ABI Research. June Stuart Carlaw. Chief Research Officer Scottsdale New York London Singapore.

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1 ABI Research June 2013 Stuart Carlaw Chief Research Officer

2 About Us By the Numbers Proven - Founded 1990 Objective - Privately owned Global - HQ in Oyster Bay, NY with 7 offices around the world Expert - Analysts spanning 19 Research Practices and 69 Research Services Comprehensive Products Published in 2012 Influential - Cited by media over 40,000 times in the 2012 The partner of choice for those seeking to capture leadership in the connected world of tomorrow.

3 Agenda The cloud versus edge debate and the ramifications of SDN and EFV, new breed of network vendors and the impact of economics Radical changes in the device market change user experiences and alter problem areas The shift from a network of consumers to a network of machines Some near-term concerns

4 Cloud Versus Edge Simplistic Transport Control Intelligence Content Internet Transport Control, Intelligence, Content Internet Network Vendor Approach or Internet Company Approach

5 Cloud Versus Edge Optimistic Transport Control Intelligence Content Internet Transport, Control, Intelligence, Content Internet Universal Complexity, Clash of Agenda, Confusion.

6 Infrastructure Market Shifts Clash of Big Iron Telecoms and IT Offload Small Cells Carrier Wi-Fi Policy Optimization Video SON Customer Experience Management Network API SDN NFV B of B Specialists

7 Net Result What Goes into the Box Will differ by Agenda Consistent Messaging to Carriers and Customers - complexity and Time to Ramp. Acquisition, Consolidation and Ecosystem Not all Partners will be there for the Long Haul All the Specialists - Choose your Partner Carefully. What Effect on The Value Prop Will Agenda Dilute Opportunity?

8 Smartphone Market Axis Shift Value Shift Top end of the market is saturating. Attention is moving to the emerging markets. Focus on Smartphones as primary on-boarding for 2013 Smartphones by Price computing is driving costs 2018 Smartphones by Price lower. Smartphone Revenues by Market Impact of PCB-A/Ref D model and Android lowering barriers to entry. OEM mix is changing. Silicon market is also adapting. Opportunity is being driven out of the market. Smartphone by Price Band

9 Smartphone Market Axis Shift Innovation is Key 9300 Sept Months 2Q 2012 Volume Crash N8 Aug Months 1Q 2012 Volume Crash 1. Samsung 2. Google 3. Huawei, Lenovo, White Label & Low Cost 4. PCB-A & Ref D - Shanzai 5. Micro-vendors 6. Wearables

10 Net Result Emerging Market Exposed to the Data Tsunami. Do you Need to IoT and Who With? Who is Shaping the Mobile Experience? Emerging Market Pricing Pressure. Is Pure Connectivity Enough? Wearables and the Prospect of Indirect Connectivity?

11 Network of Machines (Billions) Others Smart Cities Retail and Advertising Mobile Devices mhealth Government, Aerospace, and Defense Connected Home and PCs Automotive, Transportation, and Logistics is seen by many as the year of the Internet of Everything, it will be many years until it reaches its full potential but the next 5 years will be pivotal in its growth and establishment as a tangible concept to the consumer, government or enterprise. There are more than 10 billion wirelessly connected devices in the market today, by 2020 this expected to be over 30 billion

12 Now, Near, Next

13 M2M/IoE Revenues Where is the Money? Global Revenues Hardware Connectivity VAS Shipments Connection Revenues Apps/Development Platform fees System Integration Cellular M2M 2% 38% 60% *Hardware = M2M Modules Short Range Wireless M2M 1 % 99% *Hardware = Short-range wireless ICs Cellular Voice/Data 26% 68% 6% *Hardware = Low-end handsets, feature phones, smartphones

14 Next Generation VAS M2M/IoE B2B Social Media Integration G2B Intelligent Products Structured and Unstructured Data G2C C2G B2C B2G Revenue enhancement and customer stickiness Privacy New Pricing Models C2B

15 Opportunity Look, Market, Develop Beyond the Consumer Long Term Game The Concept of Application Coverage Applies - Coverage Don t Underestimate Raw Traffic Impact - Capacity Work with Standards Bodies Controlling the Indirect Connectivity Piece Extend Reach Open API to M2M SDP and AEP Owners Extend Value Prop Make Sure Core network Assets are Dimensioned and Optimised for IoE Focus on How Small Cells can Influence the VaS Opportunity of IoE

16 Near Term Concerns & Observations Scaling OSS to Small Cells, at least an order of magnitude increase needed Complexity of deployment and operation underestimated by many MNO s slows market ramp. LTE uptake faster than expected, so more emphasis to recycle spectrum Carrier-Grade and Smart Wi-Fi encroaches on licensed spectrum Small Cell Market and may throttle licensed small cell growth Neutral host small cell may be required by municipalities looking to minimize lamp post clutter X2 interoperability can small cells be mixed and matched in a macro RAN underlay? Multivendor SON interoperability in a mix n match underlay Security both physical and network

17 Thank you! Stuart Carlaw Chief Research Officer

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