Florence Le Borgne
Head of the TV & Digital Content Practice, IDATE DigiWorld
As the number of TV channels has exploded over the past several years, acquiring premium content has been one of the key strategies used by TV networks to distinguish themselves.
At the heart of this coveted selection of content, sport has enjoyed a spectacular increase in the amount that broadcasters are willing to pay to carry it. If this is especially true of major league sports and events, secondary ones are also capitalising on the boon, thanks to new generalist and sport channels providing new outlets.
In recent months we have also seen top Internet players display a growing interest in acquiring the rights to live streaming sporting events both nationally and internationally, either by acquiring the rights directly or by forging partnerships with rights owners. Whether to increase their user base or to a secure the loyalty of existing users, YouTube, Yahoo!, Twitter, Facebook and Amazon all plan on establishing themselves as key partners in distributing and monetising sport.
This newfound competition only exacerbates the one that already exists between heavyweight telcos, some of whose content policies focus purely on sport (Cf. Proximus) and some which include sport amongst a wider array of content (Cf. Altice/SFR). The amounts spent by these companies have often enabled them to increase their IPTV customer numbers and/or their ARPU, but have also contributed to an unprecedented spike in the price of sports rights, which makes it harder and harder to break even, especially in a universe populated by a growing number of rivals.
As the price of sport content drives up programming costs, traditional TV channels are being forced to adapt:
• Veteran general-interest channels are choosing to cut back on their acquisitions and concentrate on a few flagship events, and to use these major events to showcase their technological savvy and their ability to innovate.
• New TV channels are not looking to compete head on, but opting instead for the rights to events that are exploited very little or not at all elsewhere, which enables them to build a reputation at a price that is in line with their budget.
• The equation is becoming increasingly challenging for the major specialist channels, which are forced to up their bids for the major sporting events that are essential to their brand image, but are also the victims of growing competition and of cord-cutting. Their subscriber numbers are shrinking while programme acquisition costs are rising exponentially. If online distribution (Cf. Sky) and the search for partners to distribute a complete sport package (Cf. Canal+/beIN Sports) are some possible solutions in the current climate, one of the main challenges is to negotiate lower rights acquisition prices.
If OTT will probably take hold over time as a credible solution for broadcasting sporting events live, there continues to be a plethora of technical issues surrounding the distribution of video streams with higher than average quality. For now, OTT distribution can only compete economically with broadcasting (in MPEG-4) when streaming to several thousand users. So it is still an interesting option for supplying bonus content, but not as a replacement solution, especially when it comes to major sporting events.
What is being built today is essentially a bridge between broadcasting and OTT in terms of:
• countries covered;
• available content;
• the ability to show a wider variety of sports;
• enhancing the viewing experience.
Discover the perspectives, key trends, and scenarios about the sports contents & TV market for the next decade through our dedicated report
A lot of (digital) ink has been spilled since Verizon announced that it would be taking control of Yahoo! (except for its patents and shares in Alibaba and Yahoo Japan), including stories tracing the company’s history, and history of missed opportunities.
The most interesting question in all of these commentaries is the following: Will being part of Verizon equal revival for Yahoo!, even though major overhauls in strategy and management over the past decade did not manage to narrow the ever widening gap that separated it from Google and Facebook in the online advertising market?
Some of the explanations being put forth for the deal include the technologies and content resulting from the acquisition of AOL last year, along with several other deals, agreements signed with studios and sports federations, as well as the launch of the Go90 mobile video service. The additional technical expertise and content will probably allow the newly expanded conglomerate to increase its market share by a few points, but not much higher than 4% to 5% for the online advertising market, which still puts it very far behind the combined 50% share enjoyed by Google and Facebook (and around 70% when looking at the mobile Internet alone). But the future Verizon does have other assets, not least the telcos’ roughly 115 million mobile customers and 20 million wireline subscribers.
Can telcos turn the tide on decreasing revenue with new business models?
Taking a look at another challenge that does not pertain so much to the future of Yahoo! but rather the future of telcos in general. Here is the question: can telcos turn the tide on the growing trend of shrinking revenue with new, more content and advertising-centric business models? Even if Verizon is one of the world’s most successful telecommunications businesses, with remarkably healthy margins, its revenue appears to be on a downwards trajectory due to competition (T-Mobile), a sudden slump in the replacement rate and dwindling subsidies for smartphones, along with cable’s supremacy in the consumer fixed market in the US.
The oft-cited competition from OTT services and players is a questionable argument when we see that the mobile sector in the United States continued to grow up to 2015, well beyond the time when the GAFA quartet took control. While it is true that Netflix, Amazon and Hulu may have a negative impact (cord cutting) on fixed service revenue, the impact is limited given the TV revenue earned by a telco such as Verizon. On the other hand, the creativity and popularity of OTT services, and especially video services, is translating into heavier use of fixed and mobile broadband services, demand for faster connections and a massive increase in traffic. Fundamentally, these are opportunities for telcos to generate additional revenue, even if it does require continual spending on their networks.
When contemplating the delicate equation of how to monetise 4G and fibre access, telcos can seek out complementary solutions in content or by monetising their relationship with customers through advertising and data markets in general. We can substantiate this hypothesis by pointing to the Verizon acquisitions listed earlier, but also the much larger deal orchestrated by AT&T last year when it took control of the country’ second biggest pay-TV provider, DirecTV. But if we stick to only these two operators, it could be said (and rightly so) that few other M&A deals are available to them, since antitrust authorities are against any further consolidation in the mobile market.
What assets can telcos leverage to become key content market players?
The first thing that usually comes to mind is telcos’ role as pipes, in other words the suppliers of the technical infrastructure that carries programmes to consumers’ homes. This argument needs to be put in perspective, however, at a time when there is real competition over access and net neutrality rules are being put into place. Still, telcos do have credible assets in two areas.
• First, if they are massive enterprises with tens of millions of customers, they can hold their own against veteran TV networks when bidding for TV rights and exclusivity deals, thanks to their ability to amortise their spending both through their subscribers but also through marketing if they enjoy an image boost and increased market share for their core business. Here it is nonetheless worth mentioning that, in terms of economies of scale, the most powerful pure OTT players have an almost global footprint, which gives them a clear edge over telcos.
• The second argument in favour of telcos is their relationship with their subscribers, their sales network (and especially their shops), the quality of the ecosystem they provide through user interfaces and network boxes, and of course the information they have that provides them with detailed knowledge of their customers. By way of illustration, we could say that even if Netflix does not need to be listed in telcos’ interface to exist in a national market, it can certainly help. On this second point, telcos have a clear advantage over broadcasters or pay-TV providers that have no return path that would enable them to target customers. It is less of an advantage compared to OTT companies that have managed to develop a model that generates relevant consumer data. Telcos still need to prove their ability to be serious rivals for Google and Facebook in the online advertising market. But it also remains to be proven that telcos’ ability to monetise their data requires investments in content.
To sum up, even if telcos want to complete the tiering and differentiation strategies used to monetise their access products with substantial revenue from content and advertising, they need to be very big (which could also be seen as an argument in favour of cross-market consolidation deals) to stand up to the growing globalisation of the rights market, and find ways to monetise their customer data without losing their customers’ trust.
Laurent Michaud Head of Consumer Electronics & Digital Entertainment Practice
This dynamic is explained primarily by the regular growth of mobile gaming and online gaming segments and a new category, virtual reality (VR).
Distribution of the global video game market per segment, 2016 and 2020
Traditional gaming segments outpaced by competition in games online and on mobile platforms
The traditional video game segments are losing influence quickly...
Games on household consoles accounted for 41% of the total market in 2016 and only 25% in 2020, a sharp drop from 2008, during the launch phase of the previous generation (78%).
Games on handheld consoles will represent 10% of the global market in 2020, compared with 6% in 2016 and Offline gaming on personal computers continues its decline.
... Due to the major success of the online computer games and mobile gaming segments
An average annual growth of 15.5% between 2016 and 2020 for tablet games and 10.2% for mobile games, compared with 9.6% for the whole of the video game market. The share of online computer games is in slight decline, representing about 18% of the total video game market in 2020. The rapid growth in tablets is explained by the enhanced gaming experience due to touch screens larger than those of smartphones.
Otherwise, the share for virtual reality (VR) will grow quickly to reach 18% of the videogame market in 2020.
Competition in terms of "Time Budget"
Although the gaming experiences in the various market segments differ, the players have a limited time budget. They therefore need to choose one platform over another depending on their interests or situation.
Over 70% of the revenue from the video game market in 2016 is from dematerialized distribution and online payment practices
In 2016, 71% of video game market revenues came from dematerialized sales (on smartphones, connected home and handheld consoles) and online pay practices (item selling, subscriptions, and commissions on foreign exchange transactions). In 2020, this share should rise to nearly 89%.
The software market for dematerialized games will display an average annual growth of 12.8% between 2016 and 2020, although the value of the physical game software market should be slightly lower.
All segments are affected: home and handheld consoles are also engaged in an unstoppable race down the road to dematerialization.
Find out more about dematerialisation in video game industry, new strategies and organisation as well as forecasts and shifts in the value chain in our dedicated market report
"Mobile dynamics: the path to 5G"
DigiWorld Economic Journal n°102
Interview with Martin FRANSMAN
Professor of economics, Founder-director of the Institute for Japanese-European Technology Studies, University of Edinburgh, United Kingdo
Conducted by Anders HENTEN Aalborg University, Balllerup, Denmark
DW Economic Journal: What do you mean by an "Innovation Ecosystem"?
Martin FRANSMAN: By an "Innovation Ecosystem" I mean a group of players who through their symbiotic interactions (both cooperative and competitive) make innovation happen and, by so doing, coevolve over time.
How may the idea of an Innovation Ecosystem be applied?
The key point to bear in mind is that an "Innovation Ecosystem" is not an observable object. Rather it is a conceptual construct which serves a particular purpose. This important point requires some elaboration.
As Edith PENROSE has pointed out, "a "firm is by no means an unambiguous clear-cut entity; it is not an observable object physically separable from other objects, and it is difficult to define except with reference to what it does or what is done within it". She goes on to observe that "Herein lies a potential source of confusion" . The same is true of an "Innovation Ecosystem".
This becomes clear in reflecting on my definition of an Innovation Ecosystem as a group of players who make innovation happen. This raises the question of which players should be included in the ecosystem and which excluded. This is the question of the appropriate boundary of the Innovation Ecosystem being conceived. How far "back" is it necessary to go in conceiving of an Innovation Ecosystem?
If we are using the concept of Innovation Ecosystems to understand how innovation happens in the Mobile Telecommunications sector, for example, where should this boundary be drawn? It may be readily agreed that players such as final consumers, telecoms operators, telecoms equipment suppliers, and regulators should be included in the ecosystem. And for some purposes this definition may suffice. However, if the purpose is to understand the main determinants of the innovation process in this sector the net should obviously be considerably widened to include, for instance, universities and government research institutes who not only do relevant research but also provide important training. Other players may also merit inclusion in order to achieve the purpose.
This example makes it clear that an appropriate conceptualisation of an Innovation Ecosystem depends on the purposes and questions asked in the investigation. But complications may go even further than this. For example, even if different analysts can agree on the purposes and questions they may differ regarding which players should necessarily be included.
In view of problems such as these it is necessary to exercise more caution than is usually done in defining an innovation ecosystem. At the very least it is important to make explicitly clear the purposes and questions that are being pursued as well as the reasons for particular boundary decisions.
What in your view is the difference between an "Innovation System" and an "Innovation Ecosystem" and why did you choose to use the latter concept in your work?
The literature on innovation in this area tends to fall into two groups. The Innovation System Group, which is more homogeneous, is made up primarily of heterodox economists such as Chris FREEMAN, Dick NELSON and Stan METCALFE. They all acknowledge intellectual inspiration from the work of Joseph SCHUMPETER. Having originally trained as economists they all came to believe that the various approaches to economic growth adopted by mainstream economics do not provide a sufficiently robust explanation of how economic growth happens and why different countries often exhibit different growth patterns. They also share a common belief that innovation is the most important driver of economic growth and that mainstream economics does not have an adequate understanding of how innovation happens and who makes it happen. The concept of an "Innovation System", originally proposed by Chris FREEMAN in his book on Japan , is put forward as an alternative way of explaining growth. Central to this concept, and explicit in their definitions of "innovation system", is the role played by institutions understood not only in the Douglass NORTH sense of rules of the game but also as non-firm determinants that help (and perhaps hinder) innovation and therefore economic growth.
The Innovation Ecosystem literature, in contrast, is far more heterogeneous. It tends to come from scholars with a background in business studies. A notable example is the iconic book by IANSITI & LEVIEN from Harvard Business School, The Keystone Advantage: what the new dynamics of business ecosystems mean for strategy, innovation, and sustainability. A central concern in this literature is the cooperative networks created by complementary businesses which both individually and jointly create value for customers. The common belief (whether tacit or explicit) is that the truth lies in the constellation of businesses, rather than in individual businesses taken alone. This has important implications for dealing with topics such as business strategy and sustainability.
In contrast, my own use of the terms "ecosystem" and "innovation ecosystem" is inspired not so much by business behaviour as by the example of biological ecosystems with their populations of interacting organisms and species. As Alfred MARSHALL, the nineteenth century economist said, "The Mecca of the economist lies in economic biology rather than in economic dynamics" . This analogy, however, should not be pushed too far and I insist that the basic unit that makes up the "players" in my ecosystem are purposive and conscious individuals whose decisions and actions imply necessary complications such as beliefs, mistakes, and expectations which are not pre-determined in any meaningful sense of this word. Whilst there is significant overlap between my "ecosystem" and the concepts of Innovation System and Innovation Ecosystem perhaps the main difference is the emphasis I give to the dilemmas involved in interacting individuals, albeit in populations, understanding and acting in the uncertain world that is ours.
Can the concept of Innovation Ecosystem contribute to our understanding of leadership in an area such as mobile telecommunications?
The first problem in answering this question is to agree on what should be understood in this context by "leadership". Both countries and companies may lead, the former, for example, in performance of infrastructure and services, and the latter, for instance, in terms of indicators such as revenue growth, market capitalisation, and market share.
Having agreed on who leads the next problem is to explain why this leader has been able to lead. It is here that the concept of an Innovation Ecosystem as defined earlier potentially becomes useful. Let us take several examples to illustrate.
The first example is the lead by "Europe" in 2G mobile. Not only were the main European telecoms operators able to introduce world-leading 2G mobile infrastructure and services, the key European mobile equipment providers, notably Ericsson and Nokia, were able to become globally dominant players. Why did this happen?
Whilst the answer to this question clearly necessitates that we understand the strengths (and also weaknesses) of these two groups of company players there were other important determinants without which their global leadership would have been, if not impossible, then far less likely. These include, notably, the prior establishment of an agreed Nordic mobile set of standards and systems initially meant to facilitate inter-country mobile communications within the Nordic region as well as the establishment and functioning of a set of European institutions that enabled the emergence of GSM standards. These events required the interventions of other players, including policy-makers, regulators, and researchers. By following this kind of reasoning we will be able to identify both the relevant players and the ecosystem of symbiotic interactions that facilitated the eventual global success of GSM.
The second example is the remarkable rise of Huawei as a leading player not only in telecoms equipment but also, more recently, in smartphones. Once again, a key part of the explanation must involve an account of the emerging capability inside this company to successfully innovate. This success was dramatically illustrated by the successful entry of this company as a supplier to some of Europe's major telecoms operators in the face of very strong and long-standing competition from the key European telecoms equipment providers. Crucially, this entry depended not only on a Chinese comparative advantage-based cost benefit but also on the ability of Huawei to address some of the important problems expressed by the operators.
But reflection soon reveals that there is more to this success story than only what happened within Huawei. Also significant was Huawei's membership of the Chinese Innovation Ecosystem. Although at first a Chinese outsider that depended as much on other emerging countries as it did on the poorer Chinese regions for sale of its equipment, Huawei, with adept leadership, soon developed sufficiently strong capabilities to become a domestic supplier of growing importance able to both contribute to and benefit from the rapid growth of China and its telecoms infrastructure. Fleshing this story out requires an account of the key players (including, for instance, Chinese universities and other organisations) in the Chinese Innovation Ecosystem whose interactions made important contributions.
The third example is the central role of the US in smartphone developments. Here too a discussion is needed of the key telecoms operators and equipment providers as well as other important players such as policy-makers, regulators, university and other research organisations. But also of crucial importance is the direction taken by the evolution of the mobile telecoms sector itself. More specifically it is also important to understand the convergence of the mobile telephone and the computing subsectors that, until the advent of the smartphone with its own operating system, were largely distinct. This convergence gave a huge opportunity to the US that had always dominated the field of computing from its origins. Once the phone became in effect a computer that added many other functionalities US players, incumbents and new entrants, were able to leverage the superior computing capabilities that they and their ecosystem possessed in this area. This was also a significant contributor to US dominance.
As these three examples illustrate, the idea of Innovation Ecosystems can make a significant contribution to our ability to understand and explain these cases of leadership. However, the conceptual caveats mentioned in the answer to the first question must be kept in mind in deploying this idea.
Does the idea of Innovation Ecosystems have any positive implications for a European attempt to regain global leadership in the field of mobile telecommunications?
We must be careful not to slip into the voluntaristic error, i.e. "create the correct Innovation Ecosystem and all will be well!". The reason is that there are always some given constraints that remain binding. Examples are the historically inherited stock of capabilities, whether one's own or those of competitors; the given institutional framework; etc. One apposite example is the demise of Nokia as one of the global mobile industry's foremost pioneers and leaders.
From my personal discussions with some of Nokia's most important leaders I have no doubt that in its last years the company and its key decision-makers had an excellent understanding of what here is called the idea of an Innovation Ecosystem. Indeed, many of the company's key documents, both private and public, were formulated using the terminology of Innovation Ecosystems. There is every reason to suppose that this made both thinking and strategy formulation in Nokia better than it would have been without these conceptualisations.
However, the fact of the matter, sadly and regretfully, was that Nokia was significantly constrained by its historical path-dependence. More specifically, the company was substantially impeded by the Symbian operating system that it had inherited from the pre-computerised smartphone past. Not only did this operating system have defects from the point of view of application development, a key requirement for competitiveness, relative to the operating systems of the main competitors it suffered important shortcomings. No amount of perceptive Ecosystems thinking could, in the time required by competition, suffice to stay the company's threat of execution at the hands of unforgiving market forces. The same goes for the company's new leaders brought in to try and stay this execution.
The Nokia example has important implications for policy-making that uses the concept of Innovation Ecosystems. The main lesson, to repeat, is to avoid voluntaristic errors by coming to better understand what can, and what cannot, be changed by purposeful action.
How useful is the idea of Company Innovation Ecosystems?
Paradoxically, very little scholarly work has been done on how innovation happens, and who makes it happen, within purposefully created Company Innovation Ecosystems. Even the book by IANSITI & LEVIEN referred to earlier, despite the word "innovation" in its subtitle, does not delve into these questions, preferring to devote only a little attention to the incentive to create organisational innovation that benefits the business network/ecosystem as a whole. Accordingly, these questions unfortunately remain unaddressed.
The "open innovation" literature does not do justice to these questions either. Although the issue of innovation players outside the focal firm is explicitly addressed the questions of how all the players in the company's Innovation Ecosystem make innovation happen and who can and should make it happen are not discussed. Yet these questions are crucial for any company or other organisation wanting to improve performance through innovation.
What kind of guidance can be given to the leaders of companies who would like to make use of the idea of Company Innovation Ecosystems in order to improve their performance? This question is currently occupying a good deal of my attention.
CEO, IDATE DigiWorld
A recent report from IDATE DigiWorld underscores the extent to which European markets as a whole lag behind the superfast access targets set by the Digital Agenda, including: 50% of Internet households subscribing to a connection of more than 100 Mbps in 2020.
At the 10th annual Assises du Très Haut Debit (Superfast broadband symposium) hosted by Aromates and IDATE DigiWorld in Paris on 6 July, we delivered a sneak peak of our coverage figures for Europe at the end of 2015, drawing on our own FTTx databases, the latest data collected from regulators and operators, along with our freshly released market report, “The Digital Agenda for Europe: a snapshot”.
Clearly, the situation varies dramatically from country to country, and the objectives set by Europe will be hard for some countries to achieve without a major policy push. The most advanced countries benefit from a strong cable footprint and an incumbent carrier that has made less ambitious technical choices than extensive FTTH rollouts. Belgium, for instance, combines vast a and dense cable system that has been upgraded to the latest Docsis technologies (>100Mps) and the top carrier’s choice to upgrade its legacy copper network to VDSL (>30Mps).
On the whole, the largest countries in Europe are less likely to achieve all of the Digital Agenda objectives. In France, for instance, the combination of giving top priority to achieving extensive FTTH rollouts, the relatively limited cable coverage (40% of households) and the very gradual deployments in the country’s more rural areas based on public-private partnerships – which will eventually coverage 40% of access lines – have put the country among the lowest ranked in terms of availability of superfast access lines and average connection speeds. The situation is better in the UK and Germany where BT and DT were quick to deploy VDSL (>30 Mbps) access products, in response to aggressive competition from cablecos. Meanwhile Spain, which has combined investments in FTTH and cable, also tops France in the rankings. Only Italy, whose incumbent dragged its heels on significant spending on FTTH and was unable to capitalise on a cable system, is faring less well than France.
The IDATE DigiWorld report reveals that, once ultrafast access networks are in place, customers are eager to sign up. We have therefore noted a much higher NGA take-up rate in those areas where ultrafast access (100 Mbps and faster) is available. This means that we can count on a virtuous cycle of differentiation that encourages market players to invest in faster networks, not with a view to continually increasing the price of access plans, but rather to enable solutions that meet a growing array of needs.
When considering these future scenarios we must not, however, underestimate the complexity of the regulator’s task which, up until now, has been defined by European copper LLU rules. The fact of replacing ADSL with VDSL (with Vectoring/Bonding and G.fast) and FTTH would seem to give the incumbent a natural advantage, setting up a duopoly with cable. But this is too simplified a view since we also need to take into account (particularly when looking at the regulatory situation in France) the potential for duplicating superfast infrastructures in very high-density areas, how it is in operators’ interest to pool their investments in medium-density areas, and the role of public-private partnerships in sparsely populated areas, not to mention the promise of superfast mobile.
Hope you all have a great summer!
Delve deeper into our analyses of superfast access in Europe by ordering our latest reports:
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Hao Yi Emerging technologies expert, IDATE DigiWorld
The development of the mobile payment market was still heterogeneous in 2015.
The m-commerce payment market grew steadily, whereas the in-store mobile payment market remained nascent given the transaction volume, although the release of Apple Pay one year earlier had seemingly put an end to the doubts about near field communication (NFC) being the right technology for in-store proximity payment.
IDATE DigiWorld estimates that the worldwide m-commerce market revenue will likely grow from 2015 to 2019 at a CAGR of 26.5%, growing its share 26% of the overall value of the e-commerce market to 44.2%. As regards the arrival of in-store mobile payments with NFC technology, QR code, mobile wallets, mobile point-of-sale (mPOS) solutions and other mobile payment methods, IDATE DigiWorld values their transaction volume to grow at a CAGR of 74% between 2015 and 2019. The volume of in-store mobile payments is tiny compared to the trillions of USD of all point-of-sale (POS) transactions.
On the in-store payment market, no one has really ‘wined out’ as yet, although Internet giants (Apple, Google and Samsung) as well as card networks (Visa and MasterCard) are very active, and numerous new entrants are flooding in.
In addition, NFC payment working with mobile wallets did not see the expected explosion in volume. Even though the technology and NFC-enabled POS terminals have been progressively in place for many years, the perceived value of such services is low for consumers.
From the perspective of merchants, mobile payment alone is not enough to bring about mass adoption.
Find out more about this market in our dedicated report
Jacques Bajon, Director of Media and Digital Contents Business Unit, IDATE DigiWorld
Given, though, the tensions on unit prices, increasing internalisation and competition, the growth in value will be lower than in volumes.
The media industry has to find answers to the increasing personalisation of video consumption. This trend is firming up through the development of on-demand video services and the growing uses of personal devices. Video distribution solutions are needed for the industry, offering them:
• More operational efficiency to integrate more IP in their systems;
• The ability to adapt to the accelerating innovation cycles being driven by Internet players, with shorter time-to-market solutions and services;
• Greater flexibility in an IP-video environment which is in constant evolution.
Alongside the traditional (broadcast) TV distribution chain, a new ecosystem has developed to tackle the needs of the Internet video delivery.
Major improvements have been made over recent years to provide a consistent OTT video experience to end users, including ABR solutions, edge-content caching, the development of software-based solutions and the increasing use of analytics. Some challenges still lie ahead, among them:
• Ensuring an always-on quality of service, in particular together with the growth of video traffic and the possible advent of game-changing live-OTT streaming;
• Managing the increasing complexity of media assets;
• Improving the use of ‘big data’ to favour a better, and more personal, user experience and more efficient advertising.
A large consolidation process occurred in the market between pairs joining up to enhance solution line-ups and/or create end-to-end solutions, and with the verticals where large telcos and cablecos invested in video-management solutions. In turn, new trade-offs then came to the table including for operators and media groups the possible integration of some distribution technologies, the development of collaboration, the increasing use of hybrid (cloud) solutions and the option to choose externalising technical processes.
The move to more IP-based facilities is strong, such as the softwarisation of processes and tools. This shift towards software is to be concretised in a wider concept of software-defined video, which has yet to take shape on a much broader scale. A step further, the virtualisation of process in the cloud has already started.
Popular product line-ups, mainly focused on the idea of enhancing the consumer experience, include seamless multiscreen and TV-everywhere solutions which are already well advanced, unified user interfaces, cloud video recording (CVR), personalisation of video services through big data solutions and recommendation, metadata for enhanced content archiving and circulation and more. Live OTT still has to prove its feasibility on a massive scale and heavy bets are being placed on programmatic ads.
Discover the perspectives, key trends, and scenarios about the TV market for the next decade through our dedicated report
In its roadmap for the Digital Agenda, Europe has set out three main coverage and take-up targets for Internet access.
The first is 100% broadband coverage for European households by 2013, taking into account the use of fixed, mobile and satellite solutions. The second is 100% superfast coverage (i.e. 30 Mbps and up) in most Europe countries, although some are still far from having achieved this. The third is calculated in terms of take-up: 50% of homes passed must have access to a more than 100 Mbps connection.
At the 10th annual Assises du Très Haut Debit (Superfast broadband symposium) held in Paris on 6 July, market research firm IDATE Digiworld gave a sneak peak of its coverage figures for Europe at the end of 2015, and presented a benchmark of the rate of progress in each European country.
‘For the first time, and drawing on our own databases as well as information collected from regulators and telcos, we are able to estimate ultrafast access (i.e. above 100 Mbps) rollouts, shipments and sales in Europe,’ reports Dominique Meunier, head of IDATE DigiWorld’s Telecoms division.
European superfast and ultrafast rankings: 30 and 100 Mbps NGA coverage (December 2015)
Source: IDATE DigiWorld, FTTx World Market (June 2016)
The situation varies dramatically from country to country, to say the least, and the objectives set by Europe will be hard for some countries to achieve without a major policy push.
The most advanced countries benefit from favourable geographical features, a strong cable footprint and less ambitious technical choices. Belgium, for instance, combines vast and dense cable systems that have been upgraded to the latest Docsis technologies (>100Mps) and the top carrier’s choice to upgrade its legacy copper network to VDSL (>30Mps). Another example is Lithuania which has opted for a massive investment in a new fibre network, doing away with its obsolete copper system.
On the whole, the largest countries in Europe are on track to achieve the Digital Agenda objectives. France, however, has set itself ambitious targets for fibre rollouts, its cable networks have a relatively small footprint and the planned investments from government bodies, which were to cover over 50% of total rollout costs, have resulted in only very gradual deployments. Lagging behind the other major countries of Europe, such the UK and Germany which were quick to roll out VDSL (>30 Mbps) access products and boast widespread cable coverage, and even Spain (cable +FTTH), France is ahead only of Italy and will need to accelerate the pace of FTTH access line shipments to make up for lost time.
Lastly, the report reveals that, once ultrafast access networks are in place, customers are eager to sign up. We have therefore noted a much higher take-up rate in those areas where ultrafast access is widely available.
Discover the perspectives, key trends, and scenarios about the THD market for the next decade through our dedicated report
CEO IDATE DigiWorld,
The next stage in the digital revolution will be the big leap forward in major manufacturing sectors, now being pressured to make the digital transition by a combination of game changers: IoT, big data and artificial intelligence.
IDATE DigiWorld has just published the latest edition of its DigiWorld Yearbook. Three public events are held every year, in Brussels, London and Paris, to coincide with its release. Under the banner of “DigiWorld Future,” these events attracted more than 800 industry professionals this year, and allowed both our own teams and a host of industry luminaries to discuss market trends and our predictions for the internet, telecom and TV markets in 2025.
Looking at market trends, our belief is that in the coming years we will need to move beyond the uncertainties over the smartphone market’s loss of momentum, the disappointments over the poor performance of pioneer wearable tech, and over how long it is taking for a mass market to develop around virtual reality. Of course they are all signs of the time, just like economists’ concerns that perhaps Moore’s Law no longer applies and that productivity gains have been decreasing since 2006.
We nevertheless believe that an extraordinary potential surrounds the game changers born of the combination of the Internet of Things (IoT), big data and artificial intelligence – and no doubt 3D printing as well. The tremendous work being done in these arenas by companies such as Michelin and Engie, which were outlined at our DigiWorld Future event, will undoubtedly have an impact in terms of productivity and transforming value chains – not least in furthering the servicisation trend in customer relations. We are clearly at a pivotal moment in time: when innovation is flourishing but positive outcomes are still some way down the road. It will still take some time for the pieces of the technical puzzle to come together (whether the still complex issues surrounding network standardisation or IoT management platforms) and for the required human expertise and appropriate business models to be put into place.
Scenarios for the future
Recognising market trends is also a way for us to identify the core variables of future market scenarios, not to predict this or that players’ strategy, but rather to build a solid foundation for a structured exploration of the different (and deliberately opposite) possible futures.
We have chosen two main avenues when mapping out our scenarios for the internet’s possible futures. The first avenue distinguishes the scenarios according to whether or not they rely heavily on processing and utilising personal data – something that will ultimately be influenced by internet users’ willingness to share their data, and on regulatory restrictions.
The second allows us to define scenarios with respect to standardisation and competition levels. In very basic terms, we could imagine on the one hand an extreme decomposition of market functionalities thanks to a vast selection of available open source software and API (the dream of geeks everywhere) and, on the other, a push to integrate the latest innovations into the massive platforms run by the Internet giants (Google, Amazon, Facebook and Apple), reaping the benefits of economies of scale and network economies.
Naturally, for those wanting to delve further into these projections, the wisest course of action would be to get a copy of the 2016 DigiWorld Yearbook, where you will also find our teams’ insights into the different markets that make up the DigiWorld, along with valuable data and analysis of the events that have shaped the past 12 months.
As always, we welcome any comments and suggestions you might have for the 2017 and all future editions of our DigiWorld Yearbook!
 But also a host of other manufacturers (GE, Audi, Airbus…) along with the major service (hotels) and finance (banking and insurance) industries, mass media, telecoms, etc.
Senior Expert, IDATE DigiWorld
The connected continent: reality check
Nicolas Moreno points out : “In May 2010, the European Commission unveiled the objectives of the Digital Agenda for Europe (DAE). The Digital Agenda is one of the key elements in the European growth strategy for the coming years (Europe 2020) with a target of a 30Mbps coverage for all households in EU-28, of which the half subscribing to a >100Mbps offer.
We conducted a study benchmarking national broadband plans in 7 countries – France, Germany, the UK, Spain, Italy, Sweden, Portugal – in order to provide metrics on the national BB plan advancement. It appears that Portugal and the UK are leading the game regarding the DAE objectives with France and Italy lagging behind.
The disparate coverage levels in the seven countries being studied cannot be attributed to any single factor, but rather to a combination of demographics, technological choices and the strength of private investment.”
National broadband plans – where do we stand regarding DAE
At this stage, as not all national schemes have reached completion, it is impossible to pinpoint a set of best practices, not least because each country’s situation is so different at the study’s outset. Each has established a public policy (objectives, technologies) based on its own situation and features, which makes it very hard to extrapolate to other situations.
Current status compared to DAE objectives
Source: IDATE DigiWorld, National FTTH public policies in Europe, June 2016
The implementation of national plans was accompanied by basic legal measures aimed at facilitating UFB rollouts nationwide. These actions were either included directly in the national plan or ratified in parallel, in response to the different laws.
Summary of regulatory measures introduced in the countries being studied
* As part of symmetric regulation in large cities
Source: IDATE DigiWorld, National FTTH public policies in Europe, June 2016
The programmes also have the common feature of making use of three different sources of financing: European, State and local, with the exception of Portugal where only European and national funding are being used. They do, however, differ in how they apply their support models:
• Direct investments: public design-build-operate (DBO) model, i.e. public authorities assuming all three roles, although there may be public-private partnership (PPP) elements as well;
• Indirect investments: a public network managed by a private entity, i.e. outsourced or operated as a concession;
• Support for local initiatives: high-speed network rollout on the community’s initiative;
• Private operator subsidy: a private sector operator given public funding for its rollout, also referred to as shortfall financing or private DBO.
The biggest budgets for national programmes today are in countries where UFB coverage needs are at their highest: 45% and 44% of households eligible for a 30 Mbps plan in France and Italy, respectively. Because of their demographic situation, Sweden and Portugal did not require a large budget to build out coverage and, in some countries (France, Germany, Spain, Sweden), rollout initiatives from local authorities preceded national programmes.
These national plans are vital but in themselves not enough to achieve complete superfast coverage, or nationwide ultra-fast 100 Mbps coverage down the road. That is the reason why search for complementary private investment is one of the cornerstones of all national plans.
The degree of public action varies from country to country, depending on their current situation. The government’s role in creating incentives for private financing is just as important as its role in helping to fund rollouts in those parts of the country ignored by private operators that deem them unprofitable.
Provide you with in-depth knowledge of each examined national broadband plan (technologies deployed, governance monitoring system, detailed data, cross-country analysis grid…) through our new report.