Business Model Innovation for the Digital Economy

Two-Sided Telecoms Markets The $375 billion growth opportunity

Simon Torrance, CEO, Telco 2.0TM Initiative
20th January 2009

Simon.torrance@stlpartners.com www.telco2.net

Introduction the Telco 2.0TM Initiative Mission To help players in the Telecoms-Media-Technology sector grow through business model innovation.

Approach A research-based approach to developing new business models through a blend of four activities: Research Brainstorms Consulting Operator Club

STL Limited Proprietary and Confidential

-2-

Telco 2.0 Research Agenda for 2009

Issues and opportunities
Corporate Strategy & Industry Issues Industry issues & new business model concepts Retail Services: Digital Kids/Generation Y next gen consumers Voice & Messaging 2.0 next gen personal comms Wholesale Services: Online Video Distribution fixing broken value chain Enterprise VAS: Advertising and Marketing services Enterprise Services Comms-enabled CRM Transaction services billing and payments Growth Opportunities: Enablers: Open API commercial model an industry framework Regulation & standards for Telco 2.0 world Infrastructure: Telco 2.0 Reference Architecture Exploiting customer data and on-demand systems Devices Mobile, Consumer premises equipment Implementation: Operational Agility Building the low cost transactional platform

Moving forward

STL Limited Proprietary and Confidential

-3-

What do telco execs really think today?

Source: Telco 2.0 Executive Brainstorm, 4-5 Nov 2008. Participant survey N = 250
STL Limited Proprietary and Confidential
-4-

Telco 2.0 and the two-sided business model

$375 billion telco growth opportunity New telco proposition: Reducing friction in the digital economy OTT threat if telcos dont embrace it

STL Limited Proprietary and Confidential

-5-

Friction in the Digital Economy

Providers
Developers Retailers Government Brand Advertisers Content Owners Telco Retail

Barriers Barriers
Identifying Other Party, Other Party, Authorisation & Authorisation & Security Security Promoting Promoting Offer Offer Conducting transaction Conducting transaction Fulfilling Order Order Fulfilling Billing & Payment Billing & Payment Service & Support Service & Support
STL Limited Proprietary and Confidential

Users

Millions of Customers

Thousands of Segments
-6-

Telco assets: well suited to reducing friction

Providers
Developers Retailers Government Brand Advertisers Content Owners Telco Retail

Telco Capabilities & Barriers Assets

Identifying Other Party, Authorisation & Security

Users

 Promoting Offer  Conducting transaction  Fulfilling Order  Billing & Payment  Service & Support 
STL Limited Proprietary and Confidential

Millions of Customers

Thousands of Segments
-7-

Telcos have a wealth of untapped data assets

Address Gender Bad debt Demographics Bank School

MY PERSONAL DATA
Name SIM Preferences Profile SoftSIM

MY CREDIT
Average balance

MY RELATIONSHIPS
Workplace Friends

Browsing History

MY DEVICES
Device details Number Serial Number SIP Number Location

MY INTERACTIONS
.mobi domains Presence Pictures QR Codes Videos

MY IDENTIFIERS
IP Address Roaming

MY CONTEXT
On/Off

MY STUFF
Address Book Calendar
-8-

STL Limited Proprietary and Confidential

by contrast, Google has very few

Search Term

URLs

STL Limited Proprietary and Confidential

-9-

Google is a two-sided business model master

Attracts audience that upstream players (advertisers) value

Advertisers

Audience

$$$
STL Limited Proprietary and Confidential

FREE!
- 10 -

Many successful two-sided market players

STL Limited Proprietary and Confidential

- 11 -

The Telco 2.0 platform connects providers to users, creating a twosided market

Upstream Customers Developers Retailers Government Brand Advertisers Content Owners Telco Retail
STL Limited Proprietary and Confidential

Downstream Customers

Telco Platform

Millions of Customers

Thousands of Segments
- 12 -

New Telco 2.0 revenue sources from two sides now

Upstream Customers
Developers Retailers Government Brand Owners Content Owners Telco (Retail) 2. 1.

Downstream End Users

Retail Platform Wholesale Platform B2B VAS Platform

$$

Consumers

SMEs

$$
2.

Enterprises

$$

Public Sector

STL Limited Proprietary and Confidential

- 13 -

Examples and Use Cases

See www.telco2.net/blog Or www.telco2.net/research Or www.telco2.net/event

STL Limited Proprietary and Confidential

- 14 -

Telco growth potential (Mature Markets) to 2017

$1,230bn
$125 VAS Platform

$689bn
$3 $20 $666

$250 'New' Wholesale Platform $855 Telco Retail Platform (& existing Wholesale)

2007

2017
STL Limited Proprietary and Confidential
- 15 -

B2B VAS: seven buckets of value potential

Total Market: $125 Billion

STL Limited Proprietary and Confidential

- 16 -

nly telcos have the breadth of capabilities

Ability for players to offer specific B2B VAS platform capabilities
Identity, Authentication and Security Advertising, Marketing & Business Intelligence Content Distribution

    

   ()1.

Billing and Payments (Voice-based) Customer Care

 
- 17 -

1. Via Google Checkout Note: The relative quality of solutions has not been considered.
STL Limited Proprietary and Confidential

Next steps towards Telco 2.0

1. Pilots around Telco 2.0 (two-sided) business models 2. Joined-up strategy and business case 3. Board-level support 4. Separate dedicated organisation for B2B VAS business 5. Expertise in two-sided business models and pricing strategies 6. Enhance downstream relationships 7. Build upstream capabilities 8. Establish a process for cross-operator collaboration
STL Limited Proprietary and Confidential
- 18 -

Telco 2.0 strategies now seen by leading practitioners as very important to future profitability (comparison with current strategies)

Telco 2.0 Strategies Telco 1.0 Strategies

Not important
STL Limited Proprietary and Confidential

Source: Telco 2.0 Executive Brainstorm, 4-5 Nov 2008. Participant survey N = 250

Very important
- 19 -

 STL Limited Proprietary and Confidential

- 20 -

Telco 2.0 and the two-sided business model

$375 billion telco growth opportunity New telco proposition: Reducing friction in the digital economy OTT threat if telcos dont embrace it

STL Limited Proprietary and Confidential

- 21 -

Business Model Innovation for the Digital Economy

Thank you
More at: www.telco2.net contact@telco2.net