monetizing broadband in apac
TRANSCRIPT
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2010 Monetizing Broadband:Asia Pacific
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May 2010
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Disclaimer
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Table of Contents
22Opportunities
28About Frost & Sullivan
16Issues6Context
Slide
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List of Charts
11Broadband Services Market: Broadband Penetration and 3G Penetration (USA), 2001 to 2009
17Broadband Services Market: Wireless Broadband Challenges (World), 1999-2009
19Broadband Services Market: NPV Analysis (World), 2009
18Broadband Services Market: Wireless Broadband Usage (World), 2001-2009
15Broadband Services Market: Wireless vs Fixed Access (World), 2009
13Broadband Services Market: Wireless Broadbands share of Incremental Broadband (World), 2006-2008
12Broadband Services Market: Broadband Penetration and 3G Penetration (Philippines), 2001-2008
12Broadband Services Market: Broadband Penetration and 3G Penetration (USA), 2001-2008
9Broadband Services Market: Broadband Access Technology Mix (Asia Pacific), 2004-2014
8Fixed Broadband Market: Subscriber Base (Asia Pacific), 2004-2014
7Broadband Services Market: ARPU/GDP per capita (Asia Pacific), 2009
10Wireless Broadband Services Market: Broadband Access Technology Mix (Asia Pacific), 2006-2013
14Broadband Market: Fixed vs. Wireless Net Subscriber Additions (Asia Pacific), 2008-2013
7Broadband Services Market: Broadband Penetration (per 100 inhabitants) (Asia Pacific), 2009
Slide
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Context
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Broadband Adoption Is an Affordability Play
Broadband penetration is a function of affordability.
Penetration in APAC Affordability in APAC
51
13
9991
12
44
3
60
39
6
0
10
20
30
40
50
6070
80
90
100
Australia
China
Japa
n
Korea
Malay
sia
New
Zea
land
Philipp
ines
Sing
apore
Taiwan
Thailand
1.34.7
1.4 2.2 3.2 2.4
19.0
1.6 1.65.1
0
10
20
30
40
50
Australia Chin
a
Japan
Korea
Mala
ysia
New
Zealand
Philip
pines
Sing
apore
Taiwan
Thailand
Note: One fixed broadband on an average serves 2 users whereas a mobile broadband serves only the individual subscriberBroadband penetration is the sum of 2 times the fixed broadband subs and mobile broadband subs divided by the population
Broadband Services Market: Broadband
Penetration (per 100 inhabitants) (Asia Pacific),2009
Broadband Services Market: ARPU/GDP Per
Capita (Asia Pacific), 2009
BroadbandPenetration(%)
ARPU/GDPPerCapit
a(%)
Note: All figures are rounded; the base year is 2009.Source: Frost & Sullivan
Note: All figures are rounded; the base year is 2009.Source: Frost & Sullivan
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Fixed Broadband Market is Growing
63,102
84,300
108,713
130,391
155,171
182,042
212,654
244,592
277,711
310,862
342,910
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year
Subscribers(Million)
0
10
20
30
40
GrowthRate(%)
Subscribers (Million) Growth Rate (%)
Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan
Fixed Broadband Market:Subscriber Base (Asia Pacific), 2004-2014
Broadband is the only real growth driver for fixed players; it is also a TINA effect.
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Access Technology Mix Would Continue
Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan
Sweating of Copper infrastructure is still critical with exception of markets like Japan, South
Korea and Taiwan.Broadband Services Market: Broadband Access
Technology Mix (Asia Pacific), 2004-2014
Note: Others include Satellite and Fixed -Wireless broadband access
58.0373.45
90.51109.19
130.03155.70
182.81
210.77
238.83
5.48
9.09
13.45
16.93
19.49
22.17
24.54
27.04
29.34
19.19
24.32
24.85
27.58
30.98
33.15
35.93
38.64
41.26
45.65
266.00
2.90
31.76
13.69
43.38
0.03
0.07
0.20
0.53
1.00
1.17
1.23
1.45
1.82
1.58
0.84
0
50
100
150
200
250
300
350
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year
Subscribers(Million)
Others
Cable Broadband
FTTH
xDSL
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10
Mobile Broadband is Here
2008 was the breakout year for HSPA.
Wireless Broadband Services Market: Broadband Access Technology Mix (Asia Pacific), 2006-2013
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Note: All figures are rounded; the base year is 2009. Source: Frost & SullivanLTE
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11
Mobile Players Attack Fixed Line Players With HSPA
Wireless players are trying to gain market share through aggressive pricing in growing broadband
markets.
Growing broadband market Saturated broadband market
Integratedoperator
Mobile-onlyoperator
Fixed Substitute Fixed Complement
Similar performance tofixed broadband at lowerprices O2 Ireland
ONE Austria
Lower prices bundled withfixed and lower downloadlimits Mobikom in Austria
In markets like Indonesia
and Philippines
Cheaper than fixedbroadband M1 Singapore FET Taiwan
Capped usage similar pricesand bundling with fixed TeliaSonera (Sweden)
More expensive than fixed
KT in Korea
Wireless Broadband Services Market: WirelessServices Offerings (Asia Pacific), 2009
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Source: Frost & Sullivan
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12
Broadband Evolution Developed VS. Developing Markets
8
0 0 0
2 510
15
26
0
1220
2635
45
5358
00
10
20
30
4050
60
70
80
90
100
2001 2002 2003 2004 2005 2006 2007 2008 2009
3G Mobile Penetration Fixed Broadband Household Penetration
The dynamics between wireless and wireline technologies differ by market maturity.
Developed Markets: Fixed leadsmobile
Developing Markets: Fixed usuallylags mobile
0
2
4
6
0
1
23
5
0
0
2
4
6
8
2004 2005 2006 2007 2008 2009
3G Mobile Penetration Fixed Broadband Household Penetration
Fixed Broadband remains the speed andexperience leader
Mobile Broadband plays catch-up
High costs of fixed line deployment Pent-up demand in certain areas
Wireless broadband subs are morethan fixed in markets like Indonesia
Broadband Services Market: Broadband Penetrationand 3G Penetration (USA), 2001-2009 Broadband Services Market: BroadbandPenetration and 3G Penetration (Philippines),
2004-2009
Penetration(%)
Penetration
(%)
Note: All figures are rounded; the base year is 2009.Source: Frost & Sullivan
Note: All figures are rounded; the base year is 2009.Source: Frost & Sullivan
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13
And Mobile Broadband is Succeeding
Mobile broadband is gaining between 30-50% of incremental broadband additions in most markets
after launch of HSPA and 3G data cards.
Wider coverage and UMTS toHSPA migration
Flat rate pricing packages
USB Dongles gainingincremental broadband share
Broadband Services Market: Wireless Broadbands Shareof Incremental Broadband (World), 2006-2008
Note: All figures are rounded; the base year is 2009.Source: Frost & Sullivan
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MobileShareofBroadbandNet-a
dds
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14
External Devices are Making a Difference
3G Dongles are taking Asias telecommunications landscape by storm and many markets now have
more dongle users than DSL users.
Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan
Broadband Market: Fixed vs. Wireless Net Subscriber Additions (Asia Pacific), 2008-2013
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0
5,00010,000
15,000
20,000
25,000
30,000
35,000
40,000
2008 2009 2010 2011 2012 2013Broadband
NetAdditions(000s)
0
510
15
20
25
30
35
40
Total(%)
Fixed Broadband Net Additions (000s)External 3G Device Net Additions (000s)
External 3G Device Net Additions as a Percentage of Total (%)
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15
Making Mobile Broadband a Serious Alternative
Mobile broadband has a larger addressable market , technological scale and good incremental rollout
economics at sub 1Mbps speedsLarger addressable Market PCs, laptops, netbooks andsmartphones
User ARPU rather than HH ARPU
Shipments of netbooks plussmartphones to overtake PCshipments in 2010 globally
Technological Stability Clear roadmap to LTE
Over 230 HSPA deployments Global scale and support
Competitive at Sub 1 Mbpsspeeds
Urban centers Sweating of 3G networkinvestments
Broadband Services Market: Wireless vs FixedAccess (World), 2009
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Source: Frost & Sullivan
Speeds
ADSL
FTTH
ADSL 2+LTE
HSPA
UMTS
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Issues
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De-Coupling of Traffic Volumes With Revenues
Huge data traffic volume increase;data > voice in most HSPAnetworks.
More than 50% data traffic videoand P2P.
Most pricing models all you caneat.
Declining Average Profit perMegabyte (APPMB).
Cost curve potential to overtakerevenue curve.
The challenges of fixed broadband economics are beginning to show in mobile broadband
as well
Broadband Services Market: Wireless BroadbandChallenges (World), 1999-2009
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Source: Frost & Sullivan
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Making Unlimited Packages Uncompetitive
Mobile broadband would find it tough to compete when usage goes beyond 4-5 GB a month and will
have unfavourable economics
Usage in MB per month Mobile will reach fixed typeusage behavior in 2-3 yrs
Leading to a change ineconomics of mobilebroadband
Backhaul Kbps per provisioned user
Current
3
40
12-15 times increase inbackhaul capacity
More number of cells tomanage RAN capacity
Limited availability of spectrum Significant increase in capex
per sub: $350 400
...
At 4-5 GB per month
Pay as you goAvg = 200 MB
Flat rate with fair usage policyAvg = 1 GB
Fully unlimited package
Avg = 3-5 GB
Heavy p2p users
MB/month/user
Share of users
Broadband Services Market: Wireless Broadband Usage (World), 2001-2009
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Source: Frost & Sullivan
1500
900
4,000
10,000
iPhone
Current
Mobile BB
avg usage
Develping
market
fixed BB
Developed
market
fixed bb
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And Making Pricing Decision a Profitability Determinant
Getting the pricing right is critical for profitability of the mobile broadband business case
For an usage level of 1 GB per month, the positive NPV generation ARPU should be close to $20 permonth (assuming 65% of new capex goes for data and 60% of peak utilization and no increment fromvoice).
The above can be reduced to $15 per month based on various market and operator conditions.
Source : JP Morgan Analysis, Frost & Sullivan
NPV Analysis
Broadband Services Market: NPV Analysis (World), 2009
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Smart the Pipe: Bite the App(le)
The app store success has significant implications for telcos
Rapid change within a year Implications for telcos
Creates an open sourceinnovation platform
Single marketplace, Centralized billing Immediate provisioning
On-device discovery Revenue distribution model
App stores being developed byoperators as well like T-Mobileand O2
What should be the number ofapps to start with and the pricingof the same?
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But is It Another Walled-Garden Trap With a Fancy Name?
Operators are ramping up their capabilities to compete with app stores
Partnering
Doing it ontheir own
Helped byVendors
O2 Litmus Orange
Vodafone
JIL Group formedby
China Mobile Softbank Verizon
Wireless Vodafone
Options
Amdocs App StoreFramework
Ericsson hostedservices
Do nothing: Pocket the dataARPUs by benefiting from theecosystem
Create the App Store using
white label APP Stores andother enablers in theecosystem: Work with theparticipants in the app storeecosystem to create a ready toserve App Store
Build an App Store: Leveragethe subscriber base and leadthrough unique differentiatedesp.. for emerging markets
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Opportunities
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Business Model Choices
Not so much about networks after all
What is the alternative andwhat is your promise?
Is it a fixed linereplacement, complement
or a new experience?
Entry point inflectionRecurring pricingTiered bandwidth
Data usage per month
Device affordability andownership
Digital natives> 4 devices
Productivityseekers ~ 2
devices
First internetexperience
device
?
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Reduce the Cost Per Bit
Anticipation of
data growth
Degree of
integration/Sharing
Operationalefficiency
Key characteristics of the services Data vs. voice vs. video traffic
Flexibility and time to market
Ownership of backhaul infrastructure Integrated/converged strategy:
consumer vs. enterprise vs. wholesale Infrastructure sharing
Multi-tiered bandwidth Reduction in cost per bit
Network criticalities
Traffic dimensioning Level of control and integration
Service awareness Security
Re-use of core and backhaulnetworks
Multi-service network design
Scalability Transport and backhaul efficiency Cost reductions
Broadband costs can easily spiral out of control if not managed properly.
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Expand the Addressable Market
Important to expand the addressable market
Expansion of access devices Expansion of applications Expansion of attention
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Evaluate the App Store Opportunity
Operators are ramping up their capabilities to compete with app stores
Options
Do nothing: Pocket the
data ARPUs by benefitingfrom the ecosystem
Change the VASbusiness model: Viewthe entry of app stores
to re-orient theorganization but dontbuild an app store
Evaluate owned AppStore: Leverage the
subscriber base and leadthrough uniquedifferentiated esp. foremerging markets
Our Recommendation
Evaluate the App store for strategicreasons
Fit with vision Emerging market focus weak in
current app store initiatives Bottom-up innovation benefits that
mitigate risk of disintermediation
The financial expectation gets determined bythe Do Nothing option floor (base case).
Utilize this project evaluation as a process tosee the alignment on VAS/Service strategyand readiness across various group cos (theTrojan horse).
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Key Issues to be Addressed
Cost effective infrastructure (incl. backhaul)expenses
Rigorous Network planning and
dimensioning
Right Portfolio Mix
Differentiated Services
Network exposure
Open Innovation
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About Frost & Sullivan
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Who is Frost & Sullivan
The Growth Consulting Company
Founded in 1961, Frost & Sullivan has over 45 years of assisting clients with theirdecision-making and growth issues
Over 1,700 Growth Consultants and Industry Analysts across 32 global locations Over 10,000 clients worldwide - emerging companies, the global 1000 and the
investment community
Developers of the Growth Excellence Matrix industry leading growthpositioning tool for corporate executives
Developers ofT.E.A.M. Methodology, proprietary process to ensure that clientsreceive a 360
operspective of technology, markets and growth opportunities
Three core services: Growth Partnership Services, Growth Consulting andCareer Best Practices
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What Makes Us Unique
Exclusively Focused on Growth
Global thought leader exclusively focused
on addressing client growth strategies
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T.E.A.M. Methodology
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Global Perspective
1,700 staff across every major market worldwide Over 10,000 clients worldwide from emerging to global 1000 companies
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