Market Trends: How smart devices are transforming the market place - Openreach
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Market Trends:
How smart devices
are transforming
the market place
December 2012
The contents of this presentation are provided for information purposes only. Openreach will provide appropriate updates via normal
communications processes. The contents of this presentation cannot be published, or reproduced without the written consent of Openreach
Copyright British Telecommunications plc 2012
Introduction
Over the last 6 years we’ve seen the world of devices drive and be
driven by profound changes in the way we interact with our friends,
family, customers and suppliers
…became the 1st country to
complete digital TV switchover
…was broadcast for the very
last time after 42 years
…were banned by commercial Phones were phones, computers were
airlines
computers, TVs were TVs
Customers are now increasingly reliant on networks to interconnect their
devices to keep in touch, serve their customers and create wealth
2
Themes
The combined use of these devices, fuelled by the interactivity
between all players, is driving three major themes in the
communications market today
1. Always On
1a) Smart devices acceleration
1b) Mobile data demand
1c) Wi-Fi proliferation
2. Personalisation 3. Social Integration
2a) Applications everywhere 3a) Social media usage
2b) BYOD growth 3b) End user dynamics
3
Always On: Smart devices acceleration and demand for mobile data
Cheaper, faster, and better devices have become mass market ,
increasing the need for interaction, connectivity and bandwidth
The market has exploded in a very short period of time, driven by Global quarterly unit sales (m), Jun 10 – Mar 12
lower prices and better functionality 160 Smartphone and tablet
• 63m tablets were sold in 2011/12 140 sales outstrips PCs for
• Total connected devices will grow by over 150% by 2020 120 the first time in Dec 11
100
Significant changes to device capability and functionality ensure 80
continued strong customer appeal 60
• Bigger screens, better cameras, faster connections 40
20
Sharing content across devices is becoming easier as the market
0
replicates the Apple end user experience
Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
More capable devices are driving bandwidth usage, as user habits
change iPhones Android Phones Tablets PCs
Source: Enders Analysis, July 2012
Communications services will become
deeper integrated into device applications Average monthly mobile traffic per connection,
2011-2016
• Productivity gains through collaboration
and project management 1000
• Mobile e-commerce and entertainment
Traffic (Mb per month)
800
• Diallers on social networks
600
400
1. Mobile operators restrictions on user data are becoming
unrealistic, meaning greater access to competitive backhaul is 200
imperative
0
2. Wi-Fi offload will be a key requirement, driving demand for 2011 2012 2013 2014 2015 2016
hotspots and subsequent connectivity
Developed markets World Emerging Markets
3. Users will demand seamless handovers and interaction between
devices, driving seamless connectivity solutions for fixed and Source: Analysys Mason, 2011
mobile operators
4
Always On: WiFi proliferation
WiFi is a key enabler for an always on society. Some elements
need simplicity to drive the opportunity
Over 70% of UK homes have a WLAN in place, the second highest Average UK smartphone originated data traffic
market penetration in the world by OS & operator, May 12
Vital for MNOs, with end users offloading mobile traffic 4000
• UK iPhone users consume 5x more WiFi data than cellular data 3500
High street access is becoming more widely available to drive 3000
purchasing activity 2500
2000
Clunky user experience, especially on paid for short term access
1500
1000
500
0
O2 Orange 3 T-Mobile Vodafone
Western European users of Public WiFi will increase their minutes
of use by 41% per year through to 2016 Cellular (AND) WiFi (AND) Cellular (IOS) WiFi (IOS)
Mobile offload will become much more significant as 4G / LTE Source: Mobidia, May 2012
begins to penetrate the UK market
• US experience suggests 2x data demand of LTE vs. 3G WiFi Access Units Shipped in EMEA, 2011-16
WiFi offload opportunities will increase significantly with retailers, 2500000
event organisers and town centres deploying WiFi to fulfil end user 19x growth in WiFi
demand access units
2000000
shipped from 2011-
2016
1500000
1. The quality of the WiFi experience for end users has to improve.
A simple user interface, with seamless billing is a must to
1000000
generate any revenue improvements
2. LLU network backhaul will need to grow to accommodate 500000
mobile offload as well as fixed requirements
3. Expectations must be set for end users concerning levels of 0
coverage and performance in the longer term 2011 2012 2013 2014 2015 2016
Source: Infonetics, May 2012
5
Always On: Case Study
WiFi: The Tesco in-store experience
Commenced a trial in July 2011, in four Tesco Extra stores
December 2011 announced full Tesco Extra store network rollout
Clubcard holders have free access and login using Clubcard details.
Customers can gain general web access. Tesco uses the facility to target
promotions, whilst also enabling immediate customers access to discount
vouchers. Customers currently access offers / promotions via Tesco website
Tesco benefits by: -
1. Targeted promotions to customers in-store (e.g. beyond access to e-
vouchers they plan longer term location specific offers / augmented
reality)
2. Generating greater end user insight, used in collaboration with other
Clubcard data
3. Driving potential new Clubcard customers with new WiFi access
incentive
4. Opening a new revenue stream for paid WiFi access by non-Clubcard
customers
Tesco’s customers benefit by: -
1. Access to electronic Clubcard vouchers in-store for immediate discount
2. Ability to compare prices
3. Read product reviews
1. Having WiFi connectivity in stores means that Retailers can generate new
revenue streams, whilst also driving customer loyalty
2. Enhanced connectivity solutions can generate new income streams for CPs as
well as their customers
6
Personalisation: Applications everywhere
Applications are driving up mobile data usage and are becoming
the central hub for mobile living
Mobile App Store Downloads (bn), Worldwide,
The market size is vast today, but will still grow six fold between 350 2011-16
2012 and 2016
300 310bn downloads
• Users worldwide will download 45 billion apps this year, more than forecast in 2016;
twice as much as in 2011 250
93% free
• Generating revenues will be more challenging, as free apps 200
dominate the market 150
Social media apps are the most commonly downloaded 100
50
• Facebook is downloaded twice as often as other iOS apps
0
Apps are on all types of connected devices, e.g. smartphone, 2011 2012 2013 2014 2015 2016
tablet, laptop, and will continue to multiply across other devices Free Downloads Paid-for Downloads
Source: Gartner, Sept 2012
• Any content, any time, anywhere, any device
Consumers are increasingly cautious
about their data and privacy when putting data
in the cloud
• Over 50% remove apps due to privacy issues
1. Potential for emergence of group features as usage increase in
the family – e.g. shared allowance, parental controls that work
across platforms
2. Users require education about security and privacy issues
3. Opportunity to integrate billing to stimulate use of paid apps
and a consistent end user experience across devices
7
Personalisation: BYOD growth
BYOD is here to stay and presents security and procurement
challenges as the boundaries of work and home blur
BYOD Decision Framework
BYOD accelerating in popularity, placing new network and security
demands on businesses Corporate DB
• Lines between corporate & consumer blurred analytics
specialized
US and European workers choose devices for work and home use, applications
Capabilities provided
Corporate
spending their own money liable
Multimedia BYOD
Mobile workers are working round security to access IT capability eReaders Tablet or Employee • Non
Virtual desktop smartphone liable standard
• ¼ of workers admit to bypassing security to access corporate data (corporate device
Product
standard) • Limited
support
controls
Web services • Limited
Tablet or
Mobile access to
smartphone
applications Business corporate
Over 80% of organisations will spend the same or more on liable apps &
mobility capability in the next 12-18 months, although cost Corporate mail Corporate network
phone
pressures mean that realistically internal pressure may drive
businesses towards BYOD, resulting in continued to grow Degrees of freedom
• 75% of enterprises plan to use tablets to support mobile apps
Source: IDC, November 2011
Security challenges become more widespread UK BYOD Spending (£m), 2011-2016
Improvements in mobility management software will allow CIOs to £800
deliver more capabilities via BYOD devices
£700
£675
Analysts believe Corporate mobility strategies will evolve to
managing a growing number of mobile apps for employees, £600
280% growth
customers & partners
£500
£400
1. Shared cost of home connectivity may become expected by
corporate users £300
£200
£176
2. Secure VPNs for all workers are likely to become a necessity
to protect businesses from security threats £100
£0
3. IT budgets may be re-prioritised to accommodate flexible, 2011 2016
employee influenced requirements
Source: TechMarketView, April 2012
8
Personalisation: Case Study
BYOD: How Intel embraced a growing phenomenon
Realised that the trend was developing in 2009
Implemented a BYOD policy that was highly publicised using effective internal
communications. Ensured that employees were able to select the devices they wanted,
but also had a shared obligation to ensure adequate protection of data
Integrated approach across multiple internal units including IT, HR and Legal teams,
together with employee involvement and consultation. Employee engagement was
ensured through web based discussion obtaining input, but also outlining policy
Security and privacy were the primary factors encountered, which must be addressed.
Employee awareness was the initial factor influencing security; they needed to
understand the impact of their actions. Privacy, and the confidence that employees have
that their own personal data was being respected was pivotal in ensuring engagement
Resulted in improved usage and engagement with employees, whilst promoting choice
and shared responsibility
Intel benefits by: -
1. Increased connectivity to the Intel network
2. Improved employee productivity
3. Better security measures
Intel’s employees benefit by: -
1. Selection and use of the devices they prefer
2. Single device vs. multiple devices
3. Sense of shared ownership concerning security
1. Security and privacy concerns are paramount. A clear policy, with buy-in is essential
otherwise businesses will be left exposed to security breaches.
2. Improved productivity and employee interaction can be achieved with minimal
additional cost to the business. Intel proved BYOD can be a very effective investment.
9
Social Integration: Social media usage
Developments of a fully integrated social media experience will
drive the next generation of fixed and mobile data usage
Facebook claim to have around 800m global active users
• ½ of smartphones are connected to Facebook every hour of every
day
62% of adults worldwide now use social media
Around 20% on time online is spent on social media
SoLoMo gaining significant traction amongst users
No.1 application for Upstream web activity on mobile devices Social Media Tools used by Marketers, 2012
100%
Businesses are using various social media vehicles today in order
to more effectively target customers 80%
• 87% of B2B marketers utilise Facebook 60%
40%
20%
Fully integrated social media experience for end users
0%
• Devices and apps create clear links between physical and virtual
social spheres
Change by majority of businesses from marketing efforts to
engagement across new channels
Dynamic mix of social media and mass media to truly personalise
content of individuals B2B Users B2C Users
• Faster access to relevant data Source: Social Media Examiner, April 2012
1. Social media will be a vital channel to market for businesses
targeting consumers, especially with increasingly relevant
data
2. Rapid access to social media experience likely to drive
acceleration towards next generation mobile and fixed data
communications
10Social integration: End user dynamics
Wider social inclusion is not only growing the market, but also
driving demand for different service support and trading models
Penetration of devices in to new demographics Share of population who have ever used the
• As handset prices come down, and as pre-paid/ low-price contracts Internet, by age (%)
Fastest
compete on value, demographics are extending 100% growth in
The mix of users adopting technology is changing use by 75+
80%
• Fastest growth in 75+ age range
Digital inclusion projects undertaken by housing associations is 60%
helping to boost penetration of services
• Could overlap in to others not covered by these schemes 40%
20%
0%
Continued pressure on voice / message revenues will drive focus 16-24 25-34 35-44 45-54 55-64 65-74 75+
on value added services for operators
Q2 11 Q4 11
Connected society is expected to drive different demands for
Source: Enders Analysis, Q4 2011
devices suitable for all incomes and age groups
Tiered service offerings dependent on end user means are Technology use by age
increasingly demanded 98%
100% 91% 92%
• Those who cannot afford premium service will accept more flexible
76%
repair if offered a discount 80% 70% 71%
60%
44%
1. Differentiation of service support dependent on end user 40% 30%
accessibility
20%
2. Lower cost options, maybe with lower performance, may be 5%
required to ensure widespread connectivity for 0%
disadvantaged members of society Have online device Own mobile Own smartphone
at home
3. Trading models allowing end users to allow short term
access for fixed services may be required 16-24 Everyone 65+
Source: Ofcom, 2012
11Summary
Devices have driven behavioural changes in the market, driving
7 primary implications for the communications providers
Market Demand Primary Implications
The market for devices is enjoying rapid growth, through 1. Faster connectivity is required to
better technology and lower prices enable devices to operate at their
optimum
Data consumption is accelerating through increasingly 2. Enhanced backhaul capability is
bandwidth hungry applications necessary to support growing
demand
Applications are the control hub for what end users do, with 3. Interaction through reliable
users managing multiple devices simply and effectively home and small office networks is
crucial
BYOD presents long term procurement and security issues 4. Flexible procurement policies
for businesses and widespread, easily
implemented security are vital
5. Small cell solutions, effectively
Mobile network offload accelerates demand for effective billed, offer new revenue and sales
WiFi solutions opportunities for retailers
6. Lower cost, lower performance
Wider social connectivity means demands for affordable
connectivity options could facilitate
connectivity propositions and flexible support
new volume demand
7. Becomes a vital comms route to
Social media experience becomes fully integrated for end
consumers for B2C providers,
users, with richer, more relevant data
meaning reliable connectivity is key
12Q&A
Mark Chamberlain
Head of Market Insight
Mark.3.chamberlain@openreach.co.uk
Tel: 07710350729
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