Rethinking the Telcos business models in the age of 5G _

Transcription

1 Rethinking the Telcos business models in the age of 5G _ Digiworld. Montpellier 20/11/2014 Carlos López Blanco Public Affairs & Regulation Telefónica, S.A.

2 Every wave of innovation gives opportunities to rebalance leadership between companies, industries and geographies Who is going to lead next generation in digital industry? 1G 2G 3G 4G 5G Basic voice service Analog based protocols The need for speed Designed for voice Improved coverage and capacity Digital standards (GSM, CDMA) Data for mobile: SMS, MMS Designed for voice with some data consideration (Multimedia, Next Internet) First Mobile broadband Designed primerily for high data transmission IP based protocols (LTE) High mobile broadband 2,4 kbps 64 kbps kbps kbps High data transmission + Lower battery consumption Higher versatility and scalability (more connected devices, with different needs) Converged fiberwireless network ?

3 5G happens in a whole new world. We are living a digital revolution! Rise of emerging markets (North vs. South) More mobile A growing data-centric business Internet Access Connected things as a growth opportunity PCs Mobility/ BYOD Internet of things M Internet of everything M Source: Ericsson mobility report Nov.2013 Traffic per customer Source: CISCO & GSMA Intelligence E 600 MB 2,2 GB 200 M Smart Wearables Smart Cities Connected Smart TV Home Source: CISCO Total ICT Market size 4.3trn in 2012 Growth Connected cars Drones + 0,9trn

4 How could the world of Telecom be like in the era of 5G? All mobile experience for customers & devices and Evolution to IP & cloud based network architectures Smaller cells IP networks FTTx Internet of Things (IoT) Device virtualization & hosting Cloud services World seamless mobile (e.g. mobile and Wifi), multidevice and multichannel (app/web/ real world ), even if there is a need of underlying fixed infrastructure to provide digital services. Cloud: SaaS Software as a service and Network functions virtualization, and Software Defined Networking. Internet of Things (IoT): Higher versatility and scalability (more connected devices, with different needs) 4

5 Telecom is not a closed ecosystem anymore. It is part of a broader digital ecosystem competing with OTT Apps Contents Telco players: Connectivity and Solutions OS Devices Services that were traditionally offered separately Telecom network & services: Fixed/mobile/core/intal networks Fixed/Mobile Voice/VoIP to number SMS Internet Access (Data) TV Internet services Web based contents E-commerce Hosting services Search engines VoIP PC to PC Instant messaging / Social are now part of one single universe where Operators compete with Internet players Communication and Online Services: Fixed/mobile/core/intal networks Fixed/Mobile Voice/VoIP SMS/Instant messaging TV/Video/Web based contents Internet Access (Data) Hosting services E-commerce Search engines 5

6 Operators are at a crossroad in Europe: declining revenues, unleveled playing field, increased investments needs Negative outlook on EU telecom revenues: Europe is the only region decreasing revenues TELCO sector and Europe are falling behind digital industry -2,4% p.a Source: IDC Worlwide Blackbook % 4% 2% 2% Value distribution of 64 Internet companies with market capitalization over 1.5 billions $ (end 2012) 83% OTT ecosystem dominated by a few players creating new monopolies Big investments needed to achieve digital Agenda Communication Content Commerce Devices & OS Source: McKinsey. Regulation Needed for a New Investment Wave. February 21,

7 How will operators handle the challenge? Living a new digital revolution Opportunities Leveraging the central role of connectivity in digital customer experience Cross-Market Competition Coping with risks from cross market competition Regulation Regulation needs to evolve with market & industry Reinforce position investing in best access networks, customer care & becoming partner of choice. Growth through stimulating adoption, limiting the unlimited and bundling. Risk of commoditizing Telco companies and losing customer relationship Risk of losing connectivity of IoT services Risk of losing management of network and services Innovation & Investment friendly area Efficient market structure Level Playing field 7

8 Opportunities come from reinforcing position investing in connectivity, partnership, customer and environment Connectivity is at the center of customer experience and the link between devices and services in the cloud. CUSTOMER EXPERIENCE CONNECTIVITY APPS AND CONTENT DISTRIBUTION REINFORCE POSITION INVESTING IN DEVICES CONNECTIVITY Best access networks & operational efficiency CUSTOMER with a best-in-class approach to customers and customer care PARTNERSHIP becoming the partner of choice for the best digital products / apps ENVIRONMENT fostering new policies and skills so to open the possibilities of technology. OPPORTUNITIES OF GROWTH BY Stimulating adoption of mobile data Promoting usage through tiered pricing Enriching customer experience by bundling with digital services, and convergent 4P bundles.

9 Excellence in basic assets as a lever to become the partner of choice for others Partnership Platform BEST IN CLASS NETWORK AND CUSTOMER CARE CONNECTIVITY-CENTRIC ECOSYSTEM Network capabilities Customer care Efficient operations Coverage + Best UX Best multichannel UX Best cost + Fastest execution + Network intelligence + Selective network capabilities open to third parties + Agility to create / sell service bundles + Fast service integration in our channels + Fast / efficient service integration with internal operations Premium digital customer experience APP DEVELOPERS CONTENT OWNERS DEVICE VENDORS Our segmentation and targeting capabilities Main motivators for 3 rd parties to join us Our distribution reach Billing capabilities Subsidy their apps and/or connectivity 9

10 Operators face challenges from cross-market competition While up to now threats to the Telco industry were related to surrounding businesses, current threats target business basics E-SIM (e.g. Apple) Spectrum & Low Power Wide Area (LPWA) (e.g. SIGFOX) Proxy (e.g. Google) Risk of commoditizing Telco companies and losing customer relationship Risk of losing connectivity of IoT services Risk of losing management of network and services Excellence in basic assets (network capabilities, customer care, operations) and partnerships skills will enable operators face the challenges ahead 10

11 Operators have to face challenges, but it is not enough! A regulatory framework adapted to the new world is needed Innovation & Investment friendly area Efficient market structure + + Level Playing field More market led, less regulatory driven. Allow market innovation and favour investment, by removing excessive ex-ante regulatory pressure Consolidation & competition framework revisited. Speed to scale: Allow efficiencies when competing with global champions, in new digital industry. Same services-same rules to all elements of value chain (&with other regions) Not to miss the boat of global digital industry in Europe, a real change in policy is needed to go from diagnosis to delivery! 11

12 Telefonica s proposal for a better Digital Ecosystem 10 policy recommendations to create an open and safe Internet experience for all and unleash the full potential of the Digital Economy 1. Build Digital 2. Create a Portable Confidence through a Digital Life for safer Internet consumers by allowing experience and by them to use their data, empowering citizens to information and be in control of their applications regardless personal data. of their devices or platforms 3. Open up mobile 4. Promote 5. Improve transparency Operating Systems, about the conditions of App Stores and other use for Internet digital platforms to services and the increase users distinction between freedom, choice and information and competition advertisement in online search results interoperable Internet applications, communication and messaging services to improve consumer experience and foster competition 6. Transform education, 7. learning and teaching by widely adopting digital technologies and services based on Open Resources and Standards. Promote Open Innovation and Open Standards principles and prevent that undue Intellectual Property protection restricts innovation in the Digital Economy 8. Create fairer policy frameworks by establishing the same rules for the same digital services and smarter regulation by relying more on outcome-based policy making and case-by-case supervision 9. Make Internet available to everyone by establishing adequate conditions for private investment in broadband infrastructure 10. Evolve the policy models of Global Internet Governance by building on its existing foundations and through involvement of all stakeholders in an open manner and on equal footing 12

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