TIPIFICACION DEL MERCADO SEGN EL MODELO DE 5 FUERZAS DE PORTER' AO 2002

1
Broadband Content WorkshopTelefonicas Point of
View
Alfonso Vicente Deputy General Manager Business
Development, Corporate Content Unit Telefónica,
S.A. Brussels, July 15th 2003
2

• A new market opportunity

THE UPS AND DOWNS OF THE INTERNET ERA SEEM TO BE
COMING TO AN END

• The B.B services environment

• New business models

• The govermental role

The few survivors have come out reinforced, and
new and exiting businesses based on content
services over B.B networks start to show up
certain success
The Internet Bubble
Before
After
During
Media
Media
Media
Convergence
Telecom

• Telefónica Terra
• DTT-Online
• FT Wanadoo
• BTYahoo

Telecom
Internet
Internet
Telecom
Internet
Most Telecom operators have moved back to their
core business while keeping an opportunity on the
new emerging market
Fuente Plan Estratégico 2003-2006
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AS THE MAIN FINANCIAL MARKETS ILLUSTRATE.

• A new market opportunity

• The B.B services environment

• New business models

• The govermental role

From July 2002
To July 2003

• FTSE media index January 2000-July 2002

NASDAQ COMPOSITE., 7TH July 2003
27
-67
January 1998
March 2000
July 2002
Source Thomson Financial datastream
Source Infobolsa
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• A new market opportunity

WHILE TODAY NETWORK OPERATORS ARE MEASURED ON
PROFITABILITY, TOMORROW THEY WILL BE ON
PROFITABLE GROWTH.

• The B.B services environment

• New business models

• The govermental role

• Operators are focused on
• Cash Flow
• Investment and costs reduction

TODAY (V p)
A business without growth, difficult investment
Un negocio que no crece no justifica invertir en
él

• Operators are focused on
• Business growth
• Profitable investment

In order to tackle investment, it is necessary
to return to a sustainable growth path
Un negocio que no crece no justifica invertir en
él
TOMORROW (V p g)
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• A new market opportunity

FORESEEN MARKET FOR COMMUNICATIONS, B.B BASED
CONTENT AND SERVICES EXPENDITURE IS INCREASING IN
SPAIN

• The B.B services environment

• New business models

• The govermental role

CAGR 2002-2007
CAGR 1998-2002
1998
Million ?
2002
2007
Household expenditure
401,009
529,079
5.7
309,279
6.7
6.8
Communications expenditure
10,627
14,814
7,546
8.9
Communications average expenditure per household
(?)
6.5
830
1,139
604
8.3
10
B.B related expenditure ()
19,248
31,745
9,278
20
Includes entertainment, shows, culture and
education Source INE (National Statistics
Institute)
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• A new market opportunity

AND THE MAIN EUROPEAN TELCOS ESTIMATE GREAT
POTENTIAL GROWTH ON SERVICES CONTENT OVER
BROADBAND NETWORKS.

• The B.B services environment

• New business models

• The govermental role

There is a clear opportunity for Content
providers to benefit from this market
Value
Services Content
Content/services providers business potential

• Returns from B.B are rather small today and they
  are mainly due to connectivity
• But in the future there is great potential growth
  if the right business models are developed, where
  innovative new services and a variety of content
  providers add value to connectivity

Connectivity
Network operators business potential
Services
Connectivity
Potential future business in 5 main European
Broadband markets
Now
Tomorrow
Milliard ()
40

• B.B market potential in the five main European
  markets is estimated at 76,000 M? euros out of
  which 8,500 in the Spanish market

37
Creation of a new Europe Multimedia Services and
Contents Industry
Source Monitor Group (integrated operators
forecasts)
Connect.
Services and Contents Providers Revenues
Network Operators Profit Margin from VAS
Revenues
7

• A new market opportunity

TELCOS WILL MOVE FROM A VOICE- INTO A
BROADBAND-BASED BUSINESS,

• The B.B services environment

• New business models

• The govermental role

Broadband market revenue
Traditional market revenue
1998
2002
2007E
From the traditional voice based business
Passing through a voice and BB mix
Into a BB driven business model
Source Internal Analysis
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• A new market opportunity

WHILE DIFFERENT INDUSTRIES WILL DRIVE BROADBAND
DEVELOPMENT.

• The B.B services environment

• New business models

• The govermental role

DEVICES  Manufacturers are developing new B.B
devices that foster content, services and
applications compsumption Devices PC,
multimedia mobile phones, consoles, STB, PDAs,
electrical households appliances, WiFi...
CONTENT Majors have made joint efforts to
develop the online market The main music labels
have created the platforms musicplay.com and
musicnet.com And similarly movie majors have
created movielink.com for content distribution
DISTRIBUTION  Specialised retail stores are
focusing on high tech and consumer electronic
products  Leading companies are positioning
themselves for first time into retailer channels
they were not present before (ie Microsoft).
TECHNICAL SUPPORT  This role is being
modified For instance in the households arena,
the business model has changed into an integral
support model fostered by main insurance and
distribution companies.
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• A new market opportunity

IN THIS NEW SCENARIO, PLATFORM IS KEY AND
CONTENT IS KING

• The B.B services environment

• New business models

• The govermental role

Network operators are willing to enter into
revenue- and risk-sharing models where Content
owners are fully recognised and rewarded
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• A new market opportunity

AND NETWORK OPERATORS WILL PROVIDE B.B ACCESS
PLATFORM ON WHICH CONTENT PROVIDERS WILL DEVELOP
THEIR OWN BUSINESS MODELS

• The B.B services environment

• New business models

• The govermental role

The broadband access platform provides a wide and
increasing set of services, content and
applications developed without restrain and in
direct competition with all market stakeholders
Third partiesbroadband services And applications
Customers
Network operators offer
Service offer from the network operator
Provider 1
Provider 2
Services, Applications and Contents
Business support (DAMDRM, Invoicing, Customer
managementcare, Distribution)
Broadband Platform
Network support (Hosting, Billing, Content
distribution, Network services)
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• A new market opportunity

THERE IS NO KILLER APPLICATION BUT A WIDE RANGE
OF CONTENT AND SERVICES THAT JOINTLY PROVIDE A
VALUE PROPOSITION TO THE END CUSTOMER.

• The B.B services environment

• New business models

• The govermental role

Telefónica
ie MundoADSL Brand name for Telefonicas B.B
based service
Content providers
Products and services
Content
Packaging and design
Platform
Commercialisation
Commercialisation
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• A new market opportunity

Mundo ADSL

• The B.B services environment

• New business models

• The govermental role

i.e Music
Concerts
Customisation
Digital quality
Latest songs
VideoClips
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• A new market opportunity

THIS VALUE PROPOSITION WILL BE MADE UP OF A RANGE
OF NEW REVENUE- AND RISK-SHARING MODELS

• The B.B services environment

• New business models

• The govermental role

Each unique business requires the participation
of various stakeholders and imposes different
relationship models i.e The music business
model
X
X
X
X
X
X
Gross income per user
Aggregation and dinamisation
Network operators Net margin
Record label
Intellectual property right management
Content net revenues
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• A new market opportunity

BUT THERE ARE STILL KEY CHALLENGES TO FACE FOR
THE DEVELOPMENT OF THIS MARKET

• The B.B services environment

• New business models

• The govermental role

DEMANDS FROM
Telecom operators
Content Providers

• Piracy and illegal copying need to be addressed
  and not only on the legal front but also by
  fostering dialogue between the stakeholders (e.g.
  DRM solutions)
• To encourage local European content development

• To foster the emergence of innovative revenue-
  and risk-sharing business models which are
  rewarding for all value chain contributors
• To provide with a steady regulation through the
  EU that promotes B.B access platform investment

Both

• Easy access to content a non-discriminatory
  approach among the different platforms for the
  distribution of this content should be guaranteed

• To issue open and interoperable standards that
  create critical mass and economy of scale

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