Tag: scenarios

COVID-19: Now, next and after

Executive Summary

It won’t be over by Christmas

The Coronavirus pandemic is an unprecedented event in our lifetimes. As well as the virus’s impact on health, shock and fear have rippled across the world. Everyday life is changing almost everywhere, with major impacts across the economy. It is having many of the same effects as a new world war, albeit a war against a common invisible enemy.

At the start of every world world war, people in the UK thought it would be over by Christmas. Coronavirus won’t be over by Christmas (December) 2020. Unchecked. Each person with COVID-19 infects about 3 people, on average. This means it is hugely infectious and can (re)infect populations rapidly. Hopefully, better healthcare treatments will be developed fast, and in time a vaccine too – though the World Health Organisation (WHO) believes this will take at least a year, and longer to immunise the population.

On this basis, unless several miracles happen, we think the world is likely to be dealing with some form of social distancing and other preventative and curative measures for a while. Given what we know today, here is our initial take on what telcos are doing now – and what they should do next, including four scenarios to help envisage a range of possibilities amid the current uncertainty.

Telcos and vendors can and should now do some great things

Telecoms is an essential service in today’s world. The initial focus of telcos has inevitably been on the short term crisis response: keeping the network working, adapting to new and changing patterns of customer behaviour, and trying to keep their employees and customers safe. Beyond that, telcos have been offering additional services and help to customers, and we outline some of the measures taken so far in this report (summarised below).

Beyond that, telco leaders must keep thinking and planning ahead. As a sector it is in a relatively strong position. Telecoms stocks are among those least impacted in the crisis, showing that shareholders see telecoms as a relatively safe haven with a more reliable future than many other sectors (e.g. travel, hospitality, etc.).

That’s not to say that all telcos will survive the crisis in the state they are in today. Some may be nationalised or struggle to finance debt or worse, though for the most part we imagine telcos will find state support where needed because of the importance of the service they deliver.

On a more positive note, the near term future will see an enhanced focus on addressing some big problems, such as accelerating the transformation of healthcare and making it and other critical functions such as logistics even more robust and resilient.

STL Partners believes that the crisis will further accelerate the evolution of the Coordination Age, as customers and governments will accept, change and learn new behaviours (such as online ordering, remote delivery, automated services, etc.) fast in the context of an environment in which they simply have to do so. The crisis will also place the importance of critical and sometimes limited resources (e.g. food, healthcare, communications) firmly in the spotlight, along with issues such as potential conflicts between the use of data and privacy.

It’s too early to say whether highly controlled economies like China will do better than less controlled ones. Yet the strengths of a coordinated response to a problem (such as how a national health service can organise and plan collectively) will become clearer, and is likely to shape regulation that prioritises desired outcomes in a more pragmatic way, potentially bringing regulated collaboration back into fashion somewhat compared to pure competition in some sectors.

True leaders think ahead

Despite all the near term focus that a crisis brings, the challenge of addressing future problems should not just be dropped. We recommend that telcos and vendors shouldn’t abandon their longer term ambitions to develop new services and solutions in order to deal with the crisis. By analogy, the countries that are doing best in the COVID-19 response today are those that were best prepared for a viral pandemic, i.e. those that have planned how to scale up testing and hospital capacity, and have previously outlined a pandemic response strategy. Likewise, the telcos that will do best will continue to offer resilient support to their communities, and develop new solutions for customer problems.

Perhaps the best that could happen is that telcos and other service providers could ultimately find this crisis a stimulant to accelerate internal and business model change. For this to happen, the change needs to come from the top, and leaders in telecoms need to set the example of looking to do everything possible to help deal with the crisis, while maintaining a strong forward looking outlook.

STL Partners will continue to research how to do that realistically in the new context. We believe that Coronavirus will change how services evolve. For example, some 5G capital investments are likely to proceed with greater caution in the near term. Our initial thoughts on this is that, rather than bin all development, telcos should use this as an opportunity to better develop their understanding of customer needs, and develop the non-network capabilities and offerings to support consumers and other sectors to prepare the ground better for when 5G does arrive.

Short-term: Some smart offers to copy

Telcos are broadly offering customer support in four ways:

  • Supporting healthcare, government and other critical care customers: prioritising communications and resources for first line responders and healthcare facilities, offering population movement statistics, participating in national tests, and providing other services (e.g. bulk SMS updates to patients and healthcare communities)
  • Business customers: support for home working such as increased capacity on collaboration services, support on business continuity
  • Consumer customers: quite a wide range of offers, varying from suspending data bundle usage caps, to providing free calls for pensioners, free calls to the worst hit countries, waiving roaming charges and late payment relief for COVID-19 impacted customers
  • Shops and customer premise visits: a range of measures to ensure customer and employee safety, including shutting shops entirely, keeping some open, and introducing social distancing

Mid term: Adjust, but don’t forget the future

For the next few months, humans will interact differently. People and businesses will want to survive, and will be keen to return to ‘normal’ – but they won’t be able to.

Thus new habits, such as home working, and work and social video conferencing, will become more deeply embedded behaviours. New support structures to care remotely for the isolated will evolve, potentially with lasting effects. Telcos will need to support these behaviours with appropriate service and capacity, and with considerate offers as they have started to do as the crisis bites. Telcos should not behave like or risk being seen as profiteers during the crisis. Such action would be wrong – and a PR disaster.

They will need to continue to focus on the needs of critical sectors such as  healthcare, government, security and logistics, and maintain a close relationship with government to assist the centralised efforts to combat COVID-19 and support the pandemic relief effort.

Long term: Four possible scenarios

When the future is as uncertain as it is now, scenarios are a useful way to envisage possible alternatives and enrich planning. We’ve therefore outlined four scenarios for the recovery stage:

  • Scenario 1: Back to (almost) normal. A cautiously optimistic scenario in which all economies recover reasonably swiftly without much impact on the global order. Global trade recovers gradually, and activities like 5G investments are merely delayed at the outset.
  • Scenario 2: Fragmented recovery. A moderately pessimistic scenario in which some economies are much more significantly damaged than others. Recovery takes longer and global initiatives are less successful because of lower collaboration. 5G take-up is patchy, nation by nation.
  • Scenario 3: Weak and distanced. The most pessimistic scenario in which nations have become much more insular and distrustful, and economic and social recovery is much slower. Economic realities have significantly delayed 5Ginvestments in most nations.
  • Scenario 4: Stronger than before. The most optimistic scenario. Collaboration and cooperation are enhanced, and the broadly successful response and recovery to the crisis has refocused strategic thoughts on the importance of resilience in the long-term. 5G is close to the trajectory it would have been on before the crisis and accelerating fast.

Introduction

World War C

The Coronavirus pandemic sweeping the world in 2020 is a truly disruptive ‘black swan’ event. It is impacting people’s lives in almost every nation and will continue to do so for many years ahead.

STL Partners, like all our customers and partners, families and friends, is feeling the impact already. We are lucky enough to be able to continue to work because the nature of our work is relatively unaffected by virtual working. Many in the global economy are not so lucky, and many others have been even more directly impacted by the illness. Our thoughts and best wishes are with you all.

Our job is to try to help others make better decisions to shape the future of their businesses. We believe that COVID-19 will change the global economy in a way that will impact all previous strategies and plans. This analysis is therefore intended to help preparations and planning for the next few months and years. Yet certainty is in short supply, and the situation is changing all the time. We do not claim to have all the answers and will update our analysis when it makes sense.

The scale and speed of this pandemic is unprecedented in the lives of the few alive today under the age of 102. Even so, when the so-called “Spanish Flu” swept the world in 1918, road and air travel were relative novelties, information spread slowly and its distribution was highly limited.

Today, the virus has spread much faster – but so too has news, information and research relating to it. The primary challenges for economies and societies as a whole are:

  • Supporting the frontline medical battle for the lives of the severely infected.
  • How the available information can be used to manage the disease to best effect by governments and authorities.
  • How other technological and economic developments such as globalised food chains and online information and entertainment services can help to sustain the rest of the population until the virus and the fear and disruption it has brought are defeated, or at least brought under control.
  • Operational and financial support to maintain economies and employment wherever possible.

Coronavirus and the Coordination Age

STL Partners has written at length about the Coordination Age – our view that the world economy now needs on-demand solutions enabled by the emergence of new technologies like AI, virtualisation, 5G, etc. These solutions must deliver outcomes (e.g. in healthcare) in a resource efficient way.

This age impacts all industries, but in the forefront are healthcare and logistics, which are also those most under test by Coronavirus. Succeeding against COVID-19 will require a massive and sustained effort of coordination, in this case mostly orchestrated by governments and health authorities.

Telcos and the telecoms industry will not solve this, but they can be major enablers of success. They can also have a major role in helping societies deal with the crisis and rebuilding and reshaping themselves after it has passed. This report starts to sketch out how this might happen.

Three stages and three questions for telcos

To simplify the analysis of what could happen, we’ve split the near future into three stages, and have structured the report correspondingly:

  • Now: shock and lockdown. Dealing with the initial global spread of the pandemic.
  • Next: finding a new, temporary normal. Coping with the longer-term impacts of social isolation, healthcare, and economic damage.
  • After: rebuilding and reshaping. What will be the lasting changes, what will need to be rebuilt?

In each case, we outline our best views on the ‘certainties’ – or at least more certain outcomes, and explore different scenarios where uncertainty is currently prime.

Throughout, we address three questions about what actions telcos and the industry should take:

  • What do telcos need to do to survive?
  • What can telcos do to help their customers?
  • How can telcos help the immediate response, then rebuild and reshape society?

Now: Shock and lockdown

The problems that need to be solved

A health crisis is a hard reminder of the need to serve the greater good of our societies. We need other people and organisations to survive and thrive, especially in today’s highly globalised and connected world. In this regard, there is an over-riding responsibility for those in positions of power to direct that power in service of the integrity of society and the economy – how we exchange goods and services to maintain our lives.

In such moments, the pursuit of competitive gains which is the normal function of companies and markets becomes secondary to the overall well-being of the society and the economy that supports it. This is a fundamental – albeit temporary – suspension of ‘business as usual’.

Telcos have a long history of providing support in times of crisis, and the COVID-19 pandemic is the broadest and most systemic global crisis of our times. The fundamental functions and sectors that the industry needs to support are:

  • Healthcare – sustaining and protecting the healthcare system in a time of critical demand and pressure
  • Logistics – ensuring that supply and delivery chains are enabled to operate and deliver the goods (e.g. food and medical supplies) and services (e.g. water, power, hygiene) required for the healthy function of society
  • Government – ensuring that governments and responsible authorities are enabled to function and make decisions to best manage, control and mitigate the impact of the virus and the accompanying fear and disruption
  • General communications – ensuring that the public, businesses and others can stay in touch with each other to provide information, economic, medical and emotional support, and maintain employment.

Immediate actions

Following airline safety advice

The classic airline safety advice is to fit your own oxygen mask before attempting to help others.

We expect that telcos will be putting in place their contingency plans for dealing with the COVID-19 pandemic – though of course, the exact circumstances cannot have been foreseen.

Clearly, maintaining the core functions of telecommunications networks will be the priority – doubling down on enabling and protecting data and voice communications across the network, especially to mission-critical establishments like hospitals, and  other healthcare and state facilities.

This may require operators to scale up network capacity at key points, although early data suggests most traffic growth from home-working and home-schooling may come at historical off-peak times. There is likely to be a shift from mobile to fixed broadband in many cases, with mobile use being concentrated in residential areas rather than urban centres and transport corridors. Mobile voice traffic is likely to rise substantially (in Spain, a 50% rise has been reported) as people speak to elder relatives and connect to conference calls and other services. Encouraging customers to shift usage to fixed-line telephony (which usually has extra capacity) could be wise.

Most cloud and enterprise facilities have been engineered to be highly resilient, but there is also likely to be increased demand in the distributed consumption of data in many societies as social isolation measures move populations into home-working environments and away from traditional daytime centres of communications localised on business.

How telcos can support and are supporting their customers

Many telcos are putting in place wider measures to support their customers.

Figure 1: How telcos are supporting their customers
overview telco coronavirus actions
Telco responses to Coronavirus

Source: Operator announcements, STL Partners

For healthcare, government and other critical support customers:

  • Prioritising connectivity for frontline healthcareresponders (AT&T, Verizon and others)
  • Offering bulk text upgrades to patients and healthcarecommunities (Vodafone)
  • Offering insights on population movements and statistics (Vodafone, Deutsche Telekom, Telefonica)
  • Collaborating in other hospital and healthcaretrials and programmes (China Mobile, China Telecom, TELUS)
  • Extending free hospital Wi-Fi (Globe)
  • Free-rating data on healthcaresites and apps

For these sectors and business more broadly, additional:

  • Conferencing lines, VPN capacity, and capacity / licenses for collaborationtools (BT)
  • Other home-working security(BT, NTT)
  • Cut price access to digital marketing services and conferencing for small businesses (Telstra)

For consumer customers, telco measures include:

  • Additional free data in bundles (Telefónica, Telstra, Dialog)
  • Removing caps on some limited data bundles (AT&T, Sprint, T-Mobile, TELUS, Telstra, Dialog)
  • Additional entertainmentcontent in some packages (Telefónica, TELUS, Dialog)
  • Free or reduced tariff calls to the countries most impacted by COVID-19(Verizon, Sprint, T-Mobile)
  • Free landline calls for pensioners (Telstra)
  • Free medical hotline service (Dialog)
  • Free data packages for families with school children without internet access or no data charges on educational services (Du, Etisalat, Dialog)
  • Waiving fees / suspension of service for non or late payment for impacted customers, or extending payment terms / credit (AT&T, Verizon, Telstra, Dialog)
  • Waiving all or some roamingfees for overseas customers (TELUS)
  • Encouraging the use of digital cash and health apps (Globe)

And in terms of shops and customer premises visits, telcos are taking a range of measures from:

  • Closing shops, or keeping some open to provide critical equipment (AT&T, Sprint, T-Mobile, DTAG, TELUS)
  • Possibly stopping or limiting customer premises visits, or continuing but with new isolation/protection procedures in place (AT&T, Globe)

NB This is illustrative and not an exhaustive or comprehensive list. Please see our blog for links to some of the companies’ policies and articles relating to them at the time of research.

STL Partners is conducting a rapid survey of telco responses which can be found here. We will be updating and freely sharing what operators tell us over the next few weeks with details of the measures used so that other telcos can review what they can copy or learn from these measures to support their customers.

Help your employees

Again, many telcos in directly impacted environments have asked employees that can to work from home. We would also hope telcos are putting in place additional health measures to protect those employees that do need to make physical contact with customers and others, such as health advice and screening.

Starting to look ahead

Which sectors will be most affected?

The impact of the COVID-19 pandemic across the economy is very hard to predict at this stage, although there are certain sectors that are clearly already under immediate pressure, such as:

  • Consumer leisure and mass transport: cruise lines, passenger airlines, hotels and tourism as people shun travel and self-isolate
  • Consumer service industries such as cafes, bars, restaurants, gyms, hairdressers
  • Entertainment and mass gatherings such as sporting events, festivals, conferences and events, concerts, museums.

Wider impacts are anticipated in demand for other consumer goods and services, such as cars, clothes and other non-food and everyday items, and this knocks on to the value chains of those industries too.

This pattern is evident looking at the impact on FT.com share indices over the last month in Figure 2. Indeed, of the major sectors, telecommunications was the least devalued on the 16th March when we looked at this data (a day on which there was a 10% drop in global financial indicators).

Figure 2: Financial markets rate telecoms as one of the sectors of the economy least hit by Coronavirus
coronavirus impact on industries
Coronavirus impact on industries

NB Oil and gas sectors have recently faced additional pressures from an industry price war. Source: STL Partners, FT.com

Moody’s credit rating agency paints a similar picture of their estimated impact of the pandemic on the credit worthiness of industries by sector as shown in Figure 3.

Figure 3: Moody’s credit rating impact of Coronavirus by industry

moody's covid-19 impact chart

Source: Moody’s

At this early stage it’s very hard to be sure of what the overall impact of the COVID-19 pandemic will be on each sector. But there’s certainly some consistency between the logic of what is causing the impacts, and the degree to which markets and market rate-setters are reflecting likely changes in future value.

For telcos, the questions are: how can they support all sectors effectively during the crisis, and how can they help them recover and rebuild in due course. We will explore this a little further in subsequent sections.

Table of contents

  • Executive Summary
    • It won’t be over by Christmas
    • Telcos and vendors can and should now do some great things
    • True leaders think ahead
    • Short-term: Some smart offers to copy
    • Mid term: Adjust, but don’t forget the future
    • Long term: Four possible scenarios
  • Introduction
    • World War C
    • Coronavirus and the Coordination Age
    • Three stages and three questions for telcos
  • Now: Shock and lockdown
    • The problems that need to be solved
    • Immediate actions
    • Starting to look ahead
  • Next: Finding a new, temporary normal
    • Identify possible turning points
    • The problems that need to be solved
    • Mid-term actions
    • Planning and contingencies
    • Telcos and the rise of the surveillance society
  • After: Rebuild and reshape
      • Scenario-planning: Looking back from 2025
      • Scenario 1: Back to (almost) normal
      • Scenario 2: Fragmented recovery
      • Scenario 3: Weak and distanced
    • Scenario 4: Stronger than before


New Strategy Report: Mobile, Fixed and Wholesale Broadband Business Models

Best Practice Innovation, ‘Telco 2.0′ Opportunities, Forecasts and Future Scenarios

Summary:  a new 249 page Telco 2.0 Strategy Report on the future of broadband, including analysis of the latest new ideas in broadband business model innovation, new ‘Telco 2.0’ Opportunities, global forecasts, four future strategic scenarios, and a detailed ‘Use Case’ describing a new Managed Offload ‘Use Case’.  (March 2010, Future Networks Stream)

The report covers:

  • Best practice innovation, and detailed assessment of ‘Telco 2.0′ opportunities, in Mobile Broadband, Advanced New Wholesale, and Fixed Retail Broadband Business Models
  • Four scenarios for broadband market players: ‘Telco 2.0 Player’, ‘Happy Piper’, ‘Device Specialist’, and ‘Government Department’
  • Telco 2.0’s forecasts for the Broadband Access market
  • An advanced and detailed ‘Use Case’ for a specific Telco 2.0 Opportunity, ‘Managed Offload of Mobile Broadband to Fixed Networks’
  • Conclusions and recommendations for Telcos and other Broadband Service providers (BSPs) and their partners

 

  cover%20image%20mfbbm%20mar%202010.png   

The report is a ‘must read’ for CxOs, strategists and broadband product managers seeking to develop their business strategies and position their products, both within Telcos and BSPs and for the community of business partners and vendors.

Read in Full (Members only)   To Subscribe click here

This report is now availalable to members of our Future Networks Stream. Below is an introductory extract and list of contents from this 249 page strategy Report that can be downloaded in full in PDF format by members of the Future Networks Stream here. 

For more on any of these services, please email contact@telco2.net / call +44 (0) 207 247 5003 

Report Details

  • 249 pages
  • 90 charts, tables and forecasts
  • Manuscript format
  • Detailed outline and contents below
  • Published: 25th March 2010

The rest of this page contains:

  • Overview and Report Content       
  • Who is the report for?
  • Contents, Figures and Forecasts
  • Downloads (Table of Contents, PDF Version of this Page)
  • Fit with other Broadband Reports

Report Overview & Content

Introduction

Broadband continues to grow in both market penetration and sophistication, with the addition of fibre and mobile access as key enablers.

Figure 1. Global broadband access lines, 2000-2020

personal%20mobile%20growth%20mar%202010.png

Source: Telco 2.0 Mobile and Fixed Future Broadband Business Models

However, while speeds and mobility are improving, there are complex challenges to the business model for service providers. These include:
  • Maturing products and business models
  • Convergence of fixed and mobile technology and product offerings
  • Greater state intervention in deploying and controlling broadband access
  • A more complex broadband ecosystem
  • New consumer behaviour and higher expectations

See here for an extract from the overview of the report on the main themes and challenges that it addresses. Among these challenges are:

  • What are the realistic prospects for non-subscription models for fixed and mobile broadband, such as prepaid / transactional / free / “comes with data”, bundled with device purchase, “sliced and diced”, etc.?
  • A critical analysis of whether operators can charge content / Internet companies for access to ‘their pipes’, and in what circumstances this may be commercially and operationally feasible.
  • What is the changing role of Government in the broadband marketplace?
  • Is Mobile Broadband substitional or synergistic with Fixed?

Overall, new business models will be necessary to help justify extra infrastructure investment as end-user spending on broadband access reaches market saturation.

Figure 2: Next-generation broadband will need new revenue sources

fbbm%20four%20skittles%20mar%202010.png

Source: Telco 2.0 Mobile and Fixed Future Broadband Business Models
The report covers the impact of key factors such as DPI, QoS. Net Neutrality, LTE, Fibre, IPTV, Video demand, mobile broadband, convergence, LLU, MVNOs, Machine-to-Machine, Cloud Computing, and regulation. It explores both developed and developing markets.

Broadband Best Practice Innovation and ‘Telco 2.0′ Opportunities

Following the introduction and market overview, the report contains chapters of detailed analysis of best practice innovation (e.g. pricing, propositions, technologies, etc.) and ‘Telco 2.0′ new business model opportunities in:

  • Fixed Retail Broadband
  • Mobile Retail Broadband
  • Advanced Wholesale Broadband business models.

The ‘Telco 2.0′ propositions are based on the ‘two-sided’ telecoms business model theory that broadband capacity can sold to “upstream” media or application providers. The report examines theoretical use cases and some compelling potential business models.

Figure 3: the Two-Sided Telecoms Business Model
2sbm%20fbbm%20report%20mar%2023%202010.png

Source: Telco 2.0 Analysis

(NB. Further detail on the ‘two-sided’ telecoms business model can be found here.)

‘Managed Mobile Offload’ Use Case

Taking one of the specific opportunities identified, the report details a ‘Use Case’ for offloading excess mobile traffic to fixed operators. This represents a wholesale opportunity for fixed BSPs and an opportunity for Mobile BSPs to manage the rising costs of carrying large volumes of (primarily video) data traffic.

Figure 4: Forms of managed offload from fixed/cable operators

fbbm%20offload%20mar%2023%202010.png

Source: Telco 2.0 Mobile and Fixed Future Broadband Business Models

Future Scenarios

The report describes four possible scenarios for broadband service providers and the benefits and risks of pursuing each strategy.

Figure 5: Potential scenarios for BSPs

fbbm%20four%20scenarios%20mar%2023%202010.png

Source: Telco 2.0 Mobile and Fixed Future Broadband Business Models

Forecasts and Conclusions

The report is completed by global forecasts for each of the core business models for broadband service providers (detailed below), conclusions, and an overview of the relative attractiveness of the scenarios.

Who is the report for?

Telecoms Operators’ and other Broadband Service Providers’:

  • Strategy departments
  • Central research libraries & market research functions
  • CTO office, Strategic Marketing, Business Development
  • Wholesale Departments
  • Government & Regulatory Affairs depts
  • Network architects & planners
  • Broadband services marketing departments (fixed, cable and mobile)

Vendor audiences:

  • Marketing / business development / strategy functions
  • Fixed broadband access equipment vendors
  • Wireless network radio & transport vendors
  • IP core suppliers
  • Fixed-broadband terminal suppliers
  • Mobile broadband device suppliers
  • Policy management, DPI & control specialists
  • Billing & OSS suppliers
  • Silicon and “enabler” providers

Regulators and other Government departments

Investors

Consultants & integrators

Report Contents

Executive Summary

Part 1: Background to the Broadband Industry

  • Market adoption of broadband and the four scenarios
  • Fibre and next-generation access: the missing business model
  • Video: killer app, or network-killer?
  • Mobile broadband: Hype & realism
  • Convergence of fixed / mobile broadband
  • Evolving regulation: help or hindrance?
  • Government & ‘National Broadband’
  • Broadband in the developing world
  • The vendor landscape

Part 2: Fixed retail broadband business models

  • Retail broadband scenario options
  • Cable vs ADSL vs Fibre – same models, or fundamentally different?
  • Pricing options: capping and tiering, application-specific caps and tiers, specific zero-rated / unmetered sites & services
  • Video: providers: the power-brokers? Triple-play / IPTV.
  • Incremental services, cross-network Internet services, prepay fixed broadband    
  • Fibre
  • Future value-add services? Smart grids, telemedicine and ‘The Cloud’
  • The impact of local-loop unbundling and structural separation

Part 3: Mobile Broadband Retail Business Models

  • Mobile broadband computing
  • Smartphone business models
  • M2M broadband business models
  • Do revenues reflect costs?
  • Wholesale mobile broadband and MVNOs
  • Enablers and technologies

Part 4: Advanced broadband wholesale business models

  • Bulk broadband wholesale models
  • Creating next-gen wholesale
  • Telco-Telco wholesale 2.0
  • Broadband capacity ‘slice and dice’
  • Marketing & selling wholesale

Part 5: Use Case: Managed Offload of Mobile Broadband

Part 6: Forecasts and Conclusions

A full table of contents and figures can be downloaded here.

This report is now availalable to members of our Future Networks Stream. Below is an introductory extract and list of contents from this 249 page strategy Report that can be downloaded in full in PDF format by members of the Future Networks Stream here. 

For more on any of these services, please email contact@telco2.net / call +44 (0) 207 247 5003 

Key Figures and Forecasts

  • Global broadband access lines, 2000-2020
  • Global broadband access lines by technology, 2005-10
  • Global fixed broadband by region, mid-2009
  • Global broadband traffic          
  • Ultra-fast broadband availability in developed markets
  • Global mobile broadband computing users
  • Examples of government broadband-related stimulus plans
  • How uptake of broadband impacts GDP
  • Global fixed broadband lines
  • Wholesale within global fixed broadband, 2010
  • The Global Online Video Market ($Billions)
  • European fibre penetration forecast 2013
  • Mobile broadband active user base
  • Global 3G data traffic by device type, mid-2009
  • Global mobile broadband computing users
  • Vodafone UK mobile broadband pricing trends
  • Traffic volumes for mobile broadband vs. revenues
  • Fixed and mobile broadband wholesale revenues
  • Global mobile broadband computing subscribers
  • Forecast broadband wholesale revenues by category
  • Global retail broadband subscribers 2005-2020
  • Global average retail charges for broadband 2005-2020
  • Broadband Retail Market Value 2005-2020
  • Percentage of broadband lines supplied via bulk wholesale 2005-2020
  • Average global wholesale prices 2005-2020
  • Global bulk wholesale access market 2005-2020
  • Global slice-and-dice revenues per line 2005-2020
  • Global slice-and-dice incremental wholesale access revenues 2005-2020
  • Global active users of broadband without a subscription 2005-2010
  • Active broadband users including ‘comes with data’
  • Global non-subscription upstream revenues per user per year 2005-2020
  • Global ‘comes with data’ broadband access 2005-2020
  • Global wholesale revenues 2005-2020
  • Global broadband access market 2005-2020
  • Breakdown of global wholesale revenues 2005-2020

Downloads

Fit with other Telco 2.0 Broadband Reports

This report is one of the Future Broadband Business Models Report Series of in-depth analyses of the Broadband market.

Companion Reports:

  • “Beyond bundling: winning the new $250Bn delivery game” examines the structural opportunities and potential technical strategies for the next 10 years, including the more infrastructure-oriented aspects of wholesale such as IP data transit, renting-out of fibre/towers and local-loop unbundling, and identifies an overall $250Bn opportunity over this period.
  • “The impact of video on broadband business models” analyses the development of online video, identifies possible market winners and losers, and sets out three interlocking scenarios depicting the evolution of the market. In each scenario, the role of Broadband Service Providers is examined, possible threats and opportunities revealed, and strategic options are discussed.

This report is now availalable to members of our Future Networks Stream. Below is an introductory extract and list of contents from this 249 page strategy Report that can be downloaded in full in PDF format by members of the Future Networks Stream here. 

For more on any of these services, please email contact@telco2.net / call +44 (0) 207 247 5003 

Mobile & Fixed Broadband Business Models: Four Strategy Scenarios

Summary: an introduction to the four strategy scenarios we see playing out in the market – ‘Telco 2.0 Player’, ‘Happy Piper’, ‘Device Specialist’, and ‘Government Department’ – part of a major new report looking at innovation in mobile and fixed broadband business models. (March 2010, Foundation 2.0, Executive Briefing Service, Future of the Networks Stream).

Introduction

This is an extract from the Overview section of the Telco 2.0 report ‘Mobile and Fixed Broadband Business Models: Best Practice, ‘Telco 2.0′ Opportunities, Forecasts and Future Scenarios‘.

The extract includes:

  • Overview of the three macroscopic broadband market trends
  • The five recurrent themes
  • Defining Telcos and Broadband Service Providers (BSPs) in the future
  • Market adoption of broadband
  • An Introduction to the four scenarios

A PDF version of this page can be downloaded here.

Overview

This section of the report provides a backdrop to the rest of the study. It highlights the key trends and developments in the evolution of broadband, which fundamentally underpin the other aspects of business model innovation discussed in the subsequent chapters. It also introduces Telco 2.0’s main ‘end-game scenarios’ for broadband service providers (BSPs), and gives a round-up of some of the key background statistics.

There are three main macroscopic trends in the broadband market:

1.   A focus on improving the reach and profitability of existing low/mid-speed broadband in developed countries, especially with the advent of inexpensive mobile data, and new methods of monetising the network through wholesale options, value-added services and better segmentation;

2.   Deployment of next-generation very high-speed broadband, and the building of business models and services to support this investment, typically involving video services and/or state backing for nationally-critical infrastructure projects;

3.   Continued steady rollout of broadband in developing markets, balancing theoretical gains in social and economic utility against the practical constraints of affordability, PC/device penetration and the need for substantial investment.

Cutting across all three trends are five recurrent themes:

Maturing products and business models

  • The global broadband market is maturing fast. In developed countries, baseline penetration rates are starting to level off as saturation approaches. Coupled with price erosion and increasing capacity demands, this deceleration is pressuring margins, especially in the recession;
  • The pivotal role of video in driving both costs and revenues, given its huge requirement for bandwidth, especially in high-definition (HD) format.
  • An awareness of the need for retail and wholesale business model evolution, as revenue growth plateaus and current attempts at bundling voice and/or IPTV (fixed) or content (mobile) show only patchy success.

Convergence of fixed and mobile technology and product offerings

  • The impact of mobile broadband, either as a substitute or a complement to fixed broadband. This goes hand-in-hand with the advent of more powerful personal devices such as smartphones and netbooks.

Greater state intervention in deploying and controlling broadband access

  • Intensifying regulation, focusing on areas such as facilities and service-based competition, unbundling and structural separation, Net Neutrality, spectrum policy and consumer advocacy;
  • Increasing government intervention in areas, such as broadband roll-out and strategy, outside the (traditional) scope of the regulatory authorities. This is conducted either through subsidy and stimulus programmes, or broader initiatives relating to national efforts on energy, health, education and the like;
  • A growing belief that broadband networks should also support ‘infrastructure’ services which may not be delivered by the public Internet – for example, remote metering and ‘smart grid’ connectivity, support for healthcare or e-government, or education services. A major battle over the next 10 years will be whether these are delivered as ‘Telco services’, ‘Internet services’ or as distinct and separately-managed network services by providers using wholesale access to a Telco network.

A more complex broadband ecosystem

The increasing role of major equipment vendors in facilitating new business models, either through managed services / outsourcing / transformation, direct engagement with governments on strategic architecture issues, or supply of key ‘platform’ components. However, many vendors are torn between protecting the legacy heavily-centralised models of their existing Telco customers, and exploring new targets within public-sector or Internet domains.

New consumer behaviour and higher expectations

Changing user behaviour as broadband becomes a basic expectation (or a government-mandated right) rather than a premium service, with the mass uptake of new applications and the added benefits of mobility.

Defining Telcos and BSPs in the future

One of the largest challenges in identifying Telco business models for the forthcoming era of next-generation access is the question of what actually defines a Telco, or a Broadband Service Provider (BSP).

In fixed networks, especially with new fibre deployment, the situation is becoming ever more complex because of the number of levels at which wholesaling can take place. If an incumbent ADSL operator buys, packages and rebrands wholesale dark fibre capacity from a municipally-owned fibre network, which one is the BSP? Or are they both BSPs?

The situation is a lot easier in mobile, where there still remains a fairly clear definition of a mobile operator, or a mobile virtual network operator (MVNO) – although in future network-sharing and outsourcing may also blur the boundaries in this market.

It is possible that there isn’t an appropriate strict definition, so a range of proxy definitions will start to apply – membership of bodies like the GSMA, possession of a ‘mobile network code’, access to certain number ranges, ownership of spectrum and so forth. In an era where Google buys dark fibre leases, Ericsson manages cellular networks, investment consortia contract to run a government-sponsored infrastructure and  mobile operators offer ‘over the top’ applications – it all becomes much less clear.

In this report, BSPs are taken as a broad class to include:

  • Owners of physical broadband access network infrastructure – taken as either physical cabling or fibre (wireline) or spectrum and radio cells (mobile). Telco 2.0 does not include rights-of-way owners or third-party cell-tower operators in this definition;
  • Owners of broadband access networks built using wholesale capacity on another provider’s wires or fibres, but with their own active electronics, E.g. basing a network on unbundled loops or dark fibre;
  • Providers of retail broadband access, perhaps bundled with other services, using bitstream, ethernet access or MVNO models based on wholesale from another network operator.

These definitions exclude 2G-only (non-broadband) mobile operators and MVNOs, PSTN or cable TV access provided without broadband connectivity and non-retail access providers, such as microwave backhaul operators and content delivery networks (CDNs) Etc.

Market adoption of broadband


The global broadband access market has grown from fewer than 10 million lines in 1999, to more than half a billion at the end of 2009, predominantly through the growth of DSL-based solutions, as well as cable and other technologies. Although growth has started to slow in percentage terms, there remains significant scope for more homes and businesses to connect, especially in developing economies, such as China. Older fixed broadband services in more industrialised economies will gradually be replaced with fibre.

The other major area of change is in wireless. Since 2007, there has been rapid growth, with the uptake of mobile broadband for ‘personal’ use with either smartphones or laptops, often in addition to users’ existing fixed lines. This category of access will grow faster than fixed connections, reaching more than one billion active individual users and almost two billion devices by 2020 (see Figure 1). Although a strong fixed/mobile overlap will remain, there will also be a growing group of users whose only broadband access is via 3G, 4G or similar technologies.

There are a number of complexities in the data:

  • Almost all fixed broadband connections are ‘actively used’. The statistics do not count copper lines capable of supporting broadband, but where the service is not provisioned;
  • Conversely, many notional ‘mobile broadband’ connections (E.g. 3G SIMs in HSPA-capable devices) are, in fact, not used actively for high-speed data access. The data in this report attempts to estimate ‘real’ users or subscribers, rather than those that are theoretically-capable, but dormant;
  • At present, most broadband usage is based on subscriptions, either through monthly contracts or regular pre-paid plans (mostly on mobile). Going forward, Telco 2.0 expects to see may non-subscription access customers who have either temporary accounts (similar to the WiFi single-use model) or have other forms of subsidised or bundled access as described later in the report;
  • Lastly, the general assumption is that fixed broadband can be shared by multiple people or devices in a home or office, but mobile broadband tends to be personal. This is starting to change with the advent of ‘shared mobile access’ on devices like Novatel’s MiFi, as well as the use of WiMAX and, sometimes, 3G broadband for fixed wireless access.

Figure 1. Global broadband access lines, 2000-2020

personal%20mobile%20growth%20mar%202010.png

Source: Telco 2.0 analysis  

Breaking the data out further shows the recent growth trends by access type (see Figure 2). Mobile use has exploded with the growth of consumer-oriented 3G modems (dongles) and popular smartphones, such as the Apple iPhone and various other manufacturers’ recent devices. DSL growth has continued in some markets, such as Eastern Europe and China. Conversely, cable modem growth, entrenched in North America, has been slow as there has been limited roll out of new cable TV networks.

Figure 2: Global broadband access lines by technology, 2005-10

fbbm%20bar%20chart%20extract%20mar%2024%202010.png

Source: Telco 2.0 analysis  

It is important to note the importance of Asia in the overall numbers (see Figure 3). Although many examples in this report focus on developed markets in Europe and North America, it is also important to consider the differences elsewhere. Fibre is already well-established in several Asian markets, such as Japan and Singapore, while future growth in markets, such as India, may well turn out to be mobile-driven.

An alternative way of looking at the industry dynamics is through levels of data traffic. This metric is critically important in determining future business models, as often data expands to fill capacity available – but without a direct link between revenue and costs. In future, fixed broadband access will start to become dominated by video traffic. Connecting an HDTV display directly to the Internet could consume 5GB of data per hour, orders of magnitude above even comparatively-intense use of PC-based services, such as YouTube or Facebook.

Figure 3: Global fixed broadband by region, mid-2009
 
fbbm%20extract%20pice%20chart%20mar%2024%202010.png

Source: Broadband Forum

The dynamics of mobile traffic growth (see Figure 4) are somewhat different, and likely to be dominated by a sustained rise in the device/user numbers for the next few years, rather than specific applications. Nevertheless, the huge ramp-up in aggregated data consumption will put pressure on networks, especially given probable downward pressure on pricing and the natural constraints of cellular network architectures and spectrum. The report looks in depth at the options for ‘offloading‘ data traffic from cellular devices onto the fixed network.

Figure 4: Global broadband traffic

fbbm%20traffic%20growth%20chart%20extract%2024%20mar%202010.png

Source: Cisco Systems   

Note: EB = Exabyte. 1 Exabyte = 1,000 Petabytes = 1 million Terabytes

The Four Scenarios

Given the broad diversity of national markets in terms of economic development, regulation, competition and technology adoption, it is difficult to create simplistic categories for the BSPs of the future. Clearly, there is a big distance between an open access, city-owned local fibre deployment in Europe versus a start-up WiMAX provider in Africa, or a cable provider in North America.

Nevertheless, it is worth attempting to set out a few scenarios, at least for BSPs in developed markets for which market maturity might at least be in sight (see Figure 5 below). While recognising the diversity in the real world, these archetypes help to anchor the discussion throughout the rest of the report.  The four we have explored (and which are outlined in summary below) are:

  • Telco 2.0 Broadband Player
  • The Happy Piper
  • Government Department
  • Device specialist

There are also a few others categories that could be considered, but which are outside the scope of this report. Most obvious is ‘Marginalised and unprofitable’, which clearly is not so much a business model as a route towards acquisition or withdrawal. The other obvious group is ‘Greenfield BSP in emerging market’, which is likely to focus on basic retail connectivity offers, although perhaps with some innovative pricing and bundling approaches.

It is also important to recognise that a given operator may be a BSP in either or both mobile and fixed domains, and possibly in multiple geographic markets. Hybrid operators may move towards ‘hybrid end-games’ in their various service areas.


Figure 5: Potential scenarios for BSPs

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Source: Telco 2.0 Mobile and Fixed Future Broadband Business Models

For more details on the scenarios, please see the new Telco 2.0 Strategy Report ‘Mobile and Fixed Broadband Business Models – Best Practice Innovation, ‘Telco 2.0’ Opportunities, Forecasts and Future Scenarios‘, email contact@telco2.net, or call +44 (0) 207 247 5003.