tmt outlook 2017: a new wave of advances offer opportunities and challenges

TMT outlook 2017: A new wave of advances offer opportunities and challengesThe Technology, Media and Telecommunications seriesSandra Shirai. Principal, Deloitte Consulting LLP

Scott Lippstreu, Principal, Deloitte Consulting LLP

Paul Sallomi, Partner, Deloitte Tax LLPCraig Wigginton, Partner, Deloitte & Touche LLP

February 8, 2017

TMT outlook 2017: A new wave of advances offer opportunities and challenges

Copyright © 2017 Deloitte Development LLC. All rights reserved. 2

Media and entertainment outlookScott Lippstreu,Deputy US Media and Entertainment Practice Leader Deloitte Consulting LLP



14–18 19–25 26–32

30% 29% 28%

32% 38% 31%

Millennials spend more time streaming content than watching live television

Liveprogramming

Streaming

Deloitte’s Digital Democracy Survey, 10th Edition, 2016



10%Smartphone

8%Tablet

38%Laptop/desktop

Other devices

9%Smartphone

8%Tablet

39% Laptop/desktop

Other devices

44%Television 56%

44%Television 56%

Movies TV shows

Millennials aged 19-25 spend more time watching content on devices other than TVs




Streaming services are growing rapidly, especially among Millennials

Average number of paid video subscription services by generation

Two

Two

Three

Two

Two

One

46%of US consumers

61%of Millennials

subscribe to astreaming video service 14–18

19–25

26–32

33–49

50–68

69+

&




Home Internet Pay TV Streaming Video Services

95%of US consumers

79%of US consumers

61%of US consumers

92% 94% 94% 64% 61% 68% 66% 78% 56%

14–18 19–25 26–32 14–18 19–25 26–32 14–18 19–25 26–32

Millennials value their streaming video subscriptions more than Pay TV




49%Only channels I watch

Traditional Pay TV packages are losing their appeal with consumers as alternative models gain ground

39%Traditional package

of channels




What does this mean?



How many activities do you typically engage in while watching TV?

• One

• Two

• Three

• Four

• Five or more

• Don’t know/don’t multitask while watching TV

Poll question #1



69%of US consumers

& 77%of Millennials

Pay more attention to digital ads over TV ads

Four

Millennials

Consumers pay more attention to digital ads than TV ads and Millennials are the most distracted while watching TV

Average number of additional activities while watching TV




73%Online reviews within

social media circle

39%Television advertising

The buying influence of online reviews in social media has surpassed TV

ads for 19-32 year olds




VR/AR and the Future of Mobility



Do you own a VR headset?

• Yes

• No

• No, but I plan to purchase one in the next 12 months

• No, but I might purchase when more content is available

• I don’t know what a VR headset is

Poll question #2



Technologies driving change in Media & Entertainment

Virtual Reality

As of October 2015, 234 companies working on VR had raised a total of $3.8 billion in capital according to VentureBeat, with a combined market value of $13 billion.

Future of Mobility

In the US, roughly 160 million hours are spent driving from point A to B annually.1

That’s 46 minutes per person, every day.

1AAA 2015 Driving Survey

Telecom Auto

TechMedia



Telecommunications OutlookCraig Wigginton, US and Global Telecommunications LeaderDeloitte & Touche LLP



Today’s Coverage of 2017 Telecom Outlook Items

Device usage

Smartphone addiction

Phone purchase channels

Second-Hand Phones

Connectivity

Biometrics

Mobile operators

Content-Based Telcos

SDN/NFV

Mobile payments

Mobile Virtual Reality

Media usage on phones

Data privacy

Digital Trans-

formation

Mobile advertising

Apps

Privacy and security

Smartphone brand loyalty

Smartphone Hub

Enterprise Mobility

M&A

Wearables

IoT

5G Small Cells




Device usage



Nearly 50% of consumers surveyed look at their phone within 5 minutes of waking up. At night, consumers are slightly less phone-tethered

Source: USA edition, Deloitte Global Mobile Consumer SurveyBase: Smartphone owners 2014: 2015: 1,458, 2016: 1,530

Typically how long is the interval between waking up and looking at your phone for the first time?

Longer than 3 hours

Within 5 minutes

Immediately

Within 15 minutes

Within 30 minutes

Within 2-3 hours

Within an hour

20162015

96%

41%

17%

59%

73%

93%

88%

97%

43%

18%

62%

76%

93%

88%

Longer than 3 hours

Within 5 minutes

Immediately

Within 15 minutes

Within 30 minutes

Within 2-3 hours

Within an hour

20162015

96%

32%

12%

50%

64%

87%

79%

95%

35%

15%

54%

68%

89%

81%

At the end of the day, typically how long is the interval between looking at your phone for the last time and preparing to sleep?



33

66

44

32 24

16 12

46

84

58

44

30

22 19

47

82

64

51

35

2016

-

10

20

30

40

50

60

70

80

90

2014 2015 2016

The 18-24 year old age group still dominates when it comes to how many times a phone is looked at in a given day

Source: USA edition, Deloitte Global Mobile Consumer Survey, June 2016Base Graph 1: Smartphone owners 2014: 2015: 1,458, 2016: 1,530# of Smartphones Source: Statista, 2015

How many times would you estimate you look at your phone in a day?

6%

32%

25%

16%

10%

4% 3% 4%2%

21%

27%

21%

13%

7%4%

6%

1%

21%

27%

21%

14%

6%4% 5%

0%

5%

10%

15%

20%

25%

30%

35%

Never Under 10 times Between 11 and

25 times

Between 26 and

50 times

Between 51 and

100 times

Between 101

and 200 times

Over 200 times I don't know

2014 2015 2016

With approximately 200 million smartphone users in the U.S., this means we look at our smartphones

nearly 9 billion times per day!

Total 18-24 25-34 35-44 45-54 55-64 65-74



Surprisingly, ½ of consumers check their phones in the middle of the night. Reasons vary, but they’re primarily personal activities

Source: UK edition, Deloitte Global Mobile Consumer Survey, May - Jun 2016

Base: All smartphone owners 1530

50%

1%

7%

7%

7%

8%

8%

11%

11%

13%

16%

16%

19%

20%

31%

0% 10% 20% 30% 40% 50% 60%

I don't check my phone during the night

Don't know

Respond to work email

Check other apps

Respond to personal emails

Read a book

Check games notifications

Read news

Read work email

Respond to instant messages

Play games

Check for personal emails

Check social media notifications

Check instant messages

Check the time

Which of the following activities do you do if you check your phone in the middle of the night?



Penetration in the smartphone market continues to increase, particularly for the older age group demographics

58%

76%72%

64%

51%

42%

70%

89%85%

77%

65%

53%

77%

88%86%

84%

75%

62%

15%

8%

9%

15%

21%

21%

0%

5%

10%

15%

20%

25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Gro

wth

rate

Pen

etr

ati

on

rate

Smartphone penetration by age group

2014 2015 2016 CAGR

Source: Deloitte Global Mobile Consumer Survey, USA edition, Aug 2014, August 2015, August 2016

Base: All respondents USA, 2014: 2001, 2015: 2069, 2016: 2000

Total 18-24 25-34 35-44 45-54 55+

Which, if any, of the following devices do you own or have ready access to?



Biometrics



Biometric security reaches the billions

Prints charming:



Mainstream adoption of smartphone biometrics will act as a catalyst for the deployment of biometric sensors in other environments

• Access to building• Register exit• Check in and out of classes• Payment of food and stationery supplies

• Fraud detection, access to or opening of new accounts, payment authorization

• Alternative to PIN entry in ATMs• Authorization process for high value B2B transfers

• Tax payments, access to medial records, e-voting (might encourage younger people to vote)

• National identity schemes• India: facial, fingerprint and iris data; 2016: 1 billion registrants.

• Access to data

• Alternative to entering a password to get access to email or intranet

• Physical security: a way of controlling entry into a building

Schools

Financial institutions

Government

Enterprises




How important would a faster wireless network (such as 5G) be to you?

• Very Important — Today’s 4G speeds simply aren’t fast enough

• Fairly Important — 4G is okay, but I could use faster speeds

• Not Very Important — 4G speeds are sufficient most of the time

• Not At All Important — Today’s network meets all of my needs

• Don’t know/Don’t understand

Polling Question #3



Future of connectivity



In 2017, we expect to see continued progress toward 5G rollout through completing market trials and beginning initial full-scale market rollouts

Higher capacity: LTE-A Pro offers 10 times the capacity of the fist 4G standard.

• Smaller cells – Allows for base stations to be placed in stores in shopping malls, lamp posts

• Carrier aggregation

• MIMO

• Greater capacity edges and hot-spots

• Higher frequency bands/higher speeds

Lower latency:

• LTE-A Pro – 600 microseconds

• LTE – 8,000 microseconds

Dedicated support for IoT: Low-Power Wide Area Network – low bandwidth connections to a large number of smaller, connected devices

• low-power transmission

• low-frequency transmission (for basements and inside buildings)

What 5G Offers‏



Based on Deloitte’s 2016 Global Mobile Consumer Survey, more than half of consumers believe 5G to be important. Specific demographics have even greater levels of interest in 5G.

If your carrier offered next generation wireless data speeds (e.g. 5G) how important would this be for you?

Source: US edition, Deloitte Global Mobile Consumer Survey

Base: All Adults, 18-75

27%

29%

24%

14%

6%

Very important Fairly important

Not very important Not at all important

Don't know

Category Value% Diff from Next Highest Age Group

Age 25-34 19%

Region Northeast 4%

HouseholdCouple with children

8%

Boughtphone in…

2016 17%

Income $250K-$299K 9%

IoT ownership

Connected car & wearables (tie)

9%

Top interested demographics

29 Meeting with incoming RBC US General Counsel Copyright © 2015 Deloitte Development LLC. All rights reserved.

Small Cells: Big impact on seamless connectivity

Why small cells now?Achieving advances in capacity and network

speed will require densification of networks

consistent with a 5G strategy over both licensed

and unlicensed spectrums—to patch coverage

holes, to optimize signal strength, and to

increase capacity to meet consumer demand.

Globally 10+million Small Cells

have been deployed so far.

The demand for network densification is only

going to increase exponentially in the future.

Small cell equipment market revenue was

around $2 billion in 2014 and is expected to

approach $10 billion by 2019.

Evolving organizational capabilities

The processes and tools for overseeing conventional network

deployment and rollout might not work so effectively in the new era of

small cells.

Impact on network design

Shifting from‏a‏“macro‏tower‏only”‏mindset‏to‏a‏“connect‏everything”‏

mindset will require looking beyond conventional ways of thinking

about network design and engineering, site selection, and deployment.

How innovation helpsSmall cells offer the potential of providing speeds that pave the way for

wireline broadband substitution and enable the creation of a mesh network,

offering direct connectivity to the rapidly growing number of Internet of Things

(IoT) devices.

Small Cell Deployed on

Street LightsElectric Poles

Traffic Light Poles

$10 billion

2019

$2 billion

2014

A diverse and potentially new

set of capabilities will be

needed, from such as process

automation, mobile apps to

support field workers,

regulatory processes, and real-

time performance monitoring

and analytics, just to name a

few.



Technology OutlookPaul Sallomi, US and Global Technology Industry LeaderDeloitte Tax LLP



Tech outlook 2017

Flexible Consumption Model offerings will have significant impact on tech companies and their customers and will drive tremendous business and operating model transformation

Cognitive Computing will enhance a wide array of enterprise and consumer applications

Digitization of the enterprise will open new markets and create new ecosystems

Cyber Security products and services are addressing the increasing threat of attacks

New partnerships and collaborations across tech and other industries are critical for driving topline growth

Mergers, Acquisitions, & Divestitures are on the rise as tech companies choose to focus on what they do best

Exponential technologies, flexible consumption business models, cyber security and ecosystem partnerships offer a continued set of opportunities and transformational

challenges for technology companies



Which trend do you predict will drive the largest growth opportunity in the tech market?

• Cognitive computing

• Cyber security advancement

• Automatic Emergency Brakes/Automotive technologies

• It-as-a-Service/Flexible Consumption models

• Mergers, Acquisitions, & Divestitures

• Don’t know/Not applicable

Polling question #4



Deloitte Global predicts by the end of 2018, spending on IT-as-a-Service for data centers, software and services will be just under $550 billion worldwide. IT-as-a-Service is the fastest growing example of Flexible Consumption Models

IT-as-a-Service: the half trillion dollar ‘niche’

A subset of flexible consumption models, potentially able to procure every aspect of IT on a “you get what you pay for’ basis.

13% of companies using FCM for more than half of their IT needs

23% of companies using FCM for more than half of their IT needs



Who it is that makes the decision to move to the alternative model seems to depend on the industry:

Adoption varies in a number of ways

IT-as-a-Service: the half trillion dollar ‘niche’

Healthcare

Industrial products

Technology

Financial Services

IT departments initiate the move

31% of companies moved on their own initiative.

8% of companies moved because of pressure from vendors.

13% of companies moved on their own initiative.

33% of companies moved because of pressure from vendors.

Media and entertainment

In other industries the change is led by the vendor:

$1-5 billion revenue +$5 billion revenue

Public cloud 7% 7%

On premise 19% 32%

Enterprise size also plays a role:



Deloitte Global predicts that over 300 million smartphones (more than a fifth of units sold in 2017) will have on-board neural network machine learning capabilities.

Brains at the edge: machine learning goes mobile

Computer models that mimic aspects of the human brain’s structure and function

Allows smartphones to perform machine

learning tasks



The technology behind it

Brains at the edge: machine learning goes mobile

GPUs (graphic

processing units)

CPUs(central

processing units)

FPGAs (field-

programmable gate arrays)

Neural networks

that fit smartphones

Machine learning on-the-go will not be limited to

smartphones.

Mobile phones are becoming critical devices in our daily lives, and need to be able to perform machine learning tasks all the time.

Special software

emulators



Deloitte Global estimates that, by 2022, a sixth of the US cars and light trucks will be equipped with automatic emergency braking (AEB).

AEB will contribute to a reduction of annual US motor vehicle fatalities by 6,000.

Safety first: the road to self-driving starts with a stop

16% decline on the likely death toll as compared to 2017

Forward-facing cameras Millimeter wave radars

Laser ranging and imaging systems (LIDAR) Associated vision processing systems

AEB technologies



The bottom line

Safety first: the road to self-driving starts with a stop

• AEB is a critical first step towards the fully autonomous vehicle

• Technology sector stands to benefit with wider deployment

−Automotive semiconductor market growing faster than rest of chip market at 6% annually until 2019

• AEB will not require rewriting laws, regulations and liability

−It could be a successful transition technology

• Telecom implications: cars in 2020 may be connected to the network or to other cars generating 0.6 exabytes per month in the US or 9% of all wireless traffic



Deloitte Global predicts that in 2017 Distributed Denial-of-Service (DDoS) attacks will become larger in scale, harder to mitigate and more frequent.

DDoS attacks enter the terabit era

1 Tbit/s attacks per month

+10 million attacks in total

Average attack size of 1.25 – 1.5 Gbit/s

(enough to take many organizations offline)



The bottom line

DDoS attacks enter the terabit era

Organizations increasing its dependence on the Internet should be aware of a potential spike in the impact of DDoS attacks

They should consider a range of options to mitigate the impact:

• Decentralizing

• Bandwidth oversubscription

• Testing

• Dynamic defense

• Fallbacks

• Protecting

• Detecting

• Repelling

DDoS attacks are likely to increase in intensity in 2017 and beyond



The new growth strategy

Partnerships, M&A and Divestiture Activity

Efforts to advance new technology fields and build end-to-end customer solutions are driving:

• Unprecedented wave of partnerships between technology companies and other industries

• New forms of consortiums and collaborations

• Partnerships between traditional competitors in emerging fields

• Increased M&A and divestiture activity

Companies that are open and adept at this type of teaming or restructuring will be able to find a broader network of growth opportunities for their products and services



Question and answer



Join us April 26 at 1 p.m. ET as our Technology, Media & Telecommunications series presents:

Media consumption trends: Multigenerational perspectives and implications



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Contact information

Sandra Shirai

PrincipalDeloitte Consulting [email protected]

Paul Sallomi

PartnerDeloitte Tax [email protected]

Scott Lippstreu

Connect with me on LinkedIn Connect with me on LinkedIn

Connect with me on LinkedIn Connect with me on LinkedIn

PrincipalDeloitte Consulting LLP [email protected]

Craig Wigginton

PartnerDeloitte & Touche [email protected]

mailto:[email protected]


https://www.linkedin.com/in/sandyshirai/

https://www.linkedin.com/in/paulsallomi/

https://www.linkedin.com/in/scottlippstreu

https://www.linkedin.com/in/craigwigginton1




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