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Motorola LTE – Beyond Mobile Broadband

6 Jun


Strategy 2.0: Lessons from Vodafone’s success in European SMB Communications

31 May
Summary:  Vodafone have been quietly stealing a march in the European SMB communications market with a well executed strategy centred on its OneNet cloud-based product. We look at how, including comparisons with BT, Telenor, and others. (May 2012) Vodafone Voice Analysis May 2012
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Below is an extract from this 24 page Telco 2.0 Report that can be downloaded in full in PDF format by members of the Telco 2.0 Executive Briefing service here. Non-members can subscribe here, buy a Single User license for this report online here for £795 (+VAT for UK buyers), or for multi-user licenses or other enquiries, please email / call +44 (0) 207 247 5003.

We’ll also be discussing our findings at the London (12-13 June) New Digital Economics Brainstorm where we’ll be joined by Bob Brace, Vodafone’s Head of Cloud and Unified Comms, in the Cloud 2.0 stream.

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Introduction – Challenges and Opportunities in Voice and Unified Communications

Although voice minutes of use are still rising slowly worldwide, it is increasingly the case that the predictions of falling revenues from traditional services are becoming a reality, and sooner than expected. A combination of regulatory pressures, price competition between operators, and disruptive competition from new entrants is crushing margins. 

Figure 1: Skype Punishes Carriers on International Voice

Skype Punishes Carriers on International Voice

Source: TeleGeography

Most worryingly, the continued huge growth in volumes at Skype and the popularity of alternative messaging options like WhatsApp, BlackBerry Messenger, and Apple’s iMessenger show that the disruption is disproportionately affecting the most profitable segments of the traditional telecoms bundle – international and SMS respectively. 

Increasingly, small and medium-sized businesses (SMBs), another key line of business, are turning to the growing numbers of independent VoIP providers. And, more broadly, voice, messaging, and video conferencing features are being disaggregated and diversified, showing up in all kinds of software, hardware, and Web service contexts – exactly as we predicted in 2007.

Again as we predicted, voice is more and more being delivered as part of a broader communications product. In the enterprise, this typically manifests itself as a “unified communications” (unicomms or UC) application, integrating telephony, voicemail, e-mail, and often also instant messaging, presence-and-availability, teleconferencing, and collaboration tools. This can be delivered on-premises, for example by an Asterisk system or an integrated hardware appliance like the ones Cisco sells, as a Web service (like Huddle or Salesforce Chatter), as a hosted/cloud-based network service, or as a telecomms operator service (like IP-Centrex).

In this context, some operators are not just surviving but succeeding. There is not only crisis here, but also opportunity. Cisco forecasts that there is a world market for $20bn of hosted unified-comms services, making up about 40% of the total “managed” UC market. Vodafone expects a 25% CAGR over the next four years in both UC and cloud services for SMBs and enterprises, with a total European market of $15bn in 2015. As for the broader communications market, BT estimates that the total UK SMB communications market is worth some £29bn from 4.8 million customers.

Figure 2: Cisco estimates $20bn of hosted unified communications, $50bn “managed”

Cisco Estimates $20bn of Hosted Unified Communications
Source: Cisco Systems, STL Partners

The drivers are clear – SMB customers are keen to get rid of the costs of owning and managing local PBXes on the one hand, to enjoy the (perceived) low, low prices of VoIP, and also to upgrade their communications services from the early 1990s GSM feature set plus the late 1990s BlackBerry e-mail service to something more in keeping with the age of Google +, the Apple iPhone, and Skype. 

At the same time, operators are in search of new sources of revenue to replace the business and international voice and SMS cash cows. As always, they also need to find applications that sell-through their basic connectivity products. Hardware vendors are keen to extend their own businesses, which are challenged by the availability of open-source software and cloud-based services. And the software and Internet service players are trying, in their turn, to defend against the remorseless drift towards “free”.

In this note, we will discuss three European operators’ response to the challenge and the results, and we will also discuss how the vigorous Voice 2.0 disruptor ecosystem relates to the SMB core market. We will start with an example of success – Vodafone.

Figure 3: Why SMB & enterprise UC is a priority at Vodafone

Why SMB & Enterprise UC is a Priority at Vodafone
Source: Vodafone interim report

Vodafone: clear definitions and responsibilities pay off

In the UK, this space is dominated by two players, Vodafone and the ex-incumbent BT. Their results contrast dramatically. 

Vodafone is aggressively promoting a cloud-based UC package, OneNet, to its SMB customers in the six biggest European markets, and looking to roll it out across the wider Vodafone Group. 

Meet Vodafone OneNet: Unified Comms in the Cloud for SMBs

OneNet is a cloud-based unicomms product, which offers single numbers for both fixed and mobile telephony, advanced call management, multi-ring and hunt groups, and voicemail integrated with push e-mail across mobile devices, fixed phones, and VoIP softphones, with a single bill and central account management via a Web interface and a smartphone app. Vodafone also offer Office 365 from Microsoft as an extra cost option and later this year (2012) will offer integration between One Net and Microsoft Lync enabling “click to call from Microsoft applications and the ability to answer an incoming call to a mobile number in Lync.

OneNet Express is a lightweight version of the product for small businesses, offering virtual landline numbers and some call management features, as well as the account management service, for mobile lines only. Both versions of the product are delivered as pure network services, running in Vodafone’s core network.

A Note on the Accounts

Although Vodafone is increasingly keen to boast about its performance in the SMB and enterprise markets, it doesn’t yet provide a line-of-business analysis in its accounts. However, we’ve constructed a roughly comparable data series, based on the growth figures Vodafone does provide, its own statement that 31% of its European revenue is from business customers, and its geographical segment breakdowns. 

A caveat must be introduced in that Vodafone Global Enterprises (VGE), the large enterprise & government business roughly analogous to BT Global Services, is included in the Vodafone series while BTGS is broken out in the BT accounts. BT does not provide a breakdown of BTGS revenue detailed enough to create an identical BT series. However, as we will soon see, it is unlikely that Global Services have contributed enough growth to falsify the conclusion we are about to draw.

In the six OneNet markets (Germany, Italy, Spain, the UK, the Czech Republic, and Portugal) through 2011, revenue growth averaged 4.8%, and it is worth noting that there is substantial momentum. Q1 saw sequential growth of 2.4%, Q2 4.85%, and Q3 7.38%. In the market and economic context, this is a spectacular performance.

Figure 4: Vodafone Is Doing Far Better In The UK

Vodafone is Doing Far Better in the UK
Source: STL Partners, Vodafone, BT

In the last 7 quarters, Vodafone’s revenue from UK business customers grew in 6 of them. It beat BT in every one of the quarters we looked at. Not only is it growing quite quickly, while BT’s is shrinking dramatically, it is almost three times as big in absolute terms (although some of this will be down to the differences in segment allocation). 

In Europe more broadly, the same picture is visible even more strongly, with the SMB segment growing at 5-8%% in major markets like Germany and Italy, and accounting for most of the growth in final ARPU. Although Vodafone’s south European interests are in the firing line of the economic crisis, this line of business has been remarkably robust. In the last three months of 2011, service revenue in Italy shrank almost 5 per cent – but revenue from SMBs and enterprises rose 1.9%. At the same time, service revenue in Germany grew 0.3%, but the OneNet target markets grew 5%. In Q2, service revenue in Italy was down 4.1%, but enterprise was up 5.8%, and OneNet itself was growing at 70% annually. In Germany, at the other end of the European economic spectrum, enterprise was up 6.6% year on year compared with total service revenue at 1.2%.

Figure 5: OneNet Markets Doing Rather Nicely, Thanks

OneNet Markets Doing Rather Nicely, Thanks
Source: Vodafone interim results presentation, November 2011


To read the note in full, including the following additional analysis…

  • BT: Incumbent or Innovator?
  • BT Voice: Volumes Shrinking…
  • Two other European operator plays
  • Telenor: The Same Factors, the Same Success?
  • So, How Did Vodafone Do It?
  • Compare and Contrast: Vodafone 360
  • The Disruptors: Twilio, Tropo, and friends
  • The Future: beyond hunt groups
  • Conclusions & Recommendations
  • 1: Service design
  • 2: Organisational focus
  • 3: Channels to market
  • 4: Cloud and software power
  • The Telco 2.0™ Initiative

…and the following figures…

  • Figure 1: Skype Punishes Carriers on International Voice
  • Figure 2: Cisco estimates $20bn of hosted unified communications, $50bn “managed”
  • Figure 3: Why SMB & enterprise UC is a priority at Vodafone
  • Figure 4: Vodafone Is Doing Far Better In The UK
  • Figure 5: OneNet Markets Doing Rather Nicely, Thanks
  • Figure 6: Enterprise & SMB Outgrowing Vodafone Group Revenues in last two quarters
  • Figure 7: BT Group strategic priorities
  • Figure 8: BT Organisational Structure – an SMB might touch all of these
  • Figure 9: BT Global Services revenues year-on-year
  • Figure 10: BT losing call volume in the UK…
  • Figure 11: A simple proposition
  • Figure 12: Enterprise revenue in Turkey growing 33% sequentially
  • Figure 13: Cisco’s view of SMB, Developer, and Enterprise Requirements


How Pinterest is changing the mobile shopper

16 Apr


April 13, 2012

Pinterest is taking over the mobile and online space with brands and retailers such as eBay, Amazon and Sephora adding “Pin It” buttons to their product pages, thus encouraging mcommerce and ecommerce sales.

Although Pinterest’s main focus is on the Web, the company does have mobile offerings such as its mobile applications and mobile site. Marketers are seeing the sudden consumer interest of Pinterest and are increasingly looking at ways to engage consumers.

“Pinterest is a better mousetrap for those that like to socially share products,” said Chris Mason, cofounder/CEO of Branding Brand “It puts items front-and-center for admiration and the creation of lookbooks.

“In some ways, using Facebook Like is too generic compared to Pinterest’s ability to solve this specific use-case,” he said. “We find that in mobile, there are many shoppers who are simply there to ‘window shop,’ and Pinterest does a good job of embracing that.”

Social interest
Pinterest is a social media site that lets users find and share pictures that inspire them from across the Web and pin them to digital boards that users can customize by category.

sign up now!


Many brands and retailers are using Pinterest to drive user engagement.

In addition to that, the site is a great conversation starter and lets users share things with others, therefore helping spread the word out more quickly.

Many companies such as Rebecca Minkoff, InStyle and Sephora have taken an interest in Pinterest.

For example, earlier this week, Sephora did a complete overhaul of its Web and online presence and created a more seamless experience for consumers.

In addition to its mobile efforts, Sephora is also branching out in the social media space.

The company has fully-integrated Pinterest.

There are now “Pin It” buttons on every product page that let users pin any of the 14,000 products from Sephora’s Web site.

Adding a tool such as this is a great way for consumers to share their favorite product with their friends.

Additionally, when consumers click on the button via their mobile device they can shop for the product right then and there.

In that manner, Pinterest is a great tool to change the mindset of a mobile shopper and change the way that retailers and brands market their products.

However, marketers need to make sure that they have a mobile-optimized presence.

For example, if a consumer taps on a Pin It button via their mobile device and the landing page is not optimized for their smartphone, they are less inclined to shop that product, especially if they have to go through obstacles such as pinching and zooming to see what the item actually is.

“The actual shopping is where it gets tricky. If an item’s original source or store is not mobilized, the experience can easily get lost when a shopper is referred over to that environment,” Mr. Mason said.

“The big question is whether the audience’s social sharing will eventually provide more traffic then brand messaging or search,” he said. “Currently, nobody can say for sure, but it is very clear that platforms need social integrations.”

No effect
Not everyone believes that Pinterest will change the way a mobile shopper shops.

“I do not think that Pinterest will change the mobile shopper, I do think that it adds a twist to it,” said Rick Singer, CEO of

“Its a great tool if someone is looking to share something,” he said. “Pinterest taps into the social end of mobile.

“It does open you to items that you may have not been familiar with, but it will change the way that we shop, it just may enhance it to a certain extent.”

According to Mr. Singer, many brands will use Pinterest if it will help them expand their reach and acquire more customers.

“Shopping for people is a necessity and a luxury, so if it can help you locate something, then it’s worth giving Pinterest a try,” Mr. Singer said. “Pinterest is an interesting concept, however, I can see how some brands may not think its necessary.

“The larger brands already have a core user base and spend a large amount of marketing campaigns on their own,” she said. “Certain people will view Pinterest as a gimmick or to an extend of ‘why does someone need to show that item on Pinterest?’

“We are seeing so many different social tools that come to market – some are good and useful, so take off and some just fade away. As the mobile space continues to grow, I think a certain standard of useful tools will fall into place –  that is until the next great thing comes.”

Rimma Kats is associate editor on Mobile Commerce Daily and Mobile Marketer. Reach her at


SAP Strategy Profile: Enabling Telcos to Operate at ‘Internet Speed’

12 Apr
Summary: Our top-level review of SAP’s vision of how it will enable telcos to ‘operate at internet speed’ against Telco 2.0 principles and the six key opportunity areas identified in our strategy research report, ‘The Roadmap to New Telco 2.0 Business Models’. We also challenged SAP to build a Proof of Concept implementation of a complex multi-sided business model with a leading European mobile operator within one month. How did it go? (February 2012, Foundation 2.0) Six Opportunity Areas within the Telco 2 Platform


  • Below is an extract from this 17 page Telco 2.0 Report. The report can be downloaded in full PDF format by members of the Telco 2.0 Executive Briefing service here
  • Additionally, to give an introduction to the principles of Telco 2.0 and digital business model innovation, we now offer for download a small selection of free Telco 2.0 Briefing reports (including this one) and a growing collection of what we think are the best 3rd party ‘white papers’. To access these reports you will need to become a Foundation 2.0 member. To do this, use the promotional code FOUNDATION2 in the box provided on the sign-up page here. NB By signing up to this service you give consent to us passing your contact details to the owners / creators of any 3rd party reports you download. Your Foundation 2.0 member details will allow you to access the reports shown here only, and once registered, you will be able to download the report here
  • We’ll also be discussing business model innovation at the Silicon Valley (27-28 March) and London (12-13 June) Executive Brainstorms.
  • To access reports from the full Telco 2.0 Executive Briefing service, or to submit whitepapers for review for inclusion in this service, please email or call +44 (0) 207 247 5003.

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Executive Summary

SAP’s new vision for telcos –  ‘operating at internet speed’ –  aligns well with certain Telco 2.0 principles and is supported by an interesting new set of tools, processes and pledges. To be more precise ‘operating at internet speed’ means driving change fast enough to match internet disruptors such as Google, Apple and Facebook. 

This sounds great (and would truly be a boon for operators) but we have heard this all before and from just about everybody.  Vendors making this claim need to be prepared to prove it. The Telco 2.0 team, together with a leading European Mobile Operator and a team of configuration experts from SAP, got together to build a Proof of Concept implementation of a complex multi-sided business challenge. 

The results were impressive and within a period of a month:

  • we defined the challenge and business model impacts in a 2-day workshop;
  • we developed a software implementation through three weekly iterations;
  • we deployed a complete reporting toolkit to measure performance against key metrics; and
  • all without writing a single line of software, just configuring SAP software.

The exercise convinced the Telco 2.0 team that operating at internet speed is not beyond the grasp of mobile operators, but it requires both a change in working practices and approach to partnering with key vendors. The barrier is organisational. 

Based upon the success of the exercise, we will shortly be launching “The Telco 2.0 Challenge” to the wider Telecommunications Industry, and we’re now looking for more operators who’d like to set a new Telco 2.0 challenge. To find out more please email us at or visit SAP’s stand at the 2012 Mobile World Congress in Barcelona. 


The Telco 2.0 team was recently invited by the leadership team at SAP’s Telecommunications Industry Group to review its vision of the evolution of Telco business models and the capabilities required to support this vision. 

SAP is a world leader in enterprise application software with a turnover in 2010 of €12.5bn serving in excess of 170,000 customers in over 120 countries, including over 1,000 telco customers. SAP software has long been present in telecom operators’ finance and supply chain departments. Recent acquisitions such as Highdeal (real-time rating), Sybase (database, device management and mobile payments) and Business Objects (customer insight) together with in-house product developments such as In-Memory Computing and Cloud Computing position SAP to serve more and more of telco computing needs.

At the heart of SAP’s vision for telecoms operators is that they should be able to operate with more dynamism and flexibility. SAP aims to support telcos both internally and externally: internally  SAP enables marketing, product and pricing teams to deliver a customized experience and quickly rollout and test new services; externally SAP enables enterprise customers and 3rd parties to integrate communications services and telco data services into their own. 

Much of the SAP vision is aligned to key aspects of Telco 2.0 thinking. In this report we map the key aspects of the SAP vision to the Telco 2.0 future growth areas for telcos.  SAP also has many years experience of working with many other industries and therefore is well positioned to assist cross-industry collaboration which of course is essential to successful two-sided business models. 

This report examines the SAP vision in the context of two-sided business models, and specifically against the Six Telco 2.0 Opportunity Types identified in our recent research report The Roadmap to Telco 2.0 Business Models. It examines the tools and pledges made by SAP to support business model innovation and implantation. Finally, it examines some of the specific features within the SAP software and their applicability to telcos.

Sponsorship and editorial independence

This report has kindly been sponsored by SAP and is freely available. SAP provided input to questions asked by STL Partners’ analysts and were given the opportunity to comment on working drafts. Research, analysis, and the writing and editing of the report itself were carried out independently by STL Partners. The views and conclusions contained herein are those of STL Partners.

Analytical Framework: The Six Strategic Telco 2.0 Opportunity Areas

The most recent of these research reports, ‘The Roadmap to Telco 2.0 Business Models’ – describes the transformational path the telecoms industry needs to take to carve out a more valuable role in the evolving ‘digital economy’, and outlines six key opportunity areas in which telcos can create new value. We have used this framework to analyse SAP’s vision at a top level.

These opportunity areas sit themselves within the context of Telco 2.0’s ‘two-sided’ telecoms business model concept, in which telcos remodel their businesses to serve both traditional ‘downstream’ customers (individual and business end-users consuming traditional telco services) and ‘upstream’ customers, or ‘merchants’ who instead use telco assets in new ways to achieve business goals such as improving business processes or services. This concept and the accompanying opportunities are described in depth in The $125Bn ‘Two-Sided’ Telecoms Market Opportunity report (see also page 14). 

Figure 1 – The Six Telco 2.0 Opportunity Types

Six Opportunity Areas within the Telco 2.0 Platform
Source: STL Partners

The six opportunity areas are in summary:

a) Core Services

  • Redefine the customer experience for telecoms via:
    • Improvement of core product portfolio (voice, messaging, connectivity, TV/media), more engaging and ‘smarter’ marketing and DRM, leveraging of online sales channels, enhanced customer interaction and care
    • Engaging differently with existing customers is important, to create loyalty and retain the customer base, and also to build the base for up-selling and providing new services. A key part of the re-engineering required is to improve customer data access, both to enable analytics and internal performance improvements, and to make it possible to enable appropriate external use of this data in the Personal Information Economy. 

b) Vertical Industry Solutions

  • Extend from telecoms into IT and networking for corporate clients via ‘verticalised’ solutions.

c) Infrastructure Services

  • Expand and extend wholesale and corporate offerings from network to infrastructure: 
  • Provide infrastructure services such as mobile offload, data centre capabilities etc. to other operators and to corporate customers. 

d) Embedded Communications

  • Integrate voice, messaging, and connectivity services into those of third parties:
  • Communications-enabled business processes, voice and messaging integrated with games (for example), M2M and embedded mobility connectivity.

e) Third party business enablers

  • Make (latent) telco capabilities available to third-party service providers: 
  • Identity & authentication; marketing & advertising; payments; customer care. 

f) Own-brand ‘Over-The-Top’ (OTT) services

  • Develop network-independent applications and services:
  • Copy internet players and provide valuable applications and services ‘OTT’ – could be free or paid-for.

The Roadmap also outlines a number of generic principles for success, which at a top level may be summarised as:

  • Unlocking the value and power of telco customer data is essential to both improve the design and delivery of existing services;
  • Telcos need to fundamentally improve their flexibility and operational capabilities to innovate and react;
  • changes enabling horizontal and ‘upstream’ partnerships will be essential to enable new business models;
  • and a list of seventeen principles for disruptive innovation. 

SAP’s Telco Vision: ‘Operating at Internet Speed’

Dynamism and Flexibility lies at the heart of SAP’s vision for the Telco of the future. This future telco is a different organization from the one most of us is familiar with today. The Telco2.0 team took away four strands from this vision:

  1. ‘Sensing at internet speed’:  According to SAP, tomorrow’s telco “knows” what its customers are experiencing and is able to make sense of this knowledge.  To be fair, telcos have already made great strides in expanding real-time analytics beyond network management for customer segmentation and applying different rule sets for support and promotions. However, Internet best-practice, particularly in optimizing all aspects of customer experience, is still a distant aspiration. 
  2. ‘Thinking at internet speed’:  In SAP’s vision, the telco of the future is able to assimilate, evaluate and act much, much more quickly than is typical today.  Part of this is down to better information, part down to better mechanisms for enacting decisions… and part is down to the decision-making processes and tools that support these.  
  3. ‘Acting at internet speed’:  For the major and successful online players, real-time A-B testing of new propositions and continuously evolving these propositions in response to customer behaviour is second nature.  Telcos do this already… for their websites, but not for their services.  Introducing new packages, policies, services, on a targeted basis, several times a day is pure fantasy for operators (particularly where they have market power and may require regulatory approval for any new service).
  4. ‘Collaborating at internet speed’:  Exposing capabilities and assets to third parties for them to integrate into their own services is common on the web (at least common for the likes of Amazon, Google and Facebook).  They have spawned veritable industries around these capabilities.  Here again, we are seeing some isolated successes from telcos, but still so much work to do. 

Ultimately, in SAP’s vision, this becomes a continuous process rather than a one-off sequence.

Mapping the SAP vision to Telco2.0 opportunity growth areas

All the Telco 2.0 opportunity growth areas require a step change in the organizations’ ability to adapt and change. Indeed, this is one of the underlying strategic imperatives for change in the digital economy. There is a however a certain degree of applicability for each strand to each growth opportunity as the diagram below highlights.

Figure 2 – Mapping the Internet Speed vision against the Telco 2.0 opportunity

Mapping the Internet Speed Vision Against the Telco 2.0 Opportunity
Source: STL Partners

For instance, the relatively asset intensive infrastructure services are slower moving than own-brand services. Similarly core services require less collaboration than with vertical industry solution and third party enablers.

However, in some instances, high speed sensing, thinking and acting may be required in these asset intensive services. For example, mobile offloading (an infrastructure service) requires real-time sensing and acting in it’s operation.

Equally, for some telcos, collaborating in OTT services may require more dynamism as some partners will need sensing information in near real-time…

To access the rest of this 17 page Telco 2.0 Report in full including…

  • Mapping SAP’s solutions to telcos in practice
  • Support for Multisided business models
  • Configurable by business people, not constrained by IT
  • Tools, processes and Pledges
  • Supporting Vertical Industry Solutions and ‘Embedded Communications’
  • Making Sense of Customer Data
  • Advanced Device Management
  • M-commerce
  • Conclusion
  • STL Partners and the Telco 2.0™ Initiative

…and the following report figures…

  • Figure 1 – The Six Telco 2.0 Opportunity Types
  • Figure 2 – Mapping the Internet Speed vision against the Telco 2.0 opportunity

…members of the Telco 2.0 Executive Briefing service can download it in full PDF format here.

Additionally, to give an introduction to the principles of Telco 2.0 and digital business model innovation, we now offer for download a small selection of free Telco 2.0 Briefing reports (including this one) and a growing collection of what we think are the best 3rd party ‘white papers’. To access these reports you will need to become a Foundation 2.0 member. To do this, use the promotional code FOUNDATION2 in the box provided on the sign-up page hereNB By signing up to this service you give consent to us passing your contact details to the owners / creators of any 3rd party reports you download. Your Foundation 2.0 member details will allow you to access the reports shown here only, and once registered, you will be able to download the report here.  

We’ll also be discussing digital business model innovation at the Silicon Valley (27-28 March) and London (12-13 June) Executive Brainstorms.

To access reports from the full Telco 2.0 Executive Briefing service, or to submit whitepapers for review for inclusion in this service, please email or call +44 (0) 207 247 5003.

The money is moving, but can telcos move with it?

12 Apr

Silicon Valley 2012 Overview Report: the money’s moving, but are telcos?


Summary: It was exhilaratingly clear at the Silicon Valley Brainstorm, March 27-28 2012, that critical inflection points are being reached in many key areas of the digital economy: the challenges are increasingly well defined, and the intellectual, practical and economic resources being employed to solve them have the quality, power and resources to succeed. The tantalising question for all was “how do we position ourselves and implement strategies that will enable our business to be one of those to profit from (or at least survive) these changes?” Our top-level take-outs from the event. (March 2012) Google's Advertising Revenues Cascade

The money is moving, but can telcos move with it?

An international group of 225 senior executives, entrepreneurs, academics and policy influencers from across the communications, media, retail, banking and technology sectors met at the New Digital Economics Silicon Valley Executive Brainstorm in San Francisco in March 2012. The brainstorm was part of a research and industry transformation programme from business model innovation firm STL Partners. Supported by leading trade bodies, the Executive Brainstorms are held on a regular basis in different parts of the world to bring together business leaders and strategists to think creatively about new growth opportunities.

Each event builds on the output of the previous one and integrates cutting-edge research, case studies and analysis from leading players. The events use a unique and widely acclaimed interactive format called ‘Mindshare’ to help clarify the important ‘next steps’ for both individual companies and industries.

The theme of the event was ‘New Business Models and Growth Opportunities in a Hyper-Connected World’, and it comprised four inter-connected one-day brainstorms covering ‘The Digital Economy 2.0’, ‘Digital Commerce 2.0’, ‘Digital Entertainment 2.0’ and ‘Digital Things 2.0’ (Agenda remider). The rest of this page summarises our top level impression of the brainstorm and key next steps. We will publish detailed reports of the sessions next week.

The Silicon Valley brainstorm was particularly exciting because it truly felt like a catalyst for productive change, rather than just another conference, just another opportunity to share and reflect on the status of the market and disruptions to it. We put this down to the event’s focus on the most pertinent questions, the quality of the stimulus material prepared and presented and, not wishing to be immodest, the improvements we’ve made to the event’s brainstorming processes which generated a higher level of energy from a wonderful crowd of open-minded senior execs from multiple converging industries. We are really looking forward to take it a step further at the EMEA Brainstorm in London on 12-13 June.

Disruptive forces driving change

The Great Game
Source: STL Partners Report ‘Dealing with the Disruptors’

To set the scene, some of the main changes in the digital economy that we explored through analysis and debate were:

  • The disruption of telecoms and entertainment industries by substitution from new services and distribution channels provided by adjacent and new online players;  
  • The explosion of interest in exploiting the value in personal data existing in many sources – banks, telcos, retailers and online players to name a few;
  • New trends in consumer behaviour, such as the growing integration of social media and TV;
  • How new technology trends such as the move to Cloud services will play out, and what role telcos can have in this; 
  • Major telcos such as Verizon beginning to trial new Telco 2.0 business models that expose latent information assets and capabilities (such as identity and billing) to other industries to improve business processes;
  • The ongoing quest to find successful ways to convert the world’s mobile phones to TV screens and tools for paying and transferring digital money.

Change is certain: how is less certain

In overview, there was one seeming over-riding certainty: what can happen, will happen. The uncertainties are now principally in when, how and where will these changes take place first, and which companies will be equipped and position to profit from them.

The scale and pace of change and the uncertainties of the future can seem perplexing, but analogies with other industry disruptions can show that these transitions are not unique. Jennifer Binder Le Pape from Bain described the transition of the digital photography industry between 1995 and 2005, showing how dramatically profits moved from incumbent players who failed to adapt to the changes to digital disruptors. The first chart shows the $1.9Bn 1995 profit pool dominated by film and photofinishing.

Profit Pool Disruption is Intensifying

Source: Bain

The second chart shows the $3.7Bn 2005 profit pool dominated by memory manufacturing.

 Profit Pool Disruption is Intensifying
Source: Bain

With the benefit of hindsight it’s relatively easy to understand the transitions that happened in photography, and most in 1995 understood the nature if not the scale of the impact of digital technologies. Of course, even further changes have come since 2005, and just this week Facebook has spent $1 billion on Instagram – yet another disruption in history of photography, which might now be described as a feature of other digital products.

Over and above the detail and definitions of the changes in photography, the key points are a) that major changes can and do happen in industry profit pools, and b) despite the foreknowledge of coming change, few if any were able to map the complete shape of this transition out accurately in advance. This challenge faces many other industries today.

Navigating complexity

One of the factors that make the future difficult to predict is that the digital economy comprises many inter-related ecosystems and platforms, including: communications, cloud and device computing, content creation and aggregation, payments, advertising and marketing.

Major changes can arise in a number of different ways, each with their own challenges. For example, Apple and Google created entirely new platforms of massive scale. These single player disruptive innovations are rare, partly because they are so difficult to achieve, and partly because most players don’t have the market position to do this. Most players need different approaches to drive innovation. Some leading players can catalyse a market by creating a de facto standard that others join (e.g. Adobe and PDF), while others innovate on the back of broader collaboration through standards (e.g. SMS). None of these approaches is guaranteed to work.

A major Telco 2.0 report previewed at the event that we will be publishing next week outlined the different strategies available to telcos looking to build new business models, as well as the different attitudes and approaches of executives across the value chain – from telcos through to vendors and ‘upstream’ industries such as media and entertainment (email to pre-register). The report outlines the different possible strategies shown below, and we are working on a number of projects and pieces of analysis that explore the opportunities to drive issues forward and which we will share more on throughout the year.

Strategies for New Business Models Vary by Operator

Source: Telco 2.0 / Openet Strategy Paper

STL Partners’ Next Steps

We are working on a number of initiatives to help lubricate the ecosystems and the creation of new sources of value that legitimately empower and protect end-customers, as well as creating new business opportunities.

  • The Telco 2.0 Initiative, of course, exists to catalyse and facilitate business model innovation for telcos and telcos’ partners, through our research, consulting projects and ongoing brainstorms. A key component of our work in the coming year is benchmarking existing telco strategies, tests and trials in practice, as well as outlining the core business models in greater detail.
  • STL Partners is also taking an ongoing role in driving the business model work stream of the World Economic Forum’s (WEF) Personal Data project to establish the business models, laws, and technology standards to create and enable the personal information economy. We are working with and a team that includes many of the big players (e.g. Google, Microsoft, AT&T) and best brains (e.g. MIT, WEF, top lawyers etc.) that are trying to make this work.

STL Partners will also be driving new research and communities to support strategists in: Digital Commerce (advertising and payments), Digital Entertainment (TV, film, media and publishing); Digital Things (M2M and embedded); and Cloud 2.0 (market evolution, telco strategies and role in Telco 2.0).

To get involved

We believe that because of the complexities and inter-relationships between the ecosystems, it’s useful for participants in the different work streams to maintain a dialogue and establish understandings with participants in the other streams as well as their own. This is what we aim to achieve in our global regional brainstorms, such as the Silicon Valley event just gone, as well as sharing the latest thinking and practice in business model innovation.

To join the next Brainstorm in EMEA in London on 12-13 June, or subscribe to our ongoing research programme, please email or call +44 (0) 207 247 5003.


First U.S. DoD Operational Deployment of 4G LTE With Navy Pilot

3 Apr

RESTON, Va. (March 29, 2012) – Oceus Networks today announced that the U.S. Navy has selected the company’s market-leading Xiphos™ mobile communications networking solution for a pilot for a new Navy portable maritime C2 system, making this the first operational deployment of 4G LTE for the U.S. Department of Defense.

The pilot will be conducted over the next year with the Kearsarge Expeditionary Strike Group, homeported in Norfolk, Va. The Xiphostactical cellular solution will provide high capacity secure wireless broadband for real time access to Intelligence, Surveillance and Reconnaissance (ISR) data for intra-ship communications over the horizon, and inter-ship communications via commercial hand-held devices.

“The Xiphos 4G LTE solution provides orders of magnitude greater capability over what is currently deployed,” said Douglas C. Smith, President and CEO of Oceus Networks. “This pilot is a result of more than two years of work with the Navy, and we’re honored to be partnering with the Navy to bring these new capabilities into operational deployment for the warfighter.”

Oceus’ mobile ruggedized networks can be placed aboard ships, installed in tactical warfighter vehicles, mounted on UAV’s and other aerial platforms, and can be soon soldier back-packed into austere environments — wherever secure robust high-speed voice, video and data communications capabilities are needed.

Available today, the Xiphos family of ruggedized and mobile 4G LTE networks, which are commonly known as full-featured cellular base stations, currently supports up to hundreds of simultaneous sessions, has data rates scalable from 37 to 350 Mbps, and has a terrestrial range up to 62 miles radius per node, enabling networks to cover the Navy’s tactical area of operations. The Xiphos family of systems are built on the 4G LTE commercial standards allowing the Navy to fully leverage the commercial investment in this technology.

LTE: a real disruptive technology and business opportunity?

3 Apr

presents an in-depth analysis about the promising technology LTE taking into account not only technology aspects but also business aspects. In detail, this report points out the key drivers that are continuously changing the Telecom market and analyzes LTE and its evolution, LTE Advanced, as technological response to the emerging market needs. In addition, it provides an overview about current trends in spectrum allocation, global status of the LTE ecosystem and worldwide initiatives to date. Finally, it explores LTE business case implications for incumbent and greenfield mobile operators through an accurate scenario and sensitivity analysis.

Topics Covered

  • Emerging needs of the Telecom market
  • LTE technology primer
  • Candidate spectrum bands and licensing experience to date
  • Availability of LTE equipments (eNodeB, UE, EPC components, wireless backhauling)
  • Operator plans, commitments, trials, deployments, launches
  • Critical factors for the LTE business case


Benefits of the report

  • Value added: A set of guidelines and figures are provided to approach LTE and fully seize opportunities offered
  • Accurate: The analysis is based on a superior business case modeling specific for LTE networks in incumbent and greenfield scenarios
  • Unbiased: Assumptions are based on the standards, suggested by experience and gathered through audits with operators, vendors, manufacturers and regulators
  • Plus: TEA|LTE is a unique and innovative application to perform LTE business case analyses taking into account all critical factors (market, technical, economic and financial) since the outset


Questions addressed

  • Which are the Telecom market dynamics?
  • How do LTE and its evolution LTE Advanced work?
  • How to formulate properly spectrum licensing policies?
  • Which are LTE equipments ready to support commercial deployments?
  • How are mobile operators currently moving towards LTE?
  • How to best achieve LTE profitability in incumbent and greenfield scenarios?

LTE Operator Strategies: Key Drivers, Deployment Strategies, CAPEX, OPEX, Price Plans, ARPUs and Service Revenues 2012 – 2016

26 Mar

Skyrocketing mobile broadband demand is driving an ever increasing number of commercial LTE network deployments. This surge has seen the number of LTE subscriptions already surpass 7 Million subscriptions worldwide, and over 300+ commercial LTE user device launches. As Mobile Network MNOs (MNOs) remain committed to deliver mobile broadband services over their LTE networks, a number of critical questions remain unanswered:


• How much revenue can an MNO generate with an LTE deployment ?
• What is the typical ARPU for an LTE subscription worldwide or in particular regional market and how will it fluctuate in the next 5 years ?
• What is the relative Total Cost of Ownership (TCO) of an LTE network in comparison to competing technologies such as HSPA + and WiMAX ?
• What is the market outlook for VoLTE (Voice over LTE) and wholesale LTE networks, and when would the first VoLTE deployments take place ?
• How much CAPEX and OPEX would an MNO require to deploy at LTE network, and what strategies can be adopted to minimize both CAPEX and OPEX ?

Covering over 325 global MNOs in 120 countries, this report answers the aforementioned questions by quantifying LTE service revenues, subscriptions, ARPUs, CAPEX and OPEX. In addition, the report reviews key trends in LTE deployment strategies such as VoLTE and SMS over LTE, the wholesale deployment model, Self-Organizing Networks (SONs) and the emergence of the data off-load (small cells, HetNets, Wi-Fi offload) equipment market.

The report further provides a global review of LTE price plans and key MNO strategies for LTE pricing and marketing. The report is supplement by an excel based interactive forecasting suite that can be used to forecast LTE service revenue, ARPUs, and subscriptions for particular regional markets, countries or MNOs from 2011 till 2016.

Target Audience: 
  • Mobile Network Operators (MNOs): Will make well-informed decisions about deployment strategies, CAPEX/OPEX reduction and price plans. Furthermore, “Greenfield” operators will understand how to capitalize on LTE technology by assessing the strategies of well established CSPs and MNOs.
  • Mobile Network Infrastructure Vendors and Handset Manufacturer: Will assess particular issues faced by MNOs investing in LTE and align their product offerings accordingly.
  • Application Developers: Will evaluate opportunities to invest in developing applications and services that run on LTE networks by understanding the market dynamics of LTE.
  • Investors: Will better understand the LTE technology and its market potential, its value chain and potential. This report will help investors evaluate the investment prospects in the promising LTE ecosystem.


Key Findings: 
  • ARPUs and Operator Service Revenues • Driven by early adoption among the enterprise users, LTE ARPUs will peak in 2012 reaching 88 USD per month, and drop down by a YoY decline of 16 % over the next five years as the consumer market segment gains a higher market share. • Having already surpassed 7 Million subscriptions, LTE subscriptions are set to grow at a CAGR of 150 % over the next five year period. • Growing at a CAGR of 80 % global LTE service revenues will reach 291 Billion, representing a lucrative market for worldwide MNOs. LTE service revenues presently account for 15 Billion USD. • While the Asia Pacific region will attain the highest number of subscriptions by 2016, the North America and Western Europe region will retain market leadership in terms of service revenues accounting for almost 60 % of all LTE service revenues worldwide.
  • Deployment Strategies • Mind Commerce estimates the first VoLTE deployments will take place in Q4’2012, with US and Korean MNOs the first to enter the market. • While early market prospects in the US appear to be deteriorated, the wholesale LTE model will increasingly gain momentum over the next 5 years, and we expect to see the first commercial launch by UK Broadband in 1H 2012.
  • CAPEX and OPEX Strategies • By 2016, the Total Cost of Ownership (TCO) for LTE will remain 44 % lower than HSPA+ and 50 % than WiMAX. • If used to full potential, SON technology has the potential to reduce worldwide LTE deployment CAPEX $ 55 Billion, and $ 15 Billion in OPEX by 2016
  • Pricing Strategies • Most MNOs are adopting tiered based price plans based on volume and speed in order to maximize revenue while managing capacity. Unlimited plans may gain momentum as MNOs learn to divert revenues with OTT (Over-The-Top) players with technologies such as VoLTE, and as they attain cheaper network TCO by deploying small cells and WiFi offload equipment.
Report Benefits: 
  • A Global review of LTE price plans and pricing and marketing strategies for MNOs worldwide
  • LTE service revenues, ARPUs and subscriptions by region, country and operator for 2011, and forecasts till 2016
  • LTE deployment strategies and key trends including VoLTE, Wholesale deployment model and FDD/TD-LTE integration
  • CAPEX and OPEX requirements and strategies for LTE MNOs, including a review of CAPEX commitments by major MNOs worldwide
  • Overview of the LTE market including key market drivers, commercial network deployments, subscriptions and device launches (as of March 2012) and frequency spectrum selection and fragmentation


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