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Strategy Paper on how successful countries and companies were driving Broadband (... and Optical Fiber usage) and what Fiber manufacturers could learn from these case studies. First presented - June 2009
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www.sterlitetechnologies.com
Perspective on the Industry:
Where do we go from here
STERLITE TECHNOLOGIES LTD | CRU Conference, June 09, Rome | ANAND AGARWAL
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At a Crossroads …
- Finding the right direction …
- … and the right role models
Learning from the Role Models
- Macro-view
- Broadband stakeholder view
The Fiber Optic Cable crossroad …
- The five forces model
- The Marketplace
- Where do we stand …
- What can we do …
- How do we do it …
Agenda
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INVEST
GROWTH
MARKET SHARE
PROFITABILITY
EMPLOYMENT
Governments
Utilities
Manufacturers
At a Crossroads … again
Countries:
Packages - Stimulus, Bail-out
Spending - Public v/s Private
Employment - Save v/s Create
Policies - Trade, Credit
Utilities / Service Providers:
Cash - Conserve v/s Use
Networks - Build v/s Buy
Marketing - Push v/s Pull
Technology – Wait v/s Upgrade
Manufacturers:
Strategy - Margins v/s Market Share
Offering - Products v/s Solution
Growth - Ramp-up v/s Acquire
Risks - Currency, Metals, Interest
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Finding the Right Direction Success Mantras’ from History
Up to the Twentieth Century:
WEALTH BUILDING = EXPLORE AND COLONISE
Discovery of Abundant resources leading to Industrial Revolution
Early Birds: UK, France, Germany, Spain
Twentieth Century:
NATION BUILDING = QUALITY INFRASTRUCTURE
Quantum Leaps in the Standards of Living
Growth Leaders: USA, Japan, Nordic countries, West Europe
Turn-of-the-Century:
THE WORLD IS FLAT = THINK GLOBAL, ACT LOCAL
Outsource high-cost, non-core activities for value-creation & profit growth
Eager Contenders: China, India, Brazil, S. Korea, South Africa, Mexico
Image credits mentioned at the end of the presentation
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Finding Role Models today
South Korea: Introduction excerpt from Wikipedia
“South Korea was … classified as a developed country in 2008 … Today, it is among the world's fastest growing
advanced economies; its economic success serves as a role model for
many developing countries. South Korea has a high-tech and
futuristic infrastructure, and is a world leader in technologically advanced goods … Since the
21st century, South Korea's modern culture has … a phenomenon known as the Korean wave.”
Global giants like Cisco and Google: from: Cisco’s Website & Google’s Annual Report
CISCO: “By combining its core strength (IP) with intelligence, the company is creating a powerful communications
platform that will serve as the basis for the convergence of data, voice, video and mobile communications in a
secure, integrated architecture. As many as 14 billion devices will be connected to the Internet by 2010.
The role of the network is evolving beyond that of
infrastructure… and is being placed squarely at the center of
innovation.
GOOGLE: In 1998, web pages numbered in the tens of millions … Fast forward to today … the web has grown
by a factor of 10,000 … Video is often thought of as an entertainment medium, but it is also a
very important source of high-quality information. Every minute, 15 hours worth of
video are uploaded to YouTube. Today, we are able to search the full text of almost
10 million books …
Stakeholders who value Broadband (and indirectly fiber) as much as we do.
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Learning from the
Role Models
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Encompassing Growth: by-product of Ubiquitous Connectivity?
The South Korean economy is the fourth largest in Asia and 13th largest in the world
World's sixth biggest foreign exchange reserves
Among top 10 by GDP per capita (for countries with >25 mn people)
2nd highest population density (for countries with >25 mn people)
World’s 6th largest Nuclear power producer
One of the world's top five automobile manufacturing nations
World’s largest number of dedicated Heliports
World’s largest shipbuilding industry
Technology Innovation: results of being world’s Most Wired Country?
#1 FTTH penetration (45%)
Files the largest number of patents per GDP
#1 in e-readiness and e-government readiness
World’s largest LCD, OLED and Plasma displays maker
World’s largest memory-chip producer
Local Exchange serving each household from within 4 kms
Plans to put at least One Robot per household by 2020
Standout Success #1 South Korea
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Sweat, toil & IT New age infrastructure building
1998 2001
Exchange crisis (97)
Emergence of IT
& global electronics
manufacturers
Long Term
Direction Planning
2003
The IT-839
project
2008
New IT
Strategy
Korea built in 2003 what the World is building now.
Now, Korea is building for 2012 & beyond.
The IT 839 project
Introducing and promoting
eight services
Building three
infrastructures
Development of nine
new IT growth engines
WiBro BcN NG mobile comms
DMB (terrestrial/satellite) U-sensor network Digital TV
Home networking IPv6 Home networks
Telematics IT SoC
RFID-based Next gen PC
W-CDMA Embedded SW
Terrestrial D-TV Digital contents
Internet telephony (VoIP) Telematics
Intelligent service robot
source: Korean Ministry of Knowledge Economy
8 3 9
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S. Korea: Beyond 2008 The New IT Strategy
source: Korean Ministry of Knowledge Economy
Information Technology plays a part in everything that Korea plans or does.
And so, they keep improving their telecom and IT infrastructure.
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What Others can Learn Countries & Service Providers
It pays to build the network.
With amount of content available today, bandwidth oversupply does not seem to be an issue.
More applications are being developed, more content is being added everyday.
Most importantly, new devices with online capabilities are being incorporated in the Cloud.
Kindle, Video games (Xbox, Nintendo Wii, Sony Playstation), PDA’s, HD TV’s, etc.
Ergo, build the network, everything else will follow.
Don’t think about the backbone, build the access networks.
When city-wide networks are available, traffic will build due to subscriber volumes and
bandwidth used per user.
Ergo, automatic demand for better supporting backhaul networks.
Don’t worry about the technology, everyone can co-exist.
Wireless = Mobility (but also = less secure, lower speeds, unstable signals).
Fiber = Speed, Security, Signal strength
Push to make regions adopt ubiquitous wireless, in-premise wireline.
Ergo, automatic demand for strong backbone and access networks.
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Standout Success #2 Google: Stakeholder driving Broadband penetration
Focusing on high-bandwidth Content generation, storage and presentation
Google’s Annual Report
For 2008 - Pg 8
Google’s Adsense for Games –
expected to drive more Games development and
more high quality, bandwidth requirement
Google’s Annual Report
For 2008 - Pg 7
Google’s Annual Report
For 2008 - Pg 9
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Focusing on Upgrading Network to support Next Gen bandwidth requirements
with emphasis on emerging economies & going green.
Standout Success #3 Cisco: Stakeholder driving Broadband penetration
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Key Takeaways All Broadband Stakeholders
Innovate to Collaborate and Collaborate to Innovate.
Work on out-of-the-box ideas, but be ready to seek help or offer advice to quicken innovation.
Offer indigenous best practices to suppliers and customers to take advantage of a coherent
value-chain.
Work with industry peers and competitors to ensure beneficial regulations and eco-systems.
Ergo, reduced time to market for new ideas and new products.
Reach out to new markets, create new audiences.
Discover regions still under-tapped.
Or partner with local vendors to grow the market.
Find alternative customers like city administrations, educational networks, medical setups,
gaming enterprises, etc to construct private networks.
Ergo, one way or the other, create more long-term demand.
Think long-term.
Availability of ALL content across ALL platforms on ALL devices.
Volumes, revenues and profits will flow with true ubiquity and true convergence.
Ergo, invest a cent now, reap dollar profits later.
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Where do we stand …
What can we do …
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Porter’s five forces Applied to the OF + FOC industry
Suppliers:
High levels of vertical integration.
Commodity raw materials, similar cost structures.
Bargaining Power: Low
New Entrants:
High Entry barriers: Technology, Finance, Skills
Threat: Low / Non-existent
Substitute Products:
No alternative currently to Fiber.
Wireless alternatives: More complementary than threat.
Customers:
Cash rich Telcos. (may or may not be price sensitive).
Governments and government-funded utilities.
Independent cablers for bare fiber.
Bargaining Power: High, as switching costs are low
Competitive Differentiators:
IP, Price, Brand, Relationships.
Manpower Costs
Facilities/Location-based Costs
Can we learn from each –
other. Share best-practices?
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The Marketplace Enormous room for further growth
Sustained growth over the years, but still a long way to go in terms of
fiber deployed per person or per sq. km. v/s developed countries.
FOC Consumption ('000 fkm) 2001
Demand 2001 2003 2008 2003 2008
China 12,779 13% 22% 29% -7% 209% 129 17.5
United States 26,798 28% 16% 19% -68% -3% 704 21.3
Japan 16,639 17% 27% 8% -14% -33% 893 299.1
India 1,420 1% 4% 6% 34% 485% 29 9.6
Russia 705 1% 2% 3% 34% 515% 113 0.9
Eastern & Central Europe 2,194 2% 5% 6% 13% 281%
ASEAN "10" 1,518 2% 2% 3% -16% 172%
Mexico 872 1% 1% 1% -49% 31% 84 4.4
RoW incl. Lat Am, MEA 8,955 9% 9% 14% -47% 114%
South Korea 2,340 2% 2% 2% -49% 35% 535 255.0
France 2,567 3% 1% 2% -72% 19% 276 26.5
Nordic Region 2,048 2% 1% 2% -69% 25% 606 12.7
W. Europe + Canada + Taiwan 17,114 18% 11% 8% -65% -26%
Market Share Growth (vs 2001) Fiber kms
/ capita1
Fiber
density2
1. Fiber consumption in kms between 1999 – 2008 per 1000 people.
2. Fiber consumption in kms between 1999 – 2008 per sq. km. of area.
CRU, Nation master,
Wikipedia, Company Research
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Past, Present & Future GDP growth and Fiber growth
Nominal GDP and Fiber Optic Cable Consumption - 2003 to 2008 (indexed to 2003 values)
0
100
200
300
400
500
United States Nordic Region China Russia
GDP GDP GDP GDPOFC OFC OFC OFC
Nordic countries considered as Sweden, Norway, Finland and Denmark
Data referenced from UN Data, Deutsche Bank, CRU, World Bank
Fiber growth leading
to GDP growth? USA: $ 7.2 billion Australia: $ 30 billion
UK: £ 5 bn (FTTC) - £ 29 bn (FTTH); 100,000 jobs
Korea: $ 25 billion; 120,000 jobs
India: > 2 bn EU: > 1.5 bn NZ: >1.5 bn
BROADBAND SPENDING
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Right place, Right time? Stimulus Packages – additional sweetener?
Why is the industry worried about retaining customers in a growing market?
Demand-supply is matched, anticipated market is huge, no new threats on horizon,
customers are cash-rich
Yet, prices are not moving, profitability is not optimum, customers are squeezing margins.
We need to grasp certain facts quickly.
Infrastructure growth drives economy and GDP growth.
Fiber infrastructure is the New Age infrastructure.
Every country/region understands the significance of Fiber.
Stimulus packages are devoting funds to grow broadband.
Ergo, demand should not be a concern,
how to fulfil demand and maximize profits should be !
Be proactive, not reactive.
Lets look for ways to grow each other and the industry.
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What can we do?
Use the economic scenario to re-define our roles.
Convince customers and regulators that we are interested in a larger play
(and not just maximizing short-term supply).
Play an active role in converting government/ service provider intent to
visible action.
Work closely with all stakeholders – to design and implement an efficient
network (from content to user).
Co-operate with each other on areas of competencies, rather than compete
illogically to create a downturn à la 2001.
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How do we do it?
Re-look at Business Strategy; Collaborate for mutual growth.
Form a group ( under CRU? ) which consolidates details of all intended
broadband infrastructure spending globally.
Build a comprehensive and appropriate solution directed towards it.
Work at mechanisms to co-operate and focus in areas of competency for
partners working in this ecosystem.
(rather than everyone doing everything themselves)
Data cables, OPGW, Overhead transmission conductors, specialty cables, LV
power cables, etc. can witness sustained growth if we work together.
Telecom and Fiber are a good representative for other Wire and Cable
categories where similar efforts can be made.
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Thank You
Cautionary Statement & Disclaimer
Certain words and statements in this release concerning Sterlite
Technologies Ltd and its prospects, and other statements relating to
Sterlite Technologies’ expected financial position, business strategy,
the future development of Sterlite Technologies’ operations and the
general economy in India, are forward looking statements.
Such statements involve known and unknown risks, uncertainties and
other factors, which may cause actual results, performance or
achievements of Sterlite Technologies Ltd, or industry results, to
differ materially from those expressed or implied by such forward-
looking statements.
Such forward-looking statements are based on numerous assumptions
regarding Sterlite Technologies’ present and future business
strategies and the environment in which Sterlite Technologies Ltd
will operate in the future, on a national, regional and global scale.
The important factors that could cause actual results, performance
or achievements to differ materially from such forward-looking
statements include, among others, changes in government policies or
regulations and, in particular, changes relating to the administration
of Sterlite Technologies’ industry, and changes in general economic,
business and credit conditions in India.
Additional factors that could cause actual results, performance or
achievements to differ materially from such forward-looking
statements, many of which are not in Sterlite Technologies’ control,
include, but are not limited to, those risk factors discussed in Sterlite
Technologies’ various filings with the National Stock Exchange, India
and the Bombay Stock Exchange, India. These filings are available at
www.nseindia.com and www.bseindia.com.
References and Webliography
• http://www.billfrymire.com
• http://www.biblicalquality.com
• http://www.dotcr.ost.dot.gov
• http://www.dkimages.com/
• http://www.umbc.edu/history/
• www.mke.go.kr/language/eng/index.jsp
• www.google.com
• www.youtube.com
• www.cisco.com
• www.engadget.com
• student.dcu.ie/~slejhad2/pics/porter.jpg
• eurocollections.blogspot.com
• www.nationmaster.com
• www.crumonitor.com
• www.dbresearch.de
• www.wikipedia.org
• http://gigaom.com
• http://news.cnet.com
• http://www.infonews.co.nz
