Overview of Telecommunications 2007 -- WIPO 3rd Sept. 2007
1. 1
Mobile Telecommunications 2007:
Challenge and Opportunity for ADR Professionals
World Intellectual Property Organisation
6th
International Mediation Interest Group
David Laurence Kreider
Chartered Arbitrator and
General Counsel
Vodafone New Zealand
3rd
September 2007
Geneva
2. 2
Global Trends in Telecommunications
At Yearend 2006
• Mobile Phones in Service 2200 million
• eMail boxes 1500 million
• PCs installed 800 million
• Internet users 1000 million
• Mobile Internet users 600 million
• Broadband Households 140 million
Mobile phone growth is 6X faster than fixed line growth
1 in 2 people in the world will have a mobile by 2008*
* International Telecommunications Union Internet report 2006
3. 3
Key observations from the market
• Mobility is the ONLY technology that has
achieved100% penetration
• Broadband has brought the desktop alive and
with mobility will accelerate the growth of
mobile devices
• The Mobile and Internet worlds are colliding
not converging
– New business models will emerge, old ones die
• Technology hype cycles will continue to
excite the media
– Customer behaviour changes will continue to lag
expectations
– New customer opportunities are led by the
Youth
• Our future is a connected personalised world
– The Internet goes mobile
– Technology becomes very personal
– Geography less important than being connected
4. 4
ACCELERATING PACE OF
TECHNOLOGY CHANGE
Internet
Home &
Desktop PC
Mobile Internet
& TV
Personal Laptop
PDA / Mobile
Technology driven forces forchange lead to rapid advances in
networkcapacity …
Wireless network
peak speed
2006 3.6 mbps
2007-8 7.2 mbps
2008-9 14.4 mbps
Future 100 mbps
5.
6. 6
From a computeron everyone’s desk, to a computerin
everyone’s pocket
• Mobile storage and connectivity
revolution
• Increasing broadband
penetration in homes and a
multiplicity of local connections
enable new distribution
channels
• Full WWW and Web 2.0
capability
• Apple i-phone
• 20 GB sufficient for entire music
collection + photo album +
20hrs of home movies + 8
hours of DVD quality movies +
a selection of games
•
Optional HDD
10-20GB
Memory Card
4GB
Embedded Flash
4GB
7. 7
All seamlessly integrated into one device
differentiated devices against themes
(experiences) or customer segment (style,
price)
optimised browsing on open operating system
(“OS”) devices mobile-rendered web sites,
Microsoft, Symbian, Linux
personalisation options personalised portal,
content and application catalogues
out-of-the-box services 1-click access to pre-
installed services, on-device portal
8. 8
Mobile Internet extends traditional Internet interactions to the
mobile
email
IM
chat
search
locate
browse
organise
buy
community
9. 9
Opening up to empower our customers
“De-walling” the mobile
Internet …
… providing access to the
world’s leading social
communities
10. 10
Youth are driving the future of the Internet
• Ideas are coming from self-
generated content
• In February 2007 alone 403.3
million unique users visited on-line
community sites (ComScore)
• Demographic profile of community
sites is 18-24 year olds
12. 12
Vodafone seeks to provide a “best in class” Mobile
Infotainment experience
Opening up the Internet
for mobile users. . .
Content deals signed with Group and
announced at
3GSM 200 and first market introductions
to happen before summer 2007
Providing customers with
access to the world's leading
social communities
Victoria…
13. Mobile Advertising
The Eyeball Business
“Mobile phones will replace TVs
as the primary medium for
advertising.”Andrew Robertson
CEO, BBDO Worldwide
14. 14
Advertising Expenditure (Gross)
Advertising - A €328 bn market
UK and Germany comprise
38% of European market
Germany 18%
€15.7bn
Global €328 bn (2006E) Europe €87 bn (2006E)
UK 20%
€17bn
France 11%
€9.9bn
Italy 10%
€8.3bn
Spain 8%
€6.6bn
ROE 33%
€28.9bn
Europe 26%
€87bn
North America 42%
€139bn
ROW 6%
€19bnAsia/Pacific 21%
€68bn
Latin America 5%
€15bn
15. 15
Operators must broaden theirthinking . . .
High pace of innovation
Accountable to advertisers
Driven by audience
Telecomms Company Media Company
16. 16
Monetising mobile advertising
Securing mobile advertising revenues depends on:
• Generating the reach to the advertising "eyeballs" - access and content
• Providing relevancy to the customer and removing wastage for the advertiser
• Engaging the customers in advertising and providing control
• Providing data, reporting and campaign management to the advertising buyer
• Building the sales and technology capabilities to create and serve the demand
17. 17
Mobile Advertising: providing customers with targeted offers
and information of value to them
Keyword search Banners Mobile TV Client
Enhanced by
More Info
All other Vodafone live! (4)
Ads by Google (3)
Enhanced by
Ringtone (32)
Picture (3)
Love at First Sight , Kylie Minogue
(real music)
Red Blooded Woman , Kylie
Minogue, by Jamba (real music)
In Your Eyes , Kylie Minogue
(polyphonic)
1.
2.
3.
Cowgirl Kylie (wallpaper)
Kylie on tour (wallpaper)
Hippy Chick Kylie (screensaver)
1.
2.
3.
Music (23)
Love at First Sight (track), Kylie
Minogue
Red Blooded Woman (track),
Kylie Minogue
1.
2.
Outside Vodafone live! (2345)
1. Kylie Minorgue, Offical site,
kylieminogue.com
More Mobile results
More Web results
Home | Menu | My Page | Search
Search Results
Celebrity Gossip, Kylie's publicist
denies all-clear report.
1.
Vodafone live! results (62)
Kylie concerts in London,
Buy Kylie Minoque tickests, Call
Kylie’s Newest CD, 12 small hits
…, majorrecords.com
Look Glamorous, With the new
enhanced GLAM!, glam.co.uk
Idle screenAd funded content
19. 19
Key challenges
• Educating the market
• Defining standards
• Lack of Pre-pay data for targeting
• Data protection
20. 20
DSL Broadband
• Arcor connects 2,000,000th customer
• Germany, Italy, the UK and Malta have launched DSL Broadband
services, partnering with Arcor, Fastweb, BT and Melita, respectively
• New Zealand provides DSL service through ihug
• Egypt provides DSL service through Raya
• Spain launched DSL for business customers in January ‘07,
available alongside their existing fixed mobile substitution tariff
• Portugal commences Local Loop Unbundling (“LLU”) programme
21. 21
Vodafone has entered the broadband market forfourmain reasons
1. Customers are interested in converged
fixed-mobile services based on DSL
2. DSL is increasingly a competitive
requirement – vs. fixed and mobile players
3. DSL is a critical enablerthat creates a
platformto delivernew Internet Protocol
(“IP”) services
4. We can capture incremental revenues and
margins fromthe large, growing DSL
market
• 250k Unique subs in
FR
• 200k UK mobile/DSL
subs
• “4 for £40”
quad play
• 30k FMC
customers
• Renewed push
with Wi-Fi
handsets
• Plans for Pico
cell/ DSL router
• CZ - FMC test
bed
• 80% of consumers interested in getting mobile and
broadband products from a single supplier. (Voda D2,
Quant research, March 06)
• 74% of SMEs and 80% of corporates are quite/very
likely to purchase voice and data from same provider
in next 2-4 years. (On Campus Data, primary research)
“Best in class
mobile service”
“Integration of mobile
and Internet/PC
services”
“Complete on and off
premise communications
provider”
Vodafone At
Home (FMC)
IP-Comms
Vodafone At
Home (Voice)
Fixed and
Mobile
Unified Comms
Desktop VAS
Mobile
(Wireless Office)
Indicative DSL economics
Year 5 after launch - 1 million customers (10-15% market share)
Wholesale Full ULL
1
Sources: JP Morgan; Merrill Lynch
• 11% CAGRin European broadband market, ’05-10
• £16bn revenue market size in VF markets in 2010
22. 22
How DSL works
Access Network
IP-Network
PSTN
Modem
NTBA
DSLAM
PSTN + ADSL
Local Loop
(copper pair) Data
Voice
Splitter
Broad-
band
Narrow-
band
BRAS
MDF / CO
Customer premises Incumbent premises
Services
Platforms
23. 23
45
27 26
23
10
35 35
30
15
50
41
16
0
10
20
30
40
50
60
2001 2002 2003 2004 2005
512kb/s 1Mb/s >1Mb/s
The DSL market is extremely dynamic – while speeds are
increasing rapidly, prices continue to fall
Access Technologies Milestones
- 1980 to date -Max. Speed
(Downstream)
Launch year
1980 1985 1990 1995 2000 2005
300 baud
9.6 Kbps
14.4 Kbps
28.8 Kbps
56.6 Kbps
64.0 Kbps
384 Kbps
5 Mbps
10 Mbps
15 Mbps
20 Mbps
30 Mbps
40 Mbps
50 Mbps
100 Mbps
Acoustic coupler
ISDN
Technology
First cable
modem
Cable
Technology
ADSL
Technology
ADSL 2
ADSL 2+
VDSL
VDSL2
Modem
Technology
ADSL
ISDN Access
(1 channel)
ADSL
Source: Booz Allen Hamilton Analysis
Partnerships must integrate this market uncertainty and
dynamism: changing technologies, services, business models
Broadband Price Evolution
- UK Example, £/month -
24. 24
0
100
200
300
400
500
600
700
800
900
TByte IP-Traffic per Day
Need to manage growth of IPtraffic:
Internet Growth versus ArcorVoice Traffic
Arcor PSTN
127 Mio. min./day results in
~ 150 TByte allocated bandwidth
x7 in 28 mo.
Need to manage quality of service
25. 25
Key issues and overview
• In retail markets prices fall quickly – operators must retain flexibility to
remain competitive
• New services are introduced and generalised rapidly – operators must
have access to new services on non-discriminatory terms, and complete
prudent cost modelling before rolling out new services
• Regulation can have significant impact on the viability of services /cost
base – will lowercosts be passed through to retail customers, orpocketed
by the incumbent fixed line carrier?
• LLU requires heavy up-front investment but has low marginal costs –
operators must prudently manage the timing and cost of networkroll out
to ensure achieving the requisite economy of scale fora sustainable cost
base (10-15% market share)
26. 26
Key issues and overview (2)
• Volume growth can be very rapid, which impacts Quality of Service
(“QoS”) issues and infrastructure requirements
• The ordering and provisioning process is very complicated – the clearly
defined roles of suppliers must be carefully monitored, escalation and
ADRprocedures, and proportionate penalties to suppliers may be in
order
• High cost (typically 50 – 90 € perline), and negative impact on the
brand constrains the migration of lines and favours long term
partnerships
28. 28
Key issues to resolve
• Set up without infringing competition law
– Negotiation phase
– Operational phase
• Are we putting in equal assets?
• Regulatory / Competition clearance / 900Mhz Refarming
• What happens if one party is far more successful?
• What happens if one party wants to invest more, e.g. rollout Wimax?
29. 29
Summary of lessons learnt
• Pick your partner wisely
- Remember: Divorce is not an option!
• Maximise scope to maximise savings potential
• Treat competition law seriously
• Keep the size of the prize in mind when negotiating!
31. 31
Ultra Low Cost Handsets
• Delivered from May 2007
• 14 markets
(emerging & developed)
• Current forecast 2.7m
32. Mediation clauses are the normwhere competitors must
“get along” and pricing issues are frequent
• Networkinterconnection
• Local Loop Unbundling (“LLU”)
• Co-location and site sharing
• National /international roaming
• Carrierregulatory undertakings
• Wholesale agreements
• Mobile Virtual NetworkOperators (“MVNOs”)
• Numbering administration
• Spectrum licensing, interference disputes
• Disputes with dealers and sales channels
• Local Mobile NumberPortability (“LMNP”)
• Technology outsource and supplierrelationships
32
33. My view of the role of ADRin the telco industry
• The telecommunications industry is insular, and often subject to extreme
competitive and political pressures
• Substantial bargaining inequality is common, pitting those who have
taken risks investing in infrastructure, against those who have not
• The “soft” skills of partnering and collaboration are not emphasized
• The roles of mediation and neutral third-party facilitation are poorly
understood by in-house counsels and negotiation teams
• ADRprovisions are often included in contracts, but are seldom invoked in
practice, because the incentive to do so is lacking
• Mediation may only become the norm within the industry if disputing
parties are compelled to attend the opening mediation session
• Thereafter, the parties must be free to leave at any time, so mediation
remains a voluntary process
33
34. My thoughts about drafting ADRclauses
• Limit the numberof escalation tiers, each with an objectively verifiable
start /finish, leaving nothing to be “agreed by the parties”
• Eitherparty may commence litigation /arbitration, even while mediation
is underway, but authorise the court /tribunal to stay proceedings while
mediation continues (empanelling a tribunal may take considerable time)
• Empowerthe court /tribunal in yourcontract to award costs against a
party that refuses to attend the initial mediation session, without a good
and sufficient reason
• Coercion to attend mediation is necessary at the outset – people often
don’t know what is best forthem – such is the “human condition”
• Afterparties “show up” formediation, the agreement must leave them
free to walkout at any time, with no fearof sanction
• A great mediatorhelps the decision-makers to see all sides of the issues –
it is not just about “getting to yes” and checking the box – (please don’t
boast to me about yourwin /loss record)
34
