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Technology Policy Implications of Market, Technology, and Policy Trends in the Latin America Telecom Marketplace
Andres Maz Advanced Technology Policy Buenos Aires, June 2014
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Program
Market, Technology and Policy Trends • Premises for the Future • Opportunities and Challenges for Telecom Operators
Impact to Business Model and Market Evolution • Forces upsetting the equilibrium
Critical Success Factors
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Four Key Messages
Market, technology, and policy trends are upsetting the telecom market equilibrium forcing telecom operators to evolve business models to develop new sources of revenue growth value creation
Service providers’ greatest opportunity to create value will depend on their ability to monetize the network and capture new market adjacencies
In this dynamic and evolving market telecom operators’ JVs, partnerships and entrepreneurship ventures will be as important as horizontal and vertical consolidation to gain competitive advantage and market leadership
A change in mindset and even organization structure will be necessary to enable the evolution
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Market, Technology and Policy Trends
Technology Policy
Market
• Role of Government
• Degree of regulatory
intervention
• Cybersecurity
• Data Privacy & cross
border data flow
• Spectrum
• Net Neutrality
• IoE
• Cloud
• Smart Devices
• Video Evolution
• Traffic Growth
• Voice Revenue
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Market, Technology and Policy Trends
Revenue Trends
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Fixed Line Voice Subscriptions NOT Declining
Source: Informa Telecoms & Media
Switched Access Lines
The number of fixed voice subscriptions is on the rise in Latin America, whereas it is on the decline in most other regions
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Fixed Broadband ARPU Going UP
Findings
• Broadband ARPU is on the rise in Latin America, whereas it is flat or falling in other regions • ARPU higher than Asia, Eastern
Europe, and world average
Upside Potential • ARPU • Migration to faster connections
• Triple/Quad Play is working
• Subscriber base
Fixed Broadband ARPU
Source: Informa Telecoms & Media
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Mobile ARPU Revenue Flat… Urgent Need to Evolve
• Voice ARPU declining
• Data ARPU growing… but not enough
• ARPU flat
Pressure Factors
• Fixed to Mobile Termination regulated rate down-path
• Roaming rates’ pressure
• New generation usage trends • Telephone call?
• Leapfrogging to video
Revenue Upside Potential • 4G
Fixed to Mobile Termination Rates
Source: Cullen International
Latin America - ARPU
Source: Informa/World Cellular Information Service
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Market, Technology and Policy Trends
Traffic Growth
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The Traffic Challenge
Internet Traffic Growing Fast
• How much CAPEX? • Can faster and robust broadband network generate
higher revenues? • Can fixed broadband compensate for fixed telephony
revenue decline? • Can telecom operators establish commercial
agreements with OTTs for faster speeds and QoS?
CAPEX and ROI
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Market, Technology and Policy Trends
Smart Phone Adoption
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Smart Mobile Devices Creating New Value Opportunities
Smart Devices Leading Market
• Advertising value moving from fixed big screen to mobile-smart mobile devices
• Critical elements: • Content • APPs • Advertisement • Data Mining • Location based services • Payment platforms
Advertising Value Migrating to Small Screen
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Market, Technology and Policy Trends
Video
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Video to Exceed 72 Percent of Mobile Data Traffic by 2018
LATAM Mobile Data Traffic Growth / Apps
• Multi-platform and mobile • Netflix, Apple TV, Amazon fireTV, youtube
• Telecom Operators’ online video offerings • AT&T to start a venture to launch both online
video platforms and on-demand TV channels • Horizontal Expansion
• AT&T’s DIRECTV acquisition • Policy Issues
• Vertical integration (Comcast – Time Warner) • Must Carry and Must Offer Regulations • Bundling • Policies for on-net vs. off-net content
e.g. Bandwidth cap exceptions for on-net content
On-line Video Platforms Disrupting the Market
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2013 2014 2015 2016 2017 2018
Exab
ytes
per
Mon
th
Mobile File Sharing (3.4%) Mobile M2M (4.8%) Mobile Audio (10.3%) Mobile Web/Data (9.4%) Mobile Video (72.1%)
Mobile Video 72%
66% CAGR 2013–2018
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Market, Technology and Policy Trends
Cloud
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0.0
0.1
0.1
0.2
0.2
0.3
0.3
0.4
2012 2013 2014 2015 2016 2017
Zetta
byte
s / Y
ear
Latin America Cloud Traffic Growth Cloud Traffic Will Grow 3.9 Fold from 2012 to 2017
31% CAGR 2012–2017
298 EB
249 EB
77 EB 117 EB
159 EB
203 EB
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Cloud: Opportunities and Challenges to Telecom Operators
Cloud Readiness • Cloud applications’ network speed and quality requirement will add additional stress to
telecom networks
• Network capacity upgrades will be necessary. Can investments be monetized?
• What are the options?
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Network Infrastructure Needed to Support to the Cloud Network Requirements for Concurrent Applications
Basic Cloud Apps Concurrency Bucket
Network Requirements: Download Speed: ~1900 kbps Upload Speed: ~600 kbps Latency: Above 160 ms
Intermediate Cloud Apps Concurrency Bucket
Network Requirements: Download Speed: ~7,000 kbps Upload Speed: ~2,600 kbps Latency: 159 - 100 ms
Advanced Cloud Apps Concurrency Bucket
Network Requirements: Download Speed: ~21,000 kbps Upload Speed: ~9,000 kbps Latency: Less than 100 ms
• Text communications (email, instant messaging)
• Web browsing • File sharing
(low-res video) • Web conferencing • Social networking
(basic text only) • Stream basic video/ music
• File sharing (high-res video) • IP Telephony • ERP / CRM • Basic gaming (single player) • Basic video chat
(low-res video) • IP audio conferencing • Basic video conferencing
(low-res video) • Advanced social networking
(multimedia/interactivity) • HD video streaming
• HD Industrial design collaboration • Advanced gaming
(multi player) • Advanced video chat
(high-res video) • Advanced file sharing
(super high-res video) • HD audio conferencing • HD video conferencing
(high-res video) • Stream super HD video
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Regional End User Cloud Readiness—2013 Supporting Business & Consumer Applications Today on Fixed Networks (Concurrent Apps)
Basic Cloud Application Ready
Intermediate Cloud Application Ready
Hi Lo Latency
Advanced Cloud Application Ready
WE APAC
CEE
NA
LATAM MEA
Uruguay
UAE USA
Romania
Hong Kong
Korea Lithuania
Luxembourg
Sweden
Lo
Hi
Average Broadband
Speed
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Regional End User Cloud Readiness—2013 Supporting Business & Consumer Applications Today on Mobile Networks (Concurrent Apps)
Basic Cloud Application Ready
Intermediate Cloud Application Ready
Hi Lo Latency
Advanced Cloud Application Ready
NA
WE
CEE
MEA
APAC
LATAM
Singapore
Hong Kong
UAE
Kuwait
Lo
Hi
Average Broadband
Speed
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Market, Technology and Policy Trends
IoE
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Daily Data Growth
Exabytes (10^18) of new data are created every single day and 90% of the world’s stored data was created in the last two years alone.
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Internet of Everything
• More Connected Devices that People
• By 2020, the total number of connected devices will range from around 20 billion to 50 billion
• Most applications do not exist today
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IoE Transformation
Parking Increased compliance Reduced search times
Lighting OpEx reductions Crime reductions
Road Pricing Improved traffic flow City revenue
Particulate Monitoring Improved health Improved compliance to standards
Buses (Bus Stops) Reduced wait times
Higher occupancy
Toll Booths Faster processing times
Reduced traffic congestion
Waste Management OpEx reductions
Usage-based pricing
City • Gas monitoring • Video surveillance
• Water management
• Smart parking
• Public transportation
• Smart street lighting
• Smart grid • Disaster response • Chronic disease
management • Telework • Smart payments • Smart buildings • Fleet management
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Technical Policy
Legacy Regulatory
Frameworks
Cross-border data traffic
Reliability
Scaling
Electrical Power
Policy and Technical Issues Facing Big Data and the IoE
Privacy & Security
Spectrum & Bandwidth Constraints
Standards & Interoperability
Network Intelligence
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Internet of Everything Unlimited Opportunities for Service Providers to Create Value in the Ecosystem
• IoE Lead Player
• Partnerships and Entrepreneurship • APPs networks inter-dependence • High dependence on entrepreneurship and new ventures • Degree of Service Providers integration with the ecosystem
• Bandwidth and platform provider
• Payment Platforms
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Market, Technology and Policy Trends
Policy & Regulation
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Evolution ICT Ecosystem – Networked Readiness Index
30
40
50
60
70
80
90
100
110 2009 2010 2011 2012 2013 2014
Networked Re
adiness R
anking
Argen1na Brazil Chile Colombia Mexico Peru
High
Low
Chile
Colombia
Brazil
Mexico
Peru
Argentina
WEF GITR
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Key Policy and Regulatory Issues
Role of Government
Degree of Regulatory Intervention
Cybersecurity
Data Privacy & Cross Border Data Flow
Spectrum
Net Neutrality
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Changing Views on the Role of Government
Regulated Market + State
Owned Telecom Company
Free Market
Regulated Market
State Monopoly
Regulatory Intervention
Gov
ernm
ent I
nves
tmen
t
+
+
- -
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Degree of Regulatory Intervention The Regulatory Tool Kit
State Intervention
• Wholesale • Retail
Wholesale
• Access to network elements / unbundling • Transparency • No discriminatory obligations • Accounting Separation • Price Controls / Cost Oriented Rates • Functional Separation
Retail
• Price Controls • Bundling limitations • No discrimination
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Cybersecurity
• Network security as a national priority • Concerns:
• -Law enforcement and intelligence • -National Security • -Citizen’s privacy rights
False Choice. Security by Decree • Data localization requirements • Security certifications • Domestic technology mandates
Government’s Response Changing Landscape
Comprehensive National Security Strategy • National security frameworks • Investment in security • Government-to-government collaboration • Industry – government partnership
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Data Privacy & Cross Border Data Flow
A growing list of issues and ideas to regulate
• Data localization requirements • Data controller requirements • Data processors requirements and liability • Breach notifications • Consultations with data protection authority • Data storage regulation • Right to be forgotten • Data portability • Standardization • Network information security
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Spectrum
700 MHz Spectrum critical to accelerate 4G networks build out -Auction timelines -Spectrum Caps -Wholesale Single Networks -Price / Conditions WiFi off-load critical to alleviate network congestion
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Net Neutrality
Net Neutrality regulation could weaken network resiliency, limit innovation and new business models, and increase network vulnerabilities
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Implications Net Neutrality Regulation
• Use of traffic management tools to resolve congestion. Regulations could require equal treatment to different types of traffic independent of the applications’ needs
• Data mining • Agreements with OTTs • Sponsored access data • Low cost limited packages • Value Added Services
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Lessons Learned From The EU Impact To Telecom Operators’ Financial Health
Arthur D Little National Fibre Strategies www.adl.com/Fibre
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Impact to Business Models and Market Evolution
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Forces Upsetting The Equilibrium IoE
Cloud
Video Evolution
Traffic Growth
Role of Goverment
Degree of Regulation
Data Privacy & Cross Border Data Flow
Spectrum
Net Neutrality
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Business Model and Market Evolution
Service Aggregation
Value Creation
Niche Services
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Business Model and Market Evolution
Service Aggregation Niche Players
Smaller but Specialized Networks
• Ability to differentiate product and segment markets
• Commercial agreements to access third party last mile and transport networks (market or regulatory driven)
Large and Complex Networks
• Ability to aggregate services • Landline, mobile, broadband, pay-tv, cloud
• Robust and wide high-speed fiber networks
• Room for consolidation • M&A, JVs, partnerships • Policy understanding and Strategy
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Market Evolution Vertical and Horizontal Market Moves
Fixed Voice
Mobile Voice
& Data
Broad- band
BroadcastTV
Pay-TV on-net
Pay-TV off-net DC Cloud IoE
Horizontal Expansion: Organic, Acquisitions, JVs, Partnerships
Con
solid
atio
n
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CRITICAL SUCCESS FACTORS
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Critical Success Factors Major Industry Transformation And Game Changers
Unlimited opportunities to create new sources of value • Revenue and growth
Identifying and capturing opportunities will require: • Enable intelligence in the network • Business development & market intelligence • Partnerships • Pro-innovation regulatory environment
Dynamic organization structure
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