Video Strategy in Ultra-Broadband Era

Ian Valentine

Huawei Consulting

2

Imagine…

3

Agenda: 3 Reasons 3 Challenges 3 Opportunities

4

-

50,000

100,000

150,000

200,000

250,000

2013 2014 2015 2016 2017 2018 2019 2020

US

$ (

millio

ns

)

Telco TV revenues

Consumer broadbandrevenues

For the top 10 players, Video revenues now counts for ~30% or more of their total

fixed revenues

By 2020, Video business will be worth $80b to telco operators in subscription

revenues alone – adding 35% to consumer broadband revenues

Video revenues as a % of total fixed revenues, Q4 2015

17%

21%

23%

24%

24%

24%

26%

27%

28%

28%

29%

31%

33%

33%

35%

36%

39%

44%

49%

57%

Slovak Telekom / Deutsche Telekom

Magyar Telekom / Deutsche Telekom

Airtel

Romtelecom / Deutsche Telekom

Verizon (FiOS)

Telefonica [Colombia] (Movistar)

Telefonica [Chile] (Movistar)

AT&T (U-Verse / DirecTV)

Telefonica [Peru] (Movistar)

Korea Telecom (Olleh TV / Skylife)

Bezeq (Yes)

Iliad (Free)

TDC / YouSee

Canal Digital / Telenor

America Movil [Colombia] (Claro)

America Movil [Chile] (Claro)

Get / TDC

America Movil [Brazil] (Claro / Net)

Vodafone [Germany] (Kabel Deutschland)

Reliance

Source: Ovum

Source: Ovum

Telcos with no Video strategy are missing out on huge revenue

growth potential

Video is an essential driver of telco revenues

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Telcos have been very successful in using bundling to protect traditional revenues, reduce

churn and increase consumer ARPU

70% of consumer broadband lines will be part of a bundle by 2020

Over 45% bundles will include Video

Typical churn rates by bundle (W. Europe)

Bundle Typical level of churn*

Single play broadband 20-25%

Dual play 15%

Triple play 10%

Quad play 5%

* Can differ greatly depending on market conditions

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2013 2014 2015 2016 2017 2018 2019 2020

Dual-play broadband

Triple-play broadband

Quad-play broadband

Other broadband bundlecombinations

Single play broadband

% o

f co

nsu

me

r b

roa

db

an

d lin

es

Source: Ovum

Telcos without a Video strategy will find themselves at significant disadvantage Source: Belgacom

Belgacom revenue example

Video is an essential element of the telco business

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• Over 50% of all broadband users in Ovum’s surveys access Internet TV and video

• This has enabled companies like Netflix to quickly gain a foothold in the market, which will reach over 25m subscriptions by 2020

• However, Telco TV providers also need to take advantage to enhance their own pay-TV services and further monetisation

Source: Ovum

Source: Ovum

Source: Ovum

Video will be the core service by 2020

Telco TV OTT offerings % of total players

Any type of OTT offering 91%

Multiscreen / multiroom service 66%

‘Netflix-equivalent’ telco-OTT apps 33%

3rd party content apps 23%

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Revenue

Growth

Be the core service

Agenda: 3 Reasons 3 Challenges 3 Opportunities

8

20

16

-ic

asa R147,339 million

Annual -4%

RSA Telecommunications Sector

Video is a key battleground

Next generation, service oriented digital home, with entertainment at its heart

STRATEGY DEMANDS: Think like a TV Operator

Co

mm

un

icat

ion

s In

du

stry

(R

SA)

Convergence & Competition Challenges 1

R28,689 millionAnnual 7%

RSA TV broadcasting Sector < R200,000 million?

Multi Play

Operator

Converged Industry

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How viewers

pay for TV

Advertising

Payments

Interaction

Engagement

Scale is a pre-requisite

to Monetisation

Challenges 2 Monetisation

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Transformation ….Challenges 3

Video is the core traffic

Becomes Commodity

Developing Markets

Usage Based

Developed Markets

Video focused Quad Play

Value based Subscriptions

Tim

e

Direct Revenue

Video & ServicesEcosystem

Advanced Markets

?

Usage Based revenues decline Subscription based services

Becomes Bundling War

Usage based Commodity

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Becomes Commodity

Developing Markets

Usage Based

Developed Markets

Video focused

Quad PlayVideo & Services

Ecosystem

Advanced Markets

?Becomes Bundling War

Watch the River Build a Water Wheel Own a Dam….

Three Basic Steps to “Harness Video”

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Revenue

Growth

Be the core service

Agenda: 3 Reasons 3 Challenges 3 Opportunities

Convergence

Monetisation

Transformation

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Market opportunity for Super Aggregator Opportunity 1

Imagine this TV Service Description:

• Main UI is a folder

– Apps only display logos not content

• Channel Change time:

– 30 seconds

• Global Discovery tools (e.g. Search)

– None

• EPG

– No

• Usability

– Every channel is different

• Content items surfaced to user

– Never, its like a Mall were the shops have closed doors, with just a logo on!

• No overarching personalisation

What a terrible, fragmented user experience !

Thinking about Apps as channels and the device as a TV:

My “Entertainment Folder”

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The Smart Video NetworkOpportunity 2

Video Origin

PaaS

SaaS

Video Solution + Network Video Network

Video Origin

U-CDN

IP Data Network

Time-ShiftNetwork PVR

Content API

Devices API

Syst

ems

AP

I

Car

rier

AP

IHybrid Video

Platform

Content API

Devices API

Syst

ems

AP

I

Car

rier

A

PI

Hybrid Video Platform

Content API

Devices API

Syst

ems

AP

I

Car

rier

A

PI Other Video

Platforms

Content API

Devices API

Syst

ems

AP

I

Car

rier

A

PI Other Video

Platforms

IP Video Network

Video FunctionsVideo Services

Security & QoSVideo Delivery

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Opportunity 3 Video as the new voice

• Number resolution

• Connections

• Switching

• Connection Rate

• Interoperability

• QoS

• Content discovery

• Live feed distribution

• Video Manipulation & Security

• Cloud Services

• Interoperability

• QoS

Customer Segment 1(e.g. Viewers)

Customer Segment 2(e.g. Publishers)Value Add

Voice WAS an Ecosystem Video is BECOMING one

(Publishers) (Viewers)

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Revenue

Growth

Be basic service

Agenda: 3 Reasons 3 Challenges 3 Opportunities

Convergence

Monetisation

Transformation

Super Aggregator

Smart Video Network

Video as new Voice

Copyright©2016 Huawei Technologies Co., Ltd. All Rights Reserved.The information in this document may contain predictive statements including, without limitation, statements regarding the future financial and operating results, future product portfolio, newtechnology, etc. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied in the predictive statements. Therefore, suchinformation is provided for reference purpose only and constitutes neither an offer nor an acceptance. Huawei may change the information at any time without notice.

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Thank You