Enablers: Telcos as a platform A two sided model?

1. Enablers: Telcos as a platform A two sided model? Stephen Wood – Global Product Director mBlox Ltd stephen.wood@mblox.com May 25, 2011

2. mBlox – the world’s largest Mobile Transaction Network • A network connecting many Content/Service Providers to many Operators • The network for Enabling Services transactions worldwide • 4 billion transactions worth $500m in 2010 • We sell SMS and Premium SMS services. Delivery and ‘on carrier billing’.

3. Enablers, telcos and content providers - A possible future landscape discussion • Telcos have assets of great value to content providers • … we know content providers will pay for them, if truly valuable • … we know they could provide revenue for operators • … in a two sided model of retail and ‘wholesale’ • BUT.. handset/OS providers may diminish the value of these assets • … by disintermediation of carriers; providing enablers directly • … however, can this be provided effectively to content providers? • … and does this model provide the ‘best hope’ for sustainable data revenue?

4. Separation of access and service- A trend accelerated by IP services • Customers want to buy service, not access. Visible in Mobile Content industry • When services were delivered inside the access network, the problem did not arise • Deregulation of voice services did not materially change this model • IP networks fully separate service and access - a new commercial challenge • ‘Wholesale’ versus retail? Service Terminal Terminal Service Access Access Terminal Terminal Service

5. Consumer hardware What new business models will prevail? • Competing for the consumer, trading together • Will the mobile business model converge on the internet, or vice versa? • What are the other sources of revenue? Content & service Access

6. SP/CP Content services Content Service Marketing BSS Content OSS Key Enabler Services ($€£) Enabler Services in Mobile ContentThe mobile operator as a 2-sided platform • Consumer relationships based on core, vertically integrated services… • …create valuable enabler services to third parties MNO Comms Service Marketing Core comms services ($€£) BSS Network OSS

7. Key enabler categories • Delivery enablers • Text messaging is established and mature • Sender-pays data is key • Quality of service will be vital • Billing enablers • Premium and WAP billing are established and mature • Refunds and credits need to come faster • More advanced ‘on carrier’ billing • Credit and debit card payments….? • Handset Context – the next frontier • Location lookup? • Roaming detection • Radio link quality lookup • Terminal capabilities and status lookup • Subscriber Insight – eventually? • Identity management • MSISDN or alias links device to person: identification and addressing • Handset enablers (possibly via the mobile cloud?) • Some complement: accelerometer • Some displace: GPS

8. How Mobile Has Worked pre App Store • Phone service relationship gives mobile operators control also over access • Mobile operators sell enabling services to content providers • Mobile operators provide payment means for service providers and so… • …Customers pay for content • Disrupted by App Stores -> Handset and OS providers build direct consumer charging relationships Content services Content & service Enabling services (billing, SMS,...) Consumer hardware Access & Phone Service Comms

9. Enabler Services in the Value Model • Enabler services earn carriers ~25% of gross customer spend • Scaleable, high margin revenue source, driven by numerous CPs and services • Standardized enabler services scale with the growth of content services eg Tax Carrier Payment Enabler Services Net to CP Other Carrier Delivery Enabler Services Service Marketing Content Rights CP Net Income

10. Billing • Handset control • Network visibility • Screen layout • Store placement Consumer hardware The Coming Fight Over Enablers • Enabling services will be important to erect barriers to customer churn…. • …and also important sources of revenue • Competition for control over consumer buying decision • Different attitude of players: e.g. Apple v. Google Content & service Brand & Application Stores • Billing • Transmission • Network data • Subscriber insight Access &Phone Service

11. Service providers require a mixture of enablers Network Enablers Data, ‘Charge-to-bill’, Identity Debit/Credit Card, Paypal, App Store Location, Security, GUI Payment Enablers Handset Enablers • How will these get provided? Telcos, app stores, credit card services…? • Has much already been given away? Handset capability..? • How are they presented? Divergence a huge issue for content providers. An ecosystem exists…

12. Mobile Transaction Network – well placed to intermediate • Provide a sales and distribution channel to content providers • Provide focused service and support wrapper • Simplify for content providers (and Telcos) • Police and protect • Competition; better for all

13. Incremental cost per GB traffic £3 - £100 The Next Challenge for Mobile • Mobile broadband is the most significant revenue driver for operators • Significant ARPU and low cost (no interconnection) • Increasing traffic will cause congestion, voice churn and heavy capex • How can operators tame this?

14. The Impact of Video Not just from • TV and HD-quality Video-on-Demand is coming • Extra revenue/audience for owners of premium content libraries • A new broadcasting medium – but who pays?

15. Consumers’ favourite services - email, information, shopping - are provided free Access providers are able to extract consumer value from these services, effectively selling an infinite bundle of services No commercial relationship need exist between service and access… …as long as neither side breaks the unspoken deal The Internet Faustian Pact Free! Content & service Consumer hardware Access &Phone Service ££

16. Data-rich services presented a huge problem of cost and pricing transparency Flat-rate data packages reach only a minority segment of the market Solution is “Sender-Pays Data”, world-first innovation launched February 2009 in UK Good approach for all Consumer wins - from total pricing transparency Content provider wins - from totally transparent pricing model with 100% market reach Operators win - from more content revenue and scaleable, value-priced revenue model for data Buy “Toyland” for £4.00 all inclusive Data termination charges for 5.2MB at agreed rate Access &Phone Service No extra charge for data Solving the Data Issue in Mobile Buy “Toyland” for £3.00... Plus an extra data charge of up to £15 if your are on an old O2 tariff, or £1 if you are a prepaid user on Vodafone or T-Mobile and have not yet used up your cap, or no charge at all if you are a bundle customer on any operator and have not yet exceeded your bundle limit, or up to £25 if you have already exceeded your bundle, including Orange Unlimited tariffs which are in fact limited Content & service Consumer hardware …plus whatever your tariff charges for 5.2MB

17. Enablers, telcos and content providers - What happens next? • Telcos have assets of great value to content providers • … will they provide them? • … will they be useful and can they be monetized? • … can the ecosystem make this consumable for content providers? • And/or • … will handset/OS providers diminish the value of telcos assets? • … by disintermediation of carriers; providing enablers directly? • And/or • … will Telcos embrace this model to aid the broadband business model…?