Florence Le Borgne,
Head of the TV & Digital Content Practice, IDATE DigiWorld
If directive 2001/29/EC harmonise copyright across the European Union, this does not mean that rights owners enjoy a single system of copyright protection throughout the EU. Their coverage is in fact an assembly of national rights whose geographic scope continues to be confined to the Member State that grants them.
At a time when more and more consumers are watching videos on mobile devices, and expect to be able to do so anywhere, anytime, the territorial aspect of copyright creates problems when it comes to cross-border access and the portability of this content. According to the European Commission, the ability to access a video service in another Member State is guaranteed for less than 4% of all VoD content in the EU. Moreover, for copyright reasons, consumers are often unable to continue to access a VoD service they subscribe to at home when travelling in another European Union country.
The territoriality of copyright is, however, far from being the single obstacle to the development of cross-border services. At the top of the list of other hurdles is the national exclusivity imposed by rights owners to secure pre-financing for their content, along with:
• the costs and constraints bound up with the need to employ multilingual staff to provide customer service;
• different national regulations on private copies, consumer protection, the protection of minors, taxation,
distribution windows, etc.;
• subtitling and dubbing costs;
• the cost of localising marketing campaigns;
• the lack of technical standards for distributing content;
• low broadband availability and/or adoption levels in some countries;
• the lack of demand for cross-border services.
A less ambitious plan, which aimed only to guarantee the portability of content across Europe, would seem more realistic. For service providers, this would mean negotiating a clearly defined exception with rights holders, and providing a clear framework for the territoriality of rights, to be able to allow their customers to view their programmes wherever they are in Europe.
DELVE DEEPER WITH THE FOLLOWING IDATE DIGIWORLD MARKET REPORTS
TV in the Digital Single Market: Impact of current regulatory changes on the audiovisual value chain, Dec. 2015
World TV & Video Services Markets: Terrestrial - Satellite - Cable - IPTV - DVD - Blu-ray - Video on demand, Dec. 2015
Video-On-Demand: Europe’s main markets in the aftermath of Netflix world conquest, May 2016
Video Solution Providers: Towards Software-Defined Video, Jul. 2016
Head of Smart City Practice, IDATE DigiWorld
The prospects opened up by the smart city are rooted in a more intense use of digital technologies in the multiple components that make up the urban ecosystem: transport, security, network management, environmental management, waste management, transforming commerce, tourism, relations with government services, etc.
It is well understood that smart city projects can only develop successfully if the applications are relevant (useful and accepted) and if they are gradually interwoven with a cross-cutting momentum on a city-wide scale.
Beyond that, the success of these initiatives will depend in large part on users’ trust in the digital infrastructure and services on offer, along with the project’s ability to mobilise all of the urban ecosystem’s stakeholders. Taking proper account of these prerequisites must be central to governing any smart city project.
How to persuade users of the benefits of smart city projects?
- How to exploit the full potential of participatory democracy (civil tech) when running a smart city project?
- How can open data help strengthen trust in smart cities?
- How to prevent a smart city project from becoming just a juxtaposition of separate initiatives, bereft of synergies?
- How to talk about the risks of cybersecurity in a smart city project?
- What process needs to be in place to ensure the development of a resilient smart city?
DELVE DEEPER WITH THE FOLLOWING IDATE DIGIWORLD MARKET REPORTS
Rewarding FrenchTech talents around the world.
The 38th annual DigiWorld Summit, in partnership with Business France and French Tech, IDATE will be hosting the second annual DigiWorld Awards, recognising excellence in digital start-ups created by French entrepreneurs outside of France.
And the nominees for 2016 are…
The Jury made an initial selection of 12 start-ups from among the applications received. Four winners will be chosen for the three main geographical regions: Africa – the Middle East, the Americas and Asia – Pacific
The nominated start-ups all satisfied the following criteria:
• A company created outside of France by at least one French national;
• Have a digital tech industry business as its main activity: equipment and devices, networks and telecoms, Internet services and applications (BtoC, BtoB…), M2M, IoT…
• Demonstrate their growth potential in their chosen field and internationally.
|DigiWorld Awards Nominees|
|Chalkboard Education||JITbase||Rilos||YOO Sourcing|
A Special Jury Prize will be awarded to an overseas start-up born of the Région Occitanie development ecosystem.
|Special Jury Prize Nominees|
Tales of French entrepreneurial spirit from the four corners of the globe.
“Launched in 2015, these awards aim to set themselves apart from the many others that recognise our start-ups at various stages of their development,” explains IDATE DigiWorld’s Deputy CEO, Jean-Dominique Séval. “By focusing on these French entrepreneurs who chose to create their start-up in another country, we want not only to train the spotlight on them but also to send the message that these talents represent a tremendous resource for our country’s digital future.”
More than anything, it is a perfect illustration of “French Tech” talent: a government initiative that was picked up and developed by industry stakeholders, including founding member Business France. Since 2015, French Tech Hubs have been created in more than 15 major cities around the globe, which represent key growth centres for French Tech start-ups. The goal is to work in concert to bring the various public actors (Business France, consulates, chambers of commerce, local authorities…) together under a single umbrella with a network of entrepreneurs that have a solid footing in overseas markets (start-ups, conglomerates, investors, engineers, designers and developers), which can serve as mentors for young start-ups wanting to develop their business in that market, and as ambassadors for French Tech with local decision-makers.
The DigiWorld Awards thus provide a unique opportunity to recognise the many entrepreneurs who have created a start-up abroad, and to reward those who have been successful overseas… perhaps before coming to France!
Prizes and rewards
The winners in each category will receive their trophy during a special ceremony that will be held at 7 pm on 16 November 2016, at the Corum in Montpellier, with special guest and Jury Chair, Pierre Chappaz, President of Teads.
Each of the prizes will be awarded by the event’s sponsors – Accenture, Capgemini, Ericsson and Orange – which will each provide the winning start-ups with access to their international Innovation resources. And of course Région Occitanie, sponsor of the Special Jury Prize.
• With the support of our partner, Air France, the winning start-ups will be invited to the DigiWorld Summit to attend the awards ceremony held during a plenary session of the conference.
• The winners will be added to Wproject (www.wproject.fr), the key listing and promotional platform for French entrepreneurs working abroad.
> For complete details: http://www.digiworldsummit.com/awards/
A competition hosted by IDATE DigiWorld
Interview with Jean-Hervé LORENZI
Chairman of the Pole of Competitiveness "Finance Innovation"
Conducted by Yves GASSOT CEO IDATE DigiWorld and Maximilien NAYARADOU, Director of R&D projects,
Pôle de Compétivité Mondial Finance Innovation
DW Economic Journal: Finance vs. FinTech, where are we seeing innovation today?
Jean-Hervé LORENZI: Without a doubt, it is new entrants in what is commonly referred to as FinTech that are driving innovation today. FinTech start-ups are the myriad micro, small and medium businesses that combine information technologies and finance, and are coming to disrupt a sector that has long been protected by regulation. FinTech innovations range from new payment systems that make it possible to decrease the cost of digital transactions, to new financing platforms: crowdfunding of course, but also seed capital, stocks, robo-advisors that digitise financial consulting, blockchains that lower the cost of certifying transactions by decentralising the process, and of course the plethora of digital services that FinTech companies are ushering in: account aggregation, generating coupons based on individual shopping habits, etc. Added to this are the myriad possibilities opened up by big data: extra-financial analysis that, at last, selects financially-relevant variables and helps expand the range of enterprises that have access to financing.
But it should also be said that, even if FinTechs have the momentum on their side, traditional finance industry players are also innovating, albeit at a slower pace: the pace of private bureaucracies and as a defensive measure, but innovating nonetheless. Regulatory pressure is stepping up, and it seems safe to predict that the rate of innovation inside banks and insurance companies will accelerate… naturally with the help of FinTechs.
The Finance Innovation competition cluster, of which I am the president, is at the very heart of these changes in the financial sector. Twice a year, we give our seal of approval to 50 innovative projects, most of which are FinTech projects, and so coming from micro, small and medium businesses, but we also give our seal to projects from the sector's larger enterprises that are seeking to promote new products that are innovative, strategic and reliable. Lastly, we extend our seal to collaborative projects driven by FinTechs, large corporations and academics, projects eligible for public subsidies aimed at encouraging players to work together to innovate. The Finance Innovation competition cluster is the only structure in France that centralises finance-related innovations of all kinds – technological or service-centric – and regardless of the entity behind the endeavour: FinTechs of course, but also large corporations and academics.
What are the different views on competition between FinTech companies and veteran market players? Is FinTech not synonymous with disintermediation?
Veteran players have their own set of assets, including their market power and immense size, especially in France, which enable economies of scale and create real barriers to entry. FinTechs are small and in some cases tiny companies. But veteran players' strengths are also their weaknesses: their large size also means a heavy bureaucracy that paralyses initiative and agility.
We should also point out that, when competing with incumbents, FinTechs have the prevailing wind of financial disintermediation in their sails. Of course, these are two separate phenomena, but they do feed and foster one another. The high-speed digitisation of the financial sector is helping to bring down market entry costs for newcomers, and the cost of disintermediation. Disintermediation allows assets managers and insurance companies to finance companies directly, without having to go through the banks, and allows crowd-funders to do the same. Disintermediation opens up the market for FinTechs, digitisation makes it possible to roll out a solvent product with very little capital, contrary to insurance companies and assets managers. FinTechs are also entering the realm of shadow banking, this non-banking form of finance that is developing and, when properly regulated, contributing to funding the economy: crowdfunding, seed capital platforms and online factoring are all part of the shadow banking phenomenon.
Does Europe lag behind in the area of FinTech and innovative financial solutions? What differences do you see between the situation in France and Europe from the one in the United States or in Asia?
It is not Europe that is lagging behind, but rather the Eurozone. The United Kingdom is absolutely not lagging behind: prior to the Brexit vote, London was Europe's FinTech capital. Compared to the US and even the UK, fundraising levels in France are still quite meagre, despite a significant increase in both frequency and volume since the end of 2014: €1.2 million on average, compared to €5 million in the UK and well over that in the US. Of course, this can be explained by the very limited development of investment capital in France, compared to English-speaking countries.
Next, government intervention in start-ups and innovative companies is very efficient: in the US and the UK, the public sector takes far more risks of losing money and in financing businesses with little or no funds of their own, so public subsidies have a far greater impact there than in France. Added to which Anglo-Saxon governments and regulatory authorities are very FinTech-friendly: the Bank of England has an office dedicated to FinTechs which helps remove the regulatory barriers to their entry into the market. A FinTech bureau was created in France as well, but several years after the one in Britain. Another very important example is that the UK equivalent of BPI France (France's public investment bank) has financed crowdfunding platforms so that they might distribute funding to SMBs, which gave the sector an enormous boost. Plus, in both the US and the UK, relations between SMBs, large corporations and the State are regulated, and a percentage of the federal government's (under the Small Business Act in the US) and big businesses' procurements must be from small businesses, which guarantees a minimum set of opportunities for start-ups. In the financial sector, the banks thus have a very practical incentive to work with start-ups. The positive and pragmatic ecosystem that we find in English-speaking countries made investments in FinTechs profitable much more quickly, so investors were quicker to invest heavily, which helped perpetuate a virtuous circle.
We should nevertheless point out that, inside the Eurozone, France in general (thanks French Tech) and the Paris exchange in particular, are in an especially strong position with respect to FinTech, compared to Germany or Italy. For instance, France has had crowdfunding legislation in place since 2014, which provides the sector with a secure framework and is allowing it to develop in a healthy, controlled fashion, which is not the case in the other major Eurozone nations. Moreover, France and the Paris exchange in particular have a sizeable advance in terms of R&D; France is a global leader in the areas of Big Data (France was the birthplace of data mining, Big Data's predecessor, back in the 1970s) and of artificial intelligence. Not only do France and the Paris exchange have considerable R&D assets, but France in general and the Paris region have a concentration of FinTech entrepreneurs, and a tremendous intensity of entrepreneurial creativity. Lastly, listings on the Paris exchange include the largest banks, assets managers and insurance companies in Europe. If they are quick to embrace the digital transition and learn to work with FinTechs, the Paris exchange will have all the assets needed to catch up to London.
Is banking and financial regulation an impediment to FinTech's development in France? And, looking at it from another angle, could FinTech weaken a financial system that public authorities and market players have been working to strengthen since 2008?
Regulation in France, which is very strict when it comes to protecting investors and consumers, increases the cost of entering the market and, as a result, favours incumbents. It took several years for France's financial market regulators, ACPR and AMF to decide to open up a dedicated FinTech office. Added to which, once open, the FinTech bureau did not follow the more FinTech-friendly sandbox approach taken by regulators in English-speaking countries. The sandbox approach consists of relaxing regulation temporarily to be able to test the relevance of a given innovation and, at the same time, of existing regulation. France's FinTech regulator refused the sandbox approach, which means that FinTechs are not exempt from existing regulations, even when testing new products.
FinTechs are still too small to upset the balance of the financial system, but we can also point out that it is the Base III, Solvency II, MIFID et. al regulations introduced since 2008 that enable FinTechs to emerge as alternatives for the financial sector's clientele. The capital constraints that have been mandatory since 2008, and which limit the banks' leverage, have paved the way for solutions such as peer-to-peer lending and crowdfunding to develop.
What scenario does the prospect of no more cheques and especially no more cash evoke for you?
This, in fact, means the end of paper money, since blockchain technology allows us to imagine the existence of digital cash, in other words a digital currency but one that is anonymous and traceable like cash. Bitcoin is to some extent a form of digital cash, but it carries the baggage of a bad reputation due to its use on the Dark Net (i.e. non public corner of the Web). There will always be a demand for a portion of transactions to remain anonymous, without implying criminal activity. When central banks start to use blockchain, digital sovereign currencies will emerge, which will be a sort of pegged exchange rate Bitcoin, like all sovereign currencies, but which would be tied to a central bank.
Can you tell us a bit about the Finance Innovation competition cluster? And what the cluster believes are the key issues facing financial market innovation today?
The Finance Innovation cluster has over 350 members: FinTechs, major banks, insurance companies and assets management companies, as well as academics, working together to disseminate a culture of innovation within the financial sector, and to accelerate the development of innovative projects in the sector that take on economic, societal and environmental issues, in the service of growth and job creation.
Finance Innovation holds two seal of approval ceremonies a year, recognising innovative FinTech start-up projects – although not confined to start-ups as the seal can also be awarded to innovative projects from large corporations in the sector, as well as collaborative projects between corporations and academia. A total of around 100 projects are awarded the seal of approval each year, through these two ceremonies. The goal is to obtain private (private fundraising) or public financing (BPI France, regional financing, innovation clusters for the trades (PIA), Single inter-ministry fund (FUI)….) and to promote innovative solutions through the cluster's YouTube channel, publishing articles on Hello Finance, use of social media, etc.
The Finance Innovation cluster is also synonymous with experimenting, testing, disseminating and promoting innovative financing solutions for micro, small and medium businesses, within the sector itself across the whole of France, and in other sectors through 70 other competition clusters.
Lastly, the Finance Innovation cluster means roadmaps for finance industry innovation. To establish these roadmaps, which are published in the form of White Papers, we work in concert with large corporations, FinTech start-ups and academics to determine which areas of innovation are priorities, and to identify future catalysts of growth. These White Papers allow us to structure innovation in our domains of expertise, and to provide the State with tools for selecting the innovative projects to subsidise. In 2016, we are publishing a White Paper on innovation in retail banking, which will be followed by two more in 2017: one on innovation in the accounting and consulting professions, and one on innovation in e-health and prevention.
Innovation in the finance industry today is coming from FinTech, in other words from technologies that are enabling the creation of new innovative and high value-added services. And let us not forget that FinTech also encompasses InsurTech, which adds connected objects, on-board systems and security issues to the mix. It is this entirely new framework that is revamping the insurance sector, as new data are available and challenging actuaries' classic risk models. The public at large tends to focus more on FinTech and the banking sector even though, thanks to InsurTech, the insurance sector is in the throes of an equally dramatic upheaval.
What do economists believe are the real stakes of the financial sector's digital transformation, in terms of economies' competitiveness, growth and job creation?
English-speaking countries have fully embraced FinTech: a shift that will allow the sector to enjoy gains in productivity, and create economies that are more competitive in terms of financing. FinTechs expand the range of what can be financed, which is something that States and the sector's regulators need to understand. On the other hand, we should not have any illusions: the prospects for job creation are strong, but so are the prospects for job destruction. Thanks to the use of digital technology, FinTechs will enjoy enormous productivity gains: over the long term, thousands of back-office jobs in banks, teller jobs and financial consultant jobs will be destroyed. The banking sector is tomorrow's steel industry. We find the classic dilemma of Schumpeterian creative destruction: a great many jobs will be lost and a great many created, but which will outnumber the other? The jobs that will be lost will be low skilled ones, while the ones that will be created will be jobs for the highly skilled: engineers, doctors, data scientists… This could further exacerbate inequalities: unskilled workers will have trouble finding a new job in the digital economy. So, to meet the challenges in terms of training, upgrading skills and making the transition to the digital economy, substantially more public monies will need to be invested in these areas to limit the negative impact of increased inequality, and the difficulties of vocational reconversion for the least skilled workers.
Jean-Hervé LORENZI, Major at the Agrégation des facultés de droit et sciences economies (Faculties of Law and Economics) in 1975, is Chairman of the Cercle des économistes (the famous circle of French economists), holder of the Chair "Demographic Transition, Economic Transition within the Fondation du Risque (Foundation of the Risk)" and Chairman of the Pôle de Compétitivité (Pole of Competitiveness) "Finance Innovation". He is a member of the Board of Directors of the Edmond de Rothschild France Group, of the supervisory board of Euler Hermes and the Boards of directors (board meetings) of the Médéric Alzheimer Foundation, the IDATE and the BNP Paribas Cardif. He was Professor at the university Paris-Dauphine and the member of council of economic analysis. He has notably published: Un monde de violences. L'économie mondiale 2015-2030, Paris, Eyrolles, 2014; Rajeunissement et vieillissement de la France (with J. Pelletan and A. Villemeur), Paris, Descartes & Cie, 2012; Droite contre gauche, (with O. Pastré), Paris, Fayard, 2012; Le fabuleux destin d'une puissance intermédiaire, Paris, Grasset, 2011; Le choc des populations: guerre ou paix, (in collaboration with P. Dockès), Paris, Fayard, 2010.
Lead IoT Expert , IDATE DigiWorld
Although the Internet of Things is a powerful concept, it is not necessarily a market in and of itself. IoT encompasses a very disparate array of fields that need to be examined separately, to obtain an accurate understanding of their particular features, and their true growth potential.
More operationally, beyond cost savings opportunities (mainly through various internal optimisations), with more and more connected objects, new services will emerge – chiefly through the connectivity itself (remote control applications), but also via the data generated by the machines. Leading industrial heavyweights already have their own data-oriented department.
On the industrial side, two approaches can be distinguished: traditional machine-to-machine and the ‘industrial internet’: the latter referring to an interconnected ecosystem and the former to a more siloed approach. In the main, the creation of value in the industrial Internet lies in data collection and analysis. The main question then for market players is how to collect data and analyse them, to then generate revenue. The bulk of M2M revenue should come from software and IT integration as primary applications, with the aim of enabling massive savings within verticals. Consequently, all providers are working on delivering an end-to-end solution with a strong service bent – even if this might require acquisitions for some verticals.
Applied to the consumer world, the Internet of Things (IoT) refers to smart home and connected objects in general, relatively new markets that are starting to take off. Even if questions are being raised over the sustainability of their adoption. The main reason is the lack of services attached to these objects, apart from remote use, through a mobile app. Many applications would be based on data generated by those things. However, unlike the industrial market, data privacy is a major concern here as it involves consumers’ approval. The blurred lines around privacy regulation have made all of the ecosystem’s players reluctant to provide consumer market solutions. Another hurdle is to determine what value-added comes from connecting these objects, and how to monetise the data they generate: will all objects be connected? Will all data be valuable? If so, how valuable?
DELVE DEEPER WITH THE FOLLOWING IDATE DIGIWORLD MARKET REPORTS
• Smart Home, A promising market, taking off slowly, Dec. 2015
CEO, IDATE DigiWorld
AT&T had only barely begun integrating DirecTV – the second largest pay-TV provider in the US, behind Comcast – when it announced its plans to acquire Time Warner for more than 85 billion USD (over 105 billion USD including debt).
This is no small chunk of change, as the company had to pay top price for a media conglomerate that is in fairly good shape and boasts a large stable of assets, including major Hollywood studios, the country’s top pay-TV channel, HBO, and several other cable properties such as CNN and TMC. The appeal of these assets has attracted a number of suitors since the spin-off of Time Warner Cable, including Apple.
A less welcoming environment
To assess the rationale for the deal, we should first give a bit of background.
• First, we should mention the very abrupt slowdown in the mobile services market in the United States. If AT&T (like Verizon) is a colossal enterprise, with more than 110 million mobile subscribers in the US, the market has become far more difficult following aggressive moves from T-Mobile and Sprint, and as consumer equipment matures. AT&T had sought to anticipate the change by merging with T-Mobile, but the FCC and antitrust authorities quashed the deal. As in Europe, intense competition is weighing on mobile operators’ margins, while the explosion in traffic is still hard to monetise and telcos will need to keep investing heavily in their networks to keep up. On the other side of the equation, the applications generating this explosion in traffic are largely the product of Internet behemoths such as Google, Amazon, Facebook and Netflix.
• Second, in those locations where it is a wireline telco, AT&T is having to contend with cable’s growing dominance (66%) of the Internet access market. For several quarters now, AT&T, Verizon and the country’s other telcos (Frontier, Century Link…) that offer connection speeds over 50 Mbps in only a small handful of locations, are losing customers to cable and its ability to deliver increasingly fast connections, thanks to DOCSIS 3.1 – giving it a steadily growing subscriber base and market share. Plus, the top cablecos appear resolved to enter the mobile market, with the belief that “mobile is the new cable!".
• Lastly, we need to remember the remarkable success of the deal that led the number one cableco, Comcast, to acquire another TV and movie industry giant, NBC Universal, back in 2013.
How will it maintain its cash-flow?
AT&T does not have that many options for maintaining its cash-flow and dividends.
• It is forbidden to engage in mobile market mergers. Of course, it can count on 5G to accelerate and widen its lead over T-Mobile and Sprint, as it managed to do (alongside Verizon) with LTE at the outset. But this lead would only last around 18 months.
• Acquiring cable companies could open up certain prospects – as the cable market’s consolidation is not yet complete – but will only be allowed in those areas where the carrier has no footprint.
• International investments are still on the menu, with the acquisition of two mobile operators in Mexico in recent years. And even if growth in more or less every telecom market is sluggish, AT&T did also have its eye on opportunities in Europe, and later in India… But, like Verizon, AT&T has been focused largely on its domestic market for more than a decade.
• It is true that the acquisition DirecTV is considered largely a success. It creates national cross-selling opportunities between mobile subscribers and satellite customers. DirecTV’s roughly 20 million subscribers bolster the company’s negotiating cloud in Hollywood, well above what it had with its 5 million U-Verse subscribers. With DirecTV, however, AT&T was still just a distributor and so sensitive to the slow but sure cord-cutting trend.
A deal that equals both vertical integration and diversification
So the acquisition of Time Warner would change all that. It would allow AT&T to move one or two notches up the programming value chain, positioned in both TV network operation and the production of premium TV series and films. The new AT&T would thus have a very impressive strike force on the content front, powerful enough to fuel its ambitious DirecTV Now TV streaming project.
This does not mean that AT&T is putting all its eggs in the vertical integration basket. It would be foolish to monetise its films, TV programming and channels only through its own fixed and mobile broadband services. So the deal can also be seen as a diversification move. AT&T has no doubt concluded that, more than ever before, content is indeed king.
We would be wrong take away from this merger the idea that is the pipes that govern broadcasting and content. The new understanding is more that, now that we can watch TV, live or in VOD, through a good quality streaming service, competition at the connectivity level will become more efficient, net neutrality rules will rein in the most direct attempts at discrimination… so it is not the pipes but rather the programmes that will be the decisive factors. Along with data on Internet users’ behaviour and habits.
Telcos do have several cards to play when it comes to the TV and video market. Cards that could allow them to stand out from other telcos, open up cross-selling opportunities, secure customer loyalty… When going head to head with the Internet titans, acquiring TV rights to sport and amortising investments in premium productions will nevertheless be possible only for the wealthiest telcos, with the most ambitious video strategies and tens of millions of subscribers. Like AT&T.
How will antitrust authorities react?
It remains to be seen how the Department of Justice (DoJ) and the FCC will react: they could oppose the deal or impose conditions. AT&T will argue the precedent of the Comcast-NBC merger, and the fact that no media or telecoms industry player would be eliminated or have its market share altered. Industry players and politicians that are against the merger will point to the dangers of having the country’s largest carrier get its hands on one of the largest media conglomerates. Others will see opportunities to strengthen provisions for increasing transparency on ISPs’ use of consumer data, and to expand net neutrality rules.
Check out the DigiWorld Summit programme
Senior Consultant, IDATE DigiWorld
A mini share of the global telecom and IT equipment market, but a maximum impact on the networks’ capabilities
72 telco SDN/NFV projects benchmarked
The latest IDATE report – “State of the SDN/NFV market” – spotlights the main pioneering players in terms of SDN/NFV implementation, and what they are doing today. The report provides a separate dataset with 72 detailed project fact sheets as of August 2016, as well as an analysis of major stakeholders – telcos and vendors – and their strategies to evolve and transform their networks to a software-based infrastructure.
“These projects are at different stages, ranging from trial to deployment, but a few (36%) have achieved a commercial launch. Whatever their level of development, most of these projects are taking place in developed countries: Europe, the US, Japan, South Korea and China,” says Tiana Ramahandry, the report’s project leader.
SDN/NFV projects per status
Source: IDATE DigiWorld, State of SDN/NFV and network investments, September 2016
Telcos’ adoption of SDN and NFV over the long term
IDATE DigiWorld analysts provide SDN/NFV market sizing data, with coming investment forecasts up to 2020. Even this market, which is expected to reach almost 19 billion EUR by 2020, remains very marginal compared to the telecom and IT equipment market, which itself is estimated at over 300 billion EUR, transformation potential in network management will be huge, as will telcos’ opportunities to adopt new services and innovative business models.
While a modest part of the global SDN and NFV market will be captured by telcos in 2020, NFV is being implemented more and more with the growing number of cloud and SDN solutions being introduced for new business services. Telcos’ large-scale deployments are expected to begin in 2016, and their CAGR over the next five years is projected to stand at 47%.
Indeed, the vast majority of the market will come from enterprises and cloud service providers that were the first to adopt SDN for use in datacentres, for both internal operations and connections with other datacentres.
Discover the perspectives, key trends, and scenarios about "SDN & NFV market" and contact Tiana Ramahandry for further information.
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Florence Le Borgne
Head of the TV & Digital Content Practice, IDATE DigiWorld
“For the first time ever, an OTT company – Netflix – made it into the world’s 20 top earning media groups in 2015.”
The United States: global OTT market leader
Still overshadowed by Netflix, which is present in 190 countries, and iTunes with services in 112 countries, Amazon is steadily building up its global OTT footprint through its e-commerce platform.
American OTT video services’ global footprint as of 31 December 2015
Source: IDATE DigiWorld, World TV market, July 2016
The United States: world’s largest OTT video market
With the exception of Starz, which lost 900,000 subscribers between 2014 and 2015, the top premium cable channels in the US continue enjoy a steady increase in subscriber numbers, and this despite stiff competition from OTT services. Between 2012 and 2015, HBO reported a 16.4% increase in subscribers to its linear channel, while Showtime and Starz reported a +1.3% and +0.7% increase, respectively.
But the momentum for signing up new customers is clearly with OTT services. During that same period, Netflix paying customers grew by 70% while Hulu Plus subscribers rose by an impressive 269%.
The top OTT services’ subscriber numbers in the United States in 2015 (million)
Source: IDATE DigiWorld, World TV market, July 2016
With its extremely dynamic national market, populated by consumers who are willing to pay for their TV content, the United States has become the world’s largest video on demand (VOD) market. Thanks to the popularity of Netflix, as well as Hulu Plus, Amazon Prime Video and more recently HBO Now, the US singlehandedly accounts for 57.5% of global VOD subscription revenue. If download to rent/own (DTR/DTO) are less popular with American viewers, the country still accounts for 47.8% of all DTO and DTR revenue.
Also noteworthy is that the United States continues to generate more than half of the world’s pay-TV revenue.
But the North American market is also showing the first signs of flagging, while growth in other parts of the world is progressing steadily.
Popularity of on-demand viewing in the US providing a global springboard for local players
If OTT services have not been adopted to the same extent in other parts of the world as they have in the United States, viewers across the planet are watching more and more on-demand programming and less and less live TV.
Although the balance between the two still tips heavily in favour of “classic” linear TV programming, which accounts for 86% of viewing time in the US, it is by now a foregone conclusion that VOD is not a passing phase, nor confined only to millennials.
Consumers in Europe, as well as in South America and in certain Asian and African markets, are also embracing OTT video. If national services have developed in most corners of the world, very few have managed to hold their own against the global juggernauts that are Netflix for SVOD and iTunes for DTO and DTR.
It does indeed appear that series are the main incentives for signing up for SVOD services. Which means the ability to attract new subscribers and keep them depends on being able to offer exclusive, high quality programming, which is something few players can do.
Netflix became the world’s second largest investor in programme production and acquisition in only a few years, outdone only by sport channel ESPN. Netflix spent 5.8 billion USD on content acquisitions and original productions in 2015, compared to the 5.5 billion USD that ESPN spent on acquiring TV rights and HBO’s budget which is estimated at 2 billion USD. At the same time, the company’s spending on original series continues to rise. Netflix invested 120 million USD in 2016 on its new series, The Get Down, or 7.5 million USD per episode, which makes it the new American titan’s most expensive show to date, ahead of Marco Polo which had a budget of 90 million USD.
But growing budgets coupled with slowing growth at home are making the search for outlets outside North America imperative. Clearly, the wealth of its library is one of the main reasons for Netflix’s global success, although international development costs and especially marketing costs are in no way detracting from the company’s profitability.
If Amazon and HBO are following, albeit more discreetly, in Netflix’s footsteps, it is hard to see what European player today could rival them, and most are put off by the size of the investment required and the meagre prospects for ROI in the short term. Vivendi appears to be struggling to build a pan-European offering, while Sky is advancing cautiously with plans to launch its Now TV streaming service in Spain by the end of the year, which would make the country the only market where it only sells an OTT product, with no satellite service to back it up.
The TV market did not enable the emergence of any major pan-European service. Will OTT give Europe’s industry a second chance?
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The global revenues from telecom services will grow from 1,174 billion EUR in 2015 to 1,293 billion EUR in 2020
Head of Strategies Telecoms Business Unit , IDATE DigiWorld
With revenues from mobile services as principal growth engine, which will grow by 14% between 2015 and 2020 (+2.8% per year on average), and reaching 814 billion EUR in 2020.
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 1 billion 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 1,174 billion EUR in 2015 to 1,293 billion EUR in 2020, representing an average annual growth of 2.0%.
• Revenues from mobile services will grow by 14% between 2015 and 2020 (+2.8% per year on average), reaching 814 billion EUR in 2020.
• Revenues associated with data transmission and Internet will grow more strongly (+21% between 2015 and 2020, i.e. +4.3% per year on average), to reach 344 billion EUR in 2020.
• Revenues from fixed telephony will continue to decline significantly (-23% between 2015 and 2020, i.e. a decline of 4.6% per year on average), to be at 135 billion EUR in 2020..
Disparate performances from operators in emerging countries
Top telcos in emerging countries continue to suffer from a sudden halt in value growth. China’s three operators in particular have seen virtually no progress: China Unicom actually reported a 3% drop in revenue. 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 starting incrementally to get back on track
Telcos in Europe are back on a growth path. If most of the top carriers are still reporting decreasing revenue, some are seeing an increase, notably Deutsche Telekom, Telenor and to a lesser extent Orange, thanks to their international operations. Their spending on LTE and superfast fixed access networks (FTTx) has not yet paid off and helped to bolster ARPU.
Interview with Olivier DUCHENNE & Sophie EOM
Conducted by Jooyong JUN
C&S: Please make a summary presentation about Solidware.
Olivier DUCHENNE & Sophie EOM: We (Solidware) build Machine Learning-based predictive models for finance companies. They need a predictive model for their business as they are related to various kinds of risks, such as underwriting, product offering, or customer retention if we name just a few.
Many financial companies already have the enormous size of valuable data. Their risk management system, however, has been mostly based on a simple model, which hinders their ability to fully utilize the data as it is plagued with many human assumptions and biases. As a result, financial firms fail to maximize their revenues while consumers pay more for loans and insurance premiums.
With our machine-learning based data analytics solution, DAVinCI LABS, we analyze clients' data and find the best combination of different machine learning algorithms such as deep learning to generate the most accurate risk prediction as far as possible, without wasting any information in the data. In all, we help to find and minimize risks, and eventually generate significant additional values.
A lot has been talked, but few success stories were observed in machine learning (ML) and FinTech at this point. Which area of finance do you think is best-suited for machine learning? (e.g. credit information discovery, robo-advisor, failure or default prediction), and which is not?
(Sophie) At this point, credit scoring is best-suited for ML. Robo-advisor does not necessarily work well because more often than not the amount of data is insufficient. It is also far harder to predict the market.
How far can ML replace the implicit knowledge that banks have and use in relational banking? What do you think the role of human traders/investors/analysts will be like in the future after the widespread of ML in finance, if there is any?
(Sophie) Humans will be able to spend more time building better "strategies" based on the insights extracted through machine learning, rather than trying to spend time extracting insights from themselves.
If every financial firm and/or investor uses FinTech services based on the similar ML algorithm, would not it homogenize the financial system and increase systematic risks?
(Sophie) I want to emphasize "No free lunch theorem". There's no single algorithm that works the best for all cases. Moreover, different datasets will give different results.
From your experience, what do you think would be the value of social networks' data or publicly available data, which are claimed to be used by many FinTech lending firms for the credit evaluation of an individual at this point? What do you think it would be like in the future? Is there any difference between individuals and firms?
(Sophie) Social Network Service data is biased, not complete, and usually difficult to match with target variables such as default and fraud probability that financial companies are interested in. In my opinion, it is not really worth spending time and resources to use SNS data for our business at this point.
If most of the financial market participants use ML, decision makings may become more homogeneous. Would not it worsen the probability of systematic risks such as a (bank) run?
(Olivier) I think if everyone has the same data, the correlation of decisions will increase with adopting ML. However, individuals, companies, and organizations have huge amount of private data now and will collect more in the future. As we said before, machine learning applied to different datasets will not lead homogeneous behaviors among financial market participants.
Many economists are still reluctant to adopt ML and big data because ML finds correlations in big data while not identifying causality which is important for policymaking. In your opinion, how can we use ML for policymaking decisions?
(Olivier) Well, I am not very familiar with the application of ML to social science and policymaking. In my opinion, for many cases, the data may not be "big" enough to justify the use of ML. Those applications require supervised machine learning, which implies that you need to already know which option is "more correct" than others. Still, ML may be useful if we know the underlying mechanism, the policy making decision is very specific (e.g. fine tuning of sales tax rate or interest rates), and there exist sufficiently big data for the process.
What are the barriers which may handicap the ML usage in banks and financial companies (potential impacts on the employment, regulation, etc.)?
(Sophie) I think one of the barriers is that banks and financial companies have to "explain" the result of their predictions to their customers and regulatory authorities. For example, if a bank rejects to give out a loan to a certain individual, that individual will ask the bank why, and if the bank does not provide a clear answer, the customer may file a complaint to the government, which will be a big trouble to the bank. However, ML is like a black box and it's difficult to explain logics behind prediction results.
What is the difference between desired objectives in computer science and in finance when it comes to applying machine learning?
(Sophie) In computer science, it is about finding the algorithm that beats the state-of-the-art, world-best one at the moment. On the other hand, in finance, it is about finding the explainable algorithm beating the incumbent models while working fast enough.
You had a choice to start your business either in France or in Korea. What factors affected your decision making?
(Olivier) First, compared with France and other EU countries, starting a company in Korea requires less complicated processes. Taxes and other regulatory burdens are also lighter in Korea. Second, compared with the US and the EU, compensation costs for engineers in Korea are lower. Third, the level of competition in the Korean market is also lower.
What are the points that you might emphasize in managing a company with people from different countries (France, Korea, Russia, and Sweden in Alphabetical order) and cultures like Solidware?
(Sophie) The common language must be English (Very important) all the time. All official documents and all talks are done in English. We emphasize task-based management. No hierarchy. (Olivier) Some of our engineers are not very comfortable with speaking in English, but they can communicate well with writing.
Do you want to stay specialized on the financial sector? For example, is there any room in your vision for a business model in which you would license your ML technology to banks and insurances? Who is your more relevant competitor?
(Sophie) We're trying to be more vertically integrated in the financial sector. That is, we are trying to adapt our solution to specific forms of datasets that financial companies often use. Potential competitors may be financial companies which are our clients as of now, if they try to build their own machine learning system.
How do you see the future of your company?
(Sophie) Bright! (Olivier) The market for ML application in finance grows fast in Korea and our revenue also does. Second, big names in ML such as IBM and Palentir are in the market, but their performance here is not on par with their reputation. We can cover more tailored and specified needs of our customer companies. As Sophie mentioned, potential competitors may be financial or credit information companies which want to internally have both data and technologies. Personally, I think it requires quite a long time for them to have both.