are often linked to 5G. Both technologies have overlapping goals of improving performance and throughput and reducing latency for applications such as AR/VR, autonomous vehicles and IoT. 5G improves speed by increasing spectral efficacy, it offers the potential of much higher speeds than 4G. Edge computing, on the other hand, reduces latency by shortening the time required for data processing by allocating resources closer to the application. When combined, edge and 5G can help to achieve round-trip latency below 10 milliseconds.

While 5G deployment is yet to accelerate and reach ubiquitous coverage, the edge can be utilised in some places to reduce latency where needed. There are two reasons why the edge will be part of 5G:

  • First, it has been included in the 5Gstandards (3GPP Release 15) to enable ultra-low latency which will not be achieved by only improvements in the radio interface.
  • Second, operators are in general taking a slow and gradual approach to 5G deployment which means that 5G coverage alone will not provide a big incentive for developers to drive the application market. Edge can be used to fill the network gaps to stimulate the application market growth.

The network edge can be used for applications that need coverage (i.e. accessible anywhere) and can be moved across different edge locations to scale capacity up or down as required. Where an operator decides to establish an edge node depends on:

  • Application latency needs. Some applications such as streaming virtual reality or mission critical applications will require locations close enough to its users to enable sub-50 milliseconds latency.
  • Current network topology. Based on the operators’ network topology, there will be selected locations that can meet the edge latency requirements for the specific application under consideration in terms of the number of hops and the part of the network it resides in.
  • Virtualisation roadmap. The operator needs to consider virtualisation roadmap and where data centre facilities are planned to be built to support future network
  • Site and maintenance costs. The cloud computing economies of scale may diminish as the number of sites proliferate at the edge, for example there is a significant difference in maintaining 1-2 large data centres to maintaining 100s across the country
  • Site availability. Some operators’ edge compute deployment plans assume the nodes reside in the same facilities as those which host their NFV infrastructure. However, many telcos are still in the process of renovating these locations to turn them into (mini) data centres so aren’t yet ready.
  • Site ownership. Sometimes the preferred edge location is within sites that the operators have limited control over, whether that is in the customer premise or within the network. For example, in the US, the cell towers are owned by tower operators such as Crown Castle, American Tower and SBA Communications.

The potential locations for edge nodes can be mapped across the mobile network in four levels as shown in Figure 2.

Figure 2: possible locations for edge computing

edge computing locations

Source: STL Partners

Table of Contents

  • Executive Summary
    • Recommendations for telco operators at the edge
    • Four key use cases for operators
    • Edge computing players are tackling market fragmentation with strategic partnerships
    • What next?
  • Table of Figures
  • Introduction
  • Definitions of edge computing terms and key components
    • What is edge computing and where exactly is the edge?
    • Network infrastructure and how the edge relates to 5G
  • Market overview and opportunities
    • The value chain and the types of stakeholders
    • Hyperscale cloud provider activities at the edge
    • Telco initiatives, pilots and plans
    • Investment and merger and acquisition trends in edge computing
  • Use cases and business models for telcos
    • Telco edge computing use cases
    • Vertical opportunities
    • Roles and business models for telcos
  • Telcos’ challenges at the edge
  • Scenarios for network edge infrastructure development
  • Recommendation
  • Index

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Cloud gaming: What’s the telco play?

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Drivers for cloud gaming services

Although many people still think of PlayStation and Xbox when they think about gaming, the console market represents only a third of the global games market. From its arcade and console-based beginnings, the gaming industry has come a long way. Over the past 20 years, one of the most significant market trends has been growth of casual gamers. Whereas hardcore gamers are passionate about frequent play and will pay more to play premium games, casual gamers play to pass the time. With the rapid adoption of smartphones capable of supporting gaming applications over the past decade, the population of casual/occasional gamers has risen dramatically.

This trend has seen the advent of free-to-play business models for games, further expanding the industry’s reach. In our earlier report, STL estimated that 45% of the population in the U.S. are either casual gamers (between 2 and 5 hours a week) or occasional gamers (up to 2 hours a week). By contrast, we estimated that hardcore gamers (more than 15 hours a week) make up 5% of the U.S. population, while regular players (5 to 15 hours a week) account for a further 15% of the population.

The expansion in the number of players is driving interest in ‘cloud gaming’. Instead of games running on a console or PC, cloud gaming involves streaming games onto a device from remote servers. The actual game is stored and run on a remote compute with the results being live streamed to the player’s device. This has the important advantage of eliminating the need for players to purchase dedicated gaming hardware. Now, the quality of the internet connection becomes the most important contributor to the gaming experience. While this type of gaming is still in its infancy, and faces a number of challenges, many companies are now entering the cloud gaming fold in an effort to capitalise on the new opportunity.

5G can support cloud gaming traffic growth

Cloud gaming requires not just high bandwidth and low latency, but also a stable connection and consistent low latency (jitter). In theory, 5G promises to deliver stable ultra-low latency. In practice, an enormous amount of infrastructure investment will be required in order to enable a fully loaded 5G network to perform as well as end-to-end fibre5G networks operating in the lower frequency bands would likely buckle under the load if lots of gamers in a cell needed a continuous 25Mbps stream. While 5G in millimetre-wave spectrum would have more capacity, it would require small cells and other mechanisms to ensure indoor penetration, given the spectrum is short range and could be blocked by obstacles such as walls.

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A complicated ecosystem

As explained in our earlier report, Cloud gaming: New opportunities for telcos?, the cloud gaming ecosystem is beginning to take shape. This is being accelerated by the growing availability of fibre and high-speed broadband, which is now being augmented by 5G and, in some cases, edge data centres. Early movers in cloud gaming are offering a range of services, from gaming rigs, to game development platforms, cloud computing infrastructure, or an amalgamation of these.

One of the main attractions of cloud gaming is the potential hardware savings for gamers. High-end PC gaming can be an extremely expensive hobby: gaming PCs range from £500 for the very cheapest to over £5,000 for the very top end. They also require frequent hardware upgrades in order to meet the increasing processing demands of new gaming titles. With cloud gaming, you can access the latest graphics processing unit at a much lower cost.

By some estimates, cloud gaming could deliver a high-end gaming environment at a quarter of the cost of a traditional console-based approach, as it would eliminate the need for retailing, packaging and delivering hardware and software to consumers, while also tapping the economies of scale inherent in the cloud. However, in STL Partners’ view that is a best-case scenario and a 50% reduction in costs is probably more realistic.

STL Partners believes adoption of cloud gaming will be gradual and piecemeal for the next few years, as console gamers work their way through another generation of consoles and casual gamers are reluctant to commit to a monthly subscription. However, from 2022, adoption is likely to grow rapidly as cloud gaming propositions improve.

At this stage, it is not yet clear who will dominate the value chain, if anyone. Will the “hyperscalers” be successful in creating a ‘Netflix’ for games? Google is certainly trying to do this with its Stadia platform, which has yet to gain any real traction, due to both its limited games library and its perceived technological immaturity. The established players in the games industry, such as EA, Microsoft (Xbox) and Sony (PlayStation), have launched cloud gaming offerings, or are, at least, in the process of doing so. Some telcos, such as Deutsche Telekom and Sunrise, are developing their own cloud gaming services, while SK Telecom is partnering with Microsoft.

What telcos can learn from Shadow’s cloud gaming proposition

The rest of this report explores the business models being pursued by cloud gaming providers. Specifically, it looks at cloud gaming company Shadow and how it fits into the wider ecosystem, before evaluating how its distinct approach compares with that of the major players in online entertainment, such as Sony and Google. The second half of the report considers the implications for telcos.

Table of Contents

  • Executive Summary
  • Introduction
  • Cloud gaming: a complicated ecosystem
    • The battle of the business models
    • The economics of cloud gaming and pricing models
    • Content offering will trump price
    • Cloud gaming is well positioned for casual gamers
    • The future cloud gaming landscape
  • 5G and fixed wireless
  • The role of edge computing
  • How and where can telcos add value?
  • Conclusions

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Coordinating the care of the elderly

Are telcos ready to enable digital health?

The world has been talking about connected healthcare – the use of in-home and wearable systems to monitor people’s condition – for a long time. Although adoption to date has been piecemeal and limited, the rapid rise in the number of elderly people is fuelling demand for in-home and wearable monitoring systems. The rapid spread of the Covid-19 virus is putting the world’s healthcare systems under huge strain, further underlining the need to reform the way in which many medical conditions are diagnosed and treated.

This report explores whether telcos now have the appetite and the tools they need to serve this very challenging, but potentially rewarding market. With the advent of the Coordination Age (see STL Partners report: Telco 2030: New purpose, strategy and business models for the Coordination Age), telcos could play a pivotal role in enabling the world’s healthcare systems to become more sustainable and effective.

This report considers demographic trends, the forces changing healthcare and the case for greater use of digital technologies to monitor chronic conditions and elderly people. It explores various implementation options and some of the healthcare-related activities of Tele2, Vodafone, Telefónica and AT&T, before drawing conclusions and recommending some high-level actions for telcos looking to support healthcare for the elderly.

This executive briefing builds on previous STL Partners reports including:

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Why healthcare needs to change

During the twentieth century, life expectancy in most countries in the world rose dramatically.  This was down to advances in medical science and diagnostic technology, as well as rising awareness about personal and environmental hygiene, health, nutrition, and education. Average global life expectancy continues to rise, increasing from 65.3 years in 1990 to 71.5 years in 2013.  In some countries, the increase in lifespans has been dramatic. The life expectancy for a Chilean female has risen to 82 years today from 33 years in 1910, according to the World Health Organization (WHO).

Figure 1: Across the world, average life expectancy is rising towards 80

raising lift expectancy to 2050

Source: The UN

Clearly, the increase in the average lifespan is a good thing. But longer life expectancy, together with falling birth rates, means the population overall is aging rapidly, posing a major challenge for the world’s healthcare systems. According to the WHO, the proportion of the world’s population over 60 years old will double from about 11% to 22% between 2000 and 2050, equivalent to a rise in the absolute number of people over 60 from 605 million to an extraordinary two billion. Between 2012 and 2050, the number of people over 80 will almost quadruple to 395 million, according to the WHO. That represents a huge increase in the number of elderly people, many of whom will require frequent care and medical attention. For both policymakers and the healthcare industry, this demographic time bomb represents a huge challenge.

Rising demand for continuous healthcare

Of particular concern is the number of people that need continuous healthcare. About 15% of the world’s population suffers from various disabilities, with between 110 million and 190 million adults having significant functional difficulties, according to the WHO. With limited mobility and independence, it can be hard for these people to get the healthcare they need.

As the population ages, this number will rise and rise. For example, the number of Americans living with Alzheimer’s disease, which results in memory loss and other symptoms of dementia, is set to rise to 16 million by 2050 from five million today, according to the Alzheimer’s Association.

The growth in the number of older people, combined with an increase in sedentary lifestyles and diets high in sugars and fats, also means many more people are now living with heart disease, obesity, diabetes and asthma. Furthermore, poor air quality in many industrial and big cities is giving rise to cancer, cardiovascular and respiratory diseases such as asthma, and lung diseases. Around 235 million people are currently suffering from asthma and about 383,000 people died from asthma in 2015, according to the WHO.

Half of all American adults have at least one chronic condition with one in three adults suffering from multiple chronic conditions, according to the National Institutes of Health (NIH). Most other rich countries are experiencing similar trends, while middle-income countries are heading in the same direction. In cases where a patient requires medical interventions, they may have to travel to a hospital and occupy a bed, at great expense. With the growing prevalence of chronic conditions, a rising proportion of GDP is being devoted to healthcare. Only low-income countries are bucking this trend (see Figure 2).

Figure 2: Spending on healthcare is rising except in low income countries

Public health as % of government spending WHO

Public health spending as % of GDP WHO

Source: The WHO

However, there is a huge difference in absolute spending levels between high-income countries and the rest of the world (see Figure 3). High-income countries, such as the U.S., spend almost ten times as much per capita as upper middle-income countries, such as Brazil. At first glance, this suggests the potential healthcare market for telcos is going to be much bigger in Europe, North America and developed Asia, than for telcos in Latin America, developing Asia and sub-Saharan Africa. Yet these emerging economies could leapfrog their developed counterparts to adopt connected self-managed healthcare systems, as the only affordable alternative.

Figure 3: Absolute health spending in high income countries is far ahead of the rest

per capita health spending by country income levelSource: The WHO

The cost associated with healthcare services continues to rise due to the increasing prices of prescription drugs, diagnostic tools and in-clinic care. According to the U.S. Centers for Disease Control and Prevention, 90% of the nation’s US$3.3 trillion annual healthcare expenditure is spent on individuals with chronic and mental health conditions.

On top of that figure, the management of chronic conditions consumes an enormous amount of informal resources. As formal paid care services are expensive, many older people rely on the support of family, friends or volunteers calling at their homes to check on them and help them with tasks, such as laundry and shopping. In short, the societal cost of managing chronic conditions is enormous.

The particular needs of the elderly

Despite the time and money being spent on healthcare, people with chronic and age-related conditions can be vulnerable. While most elderly people want to live in their own home, there are significant risks attached to this decision, particularly if they live alone. The biggest danger is a fall, which can lead to fractures and, sometimes, lethal medical complications. In the U.S., more than one in four older people fall each year due to illness or loss of balance, according to the U.S. Centers for Disease Control and Prevention. But less than half tell their doctor. One out of five falls causes a serious injury, such as broken bones or a head injury. In 2015, the total medical costs for falls was more than US$50 billion in the U.S. Beyond falls, another key risk is that older people neglect their own health. A 2016 survey of 1,000 U.K. consumers by IT solutions company Plextek, found that 42% of 35- to 44-year-olds are concerned that their relatives aren’t telling them they feel ill.

Such concerns are driving demand for in-home and wearable systems that can monitor people in real-time and then relay real-time location and mobility information to relatives or carers. If they are perceived to be reliable and comprehensive, such systems can provide peace of mind, making home-based care a more palatable alternative for both patients and their families.

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Table of contents

  • Executive Summary
    • Barriers to more in-home healthcare
  • Introduction
  • Why healthcare needs to change
    • Rising demand for continuous healthcare
    • The particular needs of the elderly
    • Shift to value-based care
    • Demands for personalised healthcare and convenience
  • How healthcare is changing
    • Barriers to more in-home healthcare
  • Implementation options
    • Working with wearables
    • Cameras and motion sensors
    • The connectivity
    • Analysing the data
  • How telcos are tackling healthcare
    • KPN: Covering most of the bases
    • Tele2 and Cuviva: Working through healthcare centres
    • Vodafone and Vision: An expensive system for Alzheimer’s
    • Telefónica’s Health Moonshot
    • AT&T: Leveraging a long-standing brand
  • Conclusions and recommendations
    • Recommendations

5G: Bridging hype, reality and future promises

The 5G situation seems paradoxical

People in China and South Korea are buying 5G phones by the million, far more than initially expected, yet many western telcos are moving cautiously. Will your company also find demand? What’s the smart strategy while uncertainty remains? What actions are needed to lead in the 5G era? What questions must be answered?

New data requires new thinking. STL Partners 5G strategies: Lessons from the early movers presented the situation in late 2019, and in What will make or break 5G growth? we outlined the key drivers and inhibitors for 5G growth. This follow on report addresses what needs to happen next.

The report is informed by talks with executives of over three dozen companies and email contacts with many more, including 21 of the first 24 telcos who have deployed. This report covers considerations for the next three years (2020–2023) based on what we know today.

“Seize the 5G opportunity” says Ke Ruiwen, Chairman, China Telecom, and Chinese reports claimed 14 million sales by the end of 2019. Korea announced two million subscribers in July 2019 and by December 2019 approached five million. By early 2020, The Korean carriers were confident 30% of the market will be using 5G by the end of 2020. In the US, Verizon is selling 5G phones even in areas without 5G services,  With nine phone makers looking for market share, the price in China is US$285–$500 and falling, so the handset price barrier seems to be coming down fast.

Yet in many other markets, operators progress is significantly more tentative. So what is going on, and what should you do about it?

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5G technology works OK

22 of the first 24 operators to deploy are using mid-band radio frequencies.

Vodafone UK claims “5G will work at average speeds of 150–200 Mbps.” Speeds are typically 100 to 500 Mbps, rarely a gigabit. Latency is about 30 milliseconds, only about a third better than decent 4G. Mid-band reach is excellent. Sprint has demonstrated that simply upgrading existing base stations can provide substantial coverage.

5G has a draft business case now: people want to buy 5G phones. New use cases are mostly years away but the prospect of better mobile broadband is winning customers. The costs of radios, backhaul, and core are falling as five system vendors – Ericsson, Huawei, Nokia, Samsung, and ZTE – fight for market share. They’ve shipped over 600,000 radios. Many newcomers are gaining traction, for example Altiostar won a large contract from Rakuten and Mavenir is in trials with DT.

The high cost of 5G networks is an outdated myth. DT, Orange, Verizon, and AT&T are building 5G while cutting or keeping capex flat. Sprint’s results suggest a smart build can quickly reach half the country without a large increase in capital spending. Instead, the issue for operators is that it requires new spending with uncertain returns.

The technology works, mostly. Mid-band is performing as expected, with typical speeds of 100–500Mbps outdoors, though indoor performance is less clear yet. mmWave indoor is badly degraded. Some SDN, NFV, and other tools for automation have reached the field. However, 5G upstream is in limited use. Many carriers are combining 5G downstream with 4G upstream for now. However, each base station currently requires much more power than 4G bases, which leads to high opex. Dynamic spectrum sharing, which allows 5G to share unneeded 4G spectrum, is still in test. Many features of SDN and NFV are not yet ready.

So what should companies do? The next sections review go-to-market lessons, status on forward-looking applications, and technical considerations.

Early go-to-market lessons

Don’t oversell 5G

The continuing publicity for 5G is proving powerful, but variable. Because some customers are already convinced they want 5G, marketing and advertising do not always need to emphasise the value of 5G. For those customers, make clear why your company’s offering is the best compared to rivals’. However, the draw of 5G is not universal. Many remain sceptical, especially if their past experience with 4G has been lacklustre. They – and also a minority swayed by alarmist anti-5G rhetoric – will need far more nuanced and persuasive marketing.

Operators should be wary of overclaiming. 5G speed, although impressive, currently has few practical applications that don’t already work well over decent 4G. Fixed home broadband is a possible exception here. As the objective advantages of 5G in the near future are likely to be limited, operators should not hype features that are unrealistic today, no matter how glamorous. If you don’t have concrete selling propositions, do image advertising or use happy customer testimonials.

Table of Contents

  • Executive Summary
  • Introduction
    • 5G technology works OK
  • Early go-to-market lessons
    • Don’t oversell 5G
    • Price to match the experience
    • Deliver a valuable product
    • Concerns about new competition
    • Prepare for possible demand increases
    • The interdependencies of edge and 5G
  • Potential new applications
    • Large now and likely to grow in the 5G era
    • Near-term applications with possible major impact for 5G
    • Mid- and long-term 5G demand drivers
  • Technology choices, in summary
    • Backhaul and transport networks
    • When will 5G SA cores be needed (or available)?
    • 5G security? Nothing is perfect
    • Telco cloud: NFV, SDN, cloud native cores, and beyond
    • AI and automation in 5G
    • Power and heat

Telco innovation: Why it’s broken and how to fix it

Telcos have tried innovating in many verticals

Incumbent telecommunications providers have seen their margins fall as basic telecommunications services, both fixed and mobile, have been increasingly commoditised. The need to provide differentiated services to counteract this trend is widely recognised in the industry, yet despite considerable investment and many attempts, too often new services launched by operators have failed to deliver the anticipated results. Yet some, especially in mobile banking and related services, have proved successful. Why is this so?

This report focuses on product and service innovation for customers, rather than on innovation in sales, marketing, finance, operations or networks. It addresses the introduction of new and innovative services and not the repackaging of existing communications services, for example in new pricing and service bundles (see Figure 2).

It looks at examples from a range of services, covering most of the new types of services introduced by MNOs over the past decade. These include:

  • Messaging: RCS and its competitors
  • Mobile financial and insurance services: Orange Money / Orange Bank, Millicom/Tigo’s joint ventures
  • Health: O2 Telehealth, Telenor’s Tonic health service
  • Smart home: AT&T’s Digital Life, Deutsche Telekom’s Qivicon
  • Lifestyle: Turkcell’s range of apps and Vodacom’s Mezzanine

We have covered many of these individually in previous reports, looking at how they were developed and have evolved over time, and whether and why they are (or we expect them to be) successful.

This report seeks to identify the common factors that led to success or failure, in order to establish some best practices for telcos in innovation. While we recognise that there are often several causes of success and failure, in some cases a single failure can undo much good work.

Previous reports this one builds on include:

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Product development or true diversification: How ambitious should telcos be?

Historically, telcos have aimed to find new customers for existing telecoms services, where the their market is not yet saturated, or expanding geographically to achieve scale. However, most telecoms markets are now nearly saturated – at least in the areas that telcos can profitably reach – so true service innovation, corresponding to the right hand side on the figure below, is now a crucial component for long term revenue growth.

The seven telco innovations discussed in this report are shown on the figure below. It is worth noting the progression Orange has made in building on its experience with its mobile money service to providing full banking services. This is highlighted in the diagram by the arrow, and is discussed more fully in the body of this report.

Most telcos innovation falls in the product development category on the Ansoff matrix

Telco innovations plotted on the Ansoff matrix

Source: STL Partners. For more on market development opportunity, see STL Partners report Making big beautiful: Multinational telcos need the telco cloud

In theory, one of the most effective ways of maximising the chances of success, and achieving the scale required to make a significant impact on revenues and profitability, is for operators to select services that target a large part of their existing customer base.

However, our analysis of the telco innovations in this report shows that there is actually little correlation between the distance from telcos’ core customer base and level of success. This because by tying new products and services too closely to their existing customer bases, telcos are actually limiting their ability to scale. While this approach is intended to help them compete more effectively against their peers, by increasing loyalty for core telecoms services, in reality, any telco-driven product development innovation is likely to compete with network agnostic service providers. So while it may make sense to offer something only to existing customers at the start, to truly scale telcos need to reach a wider market.

Orange is a good example of this transition. While its mobile money services in Africa remain tied to its telecoms customer base, its move into full-fledge banking in France is separate from telecoms services. As it rolls out full banking services across its footprint, this separation is likely to become more entrenched.

Many of the examples discussed in the main body of the report, including AT&T’s Digital Life, Orange Money and O2’s Telehealth venture were set up as separate businesses, which allowed their initial development to progress well. But this was not enough on their own to make them successful.

How successful have telcos been?

Comparing telcos’ investments into service innovations shows that, too often, they have made bets on areas that seem like natural opportunities for new services, but failed to gain traction because they didn’t do a rigorous enough assessment of the conditions for success.

To succeed in innovation, telcos must evaluate proposed new services or products much more painstakingly across three areas:

  1. User needs and requirements: that the product or service meets a real user need. This breaks down into two points:
    • The product or servicemust be easy to use and fit into users’ lifestyles.
    • And at the right price point. Most consumer products need a free tier to encourage customers to try and engage before paying (if ever). In some cases, the end user might not be the payer, so if that is the case then telcos need to identify the payer and ensure the product is relevant and valuable for them, too.
  2. Market structure and characteristics: clear vision of where the ROI is coming from. There are two main options for ROI – increased customer loyalty and new revenue.
    • For loyalty, telcos need a clear means of measuring whether the product or service is improving retention.
    • If telcos are seeking to build new revenue, they need to be realistic about how long it will take to achieve profitability and the size of the opportunity. Too often, telcos give up because they deem a new venture not valuable enough compared with the core business..
  3. Business structure: deciding on whether to develop something in house, to set up a joint venture, or acquire, and what the relationship is with the core business. The further away a new product or service is from the core business, the more independence it needs to develop and grow.

In this report, we compare the approaches of seven telco innovations, drawing on in-depth analysis from previous STL Partners reports, summarised in the table below.

Strategy is more important that degree of difficult for successful innovation

Assessment of quality of strategy and execution for telco innovationsSource: STL Partners

Our analysis shows that the difficulty of the innovation, i.e. whether it is product development or diversification into a new vertical, is less important to success than doing the difficult strategy and planning work outlined above.

For instance, while RCS is very closely tied to telcos’ existing customers and services, the necessary cooperation between telcos to bring it to market in a way that is valuable to consumers and potential enterprise customers was unrealistic from the start. By constrast, Tonic’s health insurance proposition is very different from Telenor’s core telecoms services, but Tonic’s clear vision and strategy, and ability to adapt to customer needs, have underpinned its early success in Bangladesh.

Read the full report to see a detailed assessment of each innovation across the three categories.

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NFV Deployment Tracker: North American data and trends

Introduction

NFV in North America – how is virtualisation moving forward in telcos against global benchmarks?

Welcome to the sixth edition of the ‘NFV Deployment Tracker’

This report is the sixth analytical report in the NFV Deployment Tracker series and is intended as an accompaniment to the updated Tracker Excel spreadsheet.

This extended update covers seven months of deployments worldwide, from October 2018 to April 2019. The update also includes an improved spreadsheet format: a more user-friendly, clearer lay-out and a regional toggle in the ‘Aggregate data by region’ worksheet, which provides much quicker access to the data on each region separately.

The present analytical report provides an update on deployments and trends in the North American market (US, Canada and the Caribbean) since the last report focusing on that region (December 2017).

Scope, definitions and importance of the data

We include in the Tracker only verified, live deployments of NFV or SDN technology powering commercial services. The information is taken mainly from public-domain sources, such as press releases by operators or vendors, or reports in reputable trade media. However, a small portion of the data also derives from confidential conversations we have had with telcos. In these instances, the deployments are included in the aggregate, anonymised worksheets in the spreadsheet, but not in the detailed dataset listing deployments by operator and geography, and by vendor where known.

Our definition of a ‘deployment’, including how we break deployments down into their component parts, is provided in the ‘Explanatory notes’ worksheet, in the accompanying Excel document.

NFV in North America in global context

We have gathered data on 120 live, commercial deployments of NFV and SDN in North America between 2011 and April 2019. These were completed by 33 mainly Tier-One telcos and telco group subsidiaries: 24 based in the US, four in Canada, one Caribbean, three European (Colt, T-Mobile and Vodafone), and one Latin American (América Móvil). The data includes information on 217 known Virtual Network Functions (VNFs), functional sub-components and supporting infrastructure elements that have formed part of these deployments.

This makes North America the third-largest NFV/SDN market worldwide, as is illustrated by the comparison with other regions in the chart below.

Total NFV/SDN deployments by region, 2011 to April 2019

total NFV deployments by region North America Africa Asia-Pacific Europe Middle East

Source: STL Partners

Deployments of NFV in North America account for around 24% of the global total of 486 live deployments (or 492 deployments counting deployments spanning multiple regions as one deployment for each region). Europe is very marginally ahead on 163 deployments versus 161 for Asia-Pacific: both equating to around 33% of the total.

The NFV North America Deployment Tracker contains the following data, to May 2019:

  • Global aggregate data
  • Deployments by primary purpose
  • Leading VNFs and functional components
  • Leading operators
  • Leading vendors
  • Leading vendors by primary purpose
  • Above data points broken down by region
  • North America
  • Asia-Pacific
  • Europe
  • Latin America
  • Middle East
  • Africa
  • Detailed dataset on individual deployments

 

Contents of the accompanying analytical report:

  • Executive Summary
  • Introduction
  • Welcome to the sixth edition of the ‘NFV Deployment Tracker’
  • Scope, definitions and importance of the data
  • Analysis of NFV in North America
  • The North American market in global context
  • SD-WAN and core network functions are the leading categories
  • 5G is driving core network virtualisation
  • Vendor trends: Open source and operator self-builds outpace vendors
  • Operator trends: Verizon and AT&T are the clear leaders
  • Conclusion: Slow-down in enterprise platform deployments while 5G provides new impetus

Investing in original content: Is it worth it?

Introduction

An in-depth analysis of whether telcos can make money from original content, this executive briefing builds on previous STL reports exploring the role of telcos in entertainment and advertising:

This new report evaluates the success of AT&T, BT and Swisscom’s original content and related distribution strategies, as well as identifying lessons to be learnt. It also appraises their investment in original content, exclusive content (e.g. sport) and buying content creators (e.g. Time Warner).

Following the acquisition of Time Warner, AT&T is a content owner and content distribution colossus. What is its underlying objective for providing a wide range of over-the-top (OTT) services, including DTV Now (satellite TV service delivered over-the-top) and AT&T Watch (live and on demand content)? How will content from Time Warner’s acquisition in June 2018 be incorporated into its products?

Has BT’s head on clash with Sky in the market with live sports met expectations? Has its heavy investment in football grown its revenue take, broadband subscriptions and attracted eyeballs?

Swisscom has grown to become Switzerland’s largest TV provider, using live sports as its differentiator. What other initiatives have contributed to its market leadership and can it maintain its dominance?

The case for investing in original content

Telcos typically invest in original content to achieve three objectives:

  • to open up new sources of revenue (direct subscription sales, wholesale distribution and ads sales)
  • to increase sales of core telco services/products (e.g. fixed broadband)
  • to raise their profile, increase their relevance and build brand loyalty.

But trying to pursue all these objectives simultaneously requires some difficult compromises – maximising content revenues means distributing the content as widely as possible, which means it no longer becomes a competitive differentiator through which to sell connectivity and build loyalty to the core proposition. In any case, regulators may require telcos to make some original content, notably the rights to live sport, available to competitors.

Therefore, achieving all of these objectives requires telcos to perform a delicate balancing act between making their content widely available and integrating it with the core connectivity proposition from both a technical perspective (using a cloud-based or physical set-top box) and a commercial perspective (attractive bundles and/or zero-rating the content). They need to perform this balancing act at a time when the digital entertainment market is in upheaval – customers in many markets are migrating from traditional pay TV (one or two year contracts) to video-on-demand subscriptions (month-by-month).

Not all content is equal

Ownership of sports rights should guarantee an audience linked to the size of the fanbase. Investing in original content, such as dramas, is far riskier. For every series of The Crown, a Netflix hit airing its third series in 2019, there is Marco Polo that cost US$200 million, cancelled after two series and an abject failure. Telco shareholders would baulk at taking such risks, given many have qualms about BT’s investment in Premier League rights (32 matches a season, 2019-22), which are equivalent to £9.2 million per game.

Alternatively, telcos could purchase a content developer/media company with a back catalogue of proven programming, as AT&T has done by buying Time Warner in June 2018. Investment in original content is a differentiator for pay TV providers (e.g. Sky) as well as over-the-top players (e.g. Netflix). Netflix has dramatically increased its investment in original content from its early foray with the House of Cards. During 2018 Netflix invested about US$6.8 billion in original content, including films, simultaneously screening some films at cinemas (e.g. Coen brothers’ The Ballad of Buster Scruggs).

However, the audience for expensively-created content is finite. They are binge watching fewer shows. In the USA, according to Hub Entertain Research, viewers watched an average of 4.4 favourite shows in 2018, compared to 5.2 in 2016. These viewers increasingly find out about favourite shows through advertisements and watch them on an video-on-demand service.

More and more competition

Although they benefit from economies of scale and scope, the major global online players are not oblivious to the risks of creating original content. Amazon somewhat mitigates the risk by using co-production. Amazon is working with pay TV companies (e.g. Sky / Sky Atlantic) as well as public service broadcasters (BBC). The co-production of content with Sky provides Amazon with the rights to show series outside Sky’s footprint. For the BBC, a junior partner in the relationship, it gets to air the co-produced programmes after Amazon has shown them (e.g. the final three series of Ripper Street). Apple is also investing US$1 billion in original content, which will be distributed by its new streaming service[1]. The new service, business model unknown, will also be accessible on non-Apple products. New Samsung, Sony, LG and Vizio TVs will support Apple iTunes movies and TV shows[2].

It is not just the major Internet platforms that are competing with telcos for eyeballs. Major content rights owners are also taking their first steps to launch direct-to-consumer services. The Disney Play streaming service will launch in late 2019, once its existing distribution agreement with Netflix comes to an end. New sports streaming services are vying for attention, e.g. DAZN owns the rights to English Premier League (EPL) in Germany, Switzerland, Austria and Japan, as well as combat sports (e.g. Matchroom Boxing and UFC) and other sports. Many sports federations also provide direct-to-consumer streaming services, alongside the sale of linear TV sports rights. These include The National Hockey League’s NHL.TV and National Football League’s GamePass in the USA, and the English Football League (EFL)’s iFollow service in the UK. Consumers outside the UK can also pay to stream EFL matches.

The importance of multiple content distribution models

But it is not just about having the right content: consumers also want the right commercial proposition. Pay TV providers recognise that not all consumers are willing to sign-up to 12- or 18-month contracts. Falling pay TV subscription rates, and a realisation that one-size doesn’t fit all has seen the emergence of month-to-month skinny pay TV packages. These offers may or may not be packaged with broadband connectivity.

Those that do subscribe to traditional pay TV will not subscribe to a second pay TV subscription, but many households are willing to subscribe to more than one additional over-the-top service. Half of the video-on-demand (SVOD) subscribers in the UK subscribe to more than one VOD service (Amazon, Netflix, NOW TV), and 71% of households with a VOD service also have a pay TV subscription (according to GfK SVOD Tracker).

There are essentially four key roles in the content value chain, identified and discussed by STL partners in previous reports. These roles are programme, package, platform and pipe. Traditionally, telcos’ primary objective is to sell as many pipes as possible. To that end, they offer packages of content (generally TV channels), which are sold on a subscription basis or offered for no fee, supported by advertising. A platform is used to distribute the channels, films and other content created and curated by another entity.

Telco content distribution models

four ways to monetise original content: pay TV, bundling and OTT

Source: STL Partners

Telco revenue from content and related services

An in-depth analysis of telcos’ return on investment in sports or film rights or original content is tricky. Telcos are not in the habit of revealing content revenue data. Figure 5 summarises the main metrics that need to be considered to evaluate the effectiveness of telcos’ investment in content.

The revenues that telcos can generate from content consist primarily of:

  1. Sale of the content to consumers
  2. Sale of banner, video and TV ads that sit / roll alongside the content
  3. Wholesale of content via third-party platforms
  4. Net additions of broadband / mobile pipes, increased ARPU/C and reduction in user/connection churn, increase in broadband / mobile pipe revenue.

Measuring return on investments in content

measuring original content ROI through direct sales, advertisement, wholesale and connectivity

Source: STL Partners

In the rest of this report, we evaluate AT&T, BT and Swisscom against these criteria.

Contents:

  • Executive Summary
  • Introduction
  • The case for investing in original content
  • More and more competition
  • The importance of multiple content distribution models
  • Telco revenue from content and related services
  • Swisscom sells content with strings attached
  • Investing in rights holders to secure original content
  • It is about the packaging, as well as the content
  • Limited advertising
  • Enriching the viewer experience
  • Mixed financial results
  • BT and its big bet on live sport
  • BT TV reaches an inflexion point
  • BT TV – getting more expensive
  • Is BT Sport changing direction?
  • BT’s broader branding strategy
  • BT as a content aggregator
  • BT Sport is available to rivals’ pay TV customers
  • Is BT making a financial return?
  • Is there a case for continued investment?
  • AT&T takes on Netflix
  • King of content?
  • DirecTV Now: A lackluster start
  • Takeaways: Walking a tightrope between old and new
  • A shaky financial performance to date
  • Conclusions

Figures:

  1. The differing strategies of Swisscom, BT and AT&T
  2. AT&T’s Entertainment Group is dragging down the broader business
  3. Rating the different elements of telcos’ original content strategy
  4. Telco content distribution models
  5. Measuring return on investments in content
  6. Swisscom’s TV subscriptions and market share
  7. Summary of Swisscom’s TV products
  8. Cost and availability of Teleclub Sport
  9. The growth in Swisscom’s TV Connections and Bundles
  10. Swisscom’s content strategy hasn’t arrested the decline in wireline revenues
  11. Swisscom’s ballpark annual revenue run rate from TV
  12. BT TV packages, February 2019 compared to end 2015
  13. BT has bought more low-grade matches and is paying less per game
  14. How BT tries to monetise its sports content
  15. A breakdown of BT’s brands and target segments
  16. BT Sport App packages across its multiple brands
  17. How BT is using content partnerships to broaden its offering
  18. BT Sport has helped to drive a major uplift in annual revenue
  19. BT’s Consumer Division has struggled to increase profitability
  20. BT’s TV and broadband customers are now flatlining
  21. Growth in BT TV and BT Sport connections has tailed off
  22. BT’s consumer fixed line revenue has been fairly flat
  23. BT Sport residential and commercial revenue estimates 2018 and 2022
  24. AT&T’s telecom, media and entertainment businesses (February 2019)
  25. AT&T’s pay TV and SVOD services (as of February 2019)
  26. The Entertainment Group’s revenues are slipping
  27. AT&T’s traditional pay TV business is in decline
  28. AT&T’s broadband connections are fairly flat
  29. AT&T’s Entertainment Group is seeing its top line squeezed
  30. AT&T is combining inventory to help increase ad spend

[1] Apple TV will be launched in 2019 https://www.fool.com/investing/2018/12/15/apples-original-content-ambitions-are-growing.aspx,  https://www.macworld.co.uk/news/apple/apple-streaming-service-3610603/

[2] Content can be streamed from an Apple device using Apple’s AirPlay wireless streaming protocol stack, which will be integrated into TVs.

How telcos can get ahead in advertising

Introduction

Why is AT&T doubling down on becoming a new media company, while Verizon Media is retrenching? With divergent strategies at play in the U.S. telecoms market, is there a path or multiple paths to success in the advertising market that other telcos can follow, or is it too soon to tell?

Telcos’ pursuit of the digital advertising market is not a new phenomenon. Early telco-led mobile marketing and advertising initiatives pre-date the mid-2007 launch of the iPhone. The journey began with pre-iPhone primitive text-messaging marketing, moved through display advertising to an increasingly sophisticated data-driven approach. What is new is the flurry of investments the leading U.S. telcos and some others, notably SingTel, have been making over the past few years to compete more holistically and effectively in the advertising/media space.

While their core communications/connectivity services businesses are maturing and being disrupted, U.S. telcos now face the prospect of investing heavily in building out next-generation 5G networks. They are placing bets on new, potentially lucrative and high-growth opportunities in the Internet-of-things (IoT), media/content and fixed wireless, among others. Among these opportunities, brokering digital advertising offers potentially the highest operating margins. AT&T’s Xandr advertising unit reported an operating margin of 68% for the fourth quarter of 2018, compared with 33% in its core communications business.

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Going on the offensive

Telecoms networks have long been the conduits for Google, Facebook, and Amazon, among others, to deliver innovative and disruptive (and mostly free) services, which generate billions in advertising revenues. Many of these same players have also introduced services, such as messaging, voice calls and video-on-demand, which have siphoned off revenues from the telcos that provide the networks they are riding on.

It is against this backdrop that distinct and evolving telco advertising strategies are emerging. And, from a U.S. market perspective, what a difference a year makes. In 2017, it looked like Verizon and AT&T were both doubling down on their advertising/media business strategies, with the aim of growing their piece of the total advertising pie and in turn attempting to siphon off advertising revenues from Google and Facebook, among others. But 2018 proved a watershed year, and now Verizon is pulling back, while AT&T continues full steam ahead.

This report focuses on the U.S. market and specifically how the big two telcos – Verizon and AT&T – have fared in the digital advertising market and what lessons other telcos can take away from their divergent market strategies. The report builds on past STL Partners research including:

The advertising opportunity for telcos

The future of advertising is digital. While spending on traditional advertising may have peaked, investment in digital advertising continues to fuel growth in the overall market. In 2018, global digital advertising revenues reached US$273 billion, and represented 44% of total advertising spend, according to eMarketer. By 2020, the specialist research firm expects digital to represent half of total global advertising spend, and by 2021 to eclipse traditional media spend – reaching US$427 billion globally in 2022. Note, eMarketer’s definition of digital advertising excludes SMS, MMS and P2P messaging-based advertising.

The global advertising opportunity – the future is digital

advertising is moving to digital

Source: eMarketer, May 2018

Within digital advertising, the mobile medium is taking over from the desktop as smartphones ship with larger screens and faster connectivity. Advertising agency Zenith, part of the Publicis Media Group, forecasts mobile advertising will account for 30.5% of global advertising expenditure in 2020, up from 19.2% in 2017. It reckons expenditure on mobile advertising will total US$187 billion by 2020, more than twice the US$88 billion spent on desktop advertising, and not far behind the US$192 billion spent on television advertising. At the current rate of growth, mobile advertising will comfortably overtake television in 2021, Zenith believes.

Mobile and cinematic advertising are growing faster than other segments

mobile and cinematic advertising growing fast

Source: Zenith

Singtel – a pioneering advertising play

Globally, one of the most advanced telcos in the advertising sector is Singtel, which has made a series of acquisitions to build out its adtech proposition, following its first deal in 2012, which saw it acquire Amobee, an early player in mobile advertising.

By some measures, Singtel is the largest telecoms group in south east Asia. The company and its affiliates serve 700 million mobile customers in 27 countries, including its wholly-owned subsidiary in Australia (Optus) and minority stakes in India, South Asia and Africa (Bharti Airtel, 40% effective stake); Indonesia (Telkomsel, 35% effective stake); Philippines (Globe Telecom, 47% ordinary shares); and mi Thailand (Advanced Info Service, 23% ordinary shares). With that extensive reach, which extends beyond mobile and includes Internet and video/TV customers, Singtel sees advertising as a high-growth opportunity and a way to leverage its customer data assets.

Singtel’s adtech play sits in its Group Digital Life (“GDL”) unit, which focuses on using the latest Internet technologies and assets of the operating companies to develop new revenue and growth engines by entering adjacent businesses where it has a competitive advantage. GDL focuses on three key businesses – digital marketing, regional premium OTT video and advanced analytics and intelligence capabilities, while acting as Singtel’s digital innovation engine through Innov8.

Singtel has spent about a billion dollars on adtech capabilities

Singtel spends a billion dollars on advertising companies

*Purchase price not available. Source: Company reports

In the fourth quarter of 2018, GDL contributed 8% (up from 7% in the previous quarter) to the Singtel group’s operating revenue. GDL’s operating revenue for the quarter grew 17%, lifted by a full quarter’s contribution from Videology and growth in Amobee’s programmatic platform business, partially offset by lower media revenues. At an EBITDA level, GDL lost S$16 million after inclusion of Videology’s losses.

Singtel said that Amobee’s programmatic platform business continues to gain traction, while the integration of Videology will further strengthen Amobee’s capabilities in TV and video advertising. Although its advertising business isn’t yet making a major financial contribution, Singtel’s continued investments in this market suggest the Singapore-based operator remains committed and convinced that there are synergies between the telecoms and advertising sectors.

The rest of this report looks at U.S. telcos’ advertising strategies in depth, drawing conclusions and recommendations for other telcos globally.

Contents:

  • Executive Summary
  • Introduction
  • The advertising opportunity for telcos
  • Singtel – a pioneering advertising play
  • U.S. mobile market shift in full swing
  • Telcos’ strategic fits and starts
  • Google and Facebook strong, but Amazon makes gains
  • Amazon pulls commerce levers in advertising
  • Privacy, identity and security challenges and mandates
  • GDPR: A harbinger of things to come to the U.S.
  • U.S. telcos’ advertising assets
  • AT&T goes all-in on advanced advertising
  • More inventory, stronger monetisation
  • Balancing advertising and subscriptions
  • Takeaways
  • Verizon cuts its losses
  • The obstacles in the way of Oath
  • Takeaways
  • Conclusions and recommendations
  • Recommendations
  • Recommendations for major telcos

Figures:

  1. Recommendations for how AT&T can get ahead in advertising
  2. Why Verizon didn’t get ahead in advertising
  3. The global advertising opportunity – the future is digital
  4. Mobile and cinematic advertising are growing faster than other segments
  5. Singtel has spent about a billion dollars on adtech capabilities
  6. US online advertising spend – shift to mobile has already happened
  7. Examples of telcos’ investments/divestments in adtech and content
  8. Amazon gains, but still significant opportunities for telcos
  9. AT&T, Verizon and Comcast’s content and advertising assets
  10. AT&T’s advertising revenues are rising rapidly
  11. Xandr is growing rapidly, but its high margins are sliding downwards
  12. AT&T reaps rewards from Xandr, WarnerMedia, but pay TV is still a drag
  13. Verizon Media (previously Oath) fails to hit revenue growth targets
  14. As Verizon’s ad business struggles, it doubles down on 5G
  15. SWOT analysis and recommendations for big telcos in advertising

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Can telcos create a compelling smart home?

Telcos role in smart homes

Part of STL Partners’ (Re)connecting with Consumers stream, this report analyses the role of telcos in the smart home market, which is now growing steadily in many developed countries, as consumers seek to bolster security, improve energy efficiency, adopt electric cars and further automate appliances. In most developed markets, there are scores of companies pitching often incompatible smart home products and services to householders, resulting in a fragmented mess in which consumers are often left to figure out what might work with what.

This fragmentation spells opportunity for both telcos and the major Internet platforms – both sets of companies can use their role as a supplier of a key part of the smart home proposition (connectivity and computing devices respectively) as a springboard into the smart home solutions space.

In the case of Apple, Amazon and Google that means using the smartphone, the tablet and/or smart speakers as a segue into this market, while telcos can build on their connectivity offering, which is a fundament to the concept of a smart home that can be monitored and controlled from anywhere.

The challenge facing both sets of players is essentially delivering the systems-level integration required to simplify the consumer proposition into a seamless end-to-end offering that will appeal to the mass market. Without coherent coordination, the smart home will continue to characterised by of point solutions.

This report begins with an overview of the smart home sector and the competitive landscape, paying particular attention to the strategies of the major Internet platforms – Amazon, Apple and Google. It then goes on to discuss Deutsche Telekom’s and A&T’s contrasting strategies in this space, before making some recommendations for telcos.

This report builds on previous STL research, notably:

This report is the first in a series looking at smart home/connected consumer propositions from telcos. Future reports will analyse how the leading Asian telcos are targeting this market, while exploring related propositions, such as connected bikes and scooters, pet tracking and asset monitoring and insurance.

The smart home market

In an ideal world, a householder would be able to remotely monitor and control all the systems in their home, simply by pressing a button to activate and deactivate heating, air conditioning, alarms, locks, cameras and appliances, such as washing machines and automated vacuum cleaners. Although this concept, known as a smart home, has been around for many years, it is only now beginning to come of age. The smart home could also become an enabler for the sharing economy, making it easier for people to rent out their homes, monitor energy usage and take out appropriate insurance cover.

Up until very recently, most so-called smart home implementations amounted to partial solutions, enabling a householder to check their energy usage or a CCTV camera, rather than get a complete picture of what is happening in their property. In other words, most suppliers have focused on discrete point solutions designed for a fairly narrow use case.

While homes in developed markets have a growing number of connected devices (such as televisions, sound systems, printers, smart meters and burglar alarms), they rarely exchange information and typically can’t be managed through a single app or desktop interface.

This lack of coordination is a result of the diversity of the many different players supplying consumers with connected equipment and services for their homes, ranging from utilities and security companies to equipment makers and tech companies.

The smart home value chain

Indeed, a smart home value chain can be very complex and diverse. To make a home really smart, you would typically need:

  • A central hub that can aggregate and analyse related data, such as energy usage and room occupancy. This hub could be in the cloud or a device in the home.
  • Middleware that enables connected things to exchange data with each other and the hub.
  • A large number of connected appliances, devices and sensors, ranging from boilers and washing machines to door locks and smoke detectors.
  • Suitable connectivity for all the components, which could be WiFi, Zigbee, Bluetooth or a cellular technology.
  • A user interface or interfaces, such as a voice-activated speaker or a touchscreen tablet or smartphone, the householder can use to monitor and control their home.

Today, most telco-led smart home implementations take an ‘inside out’ approach in which the hub is located in the home: short range wireless technologies collect data from connected devices, which are aggregated in the hub and are then made available to the consumer via a smartphone app. In this scenario, the hub is generally connected to a fixed-line network via WiFi. However, 4G and 5G technologies, such as NB-IoT and LTE-M, could make it feasible to connect more devices directly to a cloud-based hub, which could ultimately allow smart homes to emerge in the many communities not served by fixed-line networks.

In some markets, these two approaches may be combined: cellular connectivity may be used to back-up WiFi, while some data and services will reside in both the cloud and on a local device in case the wide area connectivity fails or is tampered with.

For telcos providing the underlying fixed-line or cellular connectivity, the sheer variety of players touting smart home products and services makes the market both complex and challenging. Figure 1, an overview of the smart home ecosystem produced by the GSMA, highlights how many different angles there are on the smart home concept. However, even this chart is an over-simplification – the smart home market also overlaps with the personal transport market to some extent. Some of the potential use cases, such as charging electric vehicles, require coordination between the consumer’s home and vehicle.

Figure 1: The smart home ecosystem is complex and fragmented

smart home market

Source: GSMA Intelligence

Size of smart home market

Given the breadth of the smart home market and the blurred lines between it and other segments, sizing it in dollar terms is difficult. Research firm Strategy Analytics estimates worldwide consumer spending on smart home devices, systems and services totalled US$84 billion in 2017 and will reach almost US$96 billion in 2018.

However, ABI Research is more conservative, pegging the global smart home market at US$56 billion in 2018. The actual number will be down to what products and services are included and whether analysts are counting the total value of an appliance or just the embedded connectivity and processing power.

For example, should the total sale price of a washing machine with built-in WiFi be included? Or should analysts just count the value of the connectivity module? What if the WiFi is never activated? In any case, it is clear that the market is growing steadily as the cost of adding connectivity to consumer appliances and devices falls. The cost of adding a WiFi or cellular module to an appliance is in the region of US$10 to US$20, depending how many frequencies it supports and which radio technology is used.

Contents:

  • Executive Summary 
  • Introduction
  • The smart home market
  • Sizing the smart home space
  • How important are smart speakers?
  • The Internet players and their strategies
  • The Internet platforms jostle for position
  • Amazon bets big on Alexa
  • Google plays aggressive defence
  • Apple plays the premium game
  • Facebook struggles to differentiate
  • Utilities/security companies
  • Consumer electronics/appliances
  • The role of telcos in the smart home
  • Deutsche Telekom offers data protection
  • Does DT need its own voice?
  • Differentiation through data protection?
  • AT&T changes course
  • Conclusions
  • A major opportunity to cut complexity
  • Internet players don’t have a stranglehold

Figures:

  • Figure 1: The smart home ecosystem is complex and fragmented
  • Figure 2: Amazon and Google face growing competition in the smart speaker market
  • Figure 3: Alexa is integrated into the control panel of Amazon’s new microwave
  • Figure 4: The new Google Home Hub is designed to be fairly proactive
  • Figure 5: Facebook’s premium Portal has a rotating screen and a video camera
  • Figure 6: The Magenta Smarthome app can manage temperature, security and lighting
  • Figure 7: Deutsche Telekom’s growing smart home service
  • Figure 8: DT’s new smart speaker
  • Figure 9: Some of the functionality available from AT&T’s Digital Life service
  • Figure 10: AT&T’s LTE-M enabled button works with AWS to perform a specific task

5G: The first three years

The near future of 5G

Who, among telecoms operators, are 5G leaders? Verizon Wireless is certainly among the most enthusiastic proponents.

On October 1, 2018, Verizon turned on the world’s first major 5G network. It is spending US$20 billion to offer 30 million homes millimetre wave 5G, often at speeds around a gigabit. One of the first homes in Houston “clocked speeds of 1.3 gigabits per second at 2,000 feet.”  CEO Vestberg expects to cover the whole country by 2028, some with 3.5 GHz. 5G: The first three years cuts through the hype and confusion to provide the industry a clear picture of the likely future. A companion report, 5G smart strategies, explores how 5G helps carriers make more money and defeat the competition.

This report was written by Dave Burstein with substantial help from Andrew Collinson and Dean Bubley.

What is 5G?

In one sense, 5G is just a name for all the new technologies now being widely deployed. It’s just better mobile broadband. It will not change the world anytime soon.

There are two very different flavours of 5G:

  • Millimetre wave: offers about 3X the capacity of mid-band or the best 4G. Spectrum used is from 20 GHz to over 60 GHz. Verizon’s mmWave system is designed to deliver 1 gigabit downloads to most customers and 5 gigabits shared. 26 GHz in Europe & 28 GHz in the U.S. are by far the most common.
  • Low and mid-band: uses 4G hardware and “New Radio” software. It is 60-80% less capable on average than millimetre wave and very similar in performance to 4G TD-LTE. 3.3 GHz – 4.2 GHz is by far the most important band.

To begin, a few examples.

5G leaders are deploying millimetre wave

Verizon’s is arguably currently the most advanced 5G network in the world. Perhaps most surprisingly, the “smart build” is keeping costs so low capital spending is coming down. Verizon’s trials found millimetre wave performance much better than expected. In some cases, 5G capacity allowed reducing the number of cells.

Verizon will sell fixed wireless outside its incumbent territory. It has ~80 million customers out of district. Goldman Sachs estimates it will add 8 million fixed wireless by 2023 and more than pay for the buildout.

Verizon CEO Hans Vestberg says he believes mmWave capacity will allow very attractive offerings that will win customers away from the competition.

What are the other 5G leaders doing?

Telefónica Deutschland has similar plans, hoping to blow open the German market with mmWave to a quarter of the country. Deutsche Telekom and Vodafone are sticking with the much slower mid-band 5G and could be clobbered.

Most 5G will be slower low and mid-band formerly called 4G

80% or more of 5G worldwide the next three years will not be high-speed mmWave. Industry group 3GPP decided early in 2018 to call anything running New Radio software “5G.” In practice, almost any currently shipping 4G radio can add on the software and be called “5G.” The software was initially said to raise capacity between 10% and 52%. That’s 60% to 80% slower than mmWave. However, improved 4G technology has probably cut the difference by more than half. That’s 60% to 80% slower than mmWave. It’s been called “faux 5G” and “5G minus,” but few make the distinction. T-Mobile USA promises 5G to the entire country by 2020 without a large investment. Neville Ray is blanketing the country with 4G in 20 MHz of the new 600 MHz band. That doesn’t require many more towers due to the long reach of low frequencies. T-Mobile will add NR software for a marketing push.

In an FCC presentation, Ray said standalone T-Mobile will have a very wide 5G coverage but at relatively low speeds. Over 85% of users will connect at less than 100 megabits. The median “5G” connection will be 40-70 megabits. Some users will only get 10-20 megabits, compared to a T-Mobile average today of over 30 megabits. Aggregating 600 MHz NR with other T-Mobile bands now running LTE would be much faster but has not been demonstrated.

While attesting to the benefits of the T-Mobile-Sprint deal, Neville claimed that using Sprint spectrum at 2500 MHz and 11,000 Sprint towers will make a far more robust offering by 2024. 10% of this would be mmWave.

In the final section of this report, I discuss 5G smart strategy: “5G” is a magic marketing term. It will probably sell well even if 4G speeds are similar. The improved sales can justify a higher budget.

T-Mobile Germany promises nationwide 5G by 2025. That will be 3.5 GHz mid-band, probably using 100 MHz of spectrum. Germany has just set aside 400 MHz of spectrum at 3.5 GHz. DT, using 100 MHz of 3.5 GHz, will deliver 100–400 megabit downloads to most.

100–400 megabits is faster than much of T-Mobile’s DSL. It soon will add fixed mobile in some rural areas. In addition, T-Mobile is selling a combined wireless and DSL router. The router uses the DSL line preferably but can also draw on the wireless when the user requires more speed.

China has virtually defined itself as a 5G leader by way of its government’s clear intent for the operators. China Mobile plans two million base stations running 2.5 GHz, which has much better reach than radio in the 3.5 GHz spectrum. In addition, the Chinese telcos have been told to build a remarkable edge network. Minister Miao Wei wants “90% of China within 25 ms of a server.” That’s extremely ambitious but the Chinese have delivered miracles before. 344 million Chinese have fibre to the home, most built in four years.

Telus, Canada’s second incumbent, in 2016 carefully studied the coming 5G choices. The decision was to focus capital spending on more fibre in the interim. 2016 was too early to make 5G plans, but a strong fibre network would be crucial. Verizon also invested heavily in fibre in 2016 and 2017, which now is speeding 5G to market. Like Verizon, Telus sees the fibre paying off in many ways. It is doing fibre to the home, wireless backhaul, and service to major corporations. CEO Darren Entwistle in November 2018 spoke at length about its future 5G, including the importance of its large fibre build, although he hasn’t announced anything yet.

There is a general principle that if it’s too early to invest in 5G, it’s a good idea to build as much fibre as you can in the interim.

Benefits of 5G technology

  • More broadband capacity and speed. Most of the improvement in capacity comes from accessing more bandwidth through carrier aggregation, and many antenna MIMO. Massive MIMO has shipped as part of 4G since 2016 and carrier aggregation goes back to 2013. All 5G phones work on 4G as well, connecting as 4G where there is no 5G signal.
  • Millimetre wave roughly triples capacity. Low and mid-band 5G runs on the same hardware as 4G. The only difference to 4G is NR software, which adds only modestly to capacity.
  • Drastically lower cost per bit. Verizon CEO Lowell McAdam said, “5G will deliver a megabit of service for about 1/10th of what 4G does.”
  • Reduced latency. 1 ms systems will mostly only be in the labs for several more years, but Verizon’s and other systems deliver speed from the receiver to the cell of about 10 milliseconds. For practical purposes, latency should be considered 15 ms to 50 ms and more, unless and until large “edge Servers” are installed. Only China is likely to do that in the first three years.

The following will have a modest effect, at most, in the next three years: Autonomous cars, remote surgery, AR/VR, drones, IoT, and just about all the great things promised beyond faster and cheaper broadband. Some are bogus, others not likely to develop in our period. 5G leaders will need to capitalise on near-term benefits.

Contents:

  • Executive Summary
  • Some basic timelines
  • What will 5G deliver?
  • What will 5G be used for?
  • Current plans reviewed in the report
  • Introduction
  • What is 5G?
  • The leaders are deploying millimetre wave
  • Key dates
  • What 5G and advanced 4G deliver
  • Six things to know
  • Six myths
  • 5G “Smart Build” brings cost down to little more than 4G
  • 5G, Edge, Cable and IoT
  • Edge networks in 5G
  • “Cable is going to be humongous” – at least in the U.S.
  • IoT and 5G
  • IoT and 5G: Does anyone need millions of connections?
  • Current plans of selected carriers (5G leaders)
  • Who’s who
  • Phone makers
  • The system vendors
  • Chip makers
  • Spectrum bands in the 5G era
  • Millimetre wave
  • A preview of 5G smart strategies
  • How can carriers use 5G to make more money?
  • The cold equations of growth

Figures:

  • Figure 1: 20 years of NTT DOCOMO capex
  • Figure 2: Verizon 5G network plans
  • Figure 3: Qualcomm’s baseband chip and radio frequency module
  • Figure 4: Intel 5G chip – Very limited 5G production capability until late 2019
  • Figure 5: Overview of 5G spectrum bands
  • Figure 6: 5G experience overview
  • Figure 7: Cisco VNI forecast of wireless traffic growth between 2021–2022

Telcos’ apps: What works?

Introduction

Part of STL Partners’ (Re)connecting with Consumers stream, this report analyses a selection of successful mobile apps run by telcos or their subsidiaries. It explains why mobile apps will continue to play a major in the digital economy for the foreseeable future before considering the factors that have made particular telco apps successful. Most of the apps considered in the report are from Asia, primarily because operators in that world have typically been more aggressive in pursuing the digital services market than their counterparts elsewhere. Note, the list of apps analysed in this report is far from exhaustive – there are other successful telco-run apps on the market.

The ultimate goal of this report is to explain how apps can engage customers and give telcos greater traction with consumers. Although many apps are rarely used and quickly discarded, the most popular apps, such as Instagram, Spotify and YouTube, have become an integral part of the daily lives of hundreds of millions of people. Some apps, such as Uber and Google Maps, regularly provide people with services and/or information that make their lives much easier – getting a taxi or navigating through an unfamiliar city is now much easier than it used to be. Indeed, a well-designed app dedicated to a specific service can deliver both relevance and revenues.

This report builds on previous STL research, notably:

Can Netflix and Spotify make the leap to the top tier?

AI in customer services: It’s not all about chatbots

AI on the Smartphone: What telcos should do 

Why apps matter for telcos

Telcos’ most successful digital services, notably SMS, pre-date the smartphone app era.  Even more recent triumphs, such as the M-Pesa, the ground breaking mobile money service in Kenya, were originally designed to work on feature phones.  Many similar services, such as MTN Money and Orange Money, aimed at the large numbers of people without bank accounts in Africa and developing Asia, continue to be accessed largely through text-based menus via SIM toolkit.

But the widespread adoption of smartphones in developed and developing markets alike mean that telcos everywhere need to ensure all the consumer services they offer can be accessed via well-designed and intuitive apps with graphical user interfaces. By the end of 2017, there were 4.3 billion smartphones in use worldwide, according to Ericsson’s estimates. Moreover, smartphone adoption continues to rise rapidly, particularly in Africa, India and other developing countries. Ericsson reckons the number of smartphone subscriptions will reach 7.2 billion in 2023 (see Figure 3).

Figure 3: The number of smartphones in use is rising steadily across the world

Global App take up

Source: Ericsson Mobility Report, June 2018

Subscriptions associated with smartphones now account for around 60% of all mobile phone subscriptions, according to Ericsson, which says that 85% of all mobile phones sold in the first quarter of 2018 were smartphones.

With smartphones the default handset for people in developed markets and many developing markets, apps have become a major medium for interactions between consumers and service providers across the economy. Now approximately ten years old, the so-called app economy is worth tens of billions of dollars per annum.

Although there has been a backlash, as people’s smartphones get clogged up with apps, the sector still has considerable momentum.

The most popular apps, such as Uber and Amazon Shopping, combine ease of access (straightforward authentication), with ease-of-use and ease-of-payment, enabling them to attract tens of millions of users.

With some justification, proponents contend that apps will continue to be one of the main drivers of the digital economy for the foreseeable future. The broader app economy will be worth $6.3 trillion by 2021, up from $1.3 trillion in 2016, according to App Annie. Note, those figures include in-app ads and mobile commerce, as well as the revenues generated through app stores. In other words, this is the total value of the business conducted via apps, rather than the revenue accrued by app stores and developers. This dramatic forecast assumes the ongoing shift of physical transactions to the mobile medium continues apace: App Annie expects the value of mobile commerce transactions to rise from $344 per user in 2016 to $946 by 2021.

Although most of the leading apps are free, many do generate a subscription fee or one-off sales. Annual consumer spending in app stores is set to rise 18% between 2016 and 2021 to reach $139 billion worldwide, according to specialist app analytics firm App Annie, which also forecasts the total time spent in apps will grow to 3.5 trillion hours in 2021, up from 1.6 trillion in 2016.

In reality, some of these aggressive forecasts may prove to be too bullish, as consumers begin to make greater use of messaging services and voice-activated speakers to interact with local merchants and purchase digital content and services.  Even so, it is clear that the leading mobile apps will continue to be a major consumer engagement tool for many brands and merchants well into the next decade. In some cases, such as Spotify or the fitness app Strava, the user has typically put significant effort into creating a personalised experience, helping to cement their loyalty.

In developed countries, some telcos, notably AT&T and Verizon, have belatedly and expensively acquired a major presence in the app economy by buying leading digital content producers and service providers. With the $85.4 billion acquisition of Time Warner, AT&T is now the owner of HBO Now, which was the third highest app by consumer spend in the US in 2017, according to App Annie. HBO Now also ranked fifth in Mexico and eighth in the world on this measure. Having acquired Yahoo! and AOL apps over the past few years, Verizon ranked eighth among companies in terms of downloads in the US in 2017.

The delicate transition from SIM toolkit to app

But expensive acquisitions are not the only way into the app economy. For telcos that have developed consumer services from the ground-up, the rise of the smartphone offers opportunities to provide much richer functionality and a more intuitive interface, as well cross-selling and up-selling. In Kenya, Safaricom has been expanding the mobile money transfer service M-Pesa into a much broader financial services proposition, while prodding users to switch from the SIM toolkit to the app, which can properly highlight M-Pesa’s wider proposition. At the same time, the telco has integrated M-Pesa into its customer service app, mySafaricom, helping it to promote its broader telecoms offering to frequent users of its mobile money services.

However, Safaricom is well aware that it needs to tread cautiously, continuing to cater for those customers who are comfortable with the SIM toolkit experience. Its softly-softly approach is to reassure Kenyans that they can always fall back on the SIM toolkit, if they don’t like the app.  In a Safaricom-sponsored article from August 2017, Emmanuel Chenze wrote the following on the online site, Android Kenya:

“For over a year now, Safaricom has had the mySafaricom application available on the Google Play Store for users to be able to better manage the services they receive from the telecommunications company. However, it wasn’t until March this year when the application was updated to include M-PESA.

“With M-PESA finally integrated, the over 1 million smartphone users can now take full advantage and transact even faster thanks to the app. While good ol’ SIM toolkit still works wonders and remains a good backup option when you’re not connected to the internet or when the mySafaricom app is acting up, using the application, which has since been updated to reflect Safaricom’s recent rebranding, is way better than using the otherwise cumbersome SIM toolkit.”

If they can make their apps straightforward and easily accessible, Africa’s telcos could still become major players in the app economy – as Figure 4 indicates, the number of smartphones in use in sub-Saharan Africa could double between now and 2023. That gives telcos a major opportunity to promote their apps to first-time smartphone users as they buy their new handsets. Pan-Africa operator MTN is pursuing this strategy with its MTN Game+ , Music+ and video apps (see Figure 4).

Figure 4: MTN is pushing its entertainment apps to new smartphone users

Safaricom app chart

Source: MTN interim results presentation for the six months ended June 2018

In Asia, some telcos have successfully developed widely used apps from scratch, notably in the customer care space, as explained in the next section (continued in full report).

Table of Contents

  • Executive Summary
  • Introduction
  • Why apps matter
  • The delicate transition from SIM toolkit to app
  • Telcos can build on customer care
  • My AIS – a top ten app in Thailand
  • Takeaways
  • Information apps have traction
  • Call management apps prove popular in South Korea
  • T Map in top ten apps in South Korea
  • Takeaways
  • Telcos’ entertainment apps go regional
  • PCCW’s Viu plays in sixteen markets
  • Liberty Global
  • Takeaways
  • Turkcell: Using apps to up engagement
  • Competitive in communications
  • Takeaways

Table of Figures

  • Figure 1: Alternative routes for telcos to build out their app proposition
  • Figure 2: Overview of the telco-owned apps covered in this report
  • Figure 3: The number of smartphones in use is rising steadily across the world
  • Figure 4: MTN is pushing its entertainment apps to new smartphone users
  • Figure 5: My AIS supports payments and loyalty points, as well as usage monitoring
  • Figure 6: The True iService app has a clear and straightforward graphic interface
  • Figure 7: True Digital’s app portfolio covers everything from coffee to communications
  • Figure 8: WhoWho helps user manage incoming calls on phones and wearables
  • Figure 9: SK Telecom’s T map app for public transport covers trains, buses and taxis
  • Figure 10: KKBOX Claims Strong Customer Base Among iPhone Users
  • Figure 11: Turkcell’s broad portfolio of apps covers content and communications
  • Figure 12: Turkcell’s BiP Messenger is designed to be fun
  • Figure 13: Turkcell is focused on how much time customers spend in its apps
  • Figure 14: Turkcell’s foreign subsidiaries are much smaller than its domestic operation