How Will Operators Evolve Messaging asThey Migrate to the NGN?

Ronald Gruia

Principal Analyst, Emerging Telecoms

January 20th 2011January 20th 2011

Today’s Presenter

Ronald Gruia, Principal Analyst

Frost & Sullivan

Functional Expertise14 years of telecom industry expertise accumulated at Frost & Sullivan (10 years) and Nortel Networks (4

years). Particular expertise in:

2

years). Particular expertise in: - NGN Transition: LTE (4G), IP Multimedia (IMS) and VoIP applications, services and standards- Telco 2.0: business models, next-gen VAS (Value Added Services), service brokering - The Enterprise of the Future: IP Telephony, WLANs, Unified Communications, Speech, IVR apps

Industry Expertise- Strong experience base covering telecom and power systems industry: - U.S. Patent holder: principal inventor of an algorithm optimizing a multimedia application- 100+ speaking engagements at telecom conferences and industry shows- Featured columnist at IMS / NGN Magazine; wrote articles for Processor Magazine and TMC.net- Quoted on Business Week, Financial Times, Forbes, Wired, API, Reuters, MarketWatch, etc.- Appearances on CNBC (US), BNN, Report on Business Television and TechTV (Canada), Decision

TV (Brazil) and Telecom TV (UK, live from Spain)

How Messaging Will Evolve as Carriers Transition to the NGN

Agenda

• A 360-Degree View of the Global Next-Gen Messaging Market

• Voicemail: Still the Primary Call Completion Service…

• Messaging Drivers - VM Global Regional At-A-Glance Outlook

• RCS: Panacea to Messaging Industry Woes?

3

• RCS: Panacea to Messaging Industry Woes?

• Platform Consolidation Drives OPEX Savings

• Faster Time-to-Market Needed for Introduction of New VAS

• Enabling the Monetization of New Assets

• A Look into the Future

• Conclusions

A 360-Degree View of the Global Next-Gen Messaging Market

Frost & Sullivan conducted 35 in-depth interviews with operators

around the world for its Next-Gen Messaging Study

Operator Regional Breakdown

23%

31%

North America

4

17%

29%

North America

Latin America

Europe/MEA

Asia/Pacific

Emerging versus mature market operator discussions split:

• 16 mature (46%)

• 19 emerging (54%) Source: Frost & Sullivan

Research Methodology

Primary research (other sources): conducted additional interviews:

• GSMA - to further evaluate the potential of the RCS initiative

• NGN Forum - to gain additional insight on the LTE / IMS rollout schedules of some operators and the uptake of IMS alongside the 4G introduction

• Sr. Wall Street Research Analysts - to obtain another independent

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• Sr. Wall Street Research Analysts - to obtain another independent opinion of the advent of new messaging paradigms in a new all-IP 4G world

• Google executive - to get an “over-the-top” perspective on the future of VAS

• Triangulating the above information w/ in-house data and our own VAS/messaging industry know-how

Voicemail: Still the Primary Call Completion Service…

• Global penetration estimated at ~ 50% on average (across all regions)

• Service represents ~ 3 to 10% of total wireless operators’ revenues

• The average subscriber gets about 2-4 messages / week

• “Premium” (high volume) users typically get 1-3 messages / day

However:

• Some subscribers do not use the service

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• Some callers do not leave messages

• Not every message is retrieved

Clearly something needs to be done to improve call completion rates

• iPhone creating demand for visual VM

• Visual interfaces becoming a de-facto standard (e.g. RCS)

• Visual experiences is becoming a key market differentiator

• Move to a single “converged” mailbox (multi-access, single storage)

Europe & MEA

North America

RegionNet Subscriber

AdditionsIncrease in Service

PenetrationPlatform Churn /

Maturity

� �

Overall

Growth Potential

Messaging Drivers - VM Global Regional At-A-Glance Outlook

� � ��

� �

7

Europe & MEA

Asia/Pacific

Attractive Un-attractive��

��

* Potential shown over forecast period (2009-2013)

Latin America �

� � ��

�

� �

�

�

Source: Frost & Sullivan

RCS: Panacea to Messaging Industry Woes?

• Jury is still out (based on the feedback from our operators)

• Some SPs still skeptical despite membership in the RCS consortium

• Others pointed out to issues such as:

• Handsets - need more than a SIP stack for IMS support, proprietary implementations and what will the required subsidy levels be like?

• Interoperability - big issue: also, if OEM models are the same for all SPs, then where will the differentiation be?

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then where will the differentiation be?

• Battery life issue - all presence updates may translate into heavy usage of the cell phone battery and shorten the useful life for each charge-up

• Control issue - RCS is too focused on features intrinsic to the handset & the mobile network while mesh-ups are happening on the web

• Too late? - Social networking support only coming in R4

• These issues along with business cases need to be resolved but in

the interim, SPs and vendors should focus on specific use cases

Platform Consolidation Drives OPEX Savings

• Common converged platform that can support multiple services in a single consolidated, flatter, all-IP architecture

• Support of various types of mobile messaging: SMS to/from mobile IM, social networking, MMS from UGC sites, VM/SMS to/from e-mail, VM2MMS, etc.

• Benefits:

• System capacity increase (e.g. 10:1 migrating to IPVM from legacy VM)

• Solution footprint (e.g. usually a 50-70% decrease in terms of floor space)

• Power consumption (e.g. typically a 40% reduction in total power consumption)

9

SOA-Based Consolidated Framework

Subscriber Data

Enablers (NAB, Presence, Location, etc.)

Shared Components

Common OA&M

SMS MMS IPVMMsg.

RouterService Broker

Converged Messaging Supporting Various Clients

Faster Time-to-Market Needed for Introduction of New VAS

Identify NewApplications

PrototypeRapidly

ConductTrials

Market LaunchModify andAugment

Scale

TTM (Time-To-Market) Needs toBe Drastically Reduced

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• “Service velocity” is becoming more and more important for service providers as they also worry about these “at the edge” players such as Google and Apple

• Operators are beginning to achieve some TTM gains via the introduction of an IMS-like converged networks architecture that can enable them to introduce new services quicker and to fail existing ones faster and more cheaply

• Typical TTM for a new service reduced from 15 months to <6 months

Enabling the Monetization of New Assets

Operator assets:

� Brand, subscriber identity (Name, address, age, devices, etc.)

� Subscriber data (usage, patterns, history, etc.)

� Location (motion, context, …)

� Rich presence

� Customer relationships

Connectivity (for cloud computing ecosystem)

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� Connectivity (for cloud computing ecosystem)

� Interoperability with legacy services

� Fine-grained billing systems (sometimes already leveraged for MVNOs)

How to better monetize these assets:

� Focus on two-sided business models and “upstream” customers

� Open up interfaces to enable third party development of apps that can leverage the above assets

� Explore new apps: targeted mobile advertising and sponsored services

A Look into the Future: Messaging Evolution

• Start simple: threading all message types from a particular user (e.g. e-mails, voice mails, SMS/MMS messages, etc.)

• Implement a rules-based engine that adapts to a user’s preferences

• Over time can blend in more enablers to the NAB (Network Address Book, adding contextual presence info, location, etc.)

• Utilize the NAB as a launch pad for different messaging applications

• Offer “smart converged messaging”, in which VM is an integral part of an “all-

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• Offer “smart converged messaging”, in which VM is an integral part of an “all-encompassing” solution:

User elects:

What to send &

Who to send it to

Operator Cloud

Operator determines the status & equipment of receiver

Voice Mail

SMS

MMS

IM (client or via SN site)

E-Mail

Operator chooses best delivery mechanism for message to be sent

A next-gen solution eases the integration of VM into this all-encompassing offering

Conclusions

• Messaging will follow the core network infrastructure trend and shift to IP

• To ensure success, new VAS will need the same SMS success ingredients

• Market will likely see more consolidation happen in 2011/2012

• Pricing erosion will make vendors consider tapping into new sources of revenue including new sponsored services and targeted mobile advertising. Messaging clients in the future could have some ad sponsorship and could be invoked from a NAB or even perhaps an augmented reality application

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augmented reality application

• The future should bring a converged messaging client with a common look-and-feel across different touch points, and shared enablers (network address book, contextual presence, location and an inter-working spec with other operators, be it RCS or something else)

• Vendors will assist operators as they evolve gradually to the NGN by providing “transitional elements” (messaging gateways, service brokers, etc.) to help ease the migration. Vendors will also have to provide a clear and practical roadmap for the winding down of legacy platforms

Q & A Session

Thank You

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Ronald F. Gruia

Program Leader - Emerging Telecoms, Principal Telecom Analyst

�rgruia@frost.com � +1-416-490-0493

Twitter: http://twitter.com/rgruia

Thank You

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For Additional Information

Ronald Gruia

Program Leader & Principal Analyst,

Emerging Telecoms

(416) 490-0493

rgruia@frost.com

Brian Cotton, PhD

Vice President

Information & Communication Technologies

(416) 490-0983

bcotton@frost.com

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Global Director, Social Media Strategy and Research(210) 247-3806

jake.wengroff@frost.com

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Marketing

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amontoya@frost.com