D6.3-F Business Plan Page 1 of 87 Information and Communication Technologies ADAMANTIUM “ADAptative Management of mediA distributioN based on saTisfaction orIented User Modelling” Contract No. 214751 D6.3-F Business Plan Deliverable Identifier: D6.3-F Work-package, Task: WP6, T6.3 Status –Version: Final Contractual Date: M27 Submission Date: M27 Distribution Security*: PU Deliverable Type **: R Editor Monica Gorricho (ERC) Contributors: Monica Gorricho (ERC), Miguel Ángel García (ERC), Alejandro Bascuñana (ERC), Harilaos G Koumaras (DEM), Vaios Koumaras (DEM), Juergen Luterjung (RS), Julien Pauty (VIO), Thierry Filoche (TGV), Ioanna Gkika (VOD), Dimitrios Sakellarakis (VOD). Abstract: This document describes the final version of the business plan for ADAMANTIUM results applied to the two services considered in the project, i.e. Voice over IP (VoIP) and TV over IP (IPTV). Based on the current market trends, an ADAMANTIUM-based Business Model is proposed and analyzed, presenting the exploitation aspects of the project concept. According to the proposed business model, a financial analysis of the ADAMANTIUM investment is presented, which shows the viability of the proposed solution as an investment by a mobile operator. Finally, exploitation plans by the industrial partners of the consortium are presented. Keywords: VoIP, IPTV, IMS, SWOT, Business Model, Financial Analysis, Exploitation Plan. *PU – Public, PP – Restricted to other programme participants (including the Commission Services), RE – Restricted to a group specified by the consortium (including the Commission Services), CO – Confidential, only for members of the consortium (including the Commission Services). **R – Report, P – Prototype, D – Demonstrator, O – Other. D6.3-F Business Plan Page 2 of 87 This page has been intentionally left empty Copyright © ADAMANTIUM D6.3-F Business Plan Page 3 of 87 Table of Contents TABLE OF CONTENTS ................................................................................................................. 3 LIST OF FIGURES ......................................................................................................................... 4 LIST OF TABLES ........................................................................................................................... 5 1 INTRODUCTION .................................................................................................................... 6 1.1 1.2 1.3 2 Purpose ............................................................................................................................................ 6 Audience ......................................................................................................................................... 6 Scope of the document ..................................................................................................................... 6 ADAMANTIUM MARKET..................................................................................................... 7 2.1 ADAMANTIUM Proposal ............................................................................................................... 7 2.2 VoIP ................................................................................................................................................ 7 2.2.1 VoIP Market Description ............................................................................................................. 7 2.2.2 Mobile VoIP Market Description................................................................................................ 13 2.3 IPTV ............................................................................................................................................. 17 2.3.1 IPTV Market Description ........................................................................................................... 17 2.3.2 Mobile IPTV Market Description ............................................................................................... 22 3 ADAMANTIUM BUSINESS MODEL ...................................................................................28 3.1 Introduction ................................................................................................................................... 28 3.2 Value chain and Business Models................................................................................................... 29 3.2.1 VoIP .......................................................................................................................................... 29 3.2.2 IPTV .......................................................................................................................................... 32 3.3 SWOT with ADAMANTIUM influences ....................................................................................... 39 3.3.1 Mobile VoIP .............................................................................................................................. 39 3.3.2 Mobile IPTV .............................................................................................................................. 41 3.4 ADAMANTIUM Business Model Analysis and Evaluation ............................................................ 43 3.4.1 Analysis Framework: Assumptions, Market, Impacts, Strategies, Challenges .............................. 44 3.4.2 STOF Evaluation Framework: Use of Cases-Scenarios .............................................................. 50 3.5 ADAMANTIUM Financial analysis and evaluation ........................................................................ 58 3.5.1 Assumptions............................................................................................................................... 58 3.5.2 Case 1 ....................................................................................................................................... 60 3.5.3 Case 2 ....................................................................................................................................... 63 4 EXPLOITATION PLANS ......................................................................................................67 4.1 4.2 4.3 4.4 4.5 Rohde & Schwarz (RS) .................................................................................................................. 67 Thomson Grass Valley/Thomson Telecom (TGV and TT) .............................................................. 67 Vodafone (VOD) ........................................................................................................................... 67 Ericsson (ERC) .............................................................................................................................. 69 Viotech (VIO)................................................................................................................................ 71 5 CONCLUSIONS......................................................................................................................73 6 APPENDIX I – COMMUNICATIONS FRAMEWORK .......................................................75 6.1 6.2 6.3 6.4 7 Introduction ................................................................................................................................... 75 IMS ............................................................................................................................................... 75 IMS Benefits.................................................................................................................................. 76 Introduction to LTE ....................................................................................................................... 77 APPENDIX II – VOIP AND IPTV INTRODUCTION ..........................................................80 7.1 VoIP .............................................................................................................................................. 80 7.1.1 Mobile VoIP .............................................................................................................................. 80 7.2 IPTV ............................................................................................................................................. 81 7.2.1 IPTV over Mobile ...................................................................................................................... 84 8 APPENDIX III – GLOSSARY................................................................................................87 Copyright © ADAMANTIUM D6.3-F Business Plan Page 4 of 87 List of Figures Figure 2-1 VoIP Subscriber and Revenue Growth in Western Europe ................................................................ 8 Figure 2-2 Sizing up the European VoIP Market (subscriber) ............................................................................ 8 Figure 2-3 VoIP Revenues Forecast by user type............................................................................................. 10 Figure 2-4 VoIP Revenues Forecast per region ............................................................................................... 10 Figure 2-5 Subscribers as % of European and U.S. households ....................................................................... 12 Figure 2-6 Mobile growth by region................................................................................................................ 13 Figure 2-7 Total VoIP 3G active users base, 2006-2012 .................................................................................. 14 Figure 2-8 Consumers statements on mobile VoIP in 2008 .............................................................................. 14 Figure 2-9 Mobile VoIP level of interest between cellular users....................................................................... 15 Figure 2-10 Mobile VoIP billable voice revenues ............................................................................................ 16 Figure 2-11 Mobile VoIP billable voice revenues by region............................................................................. 16 Figure 2-12 Telco IPTV subscribers by sub-region Q3 2007............................................................................ 17 Figure 2-13 Global IPTV Subscribers per region (MRG)................................................................................. 18 Figure 2-14 Global IPTV Subscribers per region (Yankee) .............................................................................. 19 Figure 2-15 Global IPTV subscribers distribution (%) per region (12/2008).................................................... 19 Figure 2-16 Global IPTV revenues per region................................................................................................. 20 Figure 2-17 IPTV system and services expansion ............................................................................................ 21 Figure 2-18 Mobile TV Subscribers ................................................................................................................ 22 Figure 2-19 Mobile TV subscribers per region ................................................................................................ 22 Figure 2-20 Percentage of global consumers who would enjoy watching any form of TV programming on a mobile device.................................................................................................................................................. 23 Figure 2-21 Global consumers’ content/device preferences ............................................................................. 23 Figure 2-22 Global consumers’ interest in viewing programs over their mobile device .................................... 24 Figure 2-23 Global consumers’ “on-demand” mobile viewing preferences...................................................... 24 Figure 3-1 The basic VoIP Value Chain .......................................................................................................... 29 Figure 3-2 Retail VoIP Business Models ......................................................................................................... 31 Figure 3-3 IPTV Value Chain of key actors ..................................................................................................... 33 Figure 3-4 Involved players ............................................................................................................................ 34 Figure 3-5 Cooperation channels for QoS ....................................................................................................... 34 Figure 3-6 IPTV Business Modeling Spheres................................................................................................... 35 Figure 3-7 ADAMANTIUM Business Model entities ........................................................................................ 43 Figure 3-8 ADAMANTIUM Business and Operational Transformation steps to be undertaken by mobile operators ........................................................................................................................................................ 44 Figure 3-9 STOF Model for ADAMANTIUM Business Model analysis............................................................. 51 Figure 3-10 ADAMANTIUM Business Model cases framework of analysis ...................................................... 54 Figure 6-1 Network convergence .................................................................................................................... 79 Figure 7-1 Growth of Mobile and Internet users by 2006................................................................................. 81 Figure 7-2 Distributing and accessing IPTV services options .......................................................................... 82 Figure 7-3 IPTV middleware and user device/software options........................................................................ 83 Figure 7-4 Users’ wishes on IPTV .................................................................................................................. 83 Figure 7-5 Three pillars for the IPTV service .................................................................................................. 84 Figure 7-6 TV, Mobile, IPTV evolution and convergence................................................................................. 85 Figure 7-7 IPTV evolution .............................................................................................................................. 85 Figure 7-8 IPTV over mobile device (Source: BNS) ......................................................................................... 85 Figure 7-9 Mobile IPTV (Source: BNS)........................................................................................................... 86 Copyright © ADAMANTIUM D6.3-F Business Plan Page 5 of 87 List of Tables Table 2-1 Consumer VoIP users/subscribers ..................................................................................................... 9 Table 2-2 Worldwide consumer VoIP forecasts ............................................................................................... 10 Table 2-3 Consumer VoIP forecasts per region ............................................................................................... 11 Table 2-4 IPTV subscribers............................................................................................................................. 18 Table 3-1 Business entities for IPTV streaming to mobile ................................................................................ 37 Table 3-2 Anticipated service portfolio, potential revenue sources and relevance to ADAMANTIUM Case: IPTV streaming to Mobile ........................................................................................................................................ 37 Table 3-3 Business entities for IPTV on demand to mobile ............................................................................... 38 Table 3-4 Anticipated service portfolio, potential revenue sources and relevance to ADAMANTIUM Case: IPTV on Demand (VoD) to Mobile ........................................................................................................................... 38 Table 3-5 Mobile VoIP SWOT with ADAMANTIUM influences ....................................................................... 39 Table 3-6 Mobile IPTV SWOT with ADAMANTIUM influences ....................................................................... 41 Table 3-7 ADAMANTIUM Business Framework/Model Analysis Assumptions ................................................. 45 Table 3-8 Financial figures of Greek data mobile market ................................................................................ 59 Table 3-9 ADAMANTIUM Financial Analysis under Optimistic Scenario ........................................................ 61 Table 3-10 ADAMANTIUM Financial Analysis under Normal Scenario .......................................................... 62 Table 3-11 ADAMANTIUM Financial Analysis under Pessimistic Scenario ..................................................... 63 Table 3-12 ADAMANTIUM Financial Analysis under Optimistic Scenario ...................................................... 64 Table 3-13 ADAMANTIUM Financial Analysis under Normal Scenario .......................................................... 65 Table 3-14 ADAMANTIUM Financial Analysis under Pessimistic Scenario ..................................................... 65 Table 4-1 Consumer VoIP users/subscribers ................................................................................................... 72 Copyright © ADAMANTIUM D6.3-F Business Plan Page 6 of 87 1 INTRODUCTION 1.1 Purpose This document describes the Business Plan for the results of the ADAMANTIUM project. An intermediate version of this document was released by March 2009. The following activities have been developed in the project and described in the document: • Market analysis of mobile VoIP and IPTV services. • Definition of indicative business cases that could be accommodated by ADAMANTIUM architecture. This activity has implemented the Business Model specification translating the formal description into roles and relationships between identified bodies within the business cases of ADAMANTIUM. • ADAMANTIUM business model analysis and evaluation. • A financial analysis of the ADAMANTIUM results. • And exploitation plans for the industrial partners of the consortium. 1.2 Audience This deliverable targets all people involved in the set-up and implementation of the ADAMANTIUM, as the business plan can have impact on this implementation, as well as people involved in commercialization of ADAMANTIUM results, especially financial staff that will use this document as a reference source for describing exploitation and financial scenarios. 1.3 Scope of the document This document develops, proposes and presents the business plan aspects of ADAMANTIUM project, considering the results of the project as well as the market evolution. More specifically the structure of this deliverable is the following: Chapter 1: Introduction. The first chapter gives the key objectives and main items of this document. Chapter 2: ADAMANTIUM Market. The second chapter describes the VoIP, mobile VoIP, IPTV and IPTV over mobile market, where the results of ADAMANTIUM project is applied and further commercially exploited. Chapter 3: ADAMANTIUM Business Model. The third chapter describes and analyzes the business models considering the two services under study (Voice over IP and IPTV), including an analysis of the value chain, a SWOT analysis with ADAMANTIUM influences under different future possibilities and market conditions, an ADAMANTIUM Business model analysis, STOF model and evaluation through the use of cases-scenarios. This chapter also describes the financial analysis and evaluation of the ADAMANTIUM results. Chapter 4: Exploitation Plans. The fourth chapter provides an initial exploitation plan from the ADAMANTIUM industrial partners’ point of view. Chapter 5: Conclusions. The fifth chapter concludes this document. APPENDIX I: Communications Framework. This Appendix describes a general IMS overview as the communication framework/infrastructure applied in ADAMANTIUM, in order to have a selfcontained document. APPENDIX II: VoIP and IPTV Introduction. This Appendix gives an overview of the two services considered in ADAMANTIUM, in order to have a self-contained document. Copyright © ADAMANTIUM D6.3-F Business Plan Page 7 of 87 2 ADAMANTIUM MARKET 2.1 ADAMANTIUM Proposal IMS entails novel business opportunities such as VoIP, Video Call and IPTV, but it lacks of usercentric management mechanisms (See APPENDIX I for an IMS introduction and description). The ADAMANTIUM project is a technical research project aiming to improve the Perceived Quality of Service (PQoS) of IPTV (Internet Protocol TeleVision) or VoIP (Voice over Internet Protocol) within an IMS environment. It proposes an IMS-compatible Multimedia Content Management System (MCMS) focused on performing dynamic cross layer adaptations for optimization of the user experience in terms of perceptual quality for media services. A brief introduction of VoIP, mobile VoIP, IPTV and mobile IPTV services are included in APPENDIX II. Throughout this document, and as already done with its intermediate version released in March 2009, the different business cases will be identified depending on the service, IPTV (Internet Protocol TeleVision) or VoIP (Voice over Internet Protocol), and therefore the markets considered in this study and enhanced by the ADAMANTIUM findings are the ones related exclusively to the two mentioned services. The main objective of ADAMANTIUM was to implement a system that made measurements and adaptations to improve the user Perceived Quality of Service (PQoS) on different multimedia service (VoIP and IPTV), based on parameters that impact on user perception on that Quality of Service (QoS), and therefore on user satisfaction. In the communication industry, and in Telco market in particular, where as market research has shown that value-added services are slowly becoming a key source of revenues, the ability to improve user’s satisfaction can become a unique strength and opportunity on the same time. Such functionality can be proved the tool, through which an operator can increase customer retention and loyalty levels, and in parallel increase the number of users accessing the mentioned services. Towards this direction, the proposed management/policy system will make use of advanced IMScompatible PQoS (Perceived Quality of Service) and NQoS (Network Quality of Service) monitoring and adaptation mechanisms across the network delivery-chain, thereby significantly enhancing the current IMS management functions by providing necessary perceptual awareness capability, based on a user-centric approach. 2.2 VoIP 2.2.1 VoIP Market Description 2.2.1.1 VoIP Current Market Conditions Nowadays, VoIP market is growing in terms of subscribers, revenues and traffic, and keeps up restructuring voice revenues worldwide. According to Strategy Analytics Report (Nov 2007), VoIP is increasingly becoming standard fare in many markets around the world, taking a growing slice of total voice traffic. According to OVUM World Consumer VoIP forecast, 2009–14 report (Sept 2009), the main trend for Europe up to the beginning of the 4th Quarter of 2009 (4Q09) was that the voice call volumes rose while prices continued to fall. In particular, for the period 2007- 2009: • Voice call volumes rose. Mobile communication was the driver of this growth, in part at the expense of fixed telephony, by enabling voice communication in far more settings. • Voice call prices fall. Traditional telephony voice call prices fall at a steady annual rate of 2.6%. Mobile call prices fall sharply although the rate of decline began to slow in 2009. • Fixed voice call revenues peaked in 2008 and declined thereafter while fixed VoIP revenues increased in the same period. Copyright © ADAMANTIUM D6.3-F Business Plan Page 8 of 87 Similarly, the Synergy Research Group Report on IP Telephony showed that at the 4Q09 the world enterprise voice market totaled just under $10 billion for 2009 and as network upgrades climbed in the second half of 2009, the VoIP market had a solid improvement in its market figures. In December 2007, German Internet-traffic-management-systems provider Ipoque sampled three Petabytes of anonymous data from Australia, Eastern Europe, Germany, the Middle East and Southern Europe. It estimated that while VoIP makes up just 1% of all Internet traffic, it is used by 30% of Internet users, and Skype accounts for 95% of all VoIP traffic. Consumer VoIP subscriber growth continued to soar in Western Europe, reaching 21.7 million at midyear 2007, significantly higher from 15.6 million counted only six months earlier. TeleGeography estimated that the ranks of European VoIP subscribers had grown to 28.9 million by the end of 2007 Figure 2-1). Figure 2-1 VoIP Subscriber and Revenue Growth in Western Europe Similarly, Infonetics reported just fewer than 80 million VoIP subscribers worldwide in 2007, with the strongest adoption rates in the Asia Pacific region. Overall, what is clear, however, is that the VoIP market is growing in terms of subscribers, revenues and traffic, a trend that add-value to the potential marketing impact of ADAMANTIUM solution for VoIP service. Figure 2-2 and Table 2-1 show how the distribution of VoIP subscribers in specific regions and worldwide has been evolved in the period 2006-2008. Particularly in Europe it is easily noticeable that for the period 2006-2008 the number of VoIP users (Internet users and dedicated subscribers) is more than doubled proving the increasing trend that exists worldwide. This increasing trend in the number of VoIP users is also accompanied by a corresponding increase in revenues of all the involved parties in the VoIP value chain. Figure 2-2 Sizing up the European VoIP Market (subscriber) Copyright © ADAMANTIUM D6.3-F Business Plan Page 9 of 87 Table 2-1 Consumer VoIP users/subscribers Consumer VoIP users/subscribers WORLDWIDE 2006 2007 2008 Internet VoIP users/subscribers (000s) 62,823 95,014 138,614 Dedicated VoIP subscriptions (000s) 41,018 64,076 87,018 VoIP revenues ($ millions) from Internet VoIP users/subscribers from dedicated VoIP subscribers - 9,687 449 9,237 15,289 656 14,633 2006 2007 2008 13,817 17,822 23,919 Dedicated VoIP subscriptions (000s) 7,723 14,633 19,373 VoIP revenues ($ millions) from Internet VoIP users/subscribers from dedicated VoIP subscribers - 4,009 120 3,889 7,186 152 7,035 EUROPE Internet VoIP users/subscribers (000s) 2006 16,102 2007 22,848 2008 31,410 Dedicated VoIP subscriptions (000s) 16,221 26,373 36,918 VoIP revenues ($ millions) from Internet VoIP users/subscribers from dedicated VoIP subscribers - 3,893 137 3,755 5,451 176 5,275 NORTH AMERICA Internet VoIP users/subscribers (000s) Source: OVUM World Consumer VoIP forecast: 2009–14 report (Sept 2009) 2.2.1.2 VoIP Market Trends-Forecasts The maturity of VoIP brings greater benefits to users no matter if they are Internet VoIP users or dedicated VoIP subscribers. Current statistical reports show that an upward sloping trend for VoIP subscribers and revenues exists for the coming years. According to OVUM World Consumer VoIP forecast, 2009–14 report (Sept 2009), the main trend for VoIP is that it will continue to grow in popularity (2006-2008 actual figures were measured while up to 2014 forecasts are made). Figure 2-3, shows that revenues by VoIP users worldwide will continue to increase up to 2014 although this increase will follow a decreasing rate year after year. Comparing the actual worldwide revenues with the forecasted ones for 2014, we draw the conclusion that in this period VoIP revenues will have almost been tripled with the main source of revenues originating from the dedicated VoIP subscribers. Copyright © ADAMANTIUM D6.3-F Business Plan Page 10 of 87 Figure 2-3 VoIP Revenues Forecast by user type According to Figure 2-4, the projected increase in VoIP worldwide revenues is equally distributed among continents of VoIP interest with Middle East and Africa following a higher increasing rate. North America remains at top with the highest portion of revenues followed by Europe and AsiaPacific. Figure 2-4 VoIP Revenues Forecast per region This increasing trend in VoIP revenues is the main outcome of the corresponding increase in VoIP users. As shown in Table 2-2, the number of VoIP consumers worldwide will keep up increasing in the coming years. In particular, the main source this rise will be the continuous increase of the dedicated VoIP subscriptions compared to the general Internet VoIP users whose figures will start declining from 2012 and on. Table 2-2 Worldwide consumer VoIP forecasts Source: OVUM World Consumer VoIP forecast, 2009–14 report (Sept 2009) Copyright © ADAMANTIUM D6.3-F Business Plan Page 11 of 87 In Table 2-3, consumer VoIP forecasts are presented per region, an analysis which further supports the already presented trend of the increasing number of total VoIP users and subscribers although the Internet VoIP users will start decreasing. In addition it is easily noticeable, that even though North America outnumbers Europe in revenues, the European VoIP users and subscribers overcome the Americans. This trend proves the high interest of Europeans in VoIP technologies and the great sales and profit margins that exist in the European market compared to the more costly North American one. However, the highest VoIP market penetration exists and will continue to exist in Asian-Pacific countries where in 2014 are expected to have a double number of VoIP users compared to North America and almost 50% more than Europe. Table 2-3 Consumer VoIP forecasts per region Copyright © ADAMANTIUM D6.3-F Business Plan Page 12 of 87 Particularly for Asia, Japan remains the largest market worldwide and leads the VoIP race mainly due to its early regulatory framework and liberalization of VoIP services in 2005 along with its innovative technological advances. Similarly, other statistical reports show that an upward sloping trend exists for the coming years. Infonetics reported just fewer than 80 million VoIP subscribers worldwide in 2007, a figure that will be well above 120 million by the end of 2010, with the strongest adoption rates in the Asia Pacific region. On the same basis, MarketResearch.com predicted that total VoIP subscribers would rise to 135 million in 2011, while London-based research firm Disruptive Analysis Ltd. predicted a mobileVoIP market that will rise from today's number of users to 250 million users by 2012. While VoIP is often associated with competitive carriers and cable companies, many European incumbents have counterattacked by launching their own VoIP services, often with great success. France Telecom has emerged as by far the largest consumer VoIP provider in Europe, while BT, Telecom Italia, and KPN all rank among the top ten European VoIP operators. As these rankings suggest, the European consumer VoIP market remains fragmented and highly diverse, featuring a wide range of provider types and business models. In some countries, incumbents dominate; in others, competitive carriers have gained the advantage. Similarly, VoIP adoption differs widely across nations. For example, 34% of all French households subscribe to VoIP, compared to only 11% in Germany. However, during the last two years Europe has been a prime innovator in VoIP services, whether stand-alone, bundled as a triple-play offer or through fixed-mobile convergence packages. The numerous all-IP networks which are being built across the region provide a range of IP services in which VoIP is just one component. While Skype still dominates the platform in Europe, largely through its ease of use, VoIP is increasingly becoming a standard and maintains Europe higher compared to U.S. in the number of subscribers as a percentage of total households (Figure 2-5) despite the increased North America revenues. Figure 2-5 Subscribers as % of European and U.S. households Copyright © ADAMANTIUM D6.3-F Business Plan Page 13 of 87 2.2.2 Mobile VoIP Market Description 2.2.2.1 Mobile Market The rapid development of mobile communication and the Internet facilitates the approaching of the global village notion. In several developed countries and regions, mobile communication penetration rate has already reached or even surpassed 100%. By 2013 the global number of mobile subscribers will be up to 5 billion and the mobile networks will cover over 80% of the global population. Overall, the revenue for voice services has saturated or even gradually declined with the development of mobile communication in the past decade. In particular revenues for fixed voice services was reduced by 15% and the growth rate of mobile voice services decreased from 17.5% in 2004 to 1% in 2009. A more detailed analysis of the mobile service revenue growth per region is shown in Figure 2-6 from Strategy Analytics. Even in emerging markets like India, the revenue per minute (RPM) of mobile operators in 2008 fell 50% compared with 2007 figures. However, despite this slowdown in revenues acquisition, the global mobile market still grew over 16% in terms of new connections in 2009. Asia alone reported more than 360 million new connections in 2009 while the entire industry surpassed 4.5 billion connections worldwide in October 20091. Figure 2-6 Mobile growth by region Mobile technology has simply become one of the most global and pervasive form of technology ever invented. All over the world is easily noticeable the continuous investment in mobile networks deployment. However, current market conditions have forced mobile phone operators to change their approach and invest more in up-to-date technologies like VoIP which will boost sales-subscriptions and increase revenues, especially during the current period of worldwide financial instability, especially in Europe. Thus the solution of VoIP by mobile operators under these pressing market conditions seems to be a necessity in order to return the mobile operators back to increasing figures. 2.2.2.2 Mobile VoIP Market and Business Models The advent of VoIP services accessible via a GPRS/3G/HSDPA or Wi-Fi link originally caused concern and anxiety within the cellular industry and amongst certain European operators in particular. Now it is apparent that mobile operators have begun to view mobile VoIP as something which they can adapt and use rather than a disruptive technology, which threatens their existing revenue streams. Many mobile operators are taking measures to ensure customer loyalty in the face of supposedly 'free' mobile calls offered by VoIP as a counter measure to the current financial instability worldwide. Figure 2-7 presents estimated figures regarding the total VoIP users over mobile networks using different radio access technologies. 1 Xianrui Gao, “Telecom Industry Trends in the next decade”, Huawei Communicate, Feb 2010, Issue 54 Copyright © ADAMANTIUM D6.3-F Business Plan Page 14 of 87 Figure 2-7 Total VoIP 3G active users base, 2006-2012 As can be noticed, 255 million active VoIPo3G users worldwide are forecasted by the end of 2012, dominated by mobile operators’ own 3.5G+ voice services. This involves a wide range of underlying assumptions, such as rollout schedules for UMB and LTE networks. Despite this growth, penetration will still be below 10% of total global mobile subscribers and around 20% of all 3G+ users, by 2012. It is likely to be at least 2015 before a majority of cellular voice minutes are based on VoIPo3G or VoIPo4G, but the next few years will set the scene for how the eventual transition will occur. Most of the 255 M user base of VoIPo3G in 2012 will still use circuit voice as well – but the ways in which they purchase and use early mobile VoIP will define the shape of future value chains and mobile operator strategies. Similarly, In-Stat projects that by 2013, mobile VoIP applications will generate annual revenues of $32.2 billion, driven by over 278 million registered users worldwide. One big development is that revenue and users associated with mobile VoIP will be evenly distributed – not just among online mobile VoIP services, but 3G-based mobile VoIP offerings and WiMAX/LTE mobile VoIP offerings too. In 2008, mobile VoIP became more popular thanks to AT&T allowing iPhone users to run VoIP on its 3G network, not just on WiFi. That’s a development that, along with mainstream smartphone consumption, has triggered the idea of carrier-sanctioned VoIP, which is very close related to ADAMANTIUM concept. Figure 2-8 shows consumers statements on mobile VoIP in 20082. Figure 2-8 Consumers statements on mobile VoIP in 2008 2 Proceedings of the International MultiConference of Engineers and Computer Scientists 2008 Vol I IMECS 2008, 19-21 March, 2008, Hong Kong Copyright © ADAMANTIUM D6.3-F Business Plan Page 15 of 87 According to the figure, though only a small share of consumers claimed in 2008 that they will use mobile VoIP instantly, most of them already knew that in the time-frame of 5 years they will adopt mobile VoIP, which makes even smoother the customer acceptance of ADAMANTIUM concept by the potential customers. Similarly, Strategy Analytics report declared that in 2007 14% of US users and 21% of Western European users showed interest in having VoIP on their mobile phone. Revenues from all kinds of mobile VoIP services approached US$1 billion in 2007 and will grow to US$65 billion by 2012. In the long term, VoIP will be an important element of cost control for mobile network operators. From early years of the next decade, more cellular networks will find sufficient efficiency gains in true VoIP to start the switch-over and it will be these carrier-branded VoIP platforms which ultimately dominate the market, undermining the value proposition of network-independent solutions. Towards that trend, ADAMANTIUM added-value seems to play a key-role for mobile VoIP success. Strategy Analytics’ Wireless Media Lab’s end-user survey, conducted among 2,800 cellular users in the US and Western Europe in Q2 2008, found that healthy levels of interest in Mobile VoIP already existing in the market (Figure 2-9). 14% of US users and 21% of Western European users showed some interest in having VoIP on their mobile phone. In general, user awareness of VoIP is running high in mature markets. Similarly, while a survey question may actually reveal how many users want free or cheap voice, it also indicates a broad level of appeal in the basic concept behind VoIP. Figure 2-9 Mobile VoIP level of interest between cellular users According to Strategy Analytics, Mobile VoIP revenues will grow from US$1 billion in 2007 to $65 billion in 2012 (Figure 2-10). These forecasts cover all kind of mobile VoIP service, using the following classification: • Ad-hoc DMH User: Owner of dual-mode handset, using WiFi VoIP independently of cellular service • Integrated DMH User: Owner of dual-mode handset, using WiFi VoIP as part of an integrated fixed-mobile convergence service (e.g. a UMA WiFi-cellular service) • CS-VoIP User: User of a circuit-switched mobile VoIP service, using a call-back or callforwarding solution (e.g. Jajah, iSkoot) • Cellular VoIP User: User of a full VoIP over cellular service. Copyright © ADAMANTIUM D6.3-F Business Plan Page 16 of 87 Figure 2-10 Mobile VoIP billable voice revenues North America and Western Europe will take a disproportionate share of mobile VoIP revenues in the medium term (Figure 2-11). Higher penetration of suitable devices (both in terms of dual-mode handsets and advanced 3G phones), higher monthly spend levels, and greater pressure of mobile voice revenues will combine to create an environment more fertile for mobile VoIP. Even in this case scenario, mobile VoIP will still only account for 5-6% of total billable voice revenues in 2010, rising to 20% by 2012. Figure 2-11 Mobile VoIP billable voice revenues by region In summary, although in 2008 less than 0.2% of the world’s mobile users are using mobile VoIP services, though with wireline markets like France seeing VoIP going from 8% to 30% of all voice traffic over the last two years, this fact represents a market discontinuity which mobile operators cannot ignore. While the market is dominated by network-independent mobile VoIP solutions at present, ultimately carrier-branded VoIP will win out as network efficiencies push more operators down the VoIP path/solution. Based on current market conditions and forecasted trends in the short term, the major business models that could be identified for mobile VoIP over networks are: • Independent VoIP • Operator’s own VoIP • Partnership models • VoIP operator over CDMA EVDO/UMB networks (This category is focused on 3GPP2 technologies) • VoIP operator over 3GPP HSPA/LTE networks Copyright © ADAMANTIUM D6.3-F Business Plan • Page 17 of 87 Independent and preloaded/partnered VoIP over 3G (In this case, the development of nonoperator variants of VoIP over 3G has been considered, typically using a separate software client on a smartphone or laptop on a suitable 3G data access tariff). ADAMANTIUM solution for VoIP service comes to address all the possible aforementioned business models for VoIP, covering all the range of service provision by adding PQoS-awareness. This will be done through the ADAMANTIUM business model suggested, presented analyzed and evaluated at Chapter 3. 2.3 IPTV 2.3.1 IPTV Market Description 2.3.1.1 IPTV Current Market Conditions Nowadays, the IPTV market is growing in terms of users, subscribers, revenues and traffic, and keeps up restructuring IPTV revenues worldwide. At the end of 2007 IPTV usage reached a total of over 8 Million household across Europe while at Q3 2008, the total number of IPTV subscribers worldwide grew 10% quarter-on-quarter to over 19 Million, according to the US research firm Dittberner3. The Western Europe Sub-region still leads the IPTV market as in the previous years (Figure 2-12), but Asia now rivals it in size. Figure 2-12 Telco IPTV subscribers by sub-region Q3 2007 Large incumbent telcos have driven much of the growth in Europe and Asia, whereas in North America, the small independent IPTV providers are driving much of the growth. Deployments at incumbent carriers such as France Telecom and Telefonica in Europe and PCCW in Hong Kong are now together serving nearly 1.5 million IPTV subscribers, and are projected to experience significantly more growth. Also competitive (non-incumbent) IPTV providers such as FastWeb from Italy, Free and Neuf from France, and spin-offs from France Telecom also are leading in innovation and subscriber growth in their markets. Table 2-4 summarizes the existing actual growth of IPTV subscribers recorded worldwide, summarized per region, for specific quarters of the years 2006-2008. 3 http://www.broadbandtvnews.com/?p=13336 Copyright © ADAMANTIUM D6.3-F Business Plan Page 18 of 87 Table 2-4 IPTV subscribers Additionally, current surveys show that service quality and ease of use are users' main requirements when it comes to IPTV services, an issue that is significantly addressed by ADAMANTIUM concept. This notion was highly supported in the IPTV World Forum held in London (23-25 March 2010)4. According to a TV study carried out by Ericsson Consumer Labs, "high quality was ranked number one," said Giles Wilson, CTO, Ericsson solution area television, speaking at IPTV World Forum. More than 70% participants listed quality as very important and they would be willing to pay for it. The study was carried out among 7,000 individuals and 52 households in seven countries worldwide. Ericsson’s survey also revealed that users prize ease of use with TV services, ranking it in second place behind quality. The availability of on-demand content came in third. These findings combined with several current views and trends as presented in IPTV World Forum make more dominant the objective of ADAMANTIUM project to design and develop a solution to improve PQoS, trying in this way to solve QoS and reliability issues of IPTV services, and providing at the very end a better user experience. 2.3.1.2 IPTV Market Trends - Forecasts Nowadays, IPTV is growing rapidly in Europe, where France is dominant and there are also active deployments throughout the rest of Western Europe, while installations are growing fast in Eastern Europe too. Forecasts show that Europe and Asia will have within next years the greatest increase both in users and revenues. Multimedia Research Group (MRG) in its IPTV Global Forecast Report (October 2008) is forecasting that the number of global IPTV subscribers will grow from 20.4 million in 2008 to 89.1 million in 2012, resulting to a compound annual growth rate of 45%. (Figure 2-13). Figure 2-13 Global IPTV Subscribers per region (MRG) 4 http://www.iptv-forum.com/ Copyright © ADAMANTIUM D6.3-F Business Plan Page 19 of 87 The same findings are also confirmed by the Yankee group research where documented figures of IPTV subscribers for years 2005-2009 are used for forecasting the period 2010-2013 in 6 regions (Figure 2-14). Figure 2-14 Global IPTV Subscribers per region (Yankee) Similarly, Figure 2-15 below shows in percentage the regional distribution of global IPTV subscribers at the end of 2008. Source: Frost and Sullivan Figure 2-15 Global IPTV subscribers distribution (%) per region (12/2008) In terms of service revenue, MRG forecasts that the Global IPTV market from $5.9 billion in 2008 and will grow to $29.6 billion in 2012, resulting to a compound annual growth rate of 50% (Figure 2-16). By 2012, Europe and North America will generate a disproportionate share of global revenue, due to very low ARPUs in China and India, the fastest growing (and ultimately, the biggest markets) in Asia. Strategy Analytics announced in its market research Multiplay Market Dynamics service report “United States IPTV Market Sizing: 2009-2013,” that the U.S. IPTV market segment is expected to have 15.5 million subscribers and $15 billion in service revenues by 2013. According to this report, the total service revenue for 2013 is projected at $38 billion worldwide. Copyright © ADAMANTIUM D6.3-F Business Plan Page 20 of 87 Figure 2-16 Global IPTV revenues per region Similarly, sourcing this revenues growth, IPTV subscriptions are poised to grow from over 30 million in 2010 to 68 million by the end of 2014, according to forecasts from analyst firm Strategy Analytics. Asia Pacific and Western Europe will lead in deployments and the findings were officially announced and presented in the IPTV World Forum in end of March 2010 in London. Although threats of financial influences or even collapse lurk at every corner as a side effect of the recent economic crisis, global telcos apparently seem to have successfully done enough reserving and contingency planning back in previous years to lessen their exposure to current financial volatility. Multimedia Research Group’s latest IPTV Global Forecast shows that global IPTV subscribers figures will grow and to drive this growth, IPTV Operators worldwide are expected to continue investing in improved QoS, ease-of-operation, HD content, exclusive programming and time-shifting as differentiating features if offered IPTV services. Similarly as shown by Strategy Analytics, Multimedia Research Group (MRG) forecasts that in Europe, steady IPTV subscriber growth will continue while more HD channels are being offered to Western and Eastern European subscribers. By 2012, European subscribers will still be slightly ahead of Asia, with Europe maintaining 41.5% of the worldwide subscriber market and Asia, 35.8%. Despite economic contraction, consistent growth continues at the three major French IPTV Operators as they compete to bring better quality and unique content to their users. Many European IPTV Operators have increased subscribers by offering differentiating services, exclusive content and interactive features. Likewise in Asia, despite flat growth in Japan, rapid growth is expected in China, Taiwan and Korea. Following the same trends, by 2012 North America will have only about 17% share of the total worldwide subscribers, however it will dominate the global market in terms of gross service revenue at about $13 billion, due to higher ARPU. Together, Verizon and AT&T should continue their rapid growth into 2012. Smaller U.S. and Canadian Operators are following similar strategies. As Figure 2-17 shows, IPTV system and services will expand towards new and improved standards of offered services/values in the upcoming years such as quality, usability, user experience, future network and technology convergences, enhanced interactivity, new marketing and advertising models, social networking, user customizations capabilities, use of third party applications. Copyright © ADAMANTIUM D6.3-F Business Plan Page 21 of 87 Source: Yankee Group, The Degrees of IPTV Open Access, June 2008 Figure 2-17 IPTV system and services expansion Given the continuously growing IPTV market and the market opportunities analyzed in the preceding paragraphs, the following key trends in IPTV are expected for the coming years: • HDTV is on the rise and shifting from early adopters to mainstream viewers, creating strong demand for the highest level of subscriber quality of experience (QoE). Technology has to be developed to ensure the QoE levels that now become mandatory. This key trend satisfaction is the ultimate ADAMANTIUM target. • Niche content in bulky volumes is becoming a reality. Service providers will be required to make accessible huge volumes of content, while employing intuitive and simple access methods. The full content life cycle will need to be managed in a flexible way, providing the base for innovative CDN (Content Delivery Network) platforms development (a key factor in the success of IPTV services). • Support for multiple viewing platforms. Consumer mobility drives the need to support a variety of end devices (terminals) to which the content is fed. Users’ viewing experiences should be automatically adapted for the different devices and networks so that the best experience on each device is guaranteed. Remaining issues to be resolved include the size of video data and content rights. • Advertising will drive future revenues. Targeted advertising is another phenomenon making its way from the Internet to the IPTV experience, providing another tool for revenue generation, subscriber retention and new market targets. • The trend of increased migration of TV consumption from linear to non-linear TV (TV OnDemand) will pick up pace, driven by innovative new ways of serving TV in a time-shifted manner and excess bandwidth available in the future networks. We expect significant increase in concurrent viewers of such services leading to the shift to On-Demand era. • User-generated content. Users are driving content and will want to incorporate that content as part of their traditional TV experience. • Networking in the home. Technology advancements in consumer premises equipment and the IPTV supply chain in general will enable increased connectivity between the various components in the home, targeting the enhanced digital lifestyle with such services as instant messaging and progressive download. Through a combination of the service provider and home networks, a small server residing in the house will provide content services to a variety of devices within or around the premises, over a variety of wired and wireless networks. • New entrants create segmented markets. More alternative service providers are offering IPTV services, opening up the market and driving growth and competition. Traditional communications players will be forced to present a differentiated offer, either through the introduction of new value-added services or competitively priced entertainment packages. Copyright © ADAMANTIUM D6.3-F Business Plan • Page 22 of 87 TV and Internet will continue to merge. The drive to turn the TV into an Internet-capable device is likely to continue, despite the failure of many prior attempts. The key drivers to success are simplicity of access and emphasis on the group experience of TV consumption. 2.3.2 Mobile IPTV Market Description 2.3.2.1 Mobile IPTV market, Challenges, Business Models and Strategies TV and Mobile technology have simply become two of the most global and pervasive forms of technology. All over the world, the investment in TV field and deployment of mobile networks is easily noticeable. However, current market conditions have forced both sides to change their approach and invest more in up-to-date technologies which result from convergence of services like mobile IPTV which has the dynamics to boost satisfaction through means of innovation, sales, subscriptions and revenues. Although initially many thought that “networked TV” would be the future of television, IPTV is currently dominated by Telco giants in an attempt to find a new source of cash-in. IPTV services are originally targeted to fixed terminals such as set-top boxes, however, issues on the requirements for mobility support were raised as an out-growth under the auspices of the Fixed-Mobile Convergence (FMC) trend. The outstanding activities are ATIS in the US, Open IPTV Forum, and ITU-T FG IPTV internationally. Statistically speaking, according to IDC research, people today consume 70.6 hours of media a week, but only 23% of that content via a traditional television device. In 2009, 3 out of 10 adults watched TV content on alternative devices such as PDA, PC or even their mobile phone. Mobile broadcast TV subscribers will total 155.6 million worldwide by the end of 2012, up from 4.4 million documented in 2007 and 65.6 forecasted for the end of 2010 (Figure 2-18). Figure 2-18 Mobile TV Subscribers The Asia-Pacific region is set to have the highest number of mobile subscribers, followed by Europe and North America (Figure 2-19). Figure 2-19 Mobile TV subscribers per region Similarly, following subscribers’ figures, total mobile TV revenue across cellular and broadcasting platforms will jump from US$1.9 billion in 2007 to $25 billion by end of 2010. Several researches have also proven the increasing trends in consumers wish to have the facility of watching TV programs on their mobile device. In particular, Accenture’s consumer broadcast survey Copyright © ADAMANTIUM D6.3-F Business Plan Page 23 of 87 (2008)5 (Figure 2-20) confirms this demand where about 1/3 of mobile users wish to have such an option and especially in young ages where the analogy is almost 1/2. Figure 2-20 Percentage of global consumers who would enjoy watching any form of TV programming on a mobile device According to the same survey, consumers’ content preferences also shape their use of alternative devices, since they select each device on the basis of which one will best suit the specific content they want to consume. They find the mobile device most interesting as a way of receiving news, sports live events and information. Clear content preferences are also emerging between ‘live’ and ‘on demand’ consumption, reflecting the timeliness and urgency of the content experience. 59% of consumers prefer to watch news ‘live’, and 46% say the same about sporting events. The strongest content genre preferences for ‘on-demand’ consumption are sitcoms and dramas, both at 23%. When it comes to paying for content, consumers’ most popular choice as a way of paying for downloading TV programs from a digital service on their mobile is by agreeing to view advertisements with the programming. This option is chosen by 33% of consumers, ahead of various financial payment methods — including a monthly fee for unlimited downloads (19%) and paying for a season of shows (13%). In terms of content/device combinations, consumers have already developed clear ideas about what type of content fits best on which alterative device. They are most interested in: • Receiving news and information via mobile device • Watching full-length television programming on the PC. The ranking of their content preferences between the PC and mobile platforms are summarized in Figure 2-21. Consumers are keen to see full-length TV programs via their PC, while the immediacy and portability of mobile makes it more suited to public service information such as news, live sport events and to user generated content. (Source: Accenture Consumer Broadcast Survey 2008) Figure 2-21 Global consumers’ content/device preferences 5 http://www.accenture.com/NR/rdonlyres/1717A8CE-AB75-4076-BF6717EF258875FC/0/BroadcastStudyTelevisionTransformsFinal.pdf Copyright © ADAMANTIUM D6.3-F Business Plan Page 24 of 87 However, the most striking trend is the impact of age on consumers’ eagerness to use alternative platforms, with younger consumers universally ahead in terms of willingness to consume TV related content over mobile (Figure 2-22) and with specific preferences (Figure 2-23). (Source: Accenture Consumer Broadcast Survey 2008) Figure 2-22 Global consumers’ interest in viewing programs over their mobile device (Source: Accenture Consumer Broadcast Survey 2008) Figure 2-23 Global consumers’ “on-demand” mobile viewing preferences Forecasts for the upcoming years show also different trends in Europe, USA and Asia. In particular: • In Europe a slower uptake is forecasted as operators charge premium but they are keen to recoup 3G license money. • In North America, steady growth with all major players launching broadcast Mobile IPTV services is forecasted while combining both free of charge and premium mobile IPTV services. • In Asia, the existing growth will lead to better figures and perspectives much earlier and easier than in Europe. Asian countries embraced free TV service model earlier helping them to build up subscriber base faster. This fact has already characterized the mobile TV markets of Japan, China and Korea as the fastest growing worldwide markets, fact which will be maintained for the years to come. In specific, over 25 million TV-enable handsets sold in Japan in 2008 while in 2009 half of all mobiles exported in other Asian countries were IPTV-enabled. Last but not least, Asian countries have already established a strong regulatory framework which facilitates and supports development in this field. In Japan and Korea the governments mandate mobile operators to support free-to-air TV services along with the premium services they offer and reinforce them to expand to mobile IPTV offerings. Similarly, as proof of this support, the Chinese government actively supported mobile IPTV broadcast and IPTV advertisements during 2008 Olympic Games. Copyright © ADAMANTIUM D6.3-F Business Plan Page 25 of 87 For example, according to Telegent survey in February 20086, China was characterized by: • Relatively low pay TV penetration – terrestrial channels or free TV over mobile ruled instead • More than three million users of free-to-air mobile TV • 74% of survey respondents to Telegent survey watching television on their handset for thirty minutes or more at a time, and 54% watching five times a week. • For 85% the primary influence driving their handset purchase decision was the built-in free-toair TV feature However, technological growth is usually accompanied by factors affecting and impacting directly or indirectly all involved players and offered services. In particular, in the mobile IPTV market framework the following factors and challenges are impacting the forecasted growth7: Impacting factors and Challenges • Content rights issues o Media rights holders wary • Commercial terms between handset manufacturers, software companies, content creators and network owners remain unclear • Standardization attempts o Multiple broadcast Mobile TV standards helpful, not hindrance to industry growth o Market will decide technology most appropriate for individual deployments • Reduced Capability Devices (A/V decoders, interactive middleware etc) • Adaptability o Various types of access networks, form factors, levels of processing power • Protocols and algorithms o Dealing with packet loss due to wireless interference • Environment changes (no movement) o Temporal reflectors/obstacles • Link condition changes with movement o LOS/non-LOS o Fast Fading/Slow Fading o Distance from the transmitter o Handover • Picture Quality o Packet loss is inevitable in wireless link. o The perceived quality degrades sharply with increasing error rate. Mobile IPTV should not be perceived just as plain TV service. It is a convergence of multiple purpose services like broadcasting, telecommunications, mobiles and computing that can be used over existing 6 Telegent. Telegent survey interviewed more than 400 consumers who purchased Telegentenabled Handsets in February 2008 in China 7 BNS-Broadband Network Systems Ltd http://www.bnsltd.com/catalog/index.php Copyright © ADAMANTIUM D6.3-F Business Plan Page 26 of 87 mobile infrastructure. Both in the current market but also in the future ones, mobile IPTV offers a wide range of services which trigger the creation of new business fields and business models. In specific, IPTV services going mobile and having the potential for fostering new business models can be categorized in: • Broadcast services/model o Linear broadcast TV o Linear broadcast TV with trick mode o Pay per view • On-demand services/model o Video on demand (VoD) o Push VoD o 3rd party content delivery o Music on demand (MoD) o Game on demand (GonD) • Advertising services/model o Traditional advertising services o Directory advertising services o Advertising message logging • Public interest services/model o Support for users with disabilities o Emergency communications • Tele-services model o Tele-learning o Tele-medicine o Monitoring services • Portal services/model • Interactive services/model o Video conferencing o Games o TV-based conversational services o Program survey services • Hosting services/model o Business to business o User Generated Content (UGC) hosting o CPU resource hosting Following this versatility of mobile IPTV business models and services, several strategies have been developed for evolving mobile IPTV: • Making mobile IPTV not only entertainment but also necessity Copyright © ADAMANTIUM D6.3-F Business Plan Page 27 of 87 o Information agent o Communicator (e.g. VoIP) • On demand services • Personalized/Intelligent o Person o Location o Time • Participation/Sharing/Openness o On-site broadcast o Social Networking • Advanced UI (User Interface) o Widgets Current trends show that mobile IPTV will be a dominant element of future communications. Future investments in mobile IPTV will lead this evolution and it will be worthy investing since: • Mobile IPTV is the first embodiment of the ultimate service: ubiquity + IP + personal • The Mobile IPTV service platform will allow other IP based services to be easily integrated (e.g. VoIP) • The Mobile IPTV will be the bridge to the hegemony over ubiquitous IP based multimedia services • Mobile IPTV becomes NGN/IMS-based • NGN/IMS can greatly benefit Mobile IPTV in QoS and PQoS terms (ADAMANTIUM case proposition) Copyright © ADAMANTIUM D6.3-F Business Plan Page 28 of 87 3 ADAMANTIUM BUSINESS MODEL 3.1 Introduction ADAMANTIUM focuses on the case of mobile VoIP and IPTV, which are considered as an evolution of the existing VoIP and IPTV services via fixed networks. Within this business and marketing framework, ADAMANTIUM considers the business case where the existing mobile operators are moving towards VoIP-based voice services and IPTV program offerings, through their well established wireless access network. The adoption of the mobile VoIP and IPTV as a service by the mobile operator includes many marketing strengths, among which, • The mobile communication at lowers costs in relevance to the existing voice services • Programs broadcasting (live or on demand) per user options while on move • Reduction of operational costs • Innovative features a lot of them without extra cost for the end user. So, it seems that mobile VoIP and IPTV will be the definite services selection for the future mobile operator, subject to specific weakness and threats, which are mainly focused on integration delays due to standardization processes and continuous evolution of IMS platforms, on issues of QoS and on the fact that mobile VoIP services are provided on a best effort basis only. Thus, due to the lack of QoS mechanisms that will guarantee an acceptable level of QoS of mobile VoIP/IPTV, the respective massive adoption of such mobile services by the respective mobile operators has been delayed or even postponed in the previous years. ADAMANTIUM adds more value towards this transition from traditional VoIP/IPTV to mobile VoIP/IPTV, considering also an intelligent and PQoS-aware VoIP and IPTV service, which is capable of adapting in real time its perceived QoS, in order to provide optimized quality of experience. In the context of ADAMANTIUM business framework, the main role affected by ADAMATIUM proposition is held by the mobile network operator. Mobile Operators’ business is based on users, who need communication and services. With an improved PQoS level of the delivered VoIP/IPTV service, more users will access the network and therefore operators will get additional revenues from their deployment (Network business model). The ADAMANTIUM business model proposal aims to improve and further enhance with additional characteristics the currently used business models by mobile network operators, such as the network effects business model been applied by the majority of them. Business model is the mechanism by which a business intends to generate a continuous and steadily increasing stream of revenues and profits, and it is perceived as a summary of how a company plans to serve its customers, involving both strategy and implementation. It is the totality of: • • • • • • • • How it will select its customers How it defines and differentiates its product offerings How it creates utility for its customers How it acquires and keeps customers How it goes to the market (promotion strategy and distribution strategy) How it defines the tasks to be performed How it configures its resources How it captures profit. There are many different types of business models used in communications sector with different complexity depending on the actor and his positioning in the value chain. A few examples of types of such business models are as follows: • • • The subscription business model The razor and blades business model The pyramid scheme business model Copyright © ADAMANTIUM D6.3-F Business Plan • • Page 29 of 87 The multi-level marketing business model The network effects business model As already stated, the majority of mobile operators fit into the network effects business model. This type of business model is based on the network effect which causes a good or service to have a value to a potential user depending on the number of user already using that product or service. ADAMANITUM proposed business model for mobile operators fits to an evolved network effects business model because the more registered mobile users, the more useful and profitable the company becomes through the use of the provided services. 3.2 Value chain and Business Models 3.2.1 VoIP In order to develop a workable business model that will reflect the commercial viability of a specific innovative product/service, it is highly important to identify specific actors that are involved in the value chain along with the responsibilities and the role of each one in the context of the general chain of activities. In the case of VoIP, there are several actors in the VoIP value chain playing a more or less important role depending on the type of the VoIP service offered. Figure 3-1 depicts the basic value chain for VoIP. Application Service Provider Network Provider End User Figure 3-1 The basic VoIP Value Chain The following actors and value proposition for them can be identified in terms of VoIP value chain: • End Users: This category includes the customers to whom the new high quality services will be offered. The end user has an access offered by the Network Provider and uses the service (VoIP), through an application provided by the Application Service Provider (ASP) that can be the same actor as the Network provider if the later one also provides the application and do not act only as a pipe. Satisfactory experience using VoIP service with new levels of Perceived Quality of Service with lower cost than “traditional” telephony. • Network Provider: Network operators own and operate the networks through which the multimedia services are accessible to the end-users. This includes Mobile Network Operators (MNO), wireline broadband network providers, WLAN providers, operators of WiMAX technology, for mobile and non-mobile devices (e.g. cable, terrestrial or satellite broadcasting). In the context of ADAMANTIUM concept, this role is held by a mobile network operator). • Application Service Provider. The Application Service Provider is the one that offers the end user the VoIP application, and can also be the Network provider. • MCMS Platform provider: This refers to the party providing and operating the external IMS compatible Multimedia Content Management System. This party would probably be the network operator (mobile or wireline) so practically is the same entity with Network Provider. Based on this value chain pattern, fragmented and well differentiated business models like equipment vendors (sell VoIP equipment), VoIP reseller platforms, VoIP Service providers, VoIP termination and billing are considered as “ageing and obsolete.” “Modern” VoIP business models must take advantage of a huge user base, invest in marketing and branding advantages and aim at high revenues Copyright © ADAMANTIUM D6.3-F Business Plan Page 30 of 87 and low churn. Modern trends for socialization, mobile communication and ease of connection should be taken into account when presenting the existing VoIP business models. • • • 8 Generic VoIP Business Models. Four different classes of business models have emerged in the public use of VoIP8 depending on which is the major key actor: o VoIP in the backbone: uses circuit-switching to the end-point (i.e. phone) in the backbone, and packet-switching in the core network. This model is vertically integrated and delivers features, reliability and regulatory compliance of the public switched telephone networks (PSTN). o Facility-based VoIP: uses packet-switching for end-to-end communication. Providers of voice over cable (VoCable), voice over digital subscriber line (VoDSL) and voice over wireless use this business model. This model is vertically integrated too, but the voice service here can be offered as a bundled good with data (i.e. Internet service) or video (i.e. Television programming). o VoIP over broadband: voice service is offered to consumers who already have broadband access. In this case, the Internet Service Provider (ISP) and the VoIP service provider are different entities. VoIP over broadband enables Phone-to-Phone, PC-to-Phone or Phone-to-PC communication. o Peer-to-peer VoIP: is available to anyone with any form of Internet connectivity by downloading a free voice-enabled application. MSN Messenger, AOL Instant Messenger (IM) and Yahoo Messenger were the early providers of this mode of voice communication but after all Skype has emerged as the most popular P2P VoIP provider. This model is not vertically integrated. The P2P VoIP provider only provides the end application and the directory service. The service is usually free. P2P VoIP provides PC-to-PC connectivity. Internet-based VoIP Business Models. Some of the business models adopted by Internetbased VoIP service providers include: o Advertising based VoIP: Advertising seems to be the business model for bulk of the VoIP providers on the Internet today. Most of the advertisement based products are not complete offerings, in the sense that they have certain limitations in terms of geography or the length of call. o Phone-based VoIP: These services usually bundle free calls for a certain period of time to certain locations. Calls are usually free within the network. o Pure VoIP: These are pure play VoIP providers that offer pure VoIP functionality. These can however be combined with hardware devices for added convenience, however that is not required. Players in this category usually offer the maximum geographical coverage. o Pure Hardware VoIP: These include hardware companies, which make the use of the other VoIP services easier. These companies are not VoIP service providers themselves, but are hardware companies like Cisco which make devices like USB VoIP phones, etc. o VoIP Aggregators/Platforms: This category may include platforms like voxalot, mysipswitch, etc. Platforms allow you to combine several VoIP providers and utilize them efficiently. It may also include DID providers. DID allows the user to receive calls directly from the traditional PSTN. Retail VoIP Business Models9. Mass-market retail VoIP is one of most dominant VoIP types along with enterprise and public VoIP. Some of the business models adopted by VoIP service retailers in retail market are shown in Figure 3-2 and they include: Value Chain Dynamic in the Communication Industry, 2006, http://cfp.mit.edu/docs/core-edge- dec2005.pdf Copyright © ADAMANTIUM D6.3-F Business Plan Page 31 of 87 Source: Analysys Research - Retail VoIP in Western Europe Figure 3-2 Retail VoIP Business Models o Open VoIP – Direct Access: the broadband access connection and VoIP service is sold by the same operator as the PSTN voice calls. o Open VoIP – Indirect Access: the service provider is considered as retailer of VoIP calls and services only. The provider has to pay termination charges to provide calls to the PSTN and the provider’s gross margin is made between the retail price of calls and the cost of terminating calls on the PSTN. o PVA: PVAs (Private VoIP Applications) are not services, but pieces of software, usually downloaded from a developer on the Web. Internet access charges and equipment costs are the usually the only cost for end users. Following this listing of existing VoIP business models, the following section presents the ADAMANTIUM case over Mobile VoIP business model. 3.2.1.1 The ADAMANTIUM case over Mobile VoIP Voice has traditionally built on circuit-switched technologies. As technology is moving towards packet switched networks, where all kinds of streams and information are easily combined into packets, the justification for circuit-switched services has to be reconsidered. It is very expensive to have a separate circuit-switched network to implement voice services, as the integration of all information on a packet-switched network is much more cost-effective and scalable. In the fixed Internet there are quite a number of voice-oriented services, where voice is essentially coded into streams of packets, Voice over IP (VoIP). However, ADAMANTIUM aim is to focus on the case of mobile VoIP, which is considered as an evolution to the VoIP services via fixed networks. Mobile VoIP is defined as voice-oriented services, in which voice is transmitted over IP-based networks, and the service is provided by mobile operators and is used with a mobile handset. ADAMANTIUM being aware of the modern trends in the industry and being totally harmonized with the market needs, expands its ambitions beyond the state-of-the-art research, academic and scientific impact to reinforcing EC position in the European (or even global) mobile telecommunication market by developing an enhanced and user-centric IMS platform. More specifically by enhancing the existing IMS capabilities with PQoS-aware cross layer adaptation techniques, it comes to minimize the existing market threats and weaknesses of mobile VoIP, towards creating the necessary circumstances for supporting the VoIP switch-over from the traditional voice services by the mobile operators. 9 Retail VoIP in Western Europe – Forecasts, Analysis Research limited Copyright © ADAMANTIUM D6.3-F Business Plan Page 32 of 87 ADAMANTIUM from an engineering aspect considers this new market of mobile VoIP, focusing on mobile handsets as small smartphone kind of devices, which have at least cellular capability and provide an operating system capable of running add-on applications. A combination of a VoIP enabled mobile handset along with a VoIP service offered by a mobile operator form the fundamental case of analysis of ADAMANTIUM VoIP (both from a technical and business perspective). However, the business implications of mobile VoIP might be even more interesting. There are already quite a number of actors somehow running mobile VoIP services, not to talk about the diversity of players currently testing, planning or considering a movement to the mobile VoIP business. ADAMANTIUM adds more value towards this transition from fixed VoIP to mobile VoIP, considering also an intelligent and PQoS-aware VoIP service, which is capable of adapting in real time its perceived level of QoS, in order to provide optimized quality of experience. From a marketing perspective, it is argued that the type of technology chosen has major implications on the type of approach to the mobile VoIP business, and different kinds of actors are currently emerging in a certain order because of technical solutions chosen. Currently there are incumbent operators, who might leverage on the combination of cellular and emerging radio technologies in providing mobile VoIP services. There are challenger operators emerging, who have a core strategy in mobile VoIP. If they provide standardized interfaces and service-level products without owning any radio access technologies, they are called virtual mobile VoIP operators. ADAMANTIUM considers the case where the existing mobile operators are moving towards VoIP-based voice services, through their wireless access network. Consequently existing business models for services offering will be maintained but with the ADAMANTIUM proposal enhancements this time. 3.2.2 IPTV The convergence of different networks and the integration of the telecommunications and media value maps create a totally new marketplace with a series of new roles to be taken up. With the added complexity in the map, there are possibilities for different types of players to adopt different types of roles. Established players in the previously separated digital content markets of the Mobile world, the Internet world and the Broadcasting world will now be challenged to re-evaluate their positioning on a common playground, moving from their traditional position to either defend their position or to make full use of the opportunities that the new value map provides them. As shown in Figure 3-3, in the IPTV market, established key actors that form the value chain of the IPTV services are: • Content Providers • Service Providers • Network Providers • End Users Copyright © ADAMANTIUM D6.3-F Business Plan Page 33 of 87 TV Music IPTV Service Platform Movie … Content Source Service Integration & Operation Content Transport Service Providers Network Operators Content Consumption Living TV Movie… Content Providers End Users Figure 3-3 IPTV Value Chain of key actors Besides the big established players that have traditionally lead the IPTV market developments, some background players are gaining power as they provide key enabling technologies to a more robust content provisioning in this fast moving and converging market of IPTV. Such key enabling actors that year after year are becoming a major part of the value key chain are: • Content Management Solution Providers using technologies, tools, and methods such as Enterprise Content Management (ECM), Digital Asset Management (DAM) and Media Asset Management (MAM) • Enterprise Content Management • Digital Asset Management • Media Asset Management All involved players, established or not, form a valued chain providing a great number of options and alternatives both to the end user and the telecom operators (Figure 3-4). Through this value chain a wider scale adoption of IPTV is progressing quickly. Nowadays, IPTV market is dominated by telecom operators’ realization that IPTV has the potential to go beyond its current status, and become a revenue generator for next generation applications that will form the so called digital home or even digital mobile office. The driven force for these changes is mainly content driven. Operators should readjust their operating habits and positions in order to be capable of going after the new revenue and profit opportunities. Copyright © ADAMANTIUM D6.3-F Business Plan Page 34 of 87 Source: Telkom www.telkom.co.id Figure 3-4 Involved players All key players as part of the IPTV value chain should develop additional channels of cooperation so as versatile content requests of different types of end user to be fully satisfied while quality of service is guaranteed (Figure 3-5). Consequently, the primary value chain driver of IPTV is not just content and content distribution but mainly consumer content. Source: Telkom www.telkom.co.id Figure 3-5 Cooperation channels for QoS The global trend of falling revenues from the traditional telecom services like voice seems to indicate that IPTV offers new business opportunities for operators. Currently most of telecommunications operators are looking for the optimal business model enabling fair collaboration with content providers. In general, the traditional content providers have a tendency to preserve their traditional business models, but these models change over time. Another key factor is the flexibility of the telecom operator and its willingness to develop an appropriate business model capable of generating revenues that will satisfy all parties involved. In terms of technology supporting IPTV, unlike what was initially thought, it is not mature enough to support a whole industry such as DRM, On-demand acquisition & calculation, Network Multicast & Broadcast (QoS) and so on. In fact, IPTV is by no means a simple technology. The attempt to purely seek a technical solution, which will be applied into the current market framework without business considerations and the validity of a flexible, suitable and versatile IPTV business model, is doomed to failure. Therefore, current market conditions and technological trends have formed IPTV services as an aggregate service of live streaming and VoD. Copyright © ADAMANTIUM D6.3-F Business Plan Page 35 of 87 IPTV by its nature has a variety of potential methods of delivery which should be reflected in its business model. Actually, by taking into account all the above statements, we conclude that this complexity both in terms of market and financial framework but also in technological terms, the business model of IPTV is the result of the integration of: • TV business models • IP Business models • WEB-Internet media entertainment models (Digital Media Business models) • Telecom Business models • Mobile Operators Business models (for the case of mobile IPTV), like the network effects or subscription models. All these types of already established business models are also merged with the concept of manageable and operable use of content and telecommunications. Consequently, the native business model of IPTV, results from the process of unification, convergence but also conflict of several mature but differently well established in the current market business models of particular services and technologies like TV, Internet, Telephone which have been evolved and combined through time (Figure 3-6). Source: Huawei Technologies Figure 3-6 IPTV Business Modeling Spheres Eventually, current trends show that the converged Business Model of IPTV develops into a brand new Profit Model on the basis of the non-operation TV mode and the Internet model, by merging with the communication-level manageable and operable model and exploring the new mode for digital entertainment/media. Many issues related with convergence arise from resource control instead of basic laws. IPTV is also characterized in its value chain operation. No one in the chain can solely control the whole profit chain regardless to the time of “network dominant” or “content-dominant” or “entertainment-dominant”10. The distribution to the entire value chain must be provided through a manageable, operable and deliverable service system. This is the core competency of IPTV. Without the conception of operation and service, no value can be effectively delivered to the clients. Therefore, the core of IPTV operation is to build a communication-class service operation system, fairly distributed and merged with all the related types of Operation Models with fast deliverability. At the 10 Huawei Technologies, “How to operate”, April 2006, Issue 21 http://www.huawei.com/publications/view.do?id=685&cid=342&pid=61 Copyright © ADAMANTIUM D6.3-F Business Plan Page 36 of 87 very end it is the usage rates, originating from the end users usage of the IPTV, which add value to the used model and make it either a success or a failure. The application of these two modeling aspects in the actual market leads to the formation of different types of business models depending eventually to the type of the final offered IPTV service (technical, marketing and business aspect). In the last years, in Western Europe, several business models for application to IPTV differentiated services have been evolved for improving business positioning in cases, such as: • Pay IPTV • Subscription-free IPTV • Amenity IPTV • Premium IPTV • Mobile IPTV (Streaming-Live and VoD) • VoD and IPTV • Triple-play and IPTV • Hybrid models The main targeting for all these commercially valuable business models is churn reduction, cost reduction, revenues increase and users’ satisfaction through QoS/PQoS improvements. For ADAMANTIUM that is the exact point of interference: evolving IPTV to a service delivering and adding value to the end user through QoS/PQoS improvements which will increase users’ satisfaction. The two basic business modeling aspects of IPTV Business Model: The IPTV Operational model and the IPTV Profit model have been described and analyzed in details in the interim version of deliverable for the Task 6.3 (D6.3I, March 2009, chapter 3.2). 3.2.2.1 The ADAMANTIUM case over Mobile IPTV Nowadays, there are several serving mobile operators, who might influence, promote and support the combination of cellular and emerging IPTV technologies in providing mobile IPTV services as requested by consumers (lower cost, higher quality). New business models and core strategies for mobile IPTV services are surfacing. ADAMANTIUM, within the existing mobile IPTV technological, marketing and business framework, considers the case where the existing mobile operators are willing and ready to invest for moving towards IPTV service offerings through their wireless/mobile access networks. As a result, existing business models formed to support traditional mobile services, such as voice, video, internet, SMS, MMS, will be maintained but enriched with the ADAMANTIUM proposition this time aiming to quality improvements of the offered IPTV service (live IPTV and VoD). ADAMANTIUM focuses on examining the case of mobile IPTV under two different service and business cases: Case A: Live IPTV Streaming to Mobile case The IPTV streaming to mobile case is a video-multimedia service provided to people on the move using a handheld screen, such as a mobile phone. This service may include major national or regional TV channels and radio programs, as well as local channels and TV for closed user groups, or even other content and service providers-operators. Broadcast of IPTV streaming can be viewed everywhere, in the street, at home or in a car, with satisfactory cellular network coverage in the area. Additionally, there are cases of local content available in specific areas such as public places (train stations, hotels, trade fairs, cafés, etc.) either for entertainment or for marketing/advertising purposes. The IPTV streaming to mobile service uses different mobile networks as a result of broadcasting, telecommunications, cellular and convergence cooperation. The main business entities for IPTV streaming to mobile case are given in Table 3-1 along with the marketing actors’ interrelation. Copyright © ADAMANTIUM D6.3-F Business Plan Page 37 of 87 Table 3-1 Business entities for IPTV streaming to mobile Business Entity Role B2C Content provider Market Actors SP B2C Network connectivity provider Content consumer Digital TV providers collaborating with the promoter SP or NP CC Access Network operator (s) NP Transport network operator (s) NP Content source CP License authority The promoter Citizens living in the target market The promoter and / or NPs collaborating with the promoter The promoter and / or NPs collaborating with the promoter Digital content providers collaborating with the B2C service providers/ promoter External actor (s) The services which are anticipated to be included in the IPTV streaming to mobile case are listed in Table 3-2. The table also refers to the anticipated revenue sources as well as the benefits / drawbacks of selecting ADAMANTIUM for implementing a key process associated to the service. Table 3-2 Anticipated service portfolio, potential revenue sources and relevance to ADAMANTIUM Case: IPTV streaming to Mobile ADAMANTIUM system components Provided Service 1 2 3 Free TV channel streaming Pay TV channel streaming Interactive services for TV (e.g. gambling/ voting) Potential revenue source Advertising commercials fees Fees: Subscription per view per month Fees: Subscription per use Workflow process Browsing of available broadcast content services Select and view broadcast audio and video content Control QoS and provide superior quality Browsing of available broadcast content services in available networks Select and view multicast audio and video content Control QoS and provide superior quality Delivery of interactive content User interaction with content ADAMANTIUM components used for/ during a process MSRF, TAM TAM, MSRF, MCMS TAM, MSRF, ADAMANTIUM DiffServ/MPLS, MCMS MSRF, TAM TAM, MSRF, MCMS TAM, MSRF, ADAMANTIUM DiffServ/MPLS, MCMS MSRF TAM Case B: IPTV on Demand to Mobile (the IPTV VoD) case IPTV on demand to mobile is an interactive TV and VoD service targeting residential user. The service is delivered to normal TV set-top boxes and/ or PCs/ TVs or Mobile terminals using residential gateways and an appropriate wireline or WiFi home network. The service includes the major national or regional TV channels/ sports channels, as well as a wide selection of videos and music. IPTV Networks should be deployed in a way that optimizes the needed content delivery. This takes into account final consumer’s locations, VoD Server storage capabilities, VoD Server streaming capabilities. Additional services are associated to IPTV networks such as Network Personal Video Recorder (NPVR) or Network Time Shifting (NTS). These services allow the end user to record broadcast delivery content; this record can be scheduled (NPVR) for ulterior usage or instantaneously started for pausing purposes, both of them providing flexibility for final user. Copyright © ADAMANTIUM D6.3-F Business Plan Page 38 of 87 ADAMANTIUM will focus on the case of IPTV VoD service over mobile, where the requested video is delivered on the consumers’ mobile device no matter the location (home, street, train, mountain etc). The main actors for IPTV on demand (VoD) to mobile case are given in Table 3-3 along with the marketing actors’ interrelation. Table 3-3 Business entities for IPTV on demand to mobile Business Entity B2C Content provider Role Market Actors SP The promoter and or business aggregators) of the promoter users (content B2C Network connectivity provider Content consumer Access Network operator (s) SP The promoter CC NP Transport network operator (s) NP Content source CP Subscribers of promoter The promoter The promoter and or parties collaborating with the promoter The promoter plus those collaborating with the promoter (to be identified by the promoter) The promoter for own content, those to be indicated by the collaborating services providers and content sources License authority The services anticipated to be included in IPTV on demand to mobile case are listed in Table 3-4. The table also refers to the anticipated revenue sources as well as the benefits / drawbacks of selecting ADAMANTIUM for implementing a key process associated to the services. Table 3-4 Anticipated service portfolio, potential revenue sources and relevance to ADAMANTIUM Case: IPTV on Demand (VoD) to Mobile ADAMANTIUM system components Service 1 IPTV Video On Demand Delivery Potential revenue source Subscription of content consumer Workflow process ADAMANTIUM component used for/ during a process Content provisioning & validation at content delivery network MSRF Offline content provisioning at VOD Servers sites MSRF End-to-end QoS enabled streaming session management VOD streaming at VOD servers sites Network Personal Video Recorder (N-PVR) at VOD Servers sites Network-Time Shifting (NTS) at VOD Servers sites MSRF, MCMS, TAM MSRF MSRF, TAM MSRF, TAM 2 Network Personal Video Recorder (NPVR) Subscription of content consumer NPVR at the user MSRF, TAM 3 Network-Time Shifting (N-TS) at VOD Servers sites Subscription of content consumer NTS at the user MSRF, TAM Copyright © ADAMANTIUM D6.3-F Business Plan Page 39 of 87 3.3 SWOT with ADAMANTIUM influences 3.3.1 Mobile VoIP It can be derived from the SWOT analysis for mobile VoIP which follows in Table 3-5, that mobile VoIP is a novel service, which offers many market opportunities in contrast to the traditional voice services. These market opportunities and service capabilities are further enhanced through the value added on by ADAMANTIUM. For successfully achieving this, ADAMANTIUM has considered the current business and market perspective of mobile VoIP and has consolidated and harmonized them within ADAMANTIUM’s overall aims and scope. Table 3-5 Mobile VoIP SWOT with ADAMANTIUM influences (By Mobile operators (acting as Service, Network and/or Content Providers) and Consumers Perspective) STRENGTHS WEAKNESSES • • • • • Mobile Internet along with services such as VoIP is not yet mass market • Lack of integrated services and policies • Time lag due to standardization processes and continuous evolution of IMS platforms • Interoperability issues between Internet services and PSTN/cellular networks • Internet mobile marketing is not developed in a degree that will boost a usage need for the provided services • High cost of mobile devices capable of offering mobile internet and VoIP • Issues of QoS and Reliability • Mobile VoIP services provided by operators without their own network/infrastructure are provided on a best effort basis only • Dependence of Mobile VoIP availability of service upon factors such as strength of mobile signal reception, roaming policies, mobile internet services and third party service providers • • • • Mobile VoIP provides portability advantage Mobile communication at lower costs New business models developed New market opportunities facilitated and reinforced by a continuous stream of accurate and valuable information at lower cost and at a mobile format Mobile VoIP comes with a host of advanced communication features at no extra cost Mobile Internet is speeding up and consumption of content along with VoIP services is growing due to enhanced technology Flat-rate pricing packages attractive in an increasingly complex multimedia environment combined with the possibility of a single and/or fixed bill per month for telecommunications Mobile VoIP helps service providers achieve economies of scale by reducing their investment, capital and operating costs ADAMANTIUM add-ons to Strengths • Existing business models add quality aspects in their value chain and become QoS and PQoS aware • Higher consumer satisfaction as a result of improved quality of services • Innovative services (with higher quality) attract new users and increase retention levels on existing ones • Achieved economies of scale for mobile operators are reinforced by innovative technologies • New services and pricing packages are offered by mobile operators and market competition becomes healthier • Optimized quality of experience and service ADAMANTIUM improvements to Weaknesses • • • • Major issues of QoS and Reliability are overcome Improved QoS form a new basis for Internet Mobile marketing development Well established mobile operators are becoming interested in offering quality improved and reliable mobile VoIP services Improved mobile VoIP services offered by more operators will increase demand for VoIP-enabled mobile devices leading the high cost of these devices to fall Copyright © ADAMANTIUM D6.3-F Business Plan Page 40 of 87 OPPORTUNITIES THREATS • New revenue opportunities and greater choice of service and communication features • Advancing the already developed Internet Model and Mobile VoIP communication by establishing new standards • Interoperability and combination of cellular and WLAN • Integration of various other value added services offered by upcoming technological advances in the Mobile Internet and VoIP framework • Enhanced innovative potential through convergence of mobile services, internet, VoIP and technology • Resistance by incumbents and established operators, which see Mobile VoIP as a threat to their established PSTN/Mobile revenues • Regulatory uncertainty and lack of commonly accepted legislative framework • VoIP spam or SPIT (Spam over Internet Telephony) • Mobile Phone fraud known as Vishing • Challenger actors such as virtual VoIP operators and third party client providers • Lack of a consistent experience of service and quality across different providers • Consumers’ lack of trust mainly because of insufficient protection of their communication content ADAMANTIUM add-ons to Opportunities • New revenue opportunities and greater choice of service based on quality and reliability • New standards of QoS are set • New market dynamics and potential for the creation of new marketing processes • Opportunities for increased market penetration and new market targets/segments • Modification of the 4Ps (Product, Price, Promotion, Place) of the offered services leads to new market opportunities • Flexibility of pricing packages leads to increased competition which favors the end user ADAMANTIUM improvements to Threats • Established operators will view Mobile VoIP as an opportunity to satisfy market demand for a new, reliable and lower cost voice communication service • New improved quality standards will create a consistent base for experience of service and quality across different mobile operators • Increase in consumers trust related to quality and reliability of VoIP service over mobile Moreover, the adoption of the mobile VoIP as a service by the mobile operator includes many marketing strengths, among which is the mobile communication at lowers costs in relevance to the existing voice services, reduction of operational costs and more features without extra cost for the user. So, it seems that mobile VoIP will be the definite service selection for the future mobile operator, subject to specific weakness and threats, which are mainly focused on integration delays due to standardization processes and continuous evolution of IMS platforms, on issues of QoS and on the fact that mobile VoIP services are provided on a best effort basis only. Thus, due to the lack of QoS mechanisms that will guarantee an acceptable level of QoS during the service provision of the mobile VoIP, the respective adoption of the mobile VoIP by the respective mobile operators has been postponed. IMS standard gains substantial importance in Europe, as fixed and mobile carriers step up competition and strive to meet the requirements of end users. According to research firm Frost & Sullivan, the success of IP telephony services has brought about increased emphasis on standards based on the third generation partnership project (3GPP). According to estimates, the deployment of IMS will facilitate the offering of differentiated services, as well as will lead to a reduction in application costs and increased revenues. Frost & Sullivan believes future applications will likely be developed to address specific end user segments (i.e. user-centric), and that operators will succeed by entering into partnerships to address these specific needs. The ADAMANTIUM project sets the basis towards these estimates by proposing, developing and evaluating an enhanced user-centric IMS, which aims to satisfy the perceptual requirements of the user during the reception/consumption of a multimedia service. Copyright © ADAMANTIUM D6.3-F Business Plan Page 41 of 87 3.3.2 Mobile IPTV As shown by the SWOT analysis of mobile IPTV, Table 3-6, mobile IPTV is a novel service, which offers many innovative market opportunities in contrast to the traditional TV and internet TV. These market opportunities are further enhanced by the value added as proposed by ADAMANTIUM. Table 3-6 Mobile IPTV SWOT with ADAMANTIUM influences STRENGTHS • Innovative mobile service which reinforces the market position of mobile operators • Convenience of live streaming and/or VoD when on move • Flexibility and independence to users • Provision of a service even at places where landlines (communication, power) do not exist • Key Market Players involved are ready to exploit new mobile services / products • Mobile users are becoming more and more familiar with audio visual services and ready to pay for content and QoS • Market Players in the mobile business framework are willing to provide value to services and users • New services lead to the creation of new pricing models which drive the content consumption increase • Increase in the sales of mobile devices with Internet/3G capability • Mobile IPTV attracts new consumers and increase levels of loyalty • Filling idle time while on move ADAMANTIUM add-ons to Strengths • Existing mobile IPTV business models add quality aspects in their value chain and offered service while becoming QoS and PQoS aware • QoS and PQoS aware mobile IPTV service helps mobile operators to achieve economies of scale • Higher consumer satisfaction as a result of improved quality of services • Optimized quality of experience and service • More marketers, retailers and publishers are recognizing need for mobile presence and more sophisticated mobile devices • Promoting the increase in sales of mobile devices with IPTV enabled features • Improving financial ratios like ROI for mobile operators • Enhanced personal viewing experience WEAKNESSES • Service too complex for some mobile users to use or configure • Cost for using services such as mobile IPTV is still high • High cost of mobile devices supporting mobile IPTV • Mobile ITPV not a mass market yet • Not satisfactory QoS for mobile IPTV • Mobile device characteristics (size, screen, analysis, keypad) and drawbacks • High dependence on quality of mobile network and reception conditions per location • Recession/debt has slowed investment and has influenced consumers spending and habits • The fragmented market of mobile services, devices and accessories • Quality of delivery often gets squeezed by Content and Service priorities • Non concrete and standardized mobile IPTV business models • Usability of services, content and applications still an issue • Standard issues still not fully addressed • Limited access to investment funds for such innovative services ADAMANTIUM improvements to Weaknesses • Major issues of QoS for mobile IPTV are overcome • Improved QoS form a new basis for Mobile multimedia marketing • Improved mobile IPTV services offered by more operators will increase demand for IPTV-enabled mobile devices leading the high cost of these devices to fall • Mobile IPTV service demand increases and existing business models are becoming more concrete and standardized. Copyright © ADAMANTIUM D6.3-F Business Plan Page 42 of 87 OPPORTUNITIES THREATS • New business models will drive growth in the mobile communication markets and IPTV markets • Investments to new innovative services (e.g. mobile IPTV) • Market is open for new entries and players willing to use edge technologies • Mobile multimedia content (Live, VoD) becomes a demand from consumers • Increased user value and QoS • Technology/industry/quality push in place • New more sophisticated mobile devices enabling content retrieval and displaying • Device manufacturers have the opportunity of diversifying their products • Standardization activities and security issues are promoted • Mobile is becoming the future of communications while offering mobile entertainment features similar fix/ground ones like to TV, Video, live streaming • Facilitating users access to content • Consumption of content is growing • New business roles and models may restrict some actors or affect existing market dynamics • Content owners (records / media firms) are sceptical in adopting new business models • Abuse of service and content • Security and protection issues are slowing the exploitation of the market • Users’ actual needs which narrow down the type/variety of the content actually demanded (e.g. high interest only for live sport events, news) drives down operators’ interest for further investment in such technologies • High dependence on mobile operators’ services/technology/infrastructure and features of mobile devices • Universal Service is still not a reality for a majority of consumers ADAMANTIUM add-ons to Opportunities ADAMANTIUM improvements to Threats • Improved entertainment methods lead to new business models and revenues • Mobile operators become interested in offering quality improved mobile IPTV services leading to investment increases • New revenue opportunities and greater choice of service based on quality • Increased user recognition of value • Flexibility of pricing packages leads to increased competition favoring the end user • Improved financial indicators/ratios will lead to more investment initiatives • Reliability and QoS standards are set • New potential for mobile marketing and advertising with high and reliable QoS • New rich content along with QoS will increase user’s trust-satisfaction their mobile operators • Increase in consumers trust related to quality and reliability of IPTV service over mobile will raise demand for such services and the need for convergence of services, technology, infrastructure and products among mobile operators, content providers and mobile devices manufactures will be achieved • Established mobile operators will view Mobile IPTV as an opportunity to invest and satisfy market demand for a new, reliable and lower cost type of multimedia entertainment while user being on move • Improved standards and services will create a consistent base for experience of service and quality across different mobile operators. The key message remains the same as in the current market of VoIP and IPTV (mobile or non-mobile) services, but now its interpretation is much more complex: delivering value is vital for market and business success. End users of converged digital services will only use, and pay for, services which they perceive that deliver value to them. They will switch to a rival service if they perceive greater value in that, or drop the service altogether. It is the key for market players in the converged digital market to understand what end users perceive as delivering value, and which part they have to engage in for successfully delivering that value to the end users. Copyright © ADAMANTIUM D6.3-F Business Plan Page 43 of 87 According to ADAMANTIUM business proposal mobile operators will offer an intelligent and PQoSaware mobile VoIP and IPTV service, which will adapt in real-time its perceived level of QoS, in order to provide optimized quality of experience. For mobile operators this newly formed business model, adapted to ADAMANTIUM proposal, will entail to increased market penetration, additional market share, higher quality of innovative offered services and after all increased revenues, improved financial ratios and higher profitability. 3.4 ADAMANTIUM Business Model Analysis and Evaluation In economics and business, a network effect is the effect that a user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service increases as more people use it. The most classic example is the telephone. The more people owning mobile phones, the more valuable the mobile phone and its services are to each owner. The more people are subscribers to a mobile operator, the more powerful this operator becomes and similarly powerful become the offered services for the rest mobile users. In fact, the existence of these types of networks and business model discourages dominance of the market by one company, as it creates pressures which work against one company attempting to establish a proprietary protocol or to even distinguish itself by means of product differentiation and offer of innovative services11. Figure 3-7, shows the ADAMANTIUM business model entities. Figure 3-7 ADAMANTIUM Business Model entities According to the previous figure, ADAMANTIUM business model advances and evolves the already existing business models of mobile operators and proposes an innovative business model which although maintains the fundamental characteristics of the network effects business model (the most characteristic model of the communications businesses) it also combines and exhibits dominant enhancements and characteristics of: • • 11 The subscription business model (a business model where a user must pay a subscription fee to have access to the product/service). In ADAMANTIUM case, a mobile operator will increase its subscribers’ figures by offering innovative and quality aware services. The loyalty business model (a business model used in strategic management in which company resources are employed to increase the loyalty of customers or customer retention). A typical example of this type of model reinforced by ADAMANTIUM is quality of offered service leads to customer satisfaction, which leads to customer retention, which leads to profitability and lower churn rate. An Overview of Network Effects, Arun Sundararajan Copyright © ADAMANTIUM D6.3-F Business Plan • Page 44 of 87 The razor and blades business model (the concept of either giving away a product/service for nothing or charging an extremely low price to generate a continual market for another, generally complementary, item or service). ADAMANITUM offers a mechanism for achieving QoS in innovative mobile services like VoIP and IPTV without forcing mobile operators to change their already applying pricing strategy. The mobile operators may select not to charge a premium for the improved quality if their offered VoIP and IPTV services aiming to generate a continual market for services related to VoIP and IPTV (eg advertising, live events broadcasting, VoD). ADAMANTIUM apart from its technical dimensions also focuses on the business and operational transformation objectives. It broadens the scope of business and operation processes while defining mobile operators’ steps for achieving operational excellence on quality delivery. ADAMANTIUM business framework bases its proposed business model evolution on a methodology which reviews and revaluates every process currently been part of the operator’s chain of operations and business requirements (Figure 3-8). Figure 3-8 ADAMANTIUM Business and Operational Transformation steps to be undertaken by mobile operators 3.4.1 Analysis Framework: Assumptions, Market, Impacts, Strategies, Challenges Pressures to drive revenue growth, emerging content delivery technologies and promising subscriber uptake in various markets has generated interest in mobile VoIP and IPTV services. Mobile service providers with well established networks have an opportunity to increase value from these investments and derive competitive strength. The ADAMANTIUM business framework provides a perspective on positioning PQoS-aware mobile VoIP and IPTV within an overall market strategy and business model to increase the likelihood of commercial success. Assumptions The basic assumption is that the ADAMANTIUM business model, which is presented and evaluated through this document, focuses on and examines the mobile services of VoIP and IPTV alongside with the mobile network operator as the key business actor of the value chain and services of the mobile communications sector. However, maybe, not all the content provided by mobile operator belongs to him, and therefore different service deployment scenarios have to be taken into account. Copyright © ADAMANTIUM D6.3-F Business Plan Page 45 of 87 Scenarios – Assumptions a. There is a content aggregator/provider able to provide packaged content that will be delivered from several mobile operators to end users. b. The network resources for the realization of the service will be a network deployed by a broadcasting infrastructure provider up to the mobile operator and then the mobile operators’ network/infrastructure is used to reach end mobile users (with ADAMANITUM proposed PQoS and QoS features). c. A mobile operator serving a number of “mobile portals” which interact with service providers of their choice to formulate the end content package they shall promote to end mobile users (with ADAMANITUM proposed PQoS and QoS features). Although individual strategies and characteristics of mobile operators differ, successful operators display many of the following traits: • • • • • • • • • Mobile Operators are market leaders for one or more elements of the bundle of services they offer (e.g. product services, pricing policies, innovations). Mobile Operators have good understanding of user behavior and needs. Mobile Operators have fundamental knowledge for good customer service. Mobile Operators select to market according to brand strengths. Mobile Operators keep their pricing policies simple, attractive and continuously adapted to the surrounding socio-economical and technological environment dynamics. Mobile Operators are keen on developing core competencies that match their business/marketing strategies and are in alignment to the current technological trends. Mobile Operators know well how to segment their customer bases and apply targeted marketing according to consumer characteristics, needs and environment conditions. Mobile Operators continuously re-examine new opportunities. Mobile Operators invest in innovative technologies aiming to customer satisfaction and retention. For creating a sound basis for evaluating the ADAMANTIUM business framework and model in the coming sections, several assumptions (Table 3-7) are made based on the current market conditions, trends and forecasts of several environment factors affecting the VoIP and IPTV mobile market. Table 3-7 ADAMANTIUM Business Framework/Model Analysis Assumptions Market Forces Macroeconomics Economic Growth Assumptions Western European economic growth was negative in 2009 but will recover gradually Technology-New Developments New products and Increasing numbers of services operators will increase their product and service range to better satisfy current market trends and consumers needs Network upgrades Mobile operators will continue launching new services and upgrades for existing users over time to keep up with competition and new trends Impact to ADAMANTIUM Business proposal Moderate. Mobile communication has become a must-have for most users, but will increase price erosion, as consumers want to limit their expenses High. This will increase the choices for the end user and more customers will find a product that better fits to their mobile usage style/needs High. Network upgrades will typically not help operators to increase ARPU, but it can help retaining customers and offering more quality demanding services Copyright © ADAMANTIUM Certainty of Assumption 4/5 5/5 4/5 D6.3-F Business Plan Market Forces Bundling of service Mobile coverage Mobile Devices Page 46 of 87 Assumptions Increasing number of mobile operators will bundle new services like VoIP and IPTV with already existing services Mobile coverage not 100% in all areas with all technologies High cost of devices capable of supporting innovative services Market Characteristics Mobile Market Mobile market will further Concentration consolidate Mobile Market Maturity Governmental Influence – Regulations Mobile VoIP Mobile IPTV Pricing Mobile communications market has already become a well established and mature market Governments will step up their efforts as regulator, coordinator, promoter, and end user of new mobile services Mobile VoIP service is becoming widely available Mobile IPTV service is becoming widely available Average prices for mobile users are expected to decrease through competition, bundling and a growing share of new low pricing packages offering new services Impact to ADAMANTIUM Business proposal High. For many mobile users, this will increase the attractiveness of a mobile device and usage of the new mobile services Low. Mobile communication coverage has increased significantly and almost everywhere all offered services are accessible High. The cost of mobile devices ready to support high PQoS VoIP and IPTV services will fall as demand increases and such services will be offered in the market by more and more mobile operators High. As market consolidates, remaining players will be able to operate more efficiently and price competition will lessen High. Market growth will slow as penetration has increased and need for new services to boost the market is highly needed Moderate. This will increase and optimize supply and demand and increase awareness High. Mobile VoIP will increasingly become a key driver behind mobile services evolution and quality awareness High. Mobile IPTV will increasingly become a key driver behind mobile services evolution and demand for high quality will raise quality request and awareness High. Affordability remains a key driver for mobile services uptake Certainty of Assumption 4/5 3/5 5/5 4/5 5/5 4/5 5/5 5/5 4/5 Market Environment and Impacts leading to ADAMANTIUM Marketing Mix Evaluating the attractiveness of launching a PQoS aware mobile VoIP and IPTV service requires consideration of specific market dynamics and business models. New technologies and evolved Copyright © ADAMANTIUM D6.3-F Business Plan Page 47 of 87 business models present significant opportunities and competitive threats for established mobile operators. Some of the key questions which have been addressed when evaluating the business attractiveness of ADAMANTIUM proposal include: • • • • • Are there new attractive customer segments where the currently available VoIP and IPTV services cannot penetrate due to QoS issues? Can users find attractive improvements in acquiring the same content but in higher quality as proposed by ADAMANTIUM? Can a viable revenue steam be secured through the establishment of new means of marketing over mobile services like targeted IPTV advertising? Does revenue sharing represent an opportunity to accelerate adoption and create value? Can a value constellation (a network of value chains) be constructed from the evolution of the existing business models and processes to improve the attractiveness of such an investment? ADAMANTIUM proposal poses a ‘yes’ to all the above hypothetical questions and based on innovative and enabling technologies, aims to establish, through its business proposed framework and the evolution of currently used business models by mobile operators: • • • • • • • • • Strong cooperation with all market actors to ensure that current market requirements and business plans are sufficiently supported by the enabling technologies developed and proposed. Strong cooperation in researching solutions for enabling technologies to provide better exploitation potential among all interested business actors. The evolution of currently successfully established business models towards the convergence of the different market segments. Dissemination and training of relevant actors to promote the ADAMANTIUM proposed technologies to the dynamically newly formed and continuously changing business, marketing and socio-economical environment. Sound foundations for achieving economies of scale, revenues increase and profitability attainment by those actors who become part of the new business value chain where innovative services such as mobile VoIP and IPTV are not just offered to end users but they are also PQoS and QoS standard enabled. Standardization which becomes the key to enable the wide adoption of such technologies. The ability to offer users better service quality based on real-time content adaptation mechanisms, through the adoption of the MCMS system. Competence in the mass market and increased prestige of the brand name. Especially since mobile telecommunications market is highly competitive and operators are competing heavily for the user and try to bundle services and lower the prices or provide new types of subscription and competing with fixed-broadband players for provision of Internet access (and enhanced communications services) to PC users, via 3G modems or integrated laptops is also a key challenge for mobile network operators. The ability to attract potential new users which up to now showed lack of interest for services like VoIP and IPTV over mobile. The newly formed business model as proposed by ADAMANTIUM also creates a new Marketing Mix for the mobile operators through which new market challenges are met and new targets are attained: ADAMANTIUM Marketing Mix • Product An intelligent and PQoS-aware service, which is capable of adapting in real time its perceived level of QoS, aiming to provide optimized quality of experience in mobile VoIP and IPTV offered services. In Particular, ADAMATIUM proposes an innovative IMS-compatible Multimedia Content Management System (MCMS) focused on performing a dynamic cross layer adaptation for the optimization of the user experience in terms of the delivered PQoS level for IPTV and VoIP Copyright © ADAMANTIUM D6.3-F Business Plan • • • Page 48 of 87 services, two of the most promising multimedia services in terms of quality of service especially for mobile communications. This multimodal management system will be applied in an integrated and coherent way across all the network layers and delivery-chain nodes based on a user/customer-centric approach rather than the traditional network QoS-oriented one. Towards this, the proposed management system will make use of advanced IMScompatible PQoS and NQoS monitoring and adaptation mechanisms across the network delivery-chain, thereby significantly enhancing the current IMS management functions by providing necessary perceptual awareness capability. Novel perceptual mapping frameworks between the NQoS-related monitored parameters and the delivered PQoS level will be researched for both IPTV (live IPTV and VoD) and VoIP (voice/video call) services. Based on the monitoring data, a decision engine (the Action Engine Module, or AEM) will initiate a dynamic cross layer adaptation procedure, which will extend from the service generation entity to the user terminals. QoS control per subscriber and per service basis permits an accurate bandwidth management allowing for optimal utilization of network resources. It also makes it possible for operators to set relevant QoS for high revenue generating services, assuring availability of required network resources. Place/Distribution Mobile network operators along with the corresponding service providers already have a wellestablished network of sales points and agents which can accommodate and facilitate the promotion and selling of ADAMANTIUM achievements. No additional changes are required in the existing distribution network and used techniques. Similarly, local dealers who in the meanwhile should have been trained to become familiar with the new quality improved services of mobile VoIP and IPTV may facilitate the entire distribution-advertising process. Price Although pricing ingredient of a marketing mix is initially based on the equipment cost and platform modules needed for operation and service offering, it is the selected pricing strategy that forms the entire pricing framework of the particular service exploitation. The pricing models to be adopted by the market exploitation of ADAMANTIUM proposal should contribute towards balancing prices and demand, meaning that mobile operators as service providers should define the optimum strategy between charging high prices to increase margins, but not so high as to reduce the overall demand. This pricing strategy could also include the identification of the most profitable pricing plans for the services to be offered: monthly fee, only by usage, packages of minutes, flat rates. Regarding flat rates, in pure mobile services, this pricing type has already been introduced by some operators, and the trend towards more flat rates pricing for all kinds of services is increasing. Promotion Mobile network operators already posse a well-established network of sales points and agents which can accommodate and facilitate the promotion of ADAMANTIUM proposed services at very low extra cost. Furthermore additional ways of promotion might be chosen like Website/Internet promotion, advertising means, and participation in several events of commercial interest as conferences, meetings, exhibitions. Challenges and Strategies ADAMANTIUM proposed business framework and model targets to the fulfillment of the majority of the current communication market challenges in the mobile sector, irrespectively of the business actor, among which are: • • • • • • • • Dealing with the increasing competition in the mobile communication landscape Fixed-Mobile services transition Commoditization of Voice Declining ARPUs Need for new substitutes to existing services/products Need for clear boundaries among media, telecommunications and entertainment Abuse of service and content Lack of quality standards. Copyright © ADAMANTIUM D6.3-F Business Plan Page 49 of 87 ADAMANTIUM business model will give the chance to mobile operators, through quality of service for mobile VoIP and IPTV to leverage competitive strengths. Many service providers evaluate the business potential of mobile VoIP/IPTV platforms on the basis of more efficient and convenient content distribution. However the primary value chain driver is consumer content along with quality perceived standards. Deployment of new content distribution technologies as a substitute for established distribution may not produce an attractive return. Consumers value content and its perceived quality, and pay for it with their time (free-to-air), duration of usage viewing fee or a subscription. Mobile operators generally need to acquire not only the capability to source, package, manage and distribute content, whether voice or multimedia, but also to do it while specific quality standards (QoS, PQoS) are achieved. That is the ultimate target where the ADAMANTIUM proposal aims if viewed by its business perspective. While Network quality issues are a major concern for network operators, the quality of the services delivered to the end users, as it is perceived by the subscribers, constitutes a challenging area for the mobile operators as it imposes the need of adopting all the necessary mechanisms and techniques in order to enhance user perception and increase revenues by attracting additional subscribers. In order for an operator’s offering to be truly successful, there appears to be an emerging need towards combining managing networks and users’ needs at the same time. This scheme balances both-side interests via a suitably defined network merit function and a user– operator negotiation model. The challenge in this case is to find an optimal policy that maximizes the network revenue without violating QoS constraints. Mobile operators must actively monitor and manage the experience their customers have while using their services. A high-quality experience will influence positively on the customer’s view of the operator brand and enhance its value. ADAMANTIUM is well aware of such challenges and takes all the actions so as its business context to be able to provide the conditions for a high quality experience of mobile VoIP and IPTV. Several aspects which are taken into account by the business perspective of ADAMANTIUM for the proposed PQoS-aware cross layer adaptation techniques and affect the formation of corresponding strategies are: • • • • • The Costs of providing the service to the users along with quality standards The costs of providing a service to users may be classified to both direct and indirect costs, considering that apart from the investment that is strictly related to the specific service, other issues such as joint ventures and/or IPRs may be raised. The Pricing The pricing models to be adopted should contribute towards balancing prices and market demand so as to remain attractive for end consumer. There are several ways for mobile operators to develop new incremental revenue streams from pursuing new pricing strategies through newly proposed business network models, as the one proposed by ADAMANTIUM, like linking pricing policies to offered quality, wholesale access to mobile network services, chargeable APIs (Application Programming Interface), revenues sharing with third parties like content providers, service mash-ups where offered services are billable like advertising, online surveys, live events broadcasting. User profiles Depending on the Mobile Operator’s strategy, the exploitation of the possibilities offered by the MCMS system could be adapted according to specific user categories and profiles. There is the possibility of “prioritizing” users according to the group they belong to, as defined by the operators. These groups may refer to business or non business users as well as to tariff classes. Users’ personal preferences as well as their perception of the value of certain services influence also their willingness to pay for the provision of such services. More specifically, in case users do not find high quality multimedia services appealing, they will not be eager to be charged with a higher amount, compared to their regular subscription, in order to have better quality regarding the aforementioned services. User density Areas with high user concentration and needs constitute a fertile ground for the provision of higher quality services as user demand in such areas is large enough to allow business feasibility. Business context of mobile operator Copyright © ADAMANTIUM D6.3-F Business Plan • Page 50 of 87 The business context includes the following items which are directly influencing the daily business of this business actor and its business process and strategies: o Ownership o Migration o Charging o Roaming agreements and continuity of high quality service delivery (through the mechanisms offered by the MCMS system) o Partnership and alliances o The types and number of actors available for cooperation o Business opportunities for providing connectivity, services or delivering content Mobile network-communication opportunities A holistic network deployment strategy to manage upcoming opportunities, like the ones posed by ADAMANTIUM, is adapted by the majority of mobile operators. o Mobile operators have to ensure that mobile networks are set up to cope with increasing demand and new technologies. Investments to boost speed and quality are necessary to ensure network competitiveness and to address the demands of new services and applications like VoIP and IPTV. Coverage is critical too. Today’s mobile users expect to exploit networks and offered services anywhere and anytime without quality “discounts”. o Mobile operators must also look to add intelligence into their cores. Intelligent shaping of traffic will be a fundamental strategy to help deliver optimum utilization levels, to help segmenting users effectively, to develop QoS-based services as ADAMANIUM proposes and to introduce more flexible and real-time billing and payment propositions/platforms. o The network and connectivity in itself is not just a service but an enabler. Operators are evolving their strategies to open up their networks so they can move into an era of service enablement and service delivery for upstream third parties seeking to exploit their network assets (e.g. third party content providers for mobile distribution of IPTV content through the existing mobile operator networks). Although within this new business context, revenue sharing opportunities may provide the motivation to up-sell VoIP and IPTV mobile services to an existing customer base, this should also be considered as an opportunity to migrate away from existing business and delivery models. Applying business practices like bundling without the capability to flawlessly manage the new services as an integrated offer, may result in customer dissatisfaction, drive churn on the whole bundle, and result in revenue erosion. Mobile operators need to ensure that content revenues are protected when actions to meet ADAMANTIUM’s suggestions for market and business transformations are pursuit. For those mobile operators and service providers that carefully consider the evolution of their business models, risk sensitivities, and overall strategy to maximize competitive strengths, there is a high opportunity to compete effectively and grow shareholder value by adapting the new business framework of ADAMANTIUM for better promoting and supporting the quality of mobile VoIP and IPTV services. 3.4.2 STOF Evaluation Framework: Use of Cases-Scenarios ADAMANTIUM, as already stated in the previous section, proposes a business framework which advances and evolves the already existing business models of mobile operators. In specific, it proposes an innovative business model which although maintains the fundamental characteristics of the network effects business model (the most dominant business model of mobile communication companies) it also exhibits certain characteristics of: • • • The subscription business model, through ADAMANTIUM commercial exploitation where a mobile operator will increase its subscribers’ figures by offering innovative and quality aware services. The loyalty business model, since ADAMANTIUM reinforces the quality of offered VoIP and IPTV services fact that leads to customer satisfaction, to customer retention, and finally to higher profitability figures and lower churn rate. The razor and blades business model as ADAMANITUM offers a mechanism for achieving QoS in innovative mobile services like VoIP and IPTV without forcing mobile operators to Copyright © ADAMANTIUM D6.3-F Business Plan Page 51 of 87 change their already applying pricing strategy since it will generate a continual market for services related to VoIP and IPTV (e.g. advertising, live events broadcasting, VoD). Among the different actors in the value chain of VoIP and IPTV, mobile operators have particular interests in developing quality enhanced and aware services over IP, in order to compensate for the decreasing revenues in their traditional services/markets and target at new markets. By leveraging their brand equity they might be able to offer attractive bundled products and create a renewed consumer loyalty not solely based on a subscription. Also, their assets can be leveraged to transform the multiple specialized networks into a cost efficient network, as a step in the upgrading of their networks to next generation networks. Mobile operators are the new entrants in the VoIP and IPTV market and are aiming to capture a fair amount of market share. 3.4.2.1 STOF Framework of Analysis In this section, we will use the STOF method (STOF stands for Service, Technology, Organization and Finance and it is a method offering a comprehensive way of modeling and analyzing a business framework) to evaluate ADAMANTIUM business model (Figure 3-9). In this evaluation process a distinction is drawn between the exploration phase and the exploitation phase. A scenario analysis is used to discuss issues that may be relevant in future exploration phases and to evaluate the robustness of the business model. The STOF model of analysis and evaluation was developed in 2003 and proved to be successful in terms of designing and evaluating the business model for mobile services, the analysis of e-commerce business models and description of critical design issues and success factors12. The business model concept in the STOF framework is defined as a blueprint of how a network of cooperating business entities and processes intends to create and capture value from new, innovative services. The STOF-model consists of four domains: • • • • Service domain Technology domain Organization domain. Financial domain Figure 3-9 STOF Model for ADAMANTIUM Business Model analysis 12 Faber, E., P. Ballon, H. Bouwman, T. Haaker, O. Rietkerk & M. Steen (2003) Designing business models for mobile services. Copyright © ADAMANTIUM D6.3-F Business Plan Page 52 of 87 Each of these domains constantly interacts with the others and is affected by external factors like: • • • Market dynamics Technological advancements Regulatory framework. Based on this generally defined STOF model and its dynamics, this section analyzes the ADAMANITUM business model both externally (influences by external forces) and internally (four domains analysis). The exploration phase implies mobile operators’ behaviors characterized by search, discovery, experimentation, risk taking and innovation, while exploitation implies behaviors characterized by refinement, implementation, efficiency, production and selection of offered services. Starting the analysis the external forces that influence the business model characteristics and attributes will be presented. These include the technology drivers for VoIP and IPTV, market dynamics, and regulatory conditions briefly presented by the STOF framework of analysis. Technological drivers for VoIP and IPTV • • • • Innovative mobile communication advances and technologically enhanced mobile devices. An increase in effective mobile distribution capacity. The older capacity of mobile networks was not sufficient to deliver streaming video and audio service with certain quality. An increased ability to process user feedback via recently developed, innovative technologies that increase the feasibility of interaction even when on the move. Recent technology developments make interaction more feasible in the mobile environment. The return channels, carrying messages from viewers to service providers, create possibilities to develop new, tailored and personal services for end-users and new revenue models for mobile operators like interactive advertisements. An increase in storage and processing capacity controlled ensure quicker innovations in the application layer, regardless of transmission bottlenecks. Market-related drivers and conditions • • • Growing usage of mobile services. Growing market demand (Western Europe has proven to be one of the world’s most vibrant markets with regard to mobile VoIP and IPTV). A convergence of voice, internet, mobile services, information, telecommunication and TV industry that leads to fiercer competition but also to lower prices and greater variety of offered services. Regulatory conditions The regulatory climate in the telecommunication sector has changed from old rules to new policy. Technology development gradually transformed a world of spectrum scarcity, dumb terminals and natural monopoly to a world of abundant channels, intelligent terminals and unnatural monopoly. The distinctions between different services platforms are largely blurred due to digitization, mobility and therefore the distinctive regulations for different sectors, telecommunications, are gradually being removed. Already, the EU made a distinction between regulation covering the distribution and audiovisual content in the recently approved directive on audiovisual media. Technology, market and regulatory developments set the conditions under which the suggested ADAMANTIUM business model for mobile VoIP and IPTV is proposed to be developed given the current technological, market and regulatory framework. Based on the STOF model framework of analysis, the ADAMANTIUM business model of mobile VoIP and IPTV will be further evaluated in its exploration phase where critical choices in each of the four STOF domains will be analyzed, with particular emphasis on the tradeoffs and relationships between relevant design options. Service Domain Copyright © ADAMANTIUM D6.3-F Business Plan Page 53 of 87 Many mobile operators position VoIP and IPTV as services that directly compete on the mass-market with other mobile services such as mobile Internet. Mobile operators expect to be able to take advantage of their expertise and of consumer loyalty in the mobile market. They have to leverage their resources to increase the competitiveness of these services, and there are three ways to do it: • • • Bundling these services with other mobile services already provided and widely used Portfolio focusing on exclusivity or on a wide range of niche services Offering more value added services with higher QoS as proposed by ADAMANTIUM. Technology Domain Within the technology domain, there are the layers of architecture when it comes to offering mobile VoIP and IPTV over the mobile network. Technical analysis of this architecture is beyond the scope of this document but is worth mentioning that part of the technology domain of the ADAMANTIUM business model is the ADAMANTIUM project proposal of the innovative IMS-compatible Multimedia Content Management System - MCMS (focused on performing a dynamic cross layer adaptation for the optimization of the user experience in terms of the delivered PQoS level for IPTV and VoIP services). Organization Domain As already analyzed, key actors in the value network chain of mobile VoIP and IPTV services are considered including telecom/mobile operators, content providers, telecom equipment, middleware providers, advertisers and consumers. Telecom operators participate in and organize the entire value delivery process. A content aggregator can intermediate between content providers and the telecom provider. Advertisers can also be involved. Ownership of and control over successive stages of the value chain plays a decisive role in the way these services are marketed. Another relevant issue has to do with the extent to which the telecom provider wants to be involved in the production of content. Financial Domain Technical and service design choices determine the commercial exploitation cost of ADAMANTIUM project. For example, a high level of service availability requires a large investment in setting up to make sure there are sufficient sources at peak times and quality standards are maintained. Interactive services require financial investments to upgrade network equipment and to solve technical problems. The revenue models depend on revenue sources, for instance advertisement or flat rate models, and the accompanying pricing models. Revenue can then be calculated by the size of market and the expected market share. In the current mobile market, most mobile operators use a flat rate subscription model (monthly fee based on a contract), and they are slowly adopting pay-per-service models such as pay per view, pay per duration, as well as advertising in the case of VoD services of mobile IPTV. However, if more IPTV customized and personal services were available, a flexible pricing model would be more desirable and feasible to cover such characteristics like IPTV offering with quality standards or not. As can be concluded from this STOF model analysis (technology drivers for VoIP and IPTV, market dynamics, and regulatory conditions, as well as the four STOF domains) designing the ADAMANTIUM business model for quality optimization of VoIP and IPTV services is a complex undertaking because it is technically complicated and requires multiple actors to balance different design requirements. There are critical interdependencies between service design, technical architectures, organizational arrangement and financial performances. Mobile operators have to balance the requirements in these domains and take into considerations the external factors and strategic interests so as to make the appropriate decision on the business model design (or more specific on the business model enhancements that they have to make into their existing business models in order to adapt ADAMANTIUM proposed services). However these decisions have to be sustainable and in order to assess the sustainability of the proposed ADAMANTIUM business framework, we use cases-scenario analysis to understand the trade-offs in the exploitation phase. 3.4.2.2 Cases-Scenarios Analysis and Evaluation The following scenario analysis will help mobile operators to develop a better concept with regard to the sustainability and feasibility of the ADAMANTIUM business model. The scenario analysis uses Copyright © ADAMANTIUM D6.3-F Business Plan Page 54 of 87 four reference scenarios that focus on the telecommunication industry and have a similar time horizon and conditions besides the ones considered as the case variables. Based on these scenarios, we identify consumer attitudes and regulations related to industry and market structure as the most important uncertainties, and we will use them as variables in our case-scenario analysis. In addition, a distinction is made between sophisticated and regular users: • • Sophisticated users are fully aware of the advantage of new mobile products and services such as mobile VoIP and IPTV. They want to pay a reasonable price for customized/personalized services and they are willing to spend more on services that are characterized by quality improvements and efficiency. Simple (regular) users are more conservative when it comes to these new services. They are satisfied with conventional mobile services, prefer easy configuration and are price-sensitive. Bundling services at a discount is very popular among this group of customers. The mobile communication industry dimension on the one hand promotes a hands-off approach on the part of the regulators and domination of the market by mobile operators in the voice and TV market. On the other hand, regulators play the role of interventionist and may or not restrain the actions of the dominant market players. As a result, there are many players in the mobile market who are interested in participating in the ongoing events. These two dimensions result in four scenarios13. By using these scenarios as cases for analysis of the business framework for the ADAMANTIUM commercial exploitation, four scenarios are presented as evaluation frames by illustrating what kind of critical design issues and market conditions become relevant, influence and to what degree the exploitation phase of ADAMANTIUM business model and its attributes (Figure 3-10). Figure 3-10 ADAMANTIUM Business Model cases framework of analysis Scenario 1: Colossal Telecom Operators (Mammoth market condition) Under this scenario certain market and environment conditions are assumed: • • • • Modest economic growth No restrictive tariff regulations Users are sensitive to prices and ready to adopt innovative mobile services if offered at affordable prices Mobile operators are the main players capable of offering mobile VoIP and IPTV services 13 http://eurofound.europa.eu/emcc/publications/2005/ef0567en.pdf http://media.bournemouth.ac.uk/research/documents/fullreport.pdf Copyright © ADAMANTIUM D6.3-F Business Plan • • • • Page 55 of 87 The market competition between present well established telecom operators, mobile operators, new entrants and other communication companies keeps growing Users show interest in bundling Bundling services are becoming a priority for mobile operators The most popular packages are the discount offers originating from bundling of services. Under this scenario, ADAMANTIUM business framework is characterized by well established mobile operators who offer mobile IPTV and VoIP services through bundling packages of services efficiently supported-promoted by ADAMANTIUM business model. The fact that service bundling is the key critical design issue in this scenario does not undermine the importance of other design issues. However, in the light of limited resources, when balancing the requirement of an efficient business model design for mobile VoIP/IPTV, telecom operators have to focus on the service bundling and the critical issues related to this. In the technical domain, quality maintenance of offered services is closely related to service bundles offering. In the organization domain, it is a challenge for telecom operators to coordinate the newly offered VoIP/IPTV services and the traditional ones (mobile internet, MMS) in order to be able to provide seamless bundles, high quality service and efficient billing system for end users. In the financial domain, because of consumers’ desire to have affordable services, it is critical to choose the right pricing package and/or discount rate. Telecom operators have to balance the technical and financial design to control the cost level and be able to offer a modest monthly fee to most users while deciding how they will charge (if they charge) the ADAMANTIUM services. This pricing strategy can be modified to more aggressive approach by offering larger discount rate in comparison with other operators’ discount rates or even by not charging ADAMANTIUM services and maintaining the same pricing policies and by taking advantage of economies of scale and scope in the long term. This can create competitive advantage and entice more consumers to the proposed configuration. In the scenario 1 case, the ADAMANTIUM business model is adopted by dominant mobile operators and it is well tailored to the surrounding market and socio economical conditions so as to offer the desired increase both in subscribers’ figures and in the use of new services but also in revenues. ADAMANTIUM business model in this scenario is characterized by bundling services, bundles aggressive discount rate, horizontal organization integration, and sufficient resources to support optimization of the user experience in terms of perceived quality of service for VoIP and IPTV as proposed by ADAMANTIUM project. Scenario 2: Head to head competition (fair competition) Under this scenario certain market and environment conditions are assumed: • • • • • • • • High economic growth Fair competition among equally strong players Non restrictive tariff regulations Fair access to mobile market Users are more aware and experienced in new mobile services such as mobile VoIP/IPTV Telecom operators have strong competitors Users are sensitive to prices but willing to pay for innovative services that offer quality/customization/personalization attributes. This leads to a fragmented content market with many alternatives Bundling is hardly considered a winning strategy since all operators can offer it. The success of ADAMANTIUM business model in this scenario is dependent on the question of whether operators are able to satisfy individuals’ choices and capture the value located in offering a variety of innovative services while quality is maintained. Content diversity is of key importance in such an environment but it cannot differentiate enough if not accompanied by the respective quality efficiencies. In order to do so, mobile operators, apart from providing just their own content, have to look for extensive cooperation with various content providers, including content generated by viewers, and Copyright © ADAMANTIUM D6.3-F Business Plan Page 56 of 87 aggregators, to obtain as many and as diverse programs-services as possible, as well as to enhance their own capabilities to produce exclusive content (organizational domain). In the technical domain, IP-based distribution technology provides a competitive advantage, because it meets the requirements inherent in the content diversity to become economically interesting. Because the IP infrastructure enables interaction and makes it possible to capture detailed information regarding user behavior, a powerful asset is created, giving telecom operators the opportunity of becoming an indispensable interface between mobile users, content providers and marketers/advertisers. In addition, delivering customized service requires additional investments in content production and distribution, and quality maintenance. Individualization requires significantly larger transmission resources, which implies higher levels of investment and measures for quality of service continuation. In the case of scenario 2, the proposed ADAMANTIUM business model is adopted by equally strong mobile operators and it is well adapted to the prevailing market and socio-economically regulated conditions. ADAMANTIUM business model in this scenario is characterized by fair market competition and offering of services, content diversity along with quality awareness, wide cooperation with various content providers, balance cost issue, full use of IP-features, usergenerated content, personalized experience and sufficient resources to support optimization of the user experience in terms of perceived quality for VoIP and IPTV services as proposed by ADAMANTIUM project. Scenario 3: Market Deadlock Under this scenario certain market and environment conditions are assumed: • • • • • • • • • High regulatory environment Monopoly market conditions Need for anti-trust legislation Minimum new entrants in the mobile market Difficulty in obtaining license for offering new services Already established operators consolidate their business and become dominant and vertically integrated players High users interest for new services for which they are willing to pay but it is difficult to find No alternatives or ease for new services selection Hard to increase revenues in this stagnating market environment. The success of ADAMANTIUM business model in this scenario is dependent on whether it can facilitate and support successfully the provision of new value added services in a market which is dictated by monopolistic influences and imposes a low supply despite the existing demand for such innovative services. The business model should be flexible enough to allow smaller or even new operators to create competitive edge by differentiating their services. However, choosing such a strategy inevitably implies conflicts either with content providers and/or with well established monopoly like mobile operators. Nevertheless, market legal framework modifications, the fruitful development of consumers demand for differentiation and consumers’ right of choice (e.g. VoD services, skipping advertisements, recording, playback features) will help such new services to foster. Operators willing to adapt these services should make the decision based on the balance between customer value and economic benefits while been able to select an appropriate business model like the ADAMANTIUM one which will be able to promote and support such business process and relationships. If the value added service (such as quality assured mobile VoIP/IPTV service) can attract big enough number of new users to offset the created conflict with well established operators, the possible initial revenue loss and the initial investment cost then it is worthy trying. In the case of scenario 3, the ADAMANTIUM business model is adopted by mobile operators willing to offer new value added services in order to gain competitive advantage in a monopolistic market environment through services differentiation based among other options to quality provision as well. ADAMANTIUM business model in this scenario is characterized by the ability Copyright © ADAMANTIUM D6.3-F Business Plan Page 57 of 87 and adaptability of value-added services provisioning, balance between service attractiveness and potential revenue loss and flexible pricing strategies which all together can assure and support optimization of the user experience in terms of perceived quality of service for VoIP and IPTV as proposed by ADAMANTIUM project. Scenario 4: Market Basics (Back to Basis) Under this scenario certain market and environment conditions are assumed: • • • • • • High regulatory environment hesitating to cope with technological advances Antitrust policies against big telecom operators Consolidated and vertically integrated companies Users satisfied with existing services and unwilling-hesitant to adapt new ones “Wait to see” user attitude is adopted Low market demand for innovative mobile services like VoIP and IPTV. The success of ADAMANTIUM business model in this scenario is dependent on whether it can facilitate and support the provision of high level of QoS, innovative services availability and excellent customer service so as to awake and attract users’ interest. In such a scenario, there are not many new opportunities for mobile operators to develop the IPTV and VoIP and move from the exploration phase to a successful exploitation phase. Bundling might still be an effective strategy. However, it will be difficult to convince users to switch from traditional services to new services. The potential market is limited. The content supply side is dominated by several vertically integrated global companies and it is difficult, for instance, to telecom operators to enter the content market and to compete with content providers for the content provision of the mobile IPTV service. The more realistic option available to telecom operators is to make better use of the existing technologies, services and resources, and then, after having created a sound customer base with technological awareness, to support the development of innovative services for VoIP and IPTV at the minimum extra cost. In such a case, mobile operators can create a fresh image as providers of new services characterized by high level of QoS, innovative services availability and excellent customer service. Better program quality and customer service are compelling reasons for consumers’ to switch from traditional services-habits to innovative ones. Moreover, mobile operators should take leverage their customer base in the telephony market. Finally, mobile operators may further promote these new services by creating complementary programs and contents on the mobile VoIP and IPTV platforms. However, it is worth noting that there is no dominant strategy mobile operators can make use of in this scenario through the ADAMANTIUM business model apart from several marketing tricks necessary for awakening users’ interest in new services even if this entails a minor change in the existing marketing and pricing strategies to emphasize the value and importance of QoS. In the case of scenario 4, the ADAMANTIUM business model is adopted by mobile operators willing to introduce new services based on high level of QoS as a means of breaking the limits of the market. ADAMANTIUM business model in this scenario is characterized by QoS provisioning, leverage experiences and expertise on innovative mobile services, synergy effect and sufficient resources to promote the experience of perceived quality for VoIP and IPTV services as proposed by ADAMANTIUM project. This analysis shows critical design issues telecom operators have to focus facing the changing external factors. In the colossal telecom operator scenario, mobile operators should take advantage of the economies of scale and scope and offer more competitive bundling offers. The critical design choice to offer bundling is the key to satisfy simple users demand on convenient configuration and help telecom operators to establish leading positions in the mobile market. In the head-to-head competition scenario, mobile operators’ capability to offer content diversity is important to match the increasing fragmented consumer demand. Besides possible integration into content production and signing deals Copyright © ADAMANTIUM D6.3-F Business Plan Page 58 of 87 with multiple content providers, providing a platform for user-generated content is also an effective way to create diverse content and personalization options at low cost. In the market deadlock scenario, the critical design choice of provision value added services should be the telecom operator focus. The interactive and versatile nature of IP-based network to carry multimedia and interactive service should be fully explored. By doing so, mobile operators can differentiate their new offered services of mobile VoIP and IPTV and gain the competitive edge. In the back to basis scenario, it is relatively difficult to implement such a business model mainly due to indifferent consumers for innovations and the existence of dominant companies in the market and there is no chance of success if the provision of QoS is not considered as a part of the marketing strategy aiming to awaken consumers interest. Concluding the analysis and evaluation of the ADAMANTIUM business model and framework, it is worth mentioning that a business model always has to adjust efficiently to the changes of external factors and uncertainties, both in the exploration and exploitation phases. This analysis highly supported that ADAMANTIUM has the potential to achieve this scope and lead mobile operators to new market segments with great opportunities for increased market share and higher profitability. The four scenarios presented explicitly in the previous paragraphs address the dynamic differences in the market demand, regulatory framework and competition related uncertainties existing in the communications sector. These scenarios represent the different future possibilities and dynamics in terms of regulation environment, industry structure and users’ attitude towards innovative services such as mobile VoIP and IPTV deployed in various markets worldwide under different environment and business conditions. By choosing the right business model or adapting the existing ones to ADAMANTIUM business framework, telecom operators can sustain the market competition and deliver customer value and economic benefit. In the light of limited resources, when balancing the requirement of adapting an effective and efficient business model, telecom operators have to put their efforts to focus on the critical design issue in each of these scenarios. The critical design issues are of eminent importance to the viability and sustainability of the ADAMANTIUM business model which is the outcome of the evolution of already well established business models in the telecommunications (mobile and wireline) sector. 3.5 ADAMANTIUM Financial analysis and evaluation Innovation requires financial investments either for developing the new technology and infrastructure or for upgrading an existing one so as the business entity willing to offer such a service to be able to provide it sufficiently and effectively. The different financial models that might be developed and used depend on current market conditions, revenue sources, as well as the accompanying business and pricing models that the business has adapted. In the previous sections, the ADAMATIUM business model was presented, analyzed and evaluated for its viability, efficiency and effectiveness under different market cases and scenarios. Within this context, this section presents a financial analysis of the proposed model so as to further elaborate the adaptability of the ADAMANTIUM proposal under different financial cases and scenarios. 3.5.1 Assumptions For creating a sound basis for evaluating the proposed ADAMANTIUM business model in a financial context, particular assumptions have to be made related to the framework in which the ADAMANTIUM proposal is going to be analyzed. More specifically, the assumptions, which the proposed analysis has been based on are the following: • • • • • Charge of VoIP/IPTV mobile services is done upon duration of usage and not per data volume. Europe is considered as the geographic area of this analysis with focus on a Greek Mobile Operator (GMO). Analysis is made and presented by the perspective of well established mobile operators. Mobile operators have available the required infrastructure of IMS and the respective one that is needed for providing VoIP and IPTV services. No extra costs involved (such as space leasing, personnel, extra training) other than the cost of initial investment (upgrading the existing infrastructure to provide ADAMANTIUM proposed Copyright © ADAMANTIUM D6.3-F Business Plan • • • • • Page 59 of 87 services), licensing, initial training, maintenance and marketing/promotion activities throughout the specified period of the analysis. Mobile operators already provide their subscribers mobile VoIP and IPTV services. All categories of subscribers and potential users own mobile devices enabled to support mobile VoIP and IPTV service consumption. Mobile subscribers with enabled 3G+ services are taken into account for this financial analysis. Markets are characterized by economic stability. Regulatory framework is not restrictive to ADAMANTIUM. 3.5.1.1 Initial Cost of Investment In order to provide a financial Market Analysis for ADAMANTIUM solution, it is necessary to estimate the necessary initial investment cost of MCMS installation and integration for a national mobile operator. Considering that the interested mobile operator already possess a fully operational IMS-enabled network with a respective policy node, then the upgrade investment cost in order to setup ADAMANTIUM MCMS solution has been calculated by partner Ericsson Spain. More specifically, if the ADAMANTIUM functionality will be considered as a feature that is included in the already installed policy node of the mobile operator (e.g. the Ericsson SAPC node, or Service Aware Policy Control node), then the total initial cost of investment of upgrading the node with ADAMANTIUM features is estimated approximately 200K€. The estimated amount of 200K€, is further distributed in: • • • License: 50 K€ (CAPEX) Integration and training services: 150 K€ (CAPEX) Hardware: 0 € (because as it is a feature included in the SAPC node, the Hardware that ADAMANTIUM MCMS requires is the same with SAPC). 3.5.1.2 Financial Market Analysis Table 3-8 summarizes financial figures related to the Greek mobile market of data communication for 2007-2013 according to the studies of IDC European Telecommunication market for the European Telecom Services1 and the Tlecoms Market Matrix in Western Europe, updated in January 2010, provided by Analysys Mason Linited2 with particular focus on GMO. Table 3-8 Financial figures of Greek data mobile market 2007 Data Revenues (M€) in Greek Mobile Operators (1) 48 2008 116 2009 198 GMO Data Revenue Share (2) 319 2011 2012 2013 431 545 625 194 245,3 281,3 38,8 49,1 56,3 45% GMO Data Revenue (M€) 21,6 GMO IPTV and Revenue Share VoIp Services GMO IPTV Revenue (M€) VoIp Services and 2010 52,2 89,1 143,6 20% (3) 4,3 10,4 17,8 (1) (2) 28,7 IDC European Telecommunication Research, European Telecom Services Database 4Q09 Telecoms Market Matrix – Western Europe, Mobile Data Financial information of the Greek Mobile Market (Source: Analysys Mason Limited, Jan 2010) (3) Estimated by partner VOD after scenario analysis Copyright © ADAMANTIUM D6.3-F Business Plan Page 60 of 87 All figures are in Million Euros and especially for years 2010-2013 are forecasted values according to IDC European Telecommunication Research, European Telecom Services Database 4Q09 Revenues Prediction. Based on these financial studies1,2, a financial analysis-forecast of the ADAMATIUM impact on the Greek mobile market of VoIP and IPTV is made in the next section through the use of different cases and scenarios, covering the range of optimistic to pessimistic market conditions. 3.5.1.3 Analysis of different cases (strategies) The following analysis will help mobile operators to develop a better concept regarding the sustainability and feasibility of the proposed business model under different strategies that they may select to apply during the exploitation phase. Two cases of different strategies leading to different pricing models that might be adapted by a mobile operator are presented and financially analyzed in the coming sections, covering the following aspects: • • Case 1 deals with the aspect of ADAMANTIUM to be offered by the mobile operator to all the VoIP and IPTV service users, without any extra cost, combined with the already existing subscription packages for 3G+ services. Case 2 deals with the aspect of ADAMANTIUM to be offered by the mobile operator as a new separate package (premium package of ADAMANTIUM VoIP and IPTV services) following a different pricing strategy compared to the normal packages of VoIP and IPTV services. These cases and their financial efficiency in terms of revenues and profitability are evaluated through the use of three scenarios: Optimistic, Normal and Pessimistic. 3.5.2 Case 1 In Case 1 it is assumed that the mobile operator undertakes all the cost of the initial investment and provides the ADAMANTIUM mobile services of VoIP and IPTV without extra charge but simply as a part of the existing packages and services. In particular, the existing packages offering VoIP and IPTV services will continue to have the same pricing policy but they will offer QoS enhanced services as proposed by ADAMANTIUM to its subscribers (in other words the already offered 3G+ services are upgraded to ADAMANTIUM QoS free of charge for the end subscriber). In addition, the same pricing policy will continue to be applied according to which apart from the flat fee of the package subscription been charged to the subscribers, the charge of using the VoIP and IPTV services will be based on usage duration (charge per second). This strategy aims to the accumulation of additional revenues through (a) the increase of usage of the new services along with (b) the increase in the number of customers subscribing to the 3G+ services packages, and certainly not through higher pricing methods, extra charges or new packages. Case Assumptions: • • • • • • • 1. 2. Area of Greece Average Annual Revenue figures are based on the forecasted figures of Table 3-8 for years 2010-2013 adjusted according to the scenario All scenarios are based on the study European Telecom Services Database 4Q09 Revenues Prediction provided by IDC European Telecommunication Research For the calculation of financial indicators we assume that ADAMANTIUM investment and initial maintenance and marketing expenses take place at the Y0 4-Year analysis period Expected annual rate of return r=10% (taking into account opportunity cost and risk factors) All amounts are in Euro currency IDC European Telecommunication Research, European Telecom Services Database 4Q09 Telecoms Market Matrix – Western Europe, Mobile Data Financial information of the Greek Mobile Market, (Source: Analysys Mason Limited, Jan 2010) Copyright © ADAMANTIUM D6.3-F Business Plan • Page 61 of 87 An added-value ADAMANTIUM impact is considered in all cases, which shows the benefit that will gain the mobile operator by the integration of ADAMANTIUM PQoS-aware solution with the already existing packages offering standard 3G+ services to its subscribers. This added value percentage depicts the market share that the player also takes due to the fact that the specific operator will offer first a new feature. This impact, expressed annually in a percentage figure as the additional revenues been gained due to ADAMANTIUM PQoSaware VoIP and IPTV services, are adjusted according to the specifications of each scenario. 3.5.2.1 Optimistic Scenario Table 3-9 shows ADAMANTIUM financial analysis considering an optimistic scenario. Table 3-9 ADAMANTIUM Financial Analysis under Optimistic Scenario 4 Year period Initial Investment Cost (Capital Expenditure - CAPEX) Marketing/ Promotion Cost Maintenance Cost (Operational Expenditure – OPEX) ADAMANTIUM DEVELOPMENT TOTAL COST Forecasted Average Annual Revenue (Optimistic) Annual ADAMANTIUM Revenues additional Increase in % Annual ADAMANTIUM additional Revenues (in Euro) Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows Annual ADAMANTIUM CASH FLOW Cumulative Annual Cash Flows NPV= 1,119,127.82 € Y1 200,000 € Y2 Y3 Y4 - - - 100,000 € 25,000 € 90,000 € 15,000 € 80,000 € 15,000 € 70,000 € 15,000 € 325,000 € 105,000 € 95,000 € 85,000 € 28,710,000 € 38,790,000 € 49,050,000 € 56,250,000 € 0.5 % 1% 1.5% 2% 143,550 € 325,000 € 143,550 € -181,450 € 387,900 € 105,000 € 387,900 € 282,900 € 735,750 € 95,000 € 735,750 € 640,750 € 1,125,000€ 85,000 € 1,125,000 € 1,040,000 € -181,450 € 101,450 € IRR= 90% 742,200 € 1,782,200 € Pay Back Time = 1.64years According to Table 3-9, the GMO under study will have increasing average revenues in 3G services and it is assumed that under the optimistic scenario the ADAMANTIUM impact has an additional increase of 0.5%, 1%, 1.5% and 2% respectively. Based solely on the ADAMANTIUM development cost and impact on forecasted revenues the annual ADAMANTIUM cash flows figures are calculated and used for the calculation of NPV, IRR and Pay Back time financial indicators. All financial figures prove that under optimistic conditions, ADAMANTIUM is by far a very promising and profitable investment. Copyright © ADAMANTIUM D6.3-F Business Plan Page 62 of 87 3.5.2.2 Normal Scenario Table 3-10 shows ADAMANTIUM financial analysis considering a normal scenario. Table 3-10 ADAMANTIUM Financial Analysis under Normal Scenario Initial Investment Cost (Capital Expenditure - CAPEX) Marketing/ Promotion Cost Maintenance Cost (Operational Expenditure – OPEX) ADAMANTIUM DEVELOPMENT TOTAL COST Forecasted Average Annual Revenue (Normal) Annual ADAMANTIUM Revenues additional Increase in % Annual ADAMANTIUM additional Revenues (in Euro) Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows Annual ADAMANTIUM CASH FLOW Cumulative Annual Cash Flows NPV= 268,615.25 € Y1 200,000 € Y2 4 Year period Y3 - Y4 - - 100,000 € 25,000 € 90,000 € 15,000 € 80,000 € 15,000 € 70,000 € 15,000 € 325,000 € 105,000 € 95,000 € 85,000 € 28,710,000 € 32,500,000 € 37,500,000 € 42,480,000 € 0.5 % 0.5 % 1.0% 1.0% 143,550 € 162,500 € 375,000 € 424,800 € 325,000 € 143,550 € -181,450 € 105,000 € 162,500 € 57,500 € 95,000 € 375,000 € 280,000 € 85,000 € 424,800 € 339,800 € -181,450 € -123,950 € IRR= 40% 156,050 € 495,850 € Pay Back Time = 2.44 years According to Table 3-10, the GMO will have increasing average revenues in 3G services (but at a lower rate compared to the Optimistic scenario) and it is assumed that under the normal scenario the ADAMANTIUM added value has an additional increase of 0.5%, 0.5%, 1% and 1% respectively, having a lower impact than in the optimistic case. Based solely on the ADAMANTIUM development cost and impact on forecasted revenues the annual ADAMANTIUM cash flows figures are calculated and used for the calculation of NPV, IRR and Pay Back time financial indicators. The results of the financial analysis, under the normal scenario, certify the attractiveness of ADAMANTIUM investment under stable market conditions which approximate the actual ones been depicted in the Greek market in 2010 and are forecasted to follow an increasing trend in aspect of revenues and number of subscribers for the next years. Copyright © ADAMANTIUM D6.3-F Business Plan Page 63 of 87 3.5.2.3 Pessimistic Scenario Table 3-11 shows ADAMANTIUM financial analysis considering a pessimistic scenario. Table 3-11 ADAMANTIUM Financial Analysis under Pessimistic Scenario Initial Investment Cost Y1 200,000 € 4 Year period Y2 Y3 - 100,000 € 25,000 € 5th year Y5 Y4 - - - 90,000 € 15,000 € 80,000 € 15,000 € 70,000 € 15,000 € 50,000 € 15,000 € 325,000 € 105,000 € 95,000 € 85,000 € 65,000 € 28,710,000 € 28,710,000 € 28,710,000 € 28,710,000 € 28,710,000 € 0,5 % 0,5 % 0,5 % 0,5 % 0,5 % 143.550,00 € 143.550,00 € 143.550,00 € 143.550,00 € 143.550,00 € 325,000 € 105,000 € 95,000 € 85,000 € 65,000 € 143,550 € 143,550 € 143,550 € 143,550 € 143,550 € -181,450 € 38,000 € 48,550 € 58,550 € 78,550 € -181,450 € -143,450 € -94,900 € -36,350 € 42,200 € (Capital Expenditure - CAPEX) Marketing/ Promotion Cost Maintenance Cost (Operational Expenditure – OPEX) ADAMANTIUM DEVELOPMENT TOTAL COST Forecasted Average Annual Revenue (Pessimistic) Annual ADAMANTIUM Revenues additional Increase in % Annual ADAMANTIUM additional Revenues (in Euro) Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows Annual ADAMANTIUM CASH FLOW Cumulative Annual Cash Flows For the 4-year period For the 5-year period NPV= -78,752.97 € NPV= -34,413.55 € IRR= - 5% IRR= 5% Pay Back Time = on 5th year Pay Back Time = 4.46 years According to Table 3-11, the GMO will have unchanged average revenues in 3G services and it is assumed that under the pessimistic scenario the ADAMANTIUM added-value is at minimum with an additional stable increase of 0.5% for every year. Based solely on the ADAMANTIUM development cost and impact on forecasted revenues the annual ADAMANTIUM cash flows figures are calculated and used for the calculation of NPV, IRR and Pay Back time financial indicators. By analyzing the financial indicators of the pessimistic scenario it is concluded that if the market conditions force revenues of 3G services are stable for a 4-year period, then even an increase of 0.5% in revenues resulting from ADAMANTIUM investment is not sufficient to make such an investment favorable within the specified time frame of 4 years. If the time frame of investment is more than 4 years then even this pessimistic scenario makes profitable ADAMANTIUM investment. For instance in the 5th year the figures are: NPV = -34,413.55 €, IRR = 5% and Pay Back Time = 4.46 years Such figures make ADAMANTIUM investment more attractive in a 5-year period than in a 4-year period even under the most pessimistic conditions. 3.5.3 Case 2 The mobile operator differentiates the offering of mobile VoIP and IPTV into two packages: standard and premium. The standard one continues offering 3G+, VoIP and IPTV services in their normal quality (as already offered by the mobile operator to its users before ADAMANTIUM PQoS-aware solution) and under the same pricing model as before. Additionally, the new package called ‘‘premium”, will be introduced in the market and will offer quality enhanced services of VoIP and IPTV according to ADAMANTIUM PQoS-aware solution. Its pricing strategy, although not within the scope of this financial analysis, is differentiated compared to the ones followed by the standard Copyright © ADAMANTIUM D6.3-F Business Plan Page 64 of 87 package so as to make the premium package more attractive at the early stages of its life cycle and more profitable at its maturity stages. Under Case 2, this premium package is financially analyzed in a 4-year period and under the three scenarios: Optimistic, Normal and Pessimistic. Overall, the strategy followed under Case 2 aims to the accumulation of additional revenues not only through the increase of usage of the offered services but also through new package offerings such as the premium package. These new packages will offer innovative PQoS-aware services and will follow differentiated pricing strategies for the improved services been offered to those subscribers (retail or business) requesting PQoS-aware services of premium quality. Case Assumptions: • • • • • • • Area of Greece. For the calculation of financial indicators it is assumed that ADAMANTIUM investment and initial maintenance and marketing expenses take place at the Y0. Average annual revenue figures are based exclusively on forecasts of ADAMANTIUM investment revenues (revenues of the premium package offering ADAMANTIUM PQoSaware services) been adjusted according to the corresponding scenarios. The forecasts of the average annual revenues of ADAMANTIUM investment used in the three scenarios of this case follow an increasing annual trend, which is of course differentiated per scenario, for the reason that this the forecasted trend of mobile 3G+ services for Greece according to IDC European Telecommunication Research, European Telecom Services Database 4Q09 Revenues Prediction. 4-Year analysis period Expected annual rate of return r=10% (taking into account opportunity cost and risk factors). All amounts are in Euro currency. Similarly, as already done in Case 1, the tables referring to the different scenarios under Case 2 conditions and assumptions for the financial analysis and evaluation of the premium package are included in the following sections. 3.5.3.1 Optimistic Scenario Table 3-12 shows ADAMANTIUM financial analysis considering an optimistic scenario. Table 3-12 ADAMANTIUM Financial Analysis under Optimistic Scenario 4 Year period Initial Investment Cost (Capital Expenditure - CAPEX) Marketing/ Promotion Cost Maintenance Cost (Operational Expenditure – OPEX) ADAMANTIUM DEVELOPMENT TOTAL COST Forecasted Annual ADAMANTIUM Revenues (in Euro) from the Premium package Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows Annual ADAMANTIUM CASH FLOW Cumulative Annual Cash Flows NPV= 561,789.43 € Y1 200,000 € Y2 - Y3 - Y4 - 100,000 € 25,000 € 90,000 € 15,000 € 80,000 € 15,000 € 70,000 € 15,000 € 325,000 € 105,000 € 95,000 € 85,000 € 150,000 € 325,000 € 150,000 € -175,000 € 250,000 € 105,000 € 250,000 € 145,000 € 450,000 € 95,000 € 450,000 € 355,000 € 700,000€ 85,000 € 700,000 € 615,000 € -175,000 € -30,000 € IRR= 61% 325,000 € 940,000 € Pay Back Time = 2.08 years According to the results of Table 3-12, the optimistic scenario of Case 2 is based on optimistic ADAMANTIUM revenues forecasts for the premium package which are used for the calculation of Copyright © ADAMANTIUM D6.3-F Business Plan Page 65 of 87 NPV, IRR and Pay Back time financial indicators over the 4–year period. The results of the financial analysis, under optimistic conditions and forecasts, certify the attractiveness of ADAMANTIUM investment under stable market conditions which will further promote the penetration into the mobile market of the premium package offering innovative 3G+ services according to ADAMANTIUM solution. 3.5.3.2 Normal Table 3-13 shows ADAMANTIUM financial analysis considering a normal scenario. Table 3-13 ADAMANTIUM Financial Analysis under Normal Scenario Initial Investment Cost (Capital Expenditure - CAPEX) Marketing/ Promotion Cost Maintenance Cost (Operational Expenditure – OPEX) ADAMANTIUM DEVELOPMENT TOTAL COST Forecasted Annual ADAMANTIUM Revenues (in Euro) from the Premium package Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows Annual ADAMANTIUM CASH FLOW Cumulative Annual Cash Flows NPV= 122,456.55 € Y1 200,000 € Y2 4 Year period Y3 - Y4 - - 100,000 € 25,000 € 90,000 € 15,000 € 80,000 € 15,000 € 70,000 € 15,000 € 325,000 € 105,000 € 95,000 € 85,000 € 100,000 € 325,000 € 100,000 € -225,000 € 150,000 € 105,000 € 150,000 € 45,000 € 250,000 € 95,000 € 250,000 € 155,000 € 400,000€ 85,000 € 400,000 € 315,000 € -225,000 € -180,000 € IRR= 24% -25,000 € 290,000 € Pay Back Time = 3.07 years According to the financial analysis depicted in Table 3-13, it is assumed that under the normal scenario the ADAMANTIUM forecasted revenues (premium package revenues) continue having an increasing trend but at a lower rate than in the optimistic case. Based solely on the ADAMANTIUM development cost and premium package forecasted revenues, the annual ADAMANTIUM cash flows figures are calculated and used for the calculation of NPV, IRR and Pay Back time financial indicators. The results of the financial analysis, under the normal scenario of Case 2, certify the attractiveness of ADAMANTIUM investment even in a standalone package of services under typical market conditions and figures are forecasted to follow an increasing trend in aspect of revenues and subscribers accumulation under the premium package for the next years. 3.5.3.3 Pessimistic Table 3-14 shows ADAMANTIUM financial analysis considering a pessimistic scenario. Table 3-14 ADAMANTIUM Financial Analysis under Pessimistic Scenario Initial Investment Cost Y1 200,000 € Y2 100,000 € 25,000 € 4 Year period Y3 - 5th year Y5 Y4 - - - 90,000 € 15,000 € 80,000 € 15,000 € 70,000 € 15,000 € 50,000 € 15,000 € 325,000 € 105,000 € 95,000 € 85,000 € 65,000 € 50,000 € 100,000 € 150,000 € 250,000 € 300,000 € 325,000 € 105,000 € 95,000 € 85,000 € 65,000 € (Capital Expenditure - CAPEX) Marketing/ Promotion Cost Maintenance Cost (Operational Expenditure – OPEX) ADAMANTIUM DEVELOPMENT TOTAL COST Forecasted Annual ADAMANTIUM Revenues (in Euro) from the Premium package (Pessimistic) Annual ADAMANTIUM Outflows Copyright © ADAMANTIUM D6.3-F Business Plan Annual ADAMANTIUM Inflows Annual ADAMANTIUM CASH FLOW Cumulative Annual Cash Flows For the 4-year period For the 5-year period Page 66 of 87 50,000 € 100,000 € 150,000 € 250,000 € 300,000 € -275,000 € -5,000 € 55,000€ 165,000 € 235,000 € -275,000 € -280,000 € -225,000 € -60,000 € 175,000 € NPV= -117,871.05 € NPV= 14,780.33 € IRR= - 6% IRR= 11% Pay Back Time = on 5th year Pay Back Time = 4.26 years According to analysis results of Table 3-14, the GMO is supposed to have under the pessimistic scenario the minimum revenues in 3G services originating from its premium package. By analyzing the financial indicators of the pessimistic scenario the conclusion is that the market conditions force revenues of the premium package (meaning ADAMANTIUM revenues) to be maintained at low levels despite their increasing trend for a 4-year period, and then NVP and IRR figures show that such an investment is not financially favorable within this specified time framework. If the time frame of investment is more than 4 years then even this pessimistic scenario makes profitable ADAMANTIUM investment. For instance in the 5th year the figures are: NPV = 14,780.33 €, IRR = 11% and Pay Back Time = 4.26 years. Such figures make ADAMANTIUM investment and the introduction of the premium package into the market more attracting in a 5-year period than in a 4-year period even under the most pessimistic conditions. Copyright © ADAMANTIUM D6.3-F Business Plan Page 67 of 87 4 EXPLOITATION PLANS In this section, the exploitation plans of ADAMANTIUM results are presented by each industrial partner that participated in the project consortium. 4.1 Rohde & Schwarz (RS) In the course of the work on the ADAMANTIUM project, Rohde & Schwarz added new functionalities to its DVM protocol analyzer platform. They include • An extended SNMP MIB that now contains all parameters related to the qPSNR measurement procedure including setting of independent thresholds for the qPSNR-over-time measurement and for the qPSNR histogram • A new software module that allows a detailed analysis of received IPTV-over-DVB-H services, • An Alarm Filter that allows the user to combine a variety of QoS parameters and monitor the related thresholds for a multitude of scenarios. These functionalities enhance the usability of the instruments of the DVM protocol analyzer family and future successors significantly since they address vital issues in the emerging IPTV-for-mobilereceivers market. As a result of the project work, it is estimated that additional sales of these instruments equipped with these functionalities of 4 to 7 MEur are generated over the life span of the instruments. The exact amount depends strongly on the date of introduction of mobile IPTV services in the major European countries and the US 4.2 Thomson Grass Valley/Thomson Telecom (TGV and TT) Enhance of the perceived quality of IPTV service is a key issue for Thomson Grass Valley as it is a mandatory condition to retain a user within an IPTV offer; otherwise if perceived IPTV service quality is not at the user expected level, user may decide to try a pure over the top solution, that offer a low level quality but often for a cheaper price. ADAMANTIUM results, proved by demonstrator project, successfully show that the proposed MCMS solution approach actually improves the delivered QoS level in terms of perceptual quality. Thanks to ADAMANTIUM, Thomson Grass Valley has acquired knowledge and know-how to improve its IPTV and MRF servers by interfacing them to the future new IMS components (MCMS) in charge of PQoS. Product Positioning Positioning is to improve Thomson IPTV solution, used by telecom operators to help them to improve IPTV QoS offer in order to retain and attract new users to their own offer. Exploitation Activities Exploitation activities for Thomson solution developed in ADAMANTIUM are dependent to the way the ADAMANTIUM MCMS component will find its market. 4.3 Vodafone (VOD) Mobile network operators like Vodafone Greece would greatly benefit from the introduction of ADAMANTIUM system in their network topologies by means of exploiting such a platform in order to offer high quality of services to their subscribers and differentiate themselves from the alternative market players. The actual adoption of ADAMANTIUM-proposed mechanisms in a mobile network like the one operated by Vodafone, depends on the technology roadmap of vendors developing platforms such as MCMS. The timeframe of a possible integration of a multimedia content management system capable of performing real-time adaptation actions is directly linked to the actual commercial release of such a platform by infrastructure vendors. Copyright © ADAMANTIUM D6.3-F Business Plan Page 68 of 87 In this context, Vodafone Greece is in close contact with Vodafone Group R&D and Innovation Center in order to communicate ADAMANTIUM findings and innovative results. Such an input could contribute towards the initiation of joint projects between Vodafone Group and vendors, aiming at product development. Vodafone Greece is greatly interested in offering optimized services, in terms of the quality of service that is ultimately perceived by the end user. Such optimized service provisioning could contribute towards differentiating the company in comparison with the local market. • Following the installation of PCRF and PCEF nodes in Vodafone Greece network, the company’s marketing department has expressed its interest for a platform that would be able to guarantee an optimal service quality in terms of what is perceived by the end user. Optimization of PQoS for multimedia services offered to mobile subscribers is a highly challenging issue which could be addressed through the adoption of ADAMANTIUM techniques, contributing in parallel towards the introduction of business opportunities for a mobile network operator. • Therefore, a need for the integration of such a platform in the Vodafone’s network shall be communicated to vendors collaborating with the company so that relevant products can be included in vendors’ roadmap. • In case such product development is implemented by vendors, Vodafone Greece will communicate with the internal product units so that services will be built, taking into account the possibilities offered by the PQoS optimization tool, and the respective tariffs will be set up as well. • The mass (retail user based) need for MCMS – like platforms as proposed in ADAMANTIUM project – for mobile operators like VF, will be with the launch of LTE (Long Term Evolution) which will enable voice over IP as the only means for voice service (timeframe 2012/13 and beyond). Evolution towards LTE and all IP networks will intensify the need for selecting the proper policy and traffic management and optimization solutions, balancing network optimization with perceived quality of service improvement. Therefore PQoS optimization tools are perceived as a prerequisite for VoIP services and a differentiation factor for IPTV services. It is also worth mentioning that the increasing mobile data traffic along with the considerable market penetration of smartphones (devices offering advanced functionalities and PC-based options such as Internet, email, e-book reader capabilities, WiFi,…) play a significant role in terms of inducing the need for a mobile operator to differentiate the services offered to its subscribers. Potential marketing strategies and pricing policies to be considered: The adoption of a proper marketing strategy related to the provision of optimized services through the adoption of the techniques and mechanisms introduced in the context of ADAMANTIUM project is considered as essential in order to guarantee the commercial exploitation of such a concept. One potential approach would be an initial classification and categorization of “own users” in specific groups, with each group enjoying different benefits in terms of service provision (standard or premium services) depending on the package to which they select to subscribe. More specifically, specific users (e.g. premium or business users) could constitute the target group enjoying the benefits of the provision of high quality services (premium service) based on the capabilities offered by MCMS regarding real time adaptation of certain service attributes. These premium services may be offered to the target group either as a part of the existing subscription packages (like an add-on feature of the existing packages as presented and analyzed in Case 1 of the financial analysis section) or as a new separate package been introduced in the market (e.g. the premium package as presented and analyzed in Case 2 of the financial analysis section) Copyright © ADAMANTIUM D6.3-F Business Plan Page 69 of 87 An alternative approach that might be used as a marketing differentiation strategy for ADAMANTIUM commercial exploitation would be the exploitation of MCMS mechanisms in order to guarantee the differentiation of the operator in comparison with competitive brand names and specific offerings. More specifically, enhanced quality of services based on the exploitation of real time adaptation capabilities offered by MCMS, could serve as the “competitive advantage” characteristic that would differentiate the operator in comparison with the “conventional” services (in terms of quality) offered by competitive brand names. In parallel, the pricing strategy that could be adopted regarding the provision of higher quality services, based on the capabilities introduced by ADAMANTIUM MCMS, is another issue of great importance that should be appropriately combined with the selected exploitation plan. According to certain aspects, the pricing models to be adopted should contribute towards balancing prices and demand, meaning that service providers should define the optimum strategy between charging high prices to increase margins, but not so high as to reduce the overall demand. This pricing strategy could also include the identification of the most profitable Tariff plans for the services to be offered: monthly subscriptions, only by usage, packages of minutes, flat rates, or even completely new packages (premium packages) offering these high quality services on a monthly subscription basis etc. Furthermore, high user concentration in certain areas constitutes a fertile ground for the provision of higher quality services as user demand in such areas is large enough to allow for business feasibility. So, even demographic statistics should be taken into account before deciding on the pricing model adaptation that should be made. By another aspect, a pricing model according to which no extra charges are made for the provision of the high quality services might be more appropriate. In this case, as already presented in Case 1 of the financial section, new services are combined, free of extra charge, with the already existing packages and additional revenues are gained through the increase of usage of the new high quality services along with the increase in the number of customers subscribing to such service packages, and certainly not through higher pricing strategies or extra charges. Depending on the Mobile Operator’s strategy, the exploitation of the possibilities offered by the MCMS system could be adapted according to specific user categories/profiles and offered subscription packages. There is the possibility of “prioritizing” users according to the group they belong to, as defined by the network operators. These groups may refer to business or non business users as well as to standard or premium subscriber groups with particular preferences towards the services they want to have when they are selecting a particular package for subscription. Users’ personal preferences as well as their perception of the value of certain services influence also their willingness to pay for the provision of such services (distinction between sophisticated or simple/regular users as presented in section 3.4.2.2 where the ADAMANTIUM Business Model is evaluated). More specifically, in the case where users do not find high quality multimedia services appealing (simple/regular users), they will not be eager to be charged with a higher amount, compared to their regular subscription, in order to have better quality regarding the aforementioned services. On the other hand, users that like to use high quality services (sophisticated/premium users) will be willing to pay higher prices or even to subscribe to new packages offering exclusively such high quality services clearly differentiated by the standard ones. 4.4 Ericsson (ERC) While Network quality issues are a major concern for network operators, the quality of the services delivered to the end users, as it is perceived by the subscribers, constitutes a challenging area for the operators as it imposes the need of adopting all the necessary mechanisms and techniques in order to enhance user perception and increase revenues by attracting additional subscribers. In order for an operator’s offering to be truly successful, there appears to be an emerging need towards combining managing networks and users’ needs at the same time. Infra-structure vendors, along with other players in telecom services chain have identified a need related to provide an adequate Perceived Quality of Service in VoIP and IPTV services in order to • Retain customers • Increase the number of users Copyright © ADAMANTIUM D6.3-F Business Plan • Page 70 of 87 Add value and credibility to the already offered services Therefore, there has been an active interest in finding a solution that can provide the operator (the infra-structure vendor’s customer) the technology and solutions to provide that PQoS. Thus, the vendor strategy is essentially based on offering equipment with sophisticated intelligence that can manage alarms of poor Perceived Quality of Service from different points in the end-to-end services supply chain and propose corrective actions to improve it. Product Positioning As a vendor, the approach taken is based on a mix of head-to-head and differentiation positioning, as there are not so many users, and the number of competitors here is relevant, having a differentiated product plays an important rule. The positioning that the infra-structure vendors have towards this market is to provide platforms to cooperate with operators in order to improve service quality to final users (operator’s users). Marketing Mix • Product Infra-structure vendors provide robust products, based on high quality standards that are installed in operator’s networks. These products do not usually confine to equipment provision, but also the vendor offers modules to manage it. Product is subject to periodic upgrades which are to be negotiated along with software licenses with users. Any proposal for new products is offered as contributions to standardization bodies. Infrastructure Vendors have their already existing products for Policy Controlling. For example, Ericsson has the SAPC (Service-Aware Policy Controller) that is a telecom grade policy manager based on 3GPP standards, allowing full interoperability with Ericsson or nonEricsson GGSNs, Packet inspection nodes or Application Function (AF) and is part of the Service Aware Charging & Control solution. QoS control per subscriber and per service basis permits an accurate bandwidth management allowing optimal utilization of network resources. It also makes possible for operators to set relevant QoS for high revenue generating services, assuring availability of required network resources. The results of the ADAMANTIUM project would be integrated with the Ericsson’s SAPC module. • Place/Distribution The way the infrastructure vendor’s products are delivered is through direct sale to the operator. • Price Pricing is based on the equipment and platform modules provided. • Promotion The way chosen to promote infrastructure vendor’s products is by the following ways: o o o Customer meetings Web-site Participation in events Exploitation Activities The following exploitation activities have been planned related to the ADAMANTIUM project, to be done after the conclusion of the project: • Internal workshops to spread inside Ericsson what it has been done in the project. Several presentations of the project have been done along the duration of it but this task will continue along the time to present to the different units within Ericsson the excellence of the projects outputs. Especially the project team will organize meetings and knowledge-shares (the internal dissemination tools) oriented to groups working on the Packet Core area. Copyright © ADAMANTIUM D6.3-F Business Plan • • • • • Page 71 of 87 Public events to present the ADAMANTIUM initiative. The outputs of the project will be presented in different dissemination events, both for specialist and general public. Internal seminaries with the Product Lines/Ericsson Research trying to find the synergies and complementation. It will be specially relevant the presentations and contacts with the Product line working on the SAPC (Service Aware Policy Control) and GGSN and Ericsson Product Units and Research Units working on all related to QoS and Packet core. Use all the experience in future developments/projects and continue looking for integration within Ericsson solutions. Study, analyze and define a Business Solution based on the ADAMANTIUM result. Explain customers how the ADAMANTIUM solution can be used integrated with other Ericsson solutions to achieve the end user satisfaction. 4.5 Viotech (VIO) The technology stemming from the ADAMANTIUM project will represent a major asset for VIOTECH exploitation strategy. Solution description The core business of the company is the development of “media digital”-focused solutions, based mainly on ISO/MPEG, IETF and ITU-T standards, but also solutions allowing the transmission of audio-visual and multimedia content over heterogeneous networks, including IP over WLAN multicasting and Intranet in homes and companies’ premises. More particularly, the V-HOME product range, marketed by VIOTECH, allows End-Users to access, via a personalised interface, all audio-visual content and accessible on different terminals (PCs, TV sets, etc.). Marketwise, V-HOME is a complete, user-friendly, plug-and-play Multi-Play (multi-users, multi-terminals, with customization capacities) services solution. This offer is easily adaptable to each End-User specificities. V-HOME is commercialized both through Triple-Play or genuine operators and directly to End-Users. The IPTV solution resulting from ADAMANTIUM will allow dynamic adaptation of multimedia content according to the user context and the characteristics of the service and the network layers, which will be performed either in the network or by an Home Gateway. Thanks to this breakthrough innovation, the functionalities of V-HOME will be enlarged, the solution offering: • • From the End-Users point of view: o Greater simultaneity for applications consumption o Service/content adaptation according to User Profile o Possibility to became Content Provider o Improved Quality of Service and thus Quality of Experience. For the present and future VIOTECH business partners (operators as well as Content-related and/or Service-related IT/Telecom actors, including SMEs): o Optimized content delivery, service management, service composition o More flexible and quickly adjustable creation of new services/applications o New business models and revenue sources. From a financial point of view, simple update will be necessary from the End-Users, so the financial leverage should be kept down to a minimum, with nonetheless important revenue expectations. Exploitation plan All marketing efforts will be dedicated to the new offer, with attention drawn onto world-wide promotion and communication in order to generate notoriety and business. We intend to engage targeted referencing and communication operations, such as: • • Advertising campaigns in specialised press Participation in major international multimedia fairs and conferences (CTIA Wireless in Las Vegas, IBC in Amsterdam, etc.) Copyright © ADAMANTIUM D6.3-F Business Plan • Page 72 of 87 Organization of pilot sites, demonstrations for potential clients. Finally, all marketing & communication actions will be undertaken Europe-wide. Thanks to contacts and connections built up within the European High Tech community and among main actors of the multimedia & broadcast sector, we aim to gain a level of notoriety that should boost our turnover as soon as we launch our solutions. Marketwise, we are considering the V-HOME solution to be manufactured in hardware series, primarily in commercial territories without major Triple-Play-similar offerings. VIOTECH will package two configured offers: The V-HOME Solution with Multi-Play functionalities for the provision of services within the home platform, and the V-HOME Away solution for both residential and moving platforms. Given that we intend to have prototypes series complete by 2011, we plan to adopt the following timetable: • • • Early to Mid-2011: promotion and introduction to Service Providers Fall 2011: market launch Christmas holiday season 2011: generation of major market buzz (TV, Internet, Press), in accordance with partner operators. Considering cost affordability, an initial market price estimate ranging 600 – 1100 € according to configuration solution is envisaged (with decreasing capability for high quantity). Incidentally, the key turnover estimate for commercial success concerns the V-HOME Away Solution, as it relies on lower investment needs than the other marketed solution, with moreover important margin and ROI expectations. The exploitation estimates are in Table 4-1. Table 4-1 Consumer VoIP users/subscribers Product Market introduction (year) Investments (M€ in 2011) Turnover (3 years in M€) Margin % ROI (n° years) V-HOME Solution 2011 1,3 7,7 40 1,5 to 2 V-HOME Away Solution 2011 1,7 12,3 70 1 Copyright © ADAMANTIUM D6.3-F Business Plan Page 73 of 87 5 CONCLUSIONS This document describes the final version of the business plan for ADAMANTIUM results (there was an initial version of this document delivered in February 2009, which was M12 of project lifetime). The two services considered in the project, i.e. Voice over IP (VoIP) and TV over IP (IPTV), have been considered separately as they have specific figures and requirements. The document has a description of the possible business cases for both services, the business idea, the market description and foreseen evolution, some possible business models, a SWOT analysis and a STOF analysis. The key message in the field of communications has a complex interpretation: “Delivering value is vital for success”. End users of converged digital services will only use, and pay for services which they perceive deliver value to them. They will switch to a rival service if they perceive greater value in that, or drop the service altogether. It is a key issue for players in the converged digital market to understand what end users perceive as delivering value, and what part they can play in delivering that value to the end users. This is by no means easy in a converged environment, as perceived value will vary for different users and across different services and platforms (e.g. mobile users are prepared to pay for data which they would expect free over the fixed Internet). Market players therefore need to understand how to identify where value is greatest for optimum return on investment. This requires a better understanding by all market players of the end user – even if there is no direct relationship with that user. For example, in many markets telco brands are simply not associated with value or with user solutions. When it comes to purchasing content and services rather than networks and technology, user allegiance is more likely to be to the established brands they trust from the retail, media and online worlds, not necessarily to telco brands. Telcos need to recognize the need to change their brand value as their customers’ needs change. In some cases, this may mean adopting new brands for particular user segments, or co-branding with partners whose brands have higher value in particular segments. The development of innovative ideas, processes and technologies will continue to drive market development, growth and ultimately value to the end user. Looking at how a service is currently delivered and considering how it could be better delivered, not necessarily from a cost reduction perspective, but primarily with an eye to adding value to the user’s experience through creative processes or content, is key to the improvement of the delivery of value, and will improve customer satisfaction and ultimately the bottom line of the brand. With increasing choice available to users, service providers who lack customer focus will find that their customers will ‘vote with their feet’ and move to competitors. Due to convergence, operators now face the challenge of delivering not just one, but several, products and/or services to their customers efficiently. Increasingly, users want a ‘one-stop shop’ for all their digital services. And with today’s busy lifestyles, users can become frustrated when they receive several bills from the same supplier and have to contact different parts of the organization for various products and services. The importance of customer focus has never been greater. The need to understand not just changing user behavior, but also user wants and needs at a very granular level is challenging but necessary. Increasingly demanding users – particularly early adopters – want choice, but over and above that they are seeking applicability to their own lifestyles and preferences. The notion of individualization of services has been around for a while, but has mostly been about users themselves defining what they want. Future value will be realized when service providers are able to offer, through segmented research, sophisticated packages and bundles of content, applications and services that are appropriate to the context of each and every one of their customers. In addition, the need to provide robust guidance, navigational and search services, that do deliver users what they want, grows exponentially in importance as the plethora of content, applications and services available to end users multiplies. Concluding, it is worth mentioning that ADAMANTIUM has the potential to succeed and lead mobile operators, and not only, to new market segments with great opportunities for increasing market share and profitability. The presented business and market analysis, along with several other sections of this document, pinpointed different future possibilities and market conditions for successful market and business exploitation of ADAMANTIUM project through an efficient and effective business model Copyright © ADAMANTIUM D6.3-F Business Plan Page 74 of 87 adaptation, market viable exploitations plans and a promising financial analysis. In parallel, a business and financial framework for analyzing-evaluating the decisions related to the effectiveness of the ADAMANTIUM business perspective as a means of commercially promoting and supporting ADAMANTIUM in the dynamic and full of uncertainties environment (market, socioeconomic, technological and legal environment) was developed and presented for further exploitation. Copyright © ADAMANTIUM D6.3-F Business Plan Page 75 of 87 6 APPENDIX I – COMMUNICATIONS FRAMEWORK 6.1 Introduction Nowadays, the communications industry is undergoing major changes in its overall structure, changing traditional sources for revenue generation and innovation with a potentially tremendous effect on the business, technology and regulatory landscape. Current incumbents are threatened by new entrants, not only from the communication sector itself (like through alternative access technologies) but also through cross-industry entrants with either complementary or substitute products been the outcome of ongoing technological advances such as the case of Apple with its iTunes/iPhone offering, or Skype with its low cost Internet call service. Changes are caused by a variety of dynamics, in the areas of regulation, business strategy but also technology. Service providers, whether wireline or wireless operators, want to break away from or avoid commodity-priced voice and data services. Despite several proposed mergers that aim to reduce the number of service providers, this objective still remains. Consequently, providers are turning to converged services to generate not just sustainable revenues from new and current users, but brand loyalty and new services revenue as well. As part of this effort, service providers are exploring blended lifestyle services that can be offered seamlessly across devices regardless of access technology. The most common applications being targeted as a new revenue source are multimedia and interactive services, such as voice, video and mobile video gaming. To deliver mix lifestyle services, network operators must introduce a new network architecture that facilitates rapid service introduction and makes the mix up cost-effective through disintegration of applications from the device and the access method. On the same time, moving in parallel with this market pattern, the advent of electronic personal and business communication has revolutionized the existing means of communication and has made fixed and mobile communication networks to go through a major transition. Key player of this transition is the IP Multimedia Subsystem (IMS). 6.2 IMS IMS is the technology that merges the Internet with the cellular world. It makes Internet technologies, such as web, email, instant messaging, videoconference, VoIP and Internet TV available nearly everywhere. In general, IMS makes feasible to provide cellular access to all the services that the Internet successfully provides. Viewed from a technical perspective, IMS defines a complete architecture and framework that enables the convergence of voice, video, data and mobile network technology over an IP-based infrastructure. It fills the gap between the two most successful communication paradigms, cellular and Internet technology. This is the vision for IMS: to provide cellular access to all services that the Internet offers and to enhance the use of particular services such as VoIP and IPTV. The IMS architecture gives service providers the opportunity to deliver new and better services, with reduced operating costs, across wireless, wireline, and broadband networks. IMS is defined by the Third Generation Partnership Project (3GPP) and supported by major Network Equipment Providers (NEPs) and service providers. It unifies applications enabled by the Session Initiation Protocol (SIP) to connect traditional telephony services and non-telephony services, such as instant messaging, pushto-talk, video streaming, and multimedia messaging. The IMS architecture involves a clear separation of three layers: • Transport and Endpoint • Session and Control • Application Services Viewed from a business and marketing perspective, the IMS architecture has been designed to give the ability to operators to provide a wide range of real-time, packet-based services and to track their use in a way that allows both traditional time-based charging as well as packet and service-based charging. It Copyright © ADAMANTIUM D6.3-F Business Plan Page 76 of 87 has become increasingly popular as it is designed to increase carrier revenues, broaden target markets, deliver integrated multimedia services, and create an open, standards-based network. In addition, the IMS architecture defines many common components (for example, call control and configuration storage) so less development work is required to create new service, since this existing infrastructure can be reused. Similarly, the use of standardized interfaces will increase competition between suppliers while preventing operators from being locked into a single supplier's proprietary interface. 6.3 IMS Benefits The benefits of IMS over the existing communications network infrastructure and within today’s technological advances framework can be demonstrated in the following three perspectives. Technical perspective14: According to the IMS architecture, separating the network into the Transport and Endpoint Layer, Session and Control Layer, and Application Services Layer allows true convergence of devices, networks, services, and applications. Convergence of devices implies that mobile or stationary terminal devices can be managed and enabled by the network, including phones, PDAs, computers, and TV sets. Convergence of networks implies that wireless access networks, the legacy PSTN, and broadband networks appear as a single manageable entity to the appropriate IMS abstraction layer. Convergence of network services involves all necessary network functionality to enable subscriberlevel applications. These services include consistent mechanisms for accessing user profiles, authentication and billing, location services, and media control services via open, standards-based Application Programming Interfaces (APIs). Finally, converged IMS applications can reside either within the service provider’s domain or anywhere in the network, can take advantage of common network services, and can reach subscribers via different types of network and devices. Business and Service providers’ perspective15: • IMS facilitates the creation and deployment of new applications and services o Enhanced applications are easier to develop due to open APIs and common network services. o Third-party developers can offer their own applications and use common network services, sharing profits with minimal risk. o New services involving concurrent sessions of multimedia (voice, video, and data) during the same call are now possible. • IMS eases processes such as capture of new subscribers and retention of current subscribers o Better voice quality for business applications, such as conferencing, is possible using wideband codecs. o Wireless applications (like SMS, and so on) can be offered to wireline or broadband subscribers. o Service providers can more easily offer bundled services. • IMS lowers operating and capital costs o Cost-effective implementation of services is possible across multiple transports, such as Push-To-Talk (PTT), presence, Location-Based Services (LBS), Fixed-Mobile Convergence (FMC), mobile video services, and so on. o Common provisioning, management, and billing systems are supported for all networks. o Significantly lower transport costs result when moving from circuit-switched to packetswitched channels. 14 http://www.dialogic.com/products/docs/whitepapers/11297-ims-arch-benefits-wp.pdf 15 http://www.dialogic.com/products/docs/whitepapers/11297-ims-arch-benefits-wp.pdf Copyright © ADAMANTIUM D6.3-F Business Plan Page 77 of 87 o IMS results in reduced expenses for delivering licensed content to subscribers of different types of devices, encodings, or networks. Cellular network perspective16: • IMS provides a common platform that may reduce time-to-market for rolling out new multimedia services. One of the biggest challenges in today's communication network is to improve the long and costly process for creating a new service. Service providers are looking for ways to reduce the time-to-market for rolling out new multimedia services. The IMS infrastructure solves this problem by providing a standardized platform and reusable components. The standardized interface and common features provided by IMS infrastructure enables service providers to easily adopt a service created by third parties and create a service that integrates effectively with other services. In addition, with the standardized interface provided by IMS, the service is no longer solely provided by a single provider; any provider who implements the standardized interface can provide the service. The multi-vendor service creation industry leads to an open market, and allows service providers to choose the most effective way to roll out new services. • IMS provides multimedia services with Quality of Service (QoS) enablement: Although the dramatically increased bandwidth in 3G cellular networks provides a much faster and more reliable Internet access compared with 2.5G cellular networks, there are no guarantees about the quality of the service. A 3G cellular network provides what is known as "best effort”, which means the network will do its best to ensure the required bandwidth, but there is no guarantee it will remain at the same level. Consequently, the bandwidth of a particular connection can vary significantly over time. In order to solve this problem, Quality of Service (QoS) mechanisms were developed in order to provide certain guarantee levels of network bandwidth during transmission instead of the so called "best effort". IMS specifies enablement of Quality of Service within the IP network and takes advantage of the QoS mechanism to improve and guarantee the transmission quality. • IMS allows operators to charge multimedia session appropriately: If a user uses videoconference over the 3G cellular network, there is usually a large data transfer that consists of audio and video. This could be expensive if the operator charges by the number of bytes transferred. On the other hand, if the operator is willing to provide a different charging scheme based on the actual service type, it may be more beneficial to the users. The advantage of IMS is that it provides information about the service type being invoked by the user and thus allows the operators to determine how to charge the users based on service types, i.e. they can choose to charge user by the number of transferred bytes, by the session duration (timebased), or perform any new type of charging. • IMS allows all services to be available irrespective of the users' location: A typical and particularly annoying problem when working with cellular technology is that some of the services will not be available when the user is roaming in another country. To resolve this problem, IMS uses Internet technologies and protocols in order to allow users to move across the countries and still be able to execute all the services as if they were from their home network. 6.4 Introduction to LTE Long Term Evolution defined by 3GPP will constitute the common standard for next generation mobile networks (4G) as it promises to deliver significant benefits to operators and end users as well. Such benefits are related to investment protection (elements that facilitate roll-out of future features, reuse of existing assets such as spectrum and sites), improvements in coverage and capacity (flexibility in frequency allocation, efficiency in terms of spectrum utilization), CAPEX and OPEX 16 http://www.ibm.com/developerworks/webservices/library/ws-soa-ipmultisub1/ Copyright © ADAMANTIUM D6.3-F Business Plan Page 78 of 87 reduction (lower cost-per-bit, simplified architecture) and last but not least, increase in revenues by means of offering enhanced multimedia services based on higher throughput and minimum latency, aiming at high Perceived Quality of Service levels. LTE and SAE/EPC (System Architecture Evolution / Evolved Packet Core) implies also the adoption of end-to-end IP as the underlying transport protocol for various services: voice, video, and data. IPbased technology allows for reduced backhaul costs and provides a flatter IP network architecture with fewer network components. IP infrastructure supports technologies like QoS prioritization and deep packet inspection (DPI). Such features could possibly be combined with customer profiles and preferences in the view of offering customer and network policy decisions based on network conditions as well as users’ characteristics such as tariffs, type of service, type of service basic prerequisites (for example in terms of bandwidth) etc. These capabilities, increasingly provided by software-based subsystems, will reside in the mobile RAN and core equipment; in IP/MPLS switch/routers; and in specialized network appliances (e.g., DPI and service-aware charging appliances). The objective related to the differentiation of services could be addressed by the use of sophisticated, granular user-, traffic-, and applications-based QoS prioritization and service control mechanisms. The use of sophisticated QoS prioritization and service control mechanisms are considered as highly beneficial for network operators in terms of offering greater flexibility for service differentiation, revenue generation and cost control. Furthermore, the ability to differentiate traffic flows and personalize services opens up all sorts of possibilities. Assuming a customer’s service terms and conditions allow it, operators can offer new services or insert ads based on a customer’s real-time browsing activity. QoS-prioritized multimedia gaming or corporate services can be a source of additional revenues to operators, while specific users (for example, public safety or corporate) who have a higher need of high quality of services and are willing to pay for that kind of services can be offered higher-priority sessions. In order to substantiate policy enforcement functionalities related to traffic class differentiation in mobile networks 3GPP, based on IMS architectural framework added a Policy and Charging Rules Function (PCRF – the “rules” engine) and Subscriber Profile Repository (SPR – customer subscriptions and preferences database) for UMTS and HSPA that will be extended and expanded for LTE. The PCRF provides the rules and a separate Policy Control Enforcement Function (PCEF) applies the rules based on a sophisticated set of criteria and subscriber data from the SPR to optimize both network behavior and user experience. Integration of these functions with billing and various classes of services allows a plethora of new premium services. IMS is considered to contribute towards service provision evolution over a mobile network environment. IMS infrastructure advantages could be summarized to simplicity, flexibility (it is easy to add a new application in the form of a SIP message processing function for each new service to be created), independence of the underlying network technology, allows the integration of several Internet services and constitutes the basis for innovative services (since it is IP based and controls the SIP sessions, IMS can embed the APIs needed to develop and invoke applications through high level APIs, thereby enriching SIP multimedia communications). This network convergence (Figure 6-1) and introduction of next generation architectures brings along the possibility of introducing wireless VoIP. Copyright © ADAMANTIUM D6.3-F Business Plan Page 79 of 87 Figure 6-1 Network convergence In order for the introduction of wireless VoIP services to take place successfully, such an action should be able to offer operators substantial cost or service benefits, combined with a relatively low risk of implementation. A mandatory prerequisite is also the characterization of the provision of this service by very high quality levels, especially since voice service is highly sensitive and extremely important to mobile operators. The key turning point for the development of wireless VoIP will be the introduction of new, more efficient (in terms of spectrum allocation) cellular technologies, most notably LTE. In the USA, cellular VoIP services will account for 49% of all cellular minutes (and 28% of the total fixed and voice minutes) by 2015, due to the relatively early introduction of cellular VoIP by some operators in this market. Cellular VoIP services in the USA are estimated to generate USD70.9 billion (EUR58.3 billion) in revenues in 2015. (Source: Analysys). In Western Europe, 33% of all cellular voice minutes (and 23% of total fixed and mobile minutes) will be carried by cellular VoIP, by 2015. Cellular VoIP will also carry more voice minutes than all fixed voice services in Western Europe, due to the relative convenience, cost effectiveness and capability of mobile VoIP handsets compared with fixed VoIP PCs. Cellular VoIP services in Western Europe will generate USD54.7 billion (EUR44.8 billion) in revenues in 2015. (Source: Analysys). The introduction of cellular VoIP will also give mobile network operators greater flexibility to integrate other service features (such as IM, video and online whiteboards for sharing information). Copyright © ADAMANTIUM D6.3-F Business Plan Page 80 of 87 7 APPENDIX II – VOIP AND IPTV INTRODUCTION 7.1 VoIP VoIP stands for Voice over Internet Protocol and is a technology being used to make voice calls using the IP networks. The process to transmit voice over an IP network involves the digitalization, conversion and compression of recorded voice signals into data packets that are transmitted, reassembled and converted back at the other end of the network into voice communication. VoIP has fundamental applications such as voice, fax, data and multimedia. The commercial use of VoIP began with VocalTec’s VocalChat software in March of 1995. Initially, it started being used by a very small community of internet enthusiastic users with very poor quality. With the increase of internet accesses together with bandwidth enhancements in the networks it has become popular and now there are many applications being used in fact to make VoIP calls. VoIP can smoothly replace traditional PSTN networks and services, but it can also replace traditional voice calls over mobile networks. Ever since, VoIP is perceived to have the potential to disrupt the existing value chains in the communications industry and be the main reason for new business models development. In the late 1990s, this threat of disruption mobilized much investment from voice and data networking suppliers towards standards and product development and deployment. As the dot-com bubble busted, VoIPrelated activities temporarily slowed down, but only to attract even greater interest in the coming years. Having already invested in VoIP-related technology, however, the suppliers continued to wonder about the ultimate form of voice communication that will be most attractive to the user, as they exploit VoIP’s ability to converge voice, video and data. Regulators around the world have begun to address the question of VoIP regulation in the last years. Most industrialized nations have decided to apply only the social regulation to VoIP, sparing it of economic regulation traditionally imposed on the telephone service. The rationale for not imposing the economic regulation is the highly competitive telecommunications sector. Regulators, however, fear whether the industry structure, resulting from the technology suppliers’ response to regulation, will continue to remain highly innovative and competitive, and at the same time deliver the desired societal robustness. Nowadays, the applied model of integrated voice and data communications where voice is carried over IP has a tremendous appeal to the communication market. However, VoIP is perceived and evaluated differently according to the perspective from which it is viewed and used. Different factors of evaluation are used by end users (businesses or private consumers) and different by Internet Service Providers (ISPs). Unfortunately, the underlying IP network used for VoIP is inherently unreliable, in contrast to the circuit-switched networks. Actually, it does not provide a mechanism to ensure that data packets are delivered in sequential order and consequently VoIP implementations cannot guarantee Quality of Service (QoS), although technological innovations and higher broadband ensure that the QoS of VoIP increasingly matches the already established quality of circuit switched networks. The objective of ADAMANTIUM project is to design and develop a solution to improve PQoS, trying in this way to solve QoS and reliability issues of VoIP services, and providing a better user experience. This will result not only in customer retention, but also in new users accessing the VoIP service, fact which will raise revenues and profitability for providers (while outbalancing for any negative affection to the revenues coming from “traditional” voice) and satisfaction for end users. 7.1.1 Mobile VoIP The number of mobile subscribers in the world has for long grown faster than the number of Internet users as Figure 7-1 depicts for the past years. According to Nokia’s estimations, the number of cellular subscriptions is likely to have surpassed the four billions in 2012. Copyright © ADAMANTIUM D6.3-F Business Plan Page 81 of 87 Figure 7-1 Growth of Mobile and Internet users by 2006 In developing countries wireless infrastructure is built in locations where no wired telecom access exists, mainly because wireless infrastructure nowadays has become cheaper and more flexible. It is no surprise that industry experts generally believe that in the coming years in many developing countries people will get their first experience with the Internet through a mobile handset. Given that packet-switched networks are more economical than circuit-switched networks and the Internet infrastructure has already matured for quite a while, it is possible that in the future all mobile services are delivered over Internet protocols. Mobile VoIP is defined as voice-oriented services, in which voice is transmitted over IP-based networks, and the service is provided by mobile operators and is used with a mobile handset. Today’s 3G networks can already support VoIP, but often without the quality, efficiency and reliability of circuit-switched telephony. Future generations of wireless technology – LTE, UMB, WiMAX – are all-IP, so unless mobile operators continue to run separate voice networks in parallel, they will have to eventually transition to VoIP. At the same time, there is an increasing trend of carriers marketing 3G modems for PCs – not just for mobile computing, but also to compete with DSL/cable broadband offerings. Laptop users will expect to be able to use their normal broadband applications, including voice-based ones like Skype. Consequently, from a technical perspective mobile VoIP is already reality. However, in further developing mobile VoIP many related issues are still to be solved. One of them is the controlling/charging of mobile VoIP, particularly if truly Internet-based VoIP services are going to emerge in the market. Another key issue is the radio network technology, including e.g. Quality of Service parameters such as end-to-end delays and handover management. With regards to challenger mobile VoIP services (e.g. virtual operators with SIP and proprietary technologies like Skype) the switching gateways and associated call termination charging of Internet to PSTN/mobile networks are both a regulatory and technical challenge. For all presented reasons and quality limitations, ADAMANTIUM focuses on the case of mobile VoIP, which is considered as an evolution to the VoIP services via fixed networks and an excellent field for improving quality, efficiency and reliability of provided service. 7.2 IPTV IPTV stands for Internet Protocol Television and is defined as a set of multimedia services such as television, video, audio, text, graphics, data delivered over IP based networks managed to provide the required level of quality, security, interactivity and reliability. In particular, IPTV is a transmission and control technique to deliver broadcast and VoD video streams to a STB (Set Top Box). What is novel in this process is the use of pure IP addressing to change channels and control other functions. In more specific, IPTV is a system through which digital television service is delivered using the architecture and networking methods of the Internet Protocol Suite over a packet-switched network Copyright © ADAMANTIUM D6.3-F Business Plan Page 82 of 87 infrastructure, e.g., the Internet and broadband Internet access networks, instead of being delivered through traditional radio frequency broadcast, satellite signal, and cable television (CATV) formats. Historically, in 1994, ABC's World News Now was the first television show to be broadcast over the Internet, using the CU-SeeMe videoconferencing software. The term IPTV first appeared in 1995 with the founding of Precept Software by Judith Estrin and Bill Carrico. Precept designed and built an Internet video product named IP/TV. IP/TV was an MBONE compatible Windows and Unix-based application that moved single and multi-source audio/video traffic, ranging from low to DVD quality, using both unicast and IP multicast Real-time Transport Protocol (RTP) and Real time control protocol (RTCP)17. IPTV is a key component of the Telcos’ strategy to increase revenue and launch into a market where, (a) user expectation for quality is already high, (b) choice (often without leaving your armchair) is broad and (c) service delivery will frequently be via relatively low bandwidth DSL connections. Delivery of competitive quality and the ability to detect service affecting faults ahead of user complaints will be a vital ingredient for the successful launch and penetration of this service. IPTV key attributes are not limited solely to delivery of video content over IP networks or through Internet but they expand to interactivity and bidirectional communication. IPTV services may be classified into three main groups: live television (live broadcast video services), time-shifted programming, and content (or video) on demand (VoD) (stored video services). Additionally, IPTV offers integrated communication services (integrated telephony and internet services), audio services (radio/music broadcast, music on demand, music subscription service), gaming services, advertising/marketing services. IPTV is distinguished from general Internet-based or web-based multimedia services (e.g. Internet TV) by its on-going standardization process (e.g., ETSI) and preferential deployment scenarios in subscriber-based telecommunications networks with high-speed access channels into end-user premises via set-top boxes or other user equipments (in house or mobile devices). Nowadays, mobile IPTV is also offered by mobile operators to users’ mobile devices. Figure 7-2 clearly shows the different options for distributing and accessing IPTV services. Source: BBC http://www.bbc.co.uk/blogs/bbcilabs/assets/bbc_tvp_what_is_iptv.pdf Figure 7-2 Distributing and accessing IPTV services options 17 http://www.cisco.com/warp/public/750/acquire.html, http://economictimes.indiatimes.com/articleshow/msid-589392,prtpage-1.cms Copyright © ADAMANTIUM D6.3-F Business Plan Page 83 of 87 Additionally, as shown by Figure 7-3, it is not only the different options for distributing and accessing IPTV services over the network but also the type of the used network, middleware and end user device/software. Figure 7-3 IPTV middleware and user device/software options Unfortunately, even today the underlying network used for IPTV remains unreliable in terms of quality of service and/or content. Actually, it does not provide an established mechanism with which IPTV transmission and implementations to be able to guarantee Quality of Service (QoS) close to the “wish” standards set by consumers which will allow them to also achieve further personalization, interactivity and ease of accessibility (Figure 7-4). Figure 7-4 Users’ wishes on IPTV For end users/consumers along with quality, additional values such as usability and extensibility are equally high valued when they are using IPTV (Figure 7-5). Consequently, such user desires for set and well defined IPTV values means that operators need to look at managed and quality guaranteed delivery of IPTV services over provisioned bandwidth, rather than an unmanaged, best-effort, contended service. Copyright © ADAMANTIUM D6.3-F Business Plan Page 84 of 87 Source: Telefonica IPTV Competence Centre Figure 7-5 Three pillars for the IPTV service As also mentioned in the previous sections of the document, the objective of ADAMANTIUM project is to design and develop a solution to improve PQoS, trying in this way to solve QoS and reliability issues of IPTV services, and providing a better user experience, that will result not only in customer retention, but also in new users accessing the IPTV service, fact which will raise profitability for providers and satisfaction for end users. Also, ADAMANTIUM focuses on the adoption of IPTV provision via IMS to mobile terminals, which refers to lower bit rates and spatial resolution in comparison to the SD of the terminals via fixed connections. 7.2.1 IPTV over Mobile A necessary part of the mobile IPTV chain is the mobile device. A mobile device can become an extension of the IPTV service both to control and to view video content (live streaming or on demand). For instance, a user may use his notebook, PDA, cell phone or other wireless device to pull up the TV schedule, select the episode and send a command to the digital video recording service to record this episode. Similarly, he can use his video-enabled mobile device to call up the DVR/PVR menu, select the pre-recorded program and watch it wherever he is, at any time. Conversely, such a user could begin watching the TV show at home and then switch seamlessly to the mobile video device to watch the rest of the program on his trip. The user interface will be the same on the mobile device as on the home IPTV set, making navigation familiar and convenient. When such an offered with an IMS foundation, IPTV changes the session from simply watching TV to experiencing TV from a passive and solitary activity into a richly interactive one. And all these will being on constant move and in areas with no wireline communication coverage. As a result, mobile phones are becoming increasingly complex in order to be able to support the new innovative services and better satisfy consumer requests. Nowadays, the common definition for mobiles phones has been transformed to include any device that has both voice-plus-data capabilities and includes an operating system. Current economic concerns are failing to hit sales of mobile phones as latest figures reveal that the global mobile device market is still on course to ship 1.3 billion units this year. According to ABI Research18, the biggest handset manufacturers enjoyed year-on-year unit shipment growth of between 15 and 22% during the second quarter (Q2) of 2008. This Q2 growth accounted for an estimated 301 million unit sales, confirming previous forecasts that the mobile device 18 http://www.itpro.co.uk/605118/mobile-phone-growth-remains-strong Copyright © ADAMANTIUM D6.3-F Business Plan Page 85 of 87 market will deliver 13% growth this year, to take 2008 annual shipments to 1.3 billion units. The converged mobile device market or smartphones, posted year-over-year increase of 85.8%. Historically, TV, mobile communication and IPTV services have evolved independently but in the recent years their convergence is more than obvious mainly for better serving the end user by adding values (such quality, convenience flexibility) to the offered services (Figure 7-6). Figure 7-6 TV, Mobile, IPTV evolution and convergence Mobile IPTV is defined as multimedia services such as television/video/ audio/text/graphics/data delivered over IP based wireless networks managed to provide the required level of QoS/QoE, security, interactivity and mobility. Following this evolution and convergence trend, IPTV services are now offered over mobile services and extensively supported by mobile operators and service/content providers (see Figure 7-7 and Figure 7-8). Figure 7-7 IPTV evolution Figure 7-8 IPTV over mobile device (Source: BNS) Copyright © ADAMANTIUM D6.3-F Business Plan Page 86 of 87 Traditionally, Mobile IPTV is the broadcast of live TV to an adapted mobile phone handset (Broadcast Mobile TV) or the streaming of an on-demand program to a 3G phone (Cellular Mobile TV) over IP based wireless networks (see Figure 7-9). In particular: Figure 7-9 Mobile IPTV (Source: BNS) Broadcast Mobile IPTV • Truly ‘broadcast’, the same signal is broadcast (over IP based wireless networks) across a large area regardless of whether anyone is watching, similar to watching TV, thus inexpensive to scale to large audiences. Cellular Mobile IPTV • Cellular service, just like voice, over IP based wireless networks • Streaming approach - similar to watching a movie clip on the Internet (buffering issues) • Direct relationship between the number of people watching and the bandwidth of the mobile phone networks’ streaming servers means expensive to scale to large audiences. Mobile users find IPTV mobile service as complementary to traditional TV and they point out to it two already established features combination: • TV on the go, offering familiar content • Multimedia functions with features such as radio, music player, camera and video recorder for a personal viewing experience. An increasing number of mobile phone users are making use of mobile TV services mainly due to the following unique attributes of this service • Flexibility and Independence • Enhanced personal viewing experience • Obtaining time and location-dependent information • Filling idle time when on move (especially for people in Asia who commute more often and longer than anywhere else in the world). Copyright © ADAMANTIUM D6.3-F Business Plan Page 87 of 87 8 APPENDIX III – GLOSSARY 3GPP 3rd Generation Partnership Project AF Application Function ASP Application Service Provider DAM Digital Asset Management DiffServ Differentiated Services DoS Denial of Service ECM Enterprise Content Management GGSN Gateway GPRS Support Node IMS IP Multimedia Subsystem IP Internet Protocol IPTV Internet Protocol Television ITU International Telecommunication Union LTE Long Term Evolution MAM Media Asset Management MCMS Multimedia Content Management System MPLS MultiProtocol Label Switching MSRF Media Server Resource Function NGN Next Generation Network NQoS Network Quality of Service PCEF Policy Control Enforcement Function PCRF Policy and Charging Rules Function PQoS Perceived Quality of Service PSTN Public Switch Telephone Network PVA Private VoIP Applications PVR Personal Video Recording QoE Quality of Experience QoS Quality of Service SIP Session Initiation Protocol SGSN Serving GPRS Support Node SPR Subscriber Profile Repository STB Set Top Box TAM Terminal Adaptation Module VoD Video on Demand VoIP Voice over IP Copyright © ADAMANTIUM
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