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.
Lead IoT expert at IDATE DigiWorld
We can already observe the integration of IoT technologies in industry assets – which is commonly called smart factory – and emerging use cases, reducing costs and increasing productivity strikingly.
In our latest study we propose an analysis of the heterogeneous industrial landscape on three major axes: Infrastructure (Industry assets), Offering (innovative products accompanied by related services) and Relation with customers.
Industrial Internet is gaining momentum, but still needs several years for larger adoption and especially for an establishment of common standards – today several technologies and concepts coexist and only the fittest will survive when market maturity is reached.
The industrial infrastructure of industrial assets will be optimised through the development of the smart factory concept by implementing new manufacturing practices that take advantage of ICT innovations. This aims to go beyond the introduction of new technologies in the production process. The core principle is the increase in connections and integration of the different ICT-enabled components in a single networked system. The developments of the smart factory result in gains in production costs as defects are eliminated and automation reduces the intensity of human resources in production tasks. Value thus shifts to research and development and design tasks on the one hand, and to after-sales services on the other hand. These shifts impact players, enabling the development of smaller-scale units focusing on the design and engineering of products on the one hand, and the emergence of platforms and ecosystems on the other. Adoption is still limited as we are but in the early years of the smart factory. Major industries now adopting the smart factory encompass aeronautics, automotive and consumer electronics. Energy and transportation are also deploying IoT solutions along their distribution network architecture.
The Industrial Internet (IIoT) is also considered as a way to improve the appeal of core products by providing more services associated with machines rather than expecting new revenues. As a consequence, vertical players are tending to lower their expectations for data monetisation, focusing essentially on using data for process optimisation mainly, bringing more value to their core products. This is even more true for very expensive machines (aircraft, heavy equipment). However, some industries like automotive still aim to generate additional recurring service-based revenues over time through additional interactions (rather than standalone product sales with renewal several years later). They are pushing their subscription-based services, even though the real adoption is still under interrogation (even for premium manufacturers).
In addition, servicisation is also used to increase customer loyalty, where the traditional product purchase (transaction relationship) is being transformed into a recurrent relationship between suppliers and clients. Moreover, new innovative and disruptive pricing models will be introduced, with the example of tyre manufacturers which sell services (on a per-km basis through Tyre-As-A-Service) for professional fleet managers.
Data will play an important and central role in the future as many players aim to leverage the data collected from the connected objects, chiefly for business reasons. There are still questions around the real monetisation of the data as it is based on the ownership of the data itself and its related control. Early initiatives show data use for internal use, circumventing data privacy issues. To build data-managing platforms, the biggest industry players are tending to develop their own digital solutions. For smaller players, data will likely be exploited by third parties, as they lack the appropriate technical expertise and capacity to combine with other data.
The market of the Industrial Internet will be driven by the enabling technologies (LPWA and big data chiefly) which provide disruptive features. Moreover, different national and international initiatives such as Industry 4.0 or the Industrial Internet Consortium (IIC) support the development of these new technologies led by the automation and engineering industry giants.
However, in addition to doubts around data monetisation, the market is also facing such barriers as security and reliability concerns, interoperability issues and potential societal impact on workforce training and employment. Furthermore, this is leading industrial giants to have their own data-oriented department and they are required to acquire new skills and expertise around data – a process which also takes time.
Get more insights on infrastructure, products and services, customer relationship related to Industrial Internet as well as an analysis of the value chain, possible monetization of data and general drivers and hurdles.
The independent telecoms, internet and digital media analysts at IDATE DigiWorld have announced a number of trends to look out for over the next decade in its annual DigiWorld Yearbook report, out this month.
These include cheaper smartphones, dwindling sales of tablets, the increasing use of IoT technologies, Artificial Intelligence (AI) and Virtual Reality (VR), and sustained growth in the digital economy. The European think-tank expects to see a continued rise in cyber-attacks and trust issues surrounding digital companies, which will lead to enhanced security protocols as consumers embrace the Internet of Things (IoT), especially to help protect their connected cars or smart homes. Improved connection speeds, especially for Europe, and better reliability for mobile and household internet services are also on the cards, with a gradual move from 4G to 5G and fibre-optic broadband (FTTH).
In its research, IDATE DigiWorld looks at how further consolidation in the telecoms industry could be replaced in future by more cross-industry mergers between networks, technology, television, media, transportation and industry: for instance, companies like Google and Apple making further in-roads into the automotive industry; or major telco and tech companies buying more into television and streaming services.
With sustained growth in online services, the industry experts at IDATE DigiWorld expect a gradual shift away from owning to using: for example, people sharing cars via an app; or streaming music and video-on-demand films, rather than buying CD’s, DVD’s or downloads. The move towards more on-demand, subscription services is likely to be driven by the increasing use of ad-blocking software which, in turn, could make the abundance of free internet services (like YouTube) a thing of the past.
“A wide range of services are sold for a minimal per-unit cost and consumed en masse, which helps to build a gigantic digital services market for telecoms and internet, estimated at more than €2,900 billion in 2025, or almost 7% annual growth,” said the report.
The two-hundred-page report also considers how Bitcoins, blockchains, mobile payments and crowdfunding will impact the future of banking and finance, arguing that further development in internet services will help ‘cut out the middleman’ in other industries too, like travel and retail. Other considerations include Big Data and how EU legislation is coping with data privacy and protection, as well as how, in future, more access to personal data might affect people’s insurance premiums or requests for loans.
“We’re riding a wave of innovation that’s never been seen before, especially in the business sector with the continuing migration to the Cloud and the prospects that the Internet of Things, Big Data and Artificial Intelligence might bring. However, at the same time, this throws up a number of potential issues, such as how the Public Cloud is now in the hands of tech giants like Amazon, Google and Microsoft,” said François Barrault, President of IDATE DigiWorld.
Despite a context of relative saturation, as shown by recent stagnation in smartphone sales, IDATE DigiWorld predicts modest growth returns for Western telcos and digital media companies during the years ahead; but bigger gains in China, India and Africa, where further global consolidation is expected both at the European and worldwide level. In television, Asia/Paciﬁc will become the world’s largest market during the next decade, while growth in the main European markets will be weak, and possibly even negative.
“European markets are also still very much weighed down by a very tough competitive and regulatory climate for telecom carriers whose revenue has been on a downward slide since the late 2000s,” said Yves Gassot, CEO of IDATE DigiWorld. “Internet services continue to enjoy double-digit yearly growth of nearly 15%. The segment is expected to represent close to 10% of the entire digi-world in 2016, a ﬁgure that will only increase in the near future: in just two years from now, internet services will be out-earning television and video services, which will nevertheless continue to grow by 3% to 4% a year.”
The DigiWorld Yearbook 2016 has been compiled using its own datasets, market reports and 2025 prospective analysis with the support of many leading players in telecoms, IT, internet, TV and digital media, with more than 50 members that include Accenture, AT&T, BT, Google, Gemalto, Huawei, IBM, Microsoft, Orange, Tata and Samsung.
The findings of the report are being presented this year to various industry chief executives keen to share their outlooks on the 2025 digital economy, through a series of DigiWorld Future conferences: in Brussels, on the 25th May; in London, on the 2nd June; and in Paris, on the 14th June. The complete programme is available at www.digiworldfuture.com
DigiWorld Yearbook infographics
Buy the DigiWorld Yearbook 2016 Edition on our website !
Senior Consultant IDATE DigiWorld
Disappointing results for the mobile industry and satisfactory results for broadcasters and the satellite industry.
World Radio Conference-15 key outcomes
Spectrum is vital for many industries – allocations are decided at a WRC. At the most recent WRC, late in 2015, many hot topics were raised, including the allocation of new frequencies to International Mobile Telecommunications and to satellite services. Globally, WRC-15 led to some very important conclusions. In the end, it delivered disappointing results for the mobile industry and satisfactory results for broadcasters and the satellite industry.
Focus on item 1.2: the 700 MHz band, 96 MHz identified for IMT use in Region 1 and in few countries in Region 3
The 700 MHz frequencies are very valuable and often considered as golden spectrum because of its propagation characteristics. The 700 MHz band is of critical importance for players both in the MEA and in Europe. In Europe, broadcasting carries a considerable weight in the industry, something that is less clear in MEA. These differences required caution on the part of the authorities.
In Europe the band corresponds to the second digital dividend. In the USA, 700 MHz frequencies correspond to the first Digital Dividend in the USA (1997-2008). In Region 3 (Asia-Pacific), the 700 MHz band corresponds to the first Digital Dividend.
At present, the 700 MHz band is still being used by digital television services in Europe (despite the WRC-12 allocation to IMT use). In some countries it is used by mobile services. It is being freed up for mobile broadband in many parts of the world.
It has been a long journey to freeing up 700 MHz frequencies.
• In 2007, 108 MHz of spectrum (698-806 MHz) for mobile services in Region 3 were identified at WRC-07.
• In 2008, the USA auctioned 700 MHz spectrum.
• Four years later in 2012, WRC-12 agreed on allocation of 700 MHz to mobile services (except aeronautical mobile) as a co-primary use with broadcasting in Region 1.
• As a kick-start to 700 MHz freeing up, the EC mandated CEPT in 2013 to develop harmonised technical conditions for the 700 MHz band in Europe.
• In 2013 and 2014, some Middle Eastern, Asian and Latin American countries auctioned 700 MHz frequencies with spectrum to be freed up as from 2015.
• During the year 2015, the first 700 MHz spectrum auctions took place in Europe.
In June 2015, more than 5 billion EUR were collected in auctions covering multiple frequencies (700, 900, 1800 and 1500 MHz). Bids for 60 MHz of spectrum in 700 MHz frequencies’ auctions alone reached 1 billion EUR (12 eurocents per MHz per 10 years).
In France, 700 MHz auctions which ended in November 2015 raised almost 2.8 billion EUR for 60 MHz on sale (35 eurocents per MHZ per 10 years), almost three times the amount reached in Germany. Finland and Sweden expect to auction 700 MHz spectrum before 2017 (respectively in January and April). The UK will make the 700 MHz available for mobile services by early 2022 and earlier if possible. In other European countries, the future of the 700 MHz is being considered.
• During the year 2015, the first LTE-700 MHz commercial services were launched.
WRC-15 outcome for the 700 MHz band
The 700 MHz topic had raised an intense debate before the conference. Broadcasters tried to defend their positions while mobile operators wanted to attract additional spectrum.
As expected, the selection of the 700 MHz (694/698-790 MHz) band as an IMT band was decided at the WRC-15 within Region 1 and 16 countries in Region 3 (including Australia). Broadcasters succeeded in protecting their services with the WRC-15 promise of “full protection” for DTT services.
Harmonisation between regions in the world was at stake. Before the conference a number of band plan options had been considered, especially in Europe, while other countries aligned to the APT700 plan, a harmonised band plan for 698-806 MHz for Region 3 which was approved by ITU. The entire band, according to the APT plan, enables the use of 2x45 MHz for FDD operation. A TDD plan has also been defined.
Access the full report Key Outcomes from WRC-15 to get more background data, decisions on items and what will shape the WRC-19 and WRC-23.
Published in DigiWorld Economic Journal DWEJ No. 102
"Mobile dynamics: the path to 5G"
Interview with Wassim CHOURBAJI
Vice-President, Public Policy and Government Affairs, Europe, Middle East and North Africa, Qualcomm
Conducted by Denis LESCOP, Télécom Ecole de Management, Evry, France
DW Economic Journal: "What do you really mean by 5G from a technology perspective?"
Wassim CHOURBAJI: As we did with 3G and 4G, Qualcomm is leading development of technologies for 5G. We are designing a unified, more capable 5G platform to meet expanded and radically diverse requirements. 5G will be much more than just a new generation with faster peak rates. We are building a 5G platform to connect new industries, enable new services and empower new user experiences in the next decade and beyond. The foundation of this platform is a new OFDM-based 5G Unified Air Interface that is scalable across all services and spectrum. 5G will usher in the next era of enhanced mobile broadband experience with more uniform high data rates everywhere, lower latency and lower cost per bit. It will connect massive numbers of things through the ability to scale down in data rates, power and mobility. It will enable new mission critical services with ultra-reliable low latency links. It will provide edgeless connectivity with new ways for devices and things to connect and interact. 5G will be also a platform for all spectrum bands and types, designed for licensed spectrum from below 1 GHz for coverage to mmWave for extreme bandwidth as well as for unlicensed and shared spectrum.
How will 5G impact the everyday life of people?
Wireless connectivity transformed human communication. With 5G, we're extending its reach and adding intelligence to transform everything else. 3G and 4G have enabled people to experience broadband on their smartphones and tablets, wherever they are, indelibly changing the way we communicate with one another. We take this for granted now, but it was actually science fiction less than two decades ago. The next step, which is quintessential to the long-term realisation of 5G, is the massive social and economic impact of the tens of billions of devices and things that will get connected to each other, to the cloud and to people, unlocking greater efficiencies, personalized services and new user experiences. This will profoundly change our lives.
Where devices such as smartphones and tablets are now still the endpoint of communication, countless methods of connectivity and interaction will emerge in homes, cars, cities, healthcare and more. Where data services are now limited to certain providers and insights, there will be near unlimited insight available thanks to a broad expansion of all kinds of discovery services. It will not just be devices that will be "smart", it will be the connectivity itself. Intelligence will be found at the place where interactions are happening and will no longer be buried in the data centre or confined to a wall garden – it will make those interactions more intuitive, immersive and secure for people.
How will 5G impact the everyday life of enterprises? Can we say that 5G will open tremendous business opportunities?
The transition that businesses will experience towards 5G will be as sweeping as that experienced by consumers, and arguably even more so because the stakes in terms of competitiveness, economic growth and job creation are extremely high. I think it is fair to say that there are tremendous opportunities for businesses big and small, but the value created by spurring technological innovation with 5G will strongly depend on the policies under which industry at large will digitize and evolve.
Businesses have so far had to adapt to a changing environment where the internet has expanded to cover most, although not all, processes related to selling and distributing goods and content. To name but two obvious examples: e-commerce has metamorphosed retail and wholesale distribution operations; and the web has completely revolutionised publishing and journalism. These changes were basically driven by the fact that people could suddenly buy things and access content online. It's a process that started in the early days of landline internet connectivity, but which has really been boosted by mobile thanks to anywhere, anytime connectivity.
But as I said, with 5G the change will not simply be about connecting people to the Internet – more people, in more places and at faster speeds – but crucially about bringing intelligent connectivity to everything. So it is not just the sale and distribution of goods that will come into play – it is the very products you are developing as a business that will be affected. You used to be a company that was top-notch at designing and manufacturing this great product, but now you need to think in terms of your connected product – what you want to do in this new environment is deliver greater efficiencies, personalised services and new user experiences. You need to stay relevant to the user or people will be drawn elsewhere. You need to be skilful in doing that because there are many other companies out there which will take any opportunity they have to disrupt your market.
How are regulators – and especially the European Union – supporting (or not) the emergence of 5G?
I think the European Commission has really embraced the vision of 5G as a cornerstone of Europe's competitiveness. In April, the Commission earmarked 5G as a technology standards priority. The fact that Europe has leadership positions in so many key industrial sectors and that European industry needs to take advantage of the business opportunities that will potentially be enabled by 5G connectivity is not lost on Vice President ANSIP, Commissioner OETTINGER and the Commission as a whole.
I see the Digital Single Market as essentially a statement that Europe cannot afford to waste this opportunity. I like the fact that it goes back to the concept of the Single Market, one of the greatest achievements not just for Europe but arguably for humanity – there is no other place that equals Europe's level of social and economic unity, imperfect though it may be, between peoples, countries and interests that used to be so disparate. Implicitly, what it says is that the key to making the Single Market stronger for Europe and the world in the 5G digital era is to stay true to its core values of integrating differences.
When you transpose integration from different countries to different industrial players, the process is actually not that different. And when you translate integration into digital terms, you are talking about interoperability. That is why I think we see a strong emphasis on facilitating more cross-sector partnerships in the European Commission's recent Communication on ICT Standardisation Priorities for the Digital Single Market. We need more collaboration and strategic vision to bring together "traditional" non-ICT industries, the telecoms industry and the rest of the value chain to deliver on the promise of interoperable 5G connectivity. Europe can turn its apparent complexity into an asset.
There are a lot of initiatives that the Commission is facilitating with a view to 5G, such as the Alliance for Internet of Things Innovation (AIOTI) and the 5G Action Plan. Where I think Europe needs to act more quickly is spectrum and the review of the regulatory framework. Notably, I think Europe should decide fast and by 2017 on a list of "pioneering" 5G bands in the low, mid and high ranges, as well as a roadmap for the harmonisation and coordinated release of these bands across Europe. This will help industry players to invest and develop interoperable 5G standards globally and pave the way for commercial deployment in 2020. In Europe, there is a lot of potential in bands such as 700 MHz and 3.4-3.8 GHz, which are suited for IoT and "Industry 4.0"-type deployments, as well as in the 24 GHz and 31 GHz bands, which can deliver extreme mobile broadband bandwidth.
How should the framework be modified to better support 5G initiatives?
In terms of policy direction, I think we need to be aware of the paradigm shift between the old Digital Agenda for Europe and the new Digital Single Market strategy, which should very much reflect the shift from connecting people to connecting everything that I've talked about earlier.
We are used to having Digital Agenda targets that are linked exclusively to "fast internet access for all", called broadband objectives, like for instance 30 Mbps for 99% of people. That is good if you are trying to connect more people, in more places and at faster speeds, but if our aim is to bring, with 5G, intelligent, reliable and secure connectivity to new industries, which have different kinds of requirements, then these targets are no longer sufficient and we need new ones. These new targets should also address the vicious circle of the 3 "lows" the mobile industry is facing in Europe, and which I and others have talked extensively about. Low revenues, low use and thus low investment. The current targets solely address the supply side, with network coverage and speed obligations, and I think new targets should also address the demand side. This is key for takeup and revenues, bringing both the mobile industry and verticals together.
So I think the Digital Single Market targets should be specified for example as 1-Gigabit connectivity by 2030; 70% penetration of connected vehicles by 2025 and 100% by 2030; 100% road coverage by 2025; 60% penetration of remote monitoring for chronic patients in 2025 and 100% of low latency, very high data rate cloud access by the same date. I think these targets are far more meaningful from both a societal and economic perspective. I believe there are ways to incorporate these new elements in the upcoming review of the EU telecoms regulatory framework to make it futureproof and 5G-ready.
Does 5G raise issues pertaining to standardisation?
Yes, the main issue being that we'll need standardisation like we've never needed it before. As you expand the need for connectivity beyond people to literally everything, you can easily imagine that there is going to be a need to invest billions and billions of euros to create and evolve interoperable solutions that can cater to the many different requirements coming from the different sectors. The 5G platform is expected to be introduced with 3GPP release 15, forecast to be complete in 2018 for 5G commercial launches in the 2020 timeframe.
We will need high-performance standards, incorporating intensive levels of interoperability. If we only end up with extremely basic functionality incorporated in standards, we'll see much less interoperability, follow-on innovation and competition along the value chain. The bulk of the technology that consumers will be interested in may end up being developed by one or a very limited number of players that will control it in full. That is going to be bad for consumers and the rest of the market.
What this means is that standardisation needs to remain a priority for Europe. As I said, given that 5G will be about complexity, thanks to its leadership in standards Europe has a real chance of turning what many perceive as a weakness – the need to intermediate between contrasting interests, be it Member States or industrial sectors in our case – into an asset. So I welcome the Commission's intention of facilitating cross-sector partnerships for standardisation – I think this initiative can unlock situations where market players aren't naturally inclined to sit together at the table, which results in them losing commercial opportunities and the entire market not moving forward.
At the same time, one cannot forget that the investment needed to develop and evolve highly interoperable standards will come first and foremost from industry players. If standardisation is not an appealing option for them, they will not participate and we won't have the standards we need. And as one can easily imagine, fair return on investment is a top priority for businesses, including when the decision has to be made as to whether or not they want to contribute their inventions to standards and thus allow access to those inventions. There is always the option of going proprietary if participating in standardisation is not generating fair value for you. And, as I said, this would represent a risk for society in that it would lead to less interoperability, less follow-on innovation and less competition.
How are actors positioning themselves around the question of standardisation and intellectual property?
Balanced and effective intellectual property rules are essential, on the one hand, to incentivise companies to contribute their technology to standards and, on the other, to enable access to standardised technology. It is a balance that we absolutely need to get right as there is too much at stake.
I think the dynamics of the IP and standards debate haven't fundamentally changed in the last few years. Repeatedly, concerns are raised about Standard-Essential Patents (SEPs) and Fair, Reasonable, and Non-Discriminatory (FRAND) licensing. These concerns, which took centre stage during the ill-famed "smartphone wars", have proven to be tragically unfounded when it comes to smartphones and tablets. As mobile communications standards have improved and included more and more patented technology in the various iterations of 3G and 4G, average device prices have been falling dramatically and we have witnessed a proliferation of new products with new features. Irrespective of any theoretical debate about "patent thickets" and "royalty stacking", it is quite clear we simply haven't seen any thickets or stacking in the actual market, which on the contrary has been incredibly successful in achieving innovation, competition and consumer choice.
That being said, there are now what I think are valid discussions about standards and intellectual property in the new context of the IoT. As the number of players who will need to implement standards in their different industrial products grows, including SMEs, there is a need to simplify access to standards for them. In this context, the Commission has announced plans in its Communication on ICT Standardisation Priorities to facilitate fast, predictable and efficient access that can keep in place the right incentives for companies to contribute technology to standards. We welcome this approach, which I think is shared among the major standards contributors, and we look forward to working with the Commission and other stakeholders to this end.
Key to a balanced environment for investment in and access to IoT and 5G standards is flexibility. The IoT and 5G are going to be new markets, and the different parts of the value chain are still in the process of figuring out how best to structure new business models and how to create and reward value. The proverbial "one size fits all" will really not work here. However, some vested interests are promoting inflexible interpretations of FRAND that would force companies to license their technology to lower parts of the value chain or at the level of the smallest-saleable unit. This would for sure devalue standardisation – what it amounts to is guaranteed destruction of value for technology contributors to standards. And as I said earlier, companies will not contribute their technology to standards if standardisation is not generating fair value for them. If we in Europe care about interoperability, we really shouldn't go down that route.
Wassim CHOURBAJI is Vice President and head of Government Affairs for Europe, the EU and MENA. He is the Managing Director of the EU Brussels Office and oversees Qualcomm's public policy, regulatory affairs and senior government relations. Wassim is member of Qualcomm Europe leadership. He leads an EMENA-wide senior team responsible for innovation, technology, intellectual property, telecoms & digital economy, spectrum, standardization, security, data protection and antitrust policy. Wassim is chairman of the Communication Policy Council of TechUK, the policy arm of the UK digital industry. He was previously chairman of the spectrum group at DigitalEurope, the Brussels-based EU industry association, and chairman of the European spectrum group at the GSMA. Prior to joining Qualcomm in 2006, Wassim was the head of spectrum for the France Telecom Group, overseeing the group's fixed, mobile and satellite spectrum strategy across its operating companies. He was also designated by European administrations as lead coordinator on 4G spectrum for Europe at the ITU World Radio Conference. Previously, he served as regulatory manager for SkyBridge, Alcatel Space global Internet satellite project. He started his career as a spectrum engineer at French mobile operator Bouygues Telecom. Wassim holds a master's degree in wireless communications and is a graduate engineer from Supelec France.
More information on DigiWorld Economic Journal No. 102 "What do you really mean by 5G from a technology perspective? on our website
Senior Consultant, IDATE DigiWorld
This market is considered one of the most promising in the Internet of Things sector with a number of connected things could climb from 200 to 900 million between 2015 and 2025.
The concept of the smart home can be understood as home automation for the Internet era, but it is a concept that has not yet really caught on.
It encompasses all of the machines in the home that could potentially be connected to the Web. It also includes a wide array of applications, from consumer electronics to home appliances, by way of light bulbs and presence sensors. Today’s market is focused mainly on selling hardware with a built-in connectivity module and which can be controlled remotely using a mobile app. But it now also includes hubs, i.e. central systems that allow the different devices to talk to each other.
Many of the currently available products are connected to managing energy consumption and personal security, as consumers are more inclined to invest in solutions that allow them to lower their electrical bill and/or feel safer in their own home.
A large and heavily populated ecosystem
The digital home ecosystem is vast, populated by a multitude of players from a wide range of industries, including veteran CE and appliance manufacturers, along with power companies and players from the lighting and security industries. Samsung is particularly active in this market, especially since it acquired the start-up SmartThings in 2004. The South Korean giant is selling a complete smart home solution, including a hub to which both the manufacturers’ and its competitors’ equipment can be connected. Philips also has a solid presence in the smart home market thanks to its Hue line of smart bulbs.
The marketplace is also populated by newcomers such as pure players specialised in connected devices – marketing smart thermostats, light bulbs and security cameras. Telcos too have joined the fray, taking advantage
of their modems already deployed in customers’ homes to roll out new initiatives. The Internet giants are also on hand: Google through its acquisition of Nest, a start-up that specialises in smart thermostats, and Apple with its HomeKit smart home development platform.
An ecosystem awash with solution providers means that there are multiple communication protocols at work. The current battle for supremacy between standards is pitting a number of initiatives backed by industry giants against one another.
Adoption of the smart home raises severalquestions
This market, fl edgling as it is, is considered one of the most promising in the Internet of Things sector. IDATE estimates that the number of connected things could climb from 200 to 900 million between 2015 and 2025. Most of the market’s revenue today comes from hardware sales, whose prices are still too high compared to virtually identical products without smart capabilities. Several issues, then, need to be resolved before the market can really take off: the price of connected devices and appliances, privacy concerns raised by the use of personal data, a business model that needs clarifying (including monetising data) and the fragmentation of core technologies.
Discover the perspectives, key trends, and scenarios about the Internet and Smart Living market for the next decade through our dedicated report.
Florence Le Borgne
Head of the TV & Digital Content Practice, IDATE DigiWorld
Generally speaking, the arrival of Netflix in a new market results in increased programming costs for its competitors.
Using North America as an example, this trend is expected to continue and grow in the coming years, which will question the profitability of such investments.
There are generally three types of pay video-on-demand (VOD) services:
• TVOD (Transactional Video-On-Demand) services, which include:
• EST (Electronic Sell-Through), also known as DTO or 'Download To Own', is like the traditional sale of physical videograms, but in digital form.
• DTR (Download To Rent) is like the traditional rental of videograms, but in digital form.
• SVOD (Subscription Video-On-Demand) services, which are based on the dominant pricing model used for linear pay-TV: subscriptions
It is common for the same service to offer several pricing models.
Business models and service positioning
The transactional video-on-demand model is based on revenue sharing between the service provider and the rights holders. Contracts between these two parties can be exclusive, but rarely so. The catalogues of transactional video-on-demand services are usually very large (from 10,000 to hundreds of thousands). Although most TVOD services are non-specialised, consumption is mainly focused on movies.
The business model of SVOD is similar to that of pay-TV. Content rights are purchased at fixed price, regardless of actual consumption. The rights may be exclusive for a given period of time and territory. SVOD catalogues have tended to be available for unlimited consumption so far, including many non-exclusive and older titles (over 5 years old). Although most SVOD offerings are non-specialised, fiction series tend to be promoted and consumed the most. Original and exclusive new content is increasingly used for differentiation. There are currently two contrasting marketing strategies used: strategies based on a volume/cost ratio; and differentiation strategies based on premium or special interest positioning.
The VOD sector as a whole is witnessing strong growth in Europe, driven by a large increase in the number of services emerging in most countries. Between February 2012 and December 2015, the number of services available in the EU increased by a factor of 5.7 on average.
Although the market share in value terms is still dominated by DTR in Europe (56.5% of the total VOD market), this market segment has been the slowest growing segment over the last five years (+215% on average in EU countries between 2010 and 2015). Revenues from subscription services are experiencing stronger growth: a growth rate of 1,824% over the same period. They generated nearly one-third of VOD revenues in Europe in 2015, whereas they only accounted for 7.6% in 2010.
The true start of the SVOD market in a particular country is often whenever Netflix launches there. Note that Netflix is often the main beneficiary of the rapid growth in subscribers that its launch creates. The arrival of the North American giant does, however, trigger a response from the main players in FTA television and pay-TV. It is the combination of all these elements that contributes to better awareness of these services among the general public and facilitates their adoption.
The growth and success of video-on-demand services can be very different depending on the market. There are various internal factors:
• the propensity for local consumers to pay for access to content;
• the price differential with local pay-TV offerings;
• the prevalence of piracy of audiovisual and cinematic content;
Find out more about the various internal factors
Various issues specific to the structure of on-demand services and players' strategies also play a role:
• the relevance of the marketing positioning of the services;
• the existence of partnerships with distributors who already have a subscriber/equipment base;
• the effectiveness of recommendation systems, which help increase consumption and provide a better user experience;
More information about these issues
Profitability conditions and the challenge facing Europe
The issue of achieving profitability with transactional services is not as critical as for subscription services. Because most transactional service costs are variable costs, proportional to consumption, these services are not expensive to create and only become so when the content is actually consumed.
Therefore, there are no real obstacles to creating new services and the costs of entry into the market are low. This explains the abundance of existing services and the great diversity of players in this segment.
The economy for SVOD services is more delicate: as well as technical and marketing costs, content acquisition costs can be regarded as fixed costs because the content is purchased at a fixed price, regardless of consumption. To that can be added costs related to development or acquisition of a recommendation tool. Subscription services therefore have significant costs even before they have started to recruit subscribers.
If the European industry cannot create some European champions of their own to compete with the US giants, many European players may disappear as the market rationalises.
For the publication of the 16th edition of the DigiWorld Yearbook (pre-order now), IDATE is organizing a conference based on the detailed analysis of the current situations and some forecasts by IDATE experts on the major digital sectors, the discussion will deal with the great trends and challenges that will disrupt the digital markets by 2025.
Directeur de Business Unit Strategies, IDATE DigiWorld
the number of mobile customers worldwide should top the 8 billion mark by the end of 2018 (+16% compared with end of 2014) and increase by a further 200 million the following year (+14% between the end of 2015 and the end of 2019).
With global penetration more than 100% in 2014, subscriber growth is expected to gradually slow down over the next few years. The number of fixed Internet subscribers is increasing at roughly the same pace, but customer numbers are eight times smaller. The one billion mark is not expected to be reached before 2020 and traditional landlines continue to loose ground as VoIP and mobile gain ground.
The spread of broadband
the number of fixed broadband subscribers is expected to reach 900 million worldwide by the end of 2019. The number of LTE customers is shooting up, with services based on carrier aggregation no longer being limited to just the more developed countries.
Three major factors will play in favour of the spread of broadband:
• The success of bundled offers (fixed telephony, VoIP, TV, mobile telephony) and the appetite for video applications.
• The investment of telecom operators in the migration of their infrastructures to mobile or fixed broadband.
• The comfort provided by ultra-fast mobile broadband and the new uses it enables.
Revenue from telecom services
the global revenues from telecom services will grow from 1,111 billion in 2014 to 1,196 billion in 2019, representing an average annual growth of 1.8%.
• Revenues from mobile services will grow by 8% between 2015 and 2019 (+1.9% per year on average), reaching 729 billion EUR in 2019.
• Revenues associated with data transmission and Internet will grow more strongly (+18% between 2015 and 2019, i.e. +4.3% per year on average), to reach 319 billion EUR in 2019.
• The turnover of fixed telephony will continue to decline significantly (-11% between 2015 and 2019, i.e. a decline of 3% per year on average), to be at 147 billion EUR in 2018.
Disparate performances from operators in emerging countries
The top telcos in emerging countries experienced a slower rate of growth for their revenues in 2014, with the notable exception of América Móvil. China’s three telcos are reporting stagnant revenues, and China Unicom actually posted a 3.5% decrease. Their margins are come in line with industry standards: between 30% and 40% of EBITDA margins. Several of these operators are actively engaged in an international expansion into Africa and Latin America, but also into advanced markets, particularly in Europe.
European operators always in trouble
European operators continue to suffer. Virtually all of them, except for Deutsche Telekom and Telenor, saw their revenues shrink once again in 2014. Their spending on LTE and superfast fixed access networks (FTTx) has not yet paid off and helped to bolster ARPU.
For the publication of the 16th edition of the DigiWorld Yearbook (pre-order now), IDATE is organizing a conference based on the detailed analysis of the current situations and some forecasts by IDATE experts on the major digital sectors, the discussion will deal with the great trends and challenges that will disrupt the digital markets by 2025.
Director of Studies, IDATE DigiWorld
The connected object market today shows a real complementarity between the major players in terms of their current positionings, aligned with their core business.
In the longer term, however, IDATE DigiWorld anticipates that competition will grow in ferocity, around the platforms and services which are set to be the next source of revenues.
The automotive market
Around the connected car business, is key for Internet giants and telcos. Competition today is, in the main, on the platform side as both telcos and Internet giants are aiming to position themselves here today. Indeed, it is the platform that is the cornerstone of the next connected car strategy. Looking further ahead, the main competitors will most likely be OTT service providers, as they will offer services by exploiting the data generated by sensors in the vehicle – Uber-like companies are one example. Some industry incumbents are already engaged in the battle: earlier in 2016, GM invested half a billion USD in Lyft, the main competitor to Uber. The major involved players are AT&T and Verizon on the side of the telcos and Google (and Apple to a lesser extent) for Internet players.
The wellness market
This market is very recent. Telcos are absent from its value chain, with the exception of very limited volumes of cellular objects. They only focus on the distribution side, where the reselling business can grab them a sale commission on wearable objects, linked to smartphones. OTT Internet players are eying this promising consumer market for the opportunities it will offer in the near future to manipulate and monetise masses of personal data.
The healthcare market :
A specific market for a long time, its very promising market has been in the growing numbers of potential ‘clients’ as their age increases. The key objectives of healthcare applications are to optimise the treatment of disease and to save costs for national healthcare services. Even though solutions will be provided in partnership with experts, both telcos and Internet players will be push platforms and services.
The smart home market
It will be the arena for immense competition in the next few years. It is considered as a growth area for fixed telcos which are already facing competition from cablecos. On the side of the OTT Internet player, smart home applications are seen as a complementary way to follow their consumers/audience, even though they have different approaches. Competition – again, it will be heavy – will on the platform and services side as all players will be wanting to manage the data.
Today, the industrial Internet market is considered as an extension of the Industrial M2M business for telcos. The Internet giants are notable by their absence, even though some could provide cloud-based tool: Google, and Amazon with its specific IoT AWS offering, are prime examples. Analogous with traditional online services, the main threat for telcos is that they yet again become the pipe, and only the pipe. They have, however, anticipated the connectivity commodity trend by offering data platform solutions and related services. The ARPU from connectivity is very limited and the telcos expect only a small share of connected devices will be equipped with a SIM card. Before services, telcos have backed their core business, by setting their eyes on LPWA technologies (SIGFOX or LoRa) or collaborating on LPWA-like cellular ones such as the NB-IoT ahead. They are also backing the next 5G technologies, which aim to empower various verticals, including healthcare, manufacturing, smart cities and the automotive. It will be a tough battle, given that Internet giants are global by definition. Moreover, compared with traditional Web services, the main difference is that Internet giants manufacture their own objects, providing almost an end-to-end solution of product, platform and services on top. Faced with this kind of solution, traditional players in the industry will also suffer from the invasive nature of the OTT Internet players and their fierce competition.
Find out more information on "Telco's Connected Objects Strategies" in our dedicated market report