New Trends in Internet Market

MA-Thesis / Master von Jose Manuel Garcia Sanchez

Abstract:

Internet. Broadband access. Mobile telephony. Fixed telephony. TV. Google. Yahoo!. Social networks. Mobile network operators. Telecommunication operators. Media conglomerates. Citizen media.

All these terms have always been traditionally considered independent, but nowadays the interrelations among all of them happen more often and are becoming deeper: a new global scenario is being defined, in which communications, entertainment and information are converging, being provided by global conglomerates in our PCs, TVs and mobile devices. Nowadays technology advances will soon enable to provide users with the best internet experience „on the go”. Services hosts, access providers, vendors, media owners and online players now realize that the barriers that traditionally have separated their markets dilute, bringing them all in a common-global market. Internet business models have now to converge with traditional structures and merges and acquisitions happen to reach competitive positions in foreign markets.

The paradigm of internet will influence and change the most popular services as they are currently known. Fixed communication providers already suffer a loose of voice revenues in favor of the cheapest online communication. Mobile operators are facing now the same situations and find themselves on a delicate strategic situation: with VoIP nearing a competitive QoS, voice along doesn’t seem to be for a long time enough as unique revenue source... Even watching TV will be soon an enriched personalized experience through the new IP end2end platforms. Will the online players be the ones successfully accomplishing a vertical expansion of their business? How will the mobile operators react? Which will be the paper of the network access providers? What about the media and content? How will all that affect the customers? In this document will be described the nowadays situation on the different markets involved in the converging scenario, and how the respective players situate themselves strategically.

An initial global point of view will be followed by the definition of strategies and trends of each of them independently, and the determination of the merging points and relations among them. The effort will be focus firstly on offering recommendations and comparisons concerning specific environments. Step by step the basis of the competition environment in the converging market will be defined, offering a strategic map of the involved players. The last chapter will concretize particular propositions of action for the mobile network operators to strategically face their strengths and weaknesses in the defined scenario.

Table of Contents:

Text Sample:

Chapter 2.8.1, GENERAL ANALYSIS:

Voice over Internet Protocol is the routing of voice conversation over any IP based networks, like internet. The voice is digitalized and transported over the same network as the data.

VoIP phone service is often cheaper than traditional phone service, and is becoming more popular: corporations and domestic phone subscribers are migrating their voice services from the traditional telephony to VoIP, interested primarily in the long-term cost savings of running a single converged network instead of maintaining legacy voice equipment. And the offer of companies providing VoIP services grows with the demand. After reaching a leading position in consumers home telephony services, the next jump will be into the wireless service: from pure VoIP providers as Skype to pseudo telephone companies as Vonage, using 3G networks or WiFi hotspots (with lower costs), building large and aisled communities or focusing on connecting small communities together… The possibilities are huge, and wireless VoIP is expected to have even a major impact on mobile telephony than is had on fixed.

The main challenge for VoIP is the quality: because VoIP uses packets to transmit data like other services on the internet, it cannot provide the quality guarantees of traditional telephone lines. But the industry makes efforts on all fronts (service providers, Internet providers, and VoIP solution makers) to adapt quality-of-service techniques to VoIP services.

Chapter 2.8.1.1, Nowadays market analysis:

Skype was the first successful VoIP initiative: launched in 2003, nowadays counts with almost 8 million online users and more than 100 millions PCs use its software platform. But VoIP is being increasingly dominated by the cable companies, who present this way a challenging competence to the telcos as 3-play services providers, challenged only by eBay’s Skype and a few independents.

Newcomers with innovative ideas (like Jajah or Fring in mobile VoIP) did not reach yet a competitive number of subscribers, but are expected to do it in a medium term. The big online players (Microsoft, Yahoo!, Google) also took VoIP initiatives, using the opportunity that their huge online users base represent, with moderate success. Skype has still the biggest number of subscribers, although the cable companies (Cox, Time Warner, CableVision, Comcast) are catching it up, due to their bigger customers’ reach, to whom they offer VoIP inclusive in a bundle of other. Among the pure VoIP providers, only Vonage, suppers also the one million subscribers, besides Skype. But in general, for all the players, the number of subscribers tend to increase.

At this moment, the telcos are the ones experimenting the bigger damage due to VoIP, because the customer tend to switch from their traditional phone service to a new VoIP one, causing increasing lost of customers and revenues. This picture reflects the global VoIP market: due to the bigger maturity of the fixed market, the mobile VoIP players don’t have yet a significant number of subscribers, and therefore do no appear in this picture. In the next sections we will offer some particularities over VoIP fixed and mobile market, offering a global picture, the main players and initiatives and an particular analysis.

Chapter 2.8.1.1.1, Fixed VoIP:

Fixed VoIP is already a mature market. In Western Europe, Indirect, BB and Calling cards calls have a call pattern similar to the traditional PSTN telephony, with a majority of calls to national phone numbers. The biggest difference is observed on the international calls made for PC users, attracted by the lower prices. On the first figure we observe that the main source of traffic are the national calls, although the international calls represents the most used service of the PC based users, due of course to the lower prices. Calling to mobile numbers is equally popular for all kind of users, and totally represents an important source of revenues:

On the other way, the incumbent telcos have been reluctant to offer VoIP packages to consumers because of the cannibalization threat. The most initiatives point to offer cheap VoIP plans for international calls, trying this way to prevent customers from switching moved for the better offer from the competency, but this way they will be cutting the revenues they become from their current users.

The best solution could be to try to the consumers buy a higher volume call plan, a call flat-rate. The fact that only an average of a 20% of the current household users would be willing to subscribe such a plan108 could be compensated offering other services, such as Mobil TV, download services.