Over-the-Top Operators

8/7/2019 Over-the-Top Operators

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Overthe

Top

Operators:

Challenges

and

OpportunitiesforServiceProviders

SimonAspinall

SeniorDirector,ServiceProviderMarketingDataCenterSolutionsCiscoSystems


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2Copyright 2009 Cisco Systems, Inc. All rights reserved.Cisco ConfidentialCisco Confidential Internet Business Solutions Group

A Winning Strategyfor Service Providersin the Exabyte Era

October 2009


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Contents

1. Threats to service providers

2. Challenges and opportunities for service providers3. A winning strategy to minimize threats and maximize opportunities

4. Benefits of implementing the SP-OTT strategy

5. Plotting a course to success


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4Copyright 2009 Cisco Systems, Inc. All rights reserved.Cisco Confidential

Threats to

Service Providers


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Internet Market Is Dominated

by a Few Large and Powerful Players

Sources: PricewaterhouseCoopers, 2006, 2007; Parks Associates, 2007; Forrester Research, 2006;Jupiter Research, 2004; TowerGroup, 2004; Gartner, 2006; In-Stat, 2006; Cisco IBSG, 2009

SegmentTop Five OTT Players

Per Segment2010

Revenue200610CAGR

MarketShare

ContentAggregators $40B 23% 80%

OnlineContent

Producers$7B 16% 60%

EcommerceEnablers

$40B 55% 76%

Social

Networks

$1.8B 60% 77%

Software-as-a-service(SaaS)

$16B 25% 40%


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Rise of OTTs Threatens to Overload SP

Networks and Compete for Core Services

Significant increase in networktraffic from OTTs and Internet video

No incremental revenue for SPs

OTTs offering competing voiceand data services

OTTs can offer services at lowercost than SPs

Revenueless Traffic Growth Service Substitution

Source: Cisco IBSG, 2009


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Driven by Video, Global Internet Traffic

Will Quintuple by 2011

Majority of traffic increase


Peer-to-Peer(P2P)

Online Video

Internet TV

IP / Cable TV(IPTV) / (CATV)

Video-on-Demand (VoD)

Global IP Traffic Growth(Conservative)

Mobility

Bus. Internet

Business IP WAN

Consumer Internet

ConsumerIPTV / CATV

50% CAGR

0

10,000

20,000

30,000

2005 2006 2007 2008 2009 2010 2011

PB / month

1x

4x

Sources of InternetTraffic


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Example: BBC iPlayer Creates

Huge Surge in Internet Traffic

Offers BBC content through P2P

downloads, streaming Available on iPhone / iPod Touch, Wii

Planned: high definition (HD), live TV,international availability, archives

Huge traffic surgefrom 1% of totalInternet traffic in December 2007 to7% in June 2008

700K videos / day (April 2008); 8:1streaming vs. downloads

3PB / month traffic forecast byDecember 2008

Traffic costs: 0.8B by 2011

BBC iPlayer for Catch-up TV

Internet Traffic Considerations BBC iPlayer Website

BBC iPlayer on Apples iPhone

Source: BBC, 2008


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FixedVoice

MobileVoice

DataConnect

VideoSMS

Message

OTTs

Average SPRevenue

$0.05per call

$0.10per call

$15per MB

$40per month

$0.2per message

AverageOTT Cost

$0.000069per call

$0.000120per call

$0.1per GB

$1per month

$0.0000001per message

OTTs Offer Competing Services

at Much Lower Costs

Sources: Company Reports, 2007; Cisco IBSG, 2009

InternetVPNs


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Challenges and

Opportunities for

Service Providers


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OTT Traffic Increases Costs

for Service Providers

OTT Traffic Costs Will Rise by 35% Annually


Cost to Service Provider of OTT Traffic

0

60

120

180

240

300

360

420

2007 2009 2011 2013 2015

Million

Other OTT Traffic

Anonymous P2P

Online Storage

Online Gaming

Music On Demand

Video-on-Demand

Linear TV

User Gen. Content

Search and Surf

2008 2010 2012 2014


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OTT Services Reduce Revenue for

Service Providers


OTT Revenues from Service Provider Customer Base

0

500

1,000

1,500

2,000

2,500

3,000

2009 2011 2013 2015

Million

OTTs Will Generate 2.5B Revenue from SPsCustomer Base by 2015

Online Storage

Online Gaming

Music On Demand

Video On Demand

Linear TV

User Gen. Content

Search and Surf

2008 2010 2012 20142007


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A Winning Strategy to

Minimize Threats and

Maximize Opportunities


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Monitor and control

services delivered

over SP networks

1. Control / Defend

Jointly deliver

OTT services and

share revenues

2. Collaborate / Enable

Extend coverage and

deliver new services

beyond network

reach

3. Imitate / Become

The SP-OTT Strategy for Service

Providers Has Three Components



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Activity Benefits Examples

Monitor

Traffic, user, and applicationmonitoring / planning

Identify major

problems and prioritizecommercialdiscussions

Deutsche Telecom

WLAN service 60+ mobile operators

Moderate

Quota and fair use policies

Selective settlement /free peering

Partition walled and openInternet

Reduce traffic growthfrom excessive 10%of users

Generate revenuefrom paid peering

Maintain existingservice quality

Free telecom-paidpeering

RTL local peering

AT&T partitions

Block

Block OTT in selectedInternet tiers

Copyright enforcement

Reduce servicesubstitution withoutrevenue

Legal compliance

Vodafone agent block

T-Mobile VoIP

U.K., France

Develop Mechanisms to Manage OTTs

and Reduce Costs from Traffic Growth


1.

Control/Defend


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Control / Defend Example:

Fair Use Policies and Traffic Management

Situation

Network congestion effects all users

IETF provides for fairness amongsessions, not among users

P2P crowds out interactive apps.

Adding bandwidth is not the solution

Solution Traffic management (TM) shares

resources among users more fairly

Variations / Considerations

Can be applied to all users

Clearly communicate about FUP

Can telco providers exempt services?

Will protocol-agnostic TM bemandated?


In

Out

0.0

0.2

0.4

0.6

0.8

1.0

10-6 10-5 10-4 10-3 10-2 10-1 100

CumulativeHeavy Hitters

Cumulative

Traffic

Top 1% 30%+ traffic

Top 10% 80%+ traffic


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Collaborate to Enhance OTT ServicesActivity Benefits Examples

Network-level Collaboration

Improved quality of service (QoS)

for key applications Exemption from traffic mgmt. Optimized delivery with CDN Paid peering, sender pays IP Network-aware P2P (P4P WG)

Guaranteed service for video /voice services

Increased speed for time-critical apps., caching

Low user delay in service Service SLAs for web P2P cooperation

PlusNet QoS Free zone

exemptions AT&T CDN

Service Codevelopment Network / STB / OSS / BSS Open, web service APIs to NGN Bundling and 3-screen

transcoding

Application and serviceperformance statistics

Device and connect status Tailored apps. / ad insertion Multidevice, location, presence

Neuf Cegetel/ Dailymotion

BT 21C SDKand APIs

Commercial Collaboration Brand, marketing, channel

leverage Rebranding, white-label capability

Direct access to customers Customer demographics,

spend patterns, preferences Comarketing / copromotion Billing relationship

BBC iPlayer


2.

Collabora

te/Enable


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Collaborate / Enable Example:

User-generated Video on TV

Solution

User-generated video website with

40M monthly visitors Recently launched HD video

Best videos available onthe Neuf Cegetel TV in France

Benefits Increased ad revenues

with three-screen approach

Differentiated from user-generatedvideo sites including YouTube

Has more attractive IPTV offering

User-generated videos drive VoDadoption among Neuf subscribers

Revenue sharing between firms

Dailymotion Video onNeuf Cegetel TV

Accueil

(Reception)

Voir une video(View video)

Videos

Sources: Neuf Cegetel TV, 2008; Dailymotion, 2008


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Imitate OTTs to Reduce Costs and

Increase RevenuesActivity Benefits Examples

Extend Service Reach

Reach more customers outsidenetwork using OTT services

Femtocells extend mobile reach

Additional servicerevenue

Better customer service Extended Connected

Life experience

Sky TV enabled onmobile phones

BBC iPlayer fornon-linearconsumption

Enable New Services / Revenue

OTT services can be tailored byindividual and generate valuefrom long-tail content

Provide digital media exchangeto white-label OTT services

Revenue from entirecatalog

Enable niche, low usageservices

Personalize interfaces /services

FT music service FT photo service Comcast web

pages Affinity sites

New Business Models

OTT services are inexpensive toimplement with potential forhigh-margin returns

Low development andlaunch costs for newservices

Enable use of third-partydevelopment

News Corps Hulu Nokia Ovi (music) BT Phorm ads Vodafone mobile

ads

3.

Imitate/Become



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Imitate / Become Example:

SoundTribes and Pikeo Communities

Solution

Introduce services that are no longer linked to SPs footprint

Benefit

Provides a hedging strategy for SPs

Consideration

Must be competent in selected area of competition to increase chance forcommercial success

Sources: SoundTribes, 2008; Pikeo, 2008


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Benefits of Implementing

the SP-OTT Strategy


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A Succesful SP-OTT Strategy

Significantly Reduces CostsTypical SP Can Reduce Traffic Costs by 29% by 2015

Cost of OTT Traffic

Million

-150-110-70-30

105090

130170210250290330370410

2007 2008 20092011

2012

Music on Demand

Other OFFnet OTT traffic

Anonymous P2P

Online storage

User-generated content

Search and surf

Online gaming

Video on DemandLinear TV

20152014

2013

TotalReduced

TrafficCosts:29%

P2P Traffic Management

Multicast, online broadcastersCDN for VoD and UGC

2010



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A Succesful SP-OTT Strategy

Significantly Increase Service Revenues

Service Provider Value-added Service (VAS) Revenues

Million

0

200

400

600

800

1000

1200

2007 2008 2009 2010 2011 2012 2013 2014 2015

SP storage

SP streaming

SP search on portalSP gaming

SP Music on Demand

SP Video on Demand

SP IPTV

Typical SP Can Increase Revenues by 30% by 2015

TotalIncreased

Revenues:30%

Online advertisingAccess to TV / EPGCDN for VoD / user-generatedcontentMulticast for online broadcastersPaid peering



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Plotting a Course

to Success


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Regulatory

Assess

regulatoryenvironmentforconstraints /limitations

Technology

Assess

currentarchitecture

Identifytechnologygaps

Operations

Redesign

appropriateprocesses

Identifycapabilitiesand gaps

Financial

Create an

economicmodel

Monitor /trackbusinessoutcomes

Evaluateinvestmentoptions,scenarios

Initial Steps to Strategy Development

and ImplementationFirst Steps: Assess Current State, Identify Gaps,Understand the Economics

Marketing

Identify

priorities(OTTs,customersegments,apps.)

Identifyrequiredbusinesscapabilitiesand gaps



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Documents

Over-the-Top Operators