1. turning knowledge into action Coping with OTT Richard Jones richard@venturateam.com

2. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 2 richard@venturateam.com STRATEGY, TECHNICAL AND REGULATORY CONSULTING World’s first gigabit everywhere network for an incumbent Detailed planning support for $3 billion network investment Creation of mini-NBN in Oman (FTTH) RETAIL TRIPLE-PLAY OPERATOR (FTTH/B/xDSL) Rated number 4 in the World for service value SWEDISH COMMUNICATIONS OPERATOR The clear market leader in Swedish open access network automation and management space. 20 networks managed with 200 service providers GLOBAL COMMUNICATIONS OPERATOR World leading experience in running ultra- efficient open access and exclusive networks Targetting smart cities, campuses, alt nets OWNERSHIP AND LEARNING

3. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 3 richard@venturateam.com Times are changing…

4. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 4 richard@venturateam.com Only 16% of mobile operators think overall revenues will go up due to OTT* Times are changing… Source Mobile Squared report

5. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 5 richard@venturateam.com Cooper’s Law is now broken…. Lasted 100 years… now broken Radio capacity doubles every 2.5 years 1G – 2G was 1000x increase in capacity 2G – 3G was 1000x increase in capacity

6. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 6 richard@venturateam.com Consumer demand for faster fixed broadband will continue to grow CAGRCompound over 10 years NielsenBandwidth50%57x MooreComputing60%100x Source: Ventura Team study for FTTH Council Europe

7. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 7 richard@venturateam.com Beta results from Ventura’s European model support the view that you have to select FTTH locations carefully Only 50%-70% homes are economic anywhere (at most)

8. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 8 richard@venturateam.com Bandwidth costs can be a killer If you assume an unlimited broadband service then you can look at the monthly costs per user of providing IP transit You clearly cannot afford to pay some of these prices so you may have to: limit bandwidth use per user find ways to reduce your IP transit charges (tricky if you don’t have your own gateway ) EuropeGCCAfrica Cost per megabit/s/month~1 €~150 €1000’s € Cost per user per month0.25 – 1 €10 – 20 €100 – 200 €

9. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 9 richard@venturateam.com How much more are they prepared to pay for double the speed? Source: Ofcom

10. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 10 richard@venturateam.com …and the challenges can be extreme In one country, payback would take 500 years to renew a particular customer’s line The incumbent would rather give them a mobile contract and an iPad to go away

11. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2011 – Page 11richard@venturateam.com The fibre business case is challenging…

12. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 12 richard@venturateam.com …and LTE is clearly easier

13. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 13 richard@venturateam.com The impact of Internet content is clear…

14. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 14 richard@venturateam.com …but it’s not TV versus computer any more

15. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 15 richard@venturateam.com The OTT attack comes in many forms TYPE OF SERVICEPLAYERS LEGAL FIXED Live streams Catch up TVBBC iPlayer, 4oD VOD (from pay-TV players) STB Virtualisation - TV on devicesSky Go VOD (subscription based)Netflix, New Sky service VOD freeTED, Bloomberg, ivi.ru Data storage/sharingDropbox MOBILE Instant messageWhatsapp VOIP callingSkype, Google Talk IP TVSky Go VoDYouTube, Vimeo ILLEGAL Peer to peer torrentsPirate Bay, Cyberlockermega.co.nz Access hackingDreambox Not to mention… security, pure back up, etc. 5% of messaging now on WhatsApp 25% of international voice minutes on Skype Netflix users average 30 Gbytes per month and xbox 360 users taking 80 gigabytes* Source Ventura Team LLP and *Sandvine

16. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 16 richard@venturateam.com The OTT attack comes in many forms TYPE OF SERVICEPLAYERS LEGAL FIXED Live streams Catch up TVBBC iPlayer, 4oD VOD (from pay-TV players) STB Virtualisation - TV on devicesSky Go VOD (subscription based)Netflix, New Sky service VOD freeTED, Bloomberg, ivi.ru Data storage/sharingDropbox MOBILE Instant messageWhatsapp VOIP callingSkype, Google Talk IP TVSky Go VoDYoutube, Vimeo ILLEGAL Peer to peer torrentsPirate Bay, Cyberlockermega.co.nz Access hackingDreambox Not to mention… security, pure back up, etc. Nawras (mobile operator in Oman) saw $43 million of SMS “Vaporised” in 2012 by WhatsApp Ross Cormack - CEO Source Ventura Team LLP and *Sandvine

17. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 17 richard@venturateam.com Net neutrality under threat and unusual consequences Free blocking Google ads (and being hit by the regulator) Mobilink Pakistan CAUSE: YouTube was blocked for blasphemous content. EFFECT: Overall net was down from 2.3 Gig to 1.6 Gig. UNEXPECTED CONSEQUENCE: YouTube is cached locally and users started searching for the same content from DailyMotion etc. – sites which are not cached RESULT: Net traffic went up

18. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 18 richard@venturateam.com So what can be done?

19. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 19 richard@venturateam.com For media services Minimise the impact of… Cord cutting – cancelling pay TV subscription Cord shaving – reducing pay TV subscription By… securing or maintaining access to premium content bundling OTT with traditional pay-TV business models to ‘cover bases’

20. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 20 richard@venturateam.com Create strategic partnerships to stay ahead of the competition Vodafone + Facebook = 20% gain in data subscribers 3UK + Skype = lowered churn (as competitors such as Orange block Skype) Google + Sprint = unique features (e.g. MMS) for Sprint users = more subscribers

21. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012 – Page 21richard@venturateam.com Virtualise the Set Top Box Telecom Italia’s Cubovision will work on speeds as low as 1.5 Mbps Radically improves coverage potential Note - Some territories don’t have the networks to support this type of service

22. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 22 richard@venturateam.com If you can’t beat the OTT threat… If you can’t beat them… join them 3 in the UK working with Skype – balancing voice revenue decline on international versus market share increase If you can’t beat them… stop them The number of mobile operators blocking OTT services has almost doubled from 5.4% in 2011 to 10.5% in 2012, and the number of operators imposing surcharges has trebled from 5% to 15.8%* In the long run – unlikely to work If you can’t beat them… make them pay Operators looking to provide CDN services (e.g. AT&T provide CDN’s for Facebook) but in 2011, 2% of fixed broadband customers used > 250 GB per month Mobile operators can monetise the OTT challenge through data charges but the traditional cash cows of voice and SMS will decline *Source Mobile Squared report

23. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 23 richard@venturateam.com If you can’t beat the OTT threat… However…with YouTube now uploading 72 hours of video each minute Operators like dU thinking about monetising this… http://blog.tagman.com There is value for big content providers and retailers in localisation Reducing page load time for ‘major’ sites such as Facebook by 2 seconds reduces lost page views by 16% = impact on customer satisfaction Tagman researched impact of page load time on Glasses Direct conversion rate (right).

24. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2012– Page 24 richard@venturateam.com Some operators actually are doing worse than they need to… …Increase their paying subscribers by 9.8%? OR Reduce their network usage by 9%? How much do they need to pay for that?

25. All Rights Reserved - Copyright Ventura Team LLP 2008 - 2011 – Page 25richard@venturateam.com Operator Experience Includes: Telecom Egypt Vodafone (various operations) Atheeb Consortium (Saudi) Millicom International Cellular Batelco Colt Communications BT STC Pipex Riksnet Cable and Wireless Eircom Turk Telekom Bulgarian Telecom Invitel+Pantel Neuf Telecom Deutsche Telekom MLL Telecom Market Experience Egypt Qatar Oman Saudi Arabia Bahrain UAE Poland Ireland UK German Mali Sweden Hungary Greece France Rwanda Estonia Thank you… Richard Jones - Partner richard@venturateam.com mobile: +44 7811 166033