The Emerging Telecommunications Landscape Detecon s 2nd European Telco Supplier Event June 17th, 2004 Frankfurt

Transcription

1 The Emerging Telecommunications Landscape 2010 Detecon s 2nd European Telco Supplier Event June 17th, 2004 Frankfurt Dr. Arnulf Heuermann Managing Partner

2 Content The emerging Telecommunications Landscape Major Strategic Trends 2. The end of the classical Value Chain 3. Long Term Restructuring of Traditional Telcos 4. Core Business and Roles of Future Players 5. Summary: Action Points for Suppliers Page 2

3 Contents 1. Strategic Trends 1.1 Politics: Re-Structuring of Regulatory Environment 1.2 Society: Demographic Change and Individualization 1.3 IT and Society: Pervasive Computing 1.4 Telecommunications Technology: NGN and Multi Access Service Platform 1.5 Technology and Economics: Fixed Mobile Convergence and Mobile Business 1.6 Operator Economics: Economies of Scale versus Economies of Specialization 1.7 Strategic Dilemma: Demand driven Differentiation vs. Cost driven Standardization 1.8 Summary Page 3

4 1. Strategic Trends: Politics 1.1 Re-Structuring of Regulatory Environment The structure and institutions of telecoms regulations are undergoing a transformation which has a direct impact on the future of the Telco sector. Traditions Practice Current Developments Tomorrow s Result Organization Telecoms Sector Authority Communications Sector Authority* Law Telecoms Sector-specific Laws & Regulations Communications Laws & Regulations + general competition law Fixed networks Fixed Market Mobile Networks Mobile Networks Networks Telecoms Services Broadcasting Services Telecoms Broadcasting Services Services & Content Page 4 *Communication Sector Authority = telecommunication + broadcasting

5 1. Strategic Trends: Society 1.2 Demographic Change and Individualization (1) Aging Societies, Rising Mobility, Individualization, and Complexity are major trends with important consequences for future Telco services and IT applications. Important Examples of Trends and Developments Challenges/ Consequences for Telcos Aging Societies More old people, longer life expectancies form a social group with no/ little experience concerning technology and being digitally connected Create new interfaces to technology that take into account the communication habits of elderly or disabled persons Mobilization/ Changing Work People are increasingly mobile for private/ leisure and work reasons Demand for secure, reliable and fast access to information and communication resources independent of location Tribalism vs. Universalism Individual societies / social groups or segment vs. globalization of production Regional Differences must be taken into account. Individuals in different groups share different beliefs and values Page 5

6 1. Strategic Trends: Society 1.2 Demographic Change and Individualization (2) Aging Societies, Rising Mobility, Individualization, and Complexity are major trends with important consequences for future Telco services and IT applications. Important Examples of Trends and Developments Challenges/ Consequences for Telcos Individualisation Affiliations and Identities form micro groups and segments Customer Segmentation, Mass Customization on a service and application level Rising Affluence Rising diversity and choice of information, sources, products and services Choice Management, Intelligent Systems Technology Mastery More technologies are emerging, it becomes increasingly harder to manage and use all kinds of technology Ease of Use, Intelligent Applications and User Interfaces Page 6

7 1. Strategic Trends: Information Technology and Society 1.3 Pervasive Computing (1) With Pervasive Computing new business opportunities will be created stimulating data communications traffic in particular in the M2M segment. Microtechnology Nanotechnology Software Agents Language Recognition Web Services WAN, LAN, PAN, BAN Tracking Localization Emerging Technologies Miniaturization Mega MIPS Tbit/in2 (2010) Artificial Intelligence Expert Systems Seamless Interaction Networked Augmented Reality Systems Wearables Tracking and Tracing Picture Reorganization Energy Supply will boost Photovoltage, Mechanics, Temperature gradient Fuelcells Hydrogene Page 7

8 1. Strategic Trends: Information Technology and Society 1.3 Pervasive Computing (2) With Pervasive Computing new business opportunities will be created stimulating data communications traffic in particular in the M2M segment. New Applications All-day-life Life: intelligent home, Smart Dust Shopping: u-commerce, Silent Commerce Smart Objects: intelligent coffee machine, Traffic Individual Traffic: Remote Control, Drive-By-Wire Driverless Public Transport Personal Travel Assistant Work Empowerment: Remote Decision Support Infrastructure: Intelligent Office, Mobile Intelligence Teamwork: Tele-Presence, Virtual Workbench Health Tele chirurgy, Nanobots Med. Telemetry, Artificial Senses Entertainment Media: E-Paper, Augmented TV Mobile Internet, AR Games Sports: Virtual Trainer Page 8

9 1. Strategic Trends: Telecommunications Technology 1.4 NGN and Multi Access Service Platform In a NGN World Differentiation and Innovation Strategies on the Service Level will become a strategic opportunity; cheap trial and error introduction of new services and individual applications will be possible. Service VPN Commerce MMS Service Layer Voice WAP Portal Mail Middleware Access Network 2G Circuit Switched CS Packed Switched CS HSS Control Layer MM-CS CSCF IP-CS Access Network WLL Network 2.5G 3G GW Network Layer GW W-LAN Satellite Physical and Transport Layer Page 9

10 1. Strategic Trends: Technology and Economics 1.5 Fixed Mobile Convergence and Mobile Business Fixed and mobile networks will migrate, voice, data access and services will be available over one basic IP network. No more difference, however, in fixed and mobile services and applications. Networks/Services Places Devices DVB Mobile network (PSTN) DAB UMTS GSM/GPRS High/Low-Mobility Marriage No/Low-Mobility Marriage Services Services Services Edge Meshed networks WLAN Intranet WiMAX Bluetooth New services and usage scenarios Fixed Network (PSTN) ISDN analog Cable DSL On to Move Home Corporate Wireless Broadband will be the future standard access to fixed or mobile networks. Majority of voice traffic via mobile devices, but majority of broadband services will be transmitted via fixed networks. Page 10

11 1. Strategic Trends: Operator Economics 1.6 Economies of Scale versus Economies of Specialization Still market power, size and profit go hand in hand Large voice networks are still more profitable than small ones. In maturing markets, all successful operators 35 % are forced to follow a cost leadership strategy, 30 % in particular trying to maximize market share. 25 % Today profit comes form economies of scale 20 % and size of operators. 15 % But this is about to change 35 % 45 % 55 % 65 % 75 % 85 % 95 % new customer demands, market regulation Combined market share of top two mobile players (%) and new technologies open profitable market opportunities for small, focused and niche players with strong and intimate customer knowledge. Country average EBITDA margin (%) 55 % 50 % 45 % 40 % All IP and converged NGN Individualization Mobile technologies Enhanced device Software enabled Data & voice Convergence (fixed) Fixed Voice Data Fixed-mobile convergence Mobile Voice Data & voice convergence (mobile) + ROI 0- - Service Provicer T-Mobile NL T-Mobile UK Market Share T-Mobile Germany Page 11

12 1. Strategic Trends: Economics 1.7 Strategic Dilemma: Demand driven Differentiation vs. Cost driven Standardization The big integrated network operators today have to focus on cost leadership and differentiation strategies at the same time. Service Provisioning Network Operations Sales Layer Service Layer Middleware Control Layer Network Layer Physical and Transport Layer Device and CRM Operating System Content & Applications Customer Centric Processes Network Centric Processes Communication Applications Access Transport Service Strategy Differentiation Platform Strategy Cost Leadership Operators have to concentrate both on: an innovation and differentiation strategy for the service provisioning part of the value chain. Uniqueness perceived by the customer Service innovation & differentiation (brand, sales, products, customer care) a cost leadership strategy for the network specific part of the value chain Low cost position Overall Cost Leadership (Efficient scale facilities, cost reduction, cost control) Page 12

13 1. Strategic Trends: Economics 1.8 Summary Technical, social, political and economic trends will dramatically change the traditional Telco value chains and push the emergence of new entrants. Technology Scientific Developments Politics Deregulation Regulation Industry Politics Privatization Traditional Telco Market Splitted Value Chains Applications Infrastructure Devices Mobilization Rational Overchoice Individualization Carrier Markets New Entrants Society Aging Societies Business Models Value Chains New Entrants Worldwide Markets Economy Page 13

14 Contents 2. The end of the classical Value Chain 2.1 Fragmentation of the Value Chain and fading Frontiers 2.2 Different layers of the value chain require a focused strategic positioning Page 14

15 2. The end of the classical Value Chain 2.1 Fragmentation of the Value Chain and fading Frontiers Telcos will come under pressure by new service providers and the backward and forward integration of manufacturers and Content&Application Providers. CRM / PoS- Management CRM / Marketing Companies Operator / Carrier Market Entry of brand Company as MVNO in Sweden Business Layer Value Chain Devices Content Value-added Services Customer Care / Billing Basic Applications Access Networks Media Companys BSS / OSS Supplier, IT-Service Provider Telco Supplier Device Manufacturer Content / Application Platforms & Provider Operator / Carrier SK Telecom launches full scale mobile ASP Business (NATE ASP), Cisco VoIP - Devices Transport Networks Legend: future Migration Page 15 Build Deliver Components / Resources Austrian GSM Operator outsources Network operations to

16 2. The end of the classical Value Chain 2.2 Different layers of the value chain require a focused strategic positioning We expect that Carriers will finally face competition on three different levels and only focused players on each level will be successful. CRM / PoS- Management CRM / Marketing Companies Operator / Carrier Business Layer Value Chain Devices Content Value-added Services Customer Care / Billing Basic Applications Access Networks Transport Networks Page 16 Media Companies BSS / OSS Supplier, IT-Service Provider Telco Supplier Device Manufacturer Content / Application Platforms & Provider Operator / Carrier Build Deliver Components / Resources SalesCo ServCo NetCo

17 Contents 3. Evolution along the Value Chain Layers 3.1 Vertically or horizontally structured (Mobile) Carriers 3.2 BT and Nordic Countries are Trend Setters 3.3 Major Functions of SalesCo, ServCo, NetCo 3.4 Strategic Threats for SalesCo, ServCo, NetCo Page 17

18 3. Evolution along the Value Chain Layers 3.1 Vertically or horizontally structured (Mobile) Carriers The successful operator will re-structure to overcome the strategic dilemma of cost-leadership and differentiation. Especially vertically integrated carriers will restructure. Vertically integrated carrier - e.g. Deutsche Telekom AG - Horizontally integrated carrier - Future carrier layout - Sales Sales Sales Sales Brand & Sales Residential SME VLE Offerings Service Service Service Service Network Network Network Network Network Services IP VPN WLAN Content Fixed Mobile Data Products Production Page 18 Those restructurings are expected to deliver large potentials for increased profitability and competitiveness against value chain specialists.

19 3. Evolution along the Value Chain Layers 3.2 BT and Nordic Countries are Trend Setters British Telecom was among the first to recognise that network business is completely different from corporate and retail markets and restructured itself accordingly. British Telecom Group Sonera/Telia Merger Brand & Sales BT Global Service BT Retail BT Wholesale Brand & Sales Sales & Marketing Network Services Narrow- and broadband wholesale services UK and European Network BT Exact UK Access and Core Network Services Products & Services Production & Networks Already in 2003 BT ended a year long transformation process and set up four main lines of business. Expected EBITDA increase sums up to 3% in 2003 Activities are structural separated into network operations and commercial and sales activities Page 19 Small domestic markets and little scale forces restructuring and final stimulated the merger Telia already sold its network construction, operations & maintenance to Flextronic Current structure has been set up by Sonera

20 3. Evolution along the Value Chain Layers 3.3 Major Functions of SalesCo, ServCo, NetCo In search of excellence: Key Performance Indicators of the different Layers are completely different and need a focused organization and management. Create scope for product bundles Segmentation SalesCo. Demand Management Service Provisioning Understand and adress customer needs & lifestyles Create brand awareness and value Ensure quality, flexibility and response time of customer relation Create modular innovative products Service Bundling ServCo. Ensure product functionality Control lifecycle management Specification Management Service Provisioning Manage linkages to sales & production Lean production of network services Page 20 Wholesale NetCo. Generate economies of scale SLA and defined QoS Cost & operational efficiencies

21 3. Evolution along the Value Chain Layers 3.4 Strategic Threats for SalesCo, ServCo, NetCo The importance of cross value chain actions will determine, whether the layers will be separated into different companies or just SBUs of one company. Cross value chain actions Layered value chain Value chain element actions Set up profit margin reporting Set up Operation support system Enhance CRM Transfer Prices Transfer Prices Page 21 Innovation management Sales Services Network Contract Management, Partnering Reduce churn through better customer services Create Needs & Lifestyle oriented brand Prepare for Media, IT, TK Convergence Shape product portfolio in line with market needs Demand focused innovation mgmt. Converged offerings, Partnering Asset & bandwidth management Carrier alliances & outsourcing Reduce OPEX through automated processes Define migration to NGN

22 Contents 4 Core Business and Roles of Future Players 4.1 NetCo: Specialist in Wholesale 4.2 ServCo: Specialist in Product Development 4.3 SalesCo: Specialist in Marketing Page 22

23 4. Core Business and Roles of Future Players 4.1 NetCo: Specialist in Wholesale The Telco will have to focus on internal and external wholesale business and should specialize on all related services. Future organization has to reflect this. Network operations and wholesale products Voice Services Data Services Wholesale Segmentation Service Bundling SalesCo. ServCo. NetCo. Page 23 Call Termination Free phone (inter-) national Roaming Call Origination Transit International calls O&M Outsourcing Enquiry services Collection IC link Calls to VAS VoIP ISP dialing Enabling Services Messaging Content Services Third party billing Peering International capacities Collocation Node B sharing Clearinghouse achieve lean production and focus on platform strategy create economies of scale network based define SLA and quality of service focus on cost & operational efficiencies IP transit Antenna and Tower sharing Leased lines Infrastructure sharing

24 4. Core Business and Roles of Future Players 4.2 ServCo: Specialist in Product Development (1) Customer-centered innovation and a profitable, convergent portfolio are key success factors. Service Innovation and Product Development Wholesale Segmentation Service Bundling SalesCo. ServCo. Page 24 NetCo. Customer Oriented Service Innovation instead of new technology Create innovative VAS for specific life-environments and situations (intelligent home, automotive communications, m- banking solutions, ) Realization of Enhanced User Interfaces (intuitive, universal, personalized user interface for all devices and applications) Realization of overaching authorization, autentification and accounting (single sign-on, identity management, biometric identification, digital signature, digital rights management) Multi Access Service Platform integrating Fixed-, Mobile-, Data Services (Portable services that will run on a variety of underlying networks, Third party service development, Network resources accessible to services by standardized Application Programming Interfaces (APIs))

25 4. Core Business and Roles of Future Players 4.2 ServCo: Specialist in Product Development (2) Customer-centered innovation and a profitable, convergent portfolio are key success factors. Service Innovation and Product Development Product Portfolio Management and Fixed-Mobile Convergence Wholesale Segmentation Service Bundling SalesCo. ServCo. Page 25 NetCo. Diversification and modularization of service portfolio capable to be bundled by SalesCos according to Micro segment needs Product portfolio streamlining to improve internal transparency and consequently extinct unprofitable products and applications Realize Fixed-Mobile Convergent Broadband Services (universal access at high speed anywhere anytime, roaming between different technology networks, organize personal profiles for global service access, integrated services independent from device and network.)

26 4. Core Business and Roles of Future Players 4.3 SalesCo: Specialist in Marketing Consequent Differentiation Strategy: Advanced marketing skills and techniques are pre-requisite for this approach. New channels and partners have to be developed. Brand operations and retail Wholesale Segmentation Service Bundling SalesCo. ServCo. Page 26 NetCo. Micro Segmentation Residential Markets: Combination of usage based and life style market segmentation Business Markets: Segmentation along company size, type of business, and ICT competence of customer Multi branding and ingredient branding strategies Customer Value Oriented Marketing Customer portfolio strategy based on value of the customer segmentation, propensity of churn, and future revenue potentials Optimized marketing by higher efficiency through targeted marketing measures with multiple partner channels based on value for the customer Retail Pricing and -billing Price bundling, content and application pricing, segment specific value of service pricing are a key element of the SalesCo competences Advanced one-stop retail billing and clearing house competences

27 5. Summary: Action Points for Suppliers (1) Action Points Design retail products and user interfaces along major social trends, in particular for elderly customers, lifestyle segments, mobile customers and ease of use. Take the business opportunities of new convergent applications resulting from pervasive computing. Prepare the portfolio for the migration to NGN and Fixed Mobile Convergent Services. Fragmentation of the value chains and convergence will lead to market entry of numerous non-traditional Telcos. Also suppliers have to decide clearly about their strategic focus and outsource non-core business. Page 27 Along the value chain the network, service and sales layer have totally different Key Performance Indicators. This will be reflected in future carriers organizations through separate SBUs, Profit Centers, or even legal entities. Suppliers will have more and different customers.

28 5. Summary: Action Points for Suppliers (2) Action Points In their core business Telco-Suppliers will have to deal with future NetCos, specialized on wholesale business. Costleadership strategies of NetCos may increase price competition among suppliers. Netcos may also become fierce competitors to suppliers in the outsourcing- and outtasking business for network O&M. Future ServCos and SalesCos will clearly focus on services and differentiate and individualize them. Suppliers will have to help them in this respect: - They may operate outsourced networks and become sales and CRM partners. Page 28 Telcos today have little brand loyalty. They have to reposition sales activities and partner with brand companies including suppliers / device manufacturers. Traditional Telco brands may become ingredient brands.

29 Contact Dr. Arnulf Heuermann Detecon International GmbH Competence Practice Strategy & Marketing Page 29 Oberkasseler Str Bonn (Germany) Phone: Fax: Mobile: Arnulf.Heuermann@detecon.com