A short presentation on the approach that telecom operators can take in creating a digital ecosystem

1. A presentation by Subrahmanyam KVJ Building a Digital Ecosystem The Evolving Imperative July 2010

2. Telecom operators are facing significant pressure on their core voice services and competition from Internet players … And they are also facing significant competition from over-the-top players Apple’s iTunes ecosystem effectively cuts out the operator from the billing relation that they share with the customer Multiple Google services are aimed at generating revenue on top of infrastructure that telcos build and maintain Most mobile operators have been seeing a steady decline in ARPU… Vodafone ARPU in UK, in £, Q2 08/09 – Q4 09/10 Source: Vodafone annual report

3. Traditional content players are also facing tough times Music Print TV Source: IFPI Statistics; Newspaper Association of America; Ofcom’s Annual Communications Report, 2009 Music Industry Trade Sales (US $ Bn), Global, 2004-2008 News Paper Circulation (Mn), US, 2004-2008 TV as a proportion of total advertising spend, UK, 2003-2008

4. These pressures are forcing telcos to partner with a wide range of players Source: Company websites Ecosystem Partners Details Nokia Ovi Nokia, Mobile operators, developers Ovi is Nokia’s attempt to create a mobile ecosystem that can act as an alternate to Apple’s iTunes platform Android Google, Mobile operators, Device vendors, developers, chipset vendors Android is Google’s attempt to create a strong ecosystem on an open-sourced platform that brings together a plethora of players

5. Telcos will need to take a clear three-step approach towards developing such ecosystems Drive Adoption Develop Partnerships Differentiate Portfolio 1 2 3 Partnerships with key players in the ecosystem, including developers, device vendors, and content players Follow consumer usage trends, lower usage barriers and make available multiple monetization models to partners Adopt sequential launch approach, simultaneous promotions from all stakeholders involved

7. The mobile applications space currently has the most potential, following the significant success of Apple’s App Store Apple’s app store has seen strong uptake in downloads… … This growth is expected to be the key driver for overall mobile applications market Mobile applications stores’ downloads and revenue, in Millions, Worldwide, 2009-2013 Source: Gartner, “Gartner Says Consumers Will Spend $6.2 Billion in Mobile Application Stores in 2010”, Jan 2010; Apple press releases Apple App Store, No of Downloads (in Mn) and No of Apps, July 2008- Jun 2010

8. On the mobile platform, telcos should partner with device vendors, third-party app stores and independent developers Category of Partner Potential Partnership Details Indicative Examples Device Vendors Partnerships for operator billing for operator’s app store; Helps in reducing barriers to consumer usage Third-Party App Stores Partnerships for providing ready access to existing app portfolio; Helps in scaling rapidly Independent Developers Partnerships to encourage developers to write for the telco’s ecosystem; Helps in creating a thriving ecosystem of apps

10. Telcos should consider partnering with Internet players that have already made significant inroads into TV and web applications Source: In-Stat, “TV Widgets/Apps Key to Monetizing OTT Video”, Apr 2010; Screen Digest, “Social Network Games: Casual Games' New Growth Engine”, Jul 2010; Press releases Verizon’s Widget Bazaar for Fios TV and Softbank’s recent investment in Zynga come across as representative examples of telco involvement Platform Indicative Partner Nature of Partnership Benefits for Telco TV Yahoo A partnership with Yahoo can help telcos integrate widgets for their IPTV offerings A partnership with an established and tested platform can help telcos cut down on the time-to-market Web Zynga Telcos can explore partnerships with social gaming companies for web applications on their web portals For operators who are already focused on the online advertising opportunity through their portals, this offers a means of increasing stickiness

15. Ecosystem operators should also try and ensure that they have easy-to-implement monetization models available for partners Illustrative Use Cases of Various Monetization Models Pay Per Use Bundled with Device Subscription Advertising In-app Purchases TV On-demand Content Limited access to content with new TVs Subscription plans to premium content Ad support on TV widgets/apps Ability to purchase inside TV apps Web On-demand Content -NA- Subscription to web apps with premium content Ad support on web apps Billing integration inside web-based apps Mobile On-demand Content Kindle-style pricing iPad-style on-demand network access Integration of mobile apps with adverts In-app purchasing for mobile apps

16. Ecosystem operators should adopt a sequential launch strategy in releasing the elements of the ecosystem TV PC Mobile 1 2 3 Currently, the largest audience for any ecosystem is the PC-using consumer base, and they should ideally be made the first target After the ecosystem operator has gained experience, then they should move on to mobile, where innovation bar is quite high Since the TV digital ecosystem is still in a developing phase, it should be approached after gaining significant experience on the other platforms

17. Ecosystem promotion should be a simultaneous joint activity between all the players Developers Device Vendors Telecom Operator Social Media Content Partners