DigiWorldYearbook2012 Eng

telecom internet media
DigiWorld Yearbook 2012

The challenges
of the digital world
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Game changers for a new digital world H
yper-connectivity is here, illustrated by the surging numbers of mobile users in every country on the planet, and by the impact of smartphones on Western markets. Alongside this, bitter battles have been raging between industry heavyweights in recent months. At stake: their control of services and applications in the cloud, and their ability to manage and monetise the massive amounts of big data being accumulated. Concurrently, the telcos especially in Europe are struggling to redefine themselves, faced as they are by over-the-top players muscling into the fray. Their challenge is to secure a return on the investments required to deploy new superfast networks, both wireline and wireless.
ISBN : 978-2-84822-294-3
IDATE creates the DigiWorld Institute

Founded in 1977, IDATE has gained a reputation as a leader in tracking telecom, Internet and media markets, thanks to the skills of its teams of specialized analysts. Now, with the support of close to 40 member companies which include many of the digital economys most inuential players the newly rebranded DigiWorld Institute has entered into a new stage of its development.. One key direction for us will be increasing the emphasis on our European think tank activities. The DigiWorld Institute therefore offers members the opportunity to participate in the following: DigiWorld Clubs: a series of monthly meetings in a European capital (Brussels, London, Paris) and international business trips DigiWorld Events: the annual DigiWorld Summit and a series of specialty seminars on this years game changers DigiWorld Publishing: the DigiWorld Yearbook and Communications & Strategies (DigiWorld economic journal) DigiWorld Collaborative Research: run by IDATE analysts with contributions from outside experts, the three main themes being explored in 2012 are: Distributing Content in the Cloud, Smart City and from NGANs to Next Gen Telcos.
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The data provided in the DigiWorld report and the analyses and opinions it contains do not necessarily reect the views of Foundation member companies. All rights reserved. None of the contents of this publication may be reproduced, stored in a retrieval system or transmitted in any form, including electronically, without the prior written permission of IDATE. This book has been edited under the direction of Hlne Ollivier and Didier Pouillot. Translation: Gail Armstrong, Paul Osborn. Graphic design and production: Jacques Lucchino Graphics: Mathieu Tanguy IDATE 2012 ISBN: 978-2-84822-294-3 ISSN: 1776-0151
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The challenges
of the digital world
Please welcome this 12th edition of our annual round-up of the outstanding issues and events that are shaping the digital world.
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> 14 & 15 November 2012
DigiWorld 2012
Foreword
Foreword
had the honour and pleasure of being elected Chairman of IDATE in late 2011. It was an organisation that I had already known well for several years, and whose many facets not to mention the tremendous quality of its teams of specialists I had appreciated as a member, client, partner and keynote speaker. I should begin by saying that my interest lies to a large degree in the plans that are underway to transform IDATE, which include gradually reorganising our operations under the DigiWorld brand. This was a project supported by my predecessor, Francis Lorentz whose eleven years of excellent and committed work I should like to salute and which has got underway under the guidance of our CEO, Yves Gassot, and his teams. The aim of this exciting project is to transform our institute into a more European organisation with an international outreach, while welcoming new players into our thriving and ever-evolving ecosystem. Of course, we must maintain the quality and independence of our analyses. These are what account for the sterling reputation enjoyed by our market reports on the latest developments in the telecom, Internet and media industries. The institute needs to strengthen its collaborative research capabilities by creating an open and relevant platform for industry players and public authorities to think together about the future. A great deal of importance is lent to the observatory aspect of the DigiWorld Institute by IDATE. In order to promote and underpin our work of debate and exchange whose highlights include the annual DigiWorld Summit and our DigiWorld Clubs in Brussels, London and Paris and to offer public and private sector players the resources of a think-tank (as in our collaborative research
programmes), we need to create a credible system for keeping track of the latest innovations and market developments, and provide solid datasets and thought-provoking analysis. This monitoring process took on momentum when, eleven years ago, IDATE launched this annual review. In some ways, it comprises the best of the work performed by our analysts and consultants over the previous 12 months. In this edition of the Yearbook, therefore, you will nd a condensed version of the analyses delivered throughout the year in some 40 specialised market reports, in our three market watch services and in a host of support assignments for our clients. In addition to the expertise of our teams, I should also like to pay tribute to the support provided by our members, to whom I extend my heartfelt thanks. The diversity of our membership is a trusty guarantor of our independence. At this stage, allow me to point out that the opinions expressed in this document are solely those of our teams. In its current embodiment, this annual report is, for me, only just out of its starting blocks. We need to enrich it, and to let it become essential reading in the discussions about digital industries. We must improve its circulation and its outreach, in particular on the Internet and in all new viral media. Together, through our think tanks, our market reports, our analyses, our dialogues and your suggestions, we can grow the Yearbook into a European and world reference work that serves our overall community in its daily steps of transformation and evolution. Please, enjoy this edition to the utmost, and until the next time we meet.
Franois BARRAULT Chairman of IDATE
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Foreword
Contents
Foreword .............................................................................................................................................................7
Part 1: DigiWorld Atlas

Introduction .......................................................................................................................................................11
Chapter 1: The DigiWorld in the global economy...............................................................................20

1. 2. 3. 4. 1. 2. 3. 4. 5. 6. 7. 8. 1. 2. 3. 4. 5. 6. 7. 1. 2. 3. 4. 5. 6. 7. 8. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 1. 2. 3. 4. 5. 6. 7. 8. Momentums compared ............................................................................................................................26 ICT and growth ........................................................................................................................................28 ICT production..........................................................................................................................................30 ICT stock prices ........................................................................................................................................32 DigiWorld markets by sector ....................................................................................................................40 Telecom services.......................................................................................................................................42 Telecom equipment ..................................................................................................................................44 IT and software services ...........................................................................................................................46 IT equipment ............................................................................................................................................48 Television services ....................................................................................................................................50 Consumer electronics ...............................................................................................................................52 Internet services .......................................................................................................................................54 DigiWorld markets by region ....................................................................................................................62 DigiWorld markets in North America ........................................................................................................64 DigiWorld markets in Europe ....................................................................................................................66 DigiWorld markets in Asia-Pacic (1/2).....................................................................................................68 DigiWorld markets in Asia-Pacic (2/2)....................................................................................................70 DigiWorld markets in Latin America .........................................................................................................72 DigiWorld markets in Africa-Middle East ..................................................................................................74 Wireline access.........................................................................................................................................82 The bre issue ..........................................................................................................................................84 Mobile access ...........................................................................................................................................86 LTE (Long Term Evolution) ........................................................................................................................88 Mobile handsets .......................................................................................................................................90 Spectrum: the mobile broadband bottleneck............................................................................................92 TV access..................................................................................................................................................94 The digital home: era of the Internet-ready device ...................................................................................96 Future challenges for TV networks .........................................................................................................104 Connected TV & OTT content..................................................................................................................106 The DTT comeback .................................................................................................................................108 Economics of the cinema: the great shake-up ........................................................................................110 Video games powered by innovation .....................................................................................................112 Bundles loosening the strings ................................................................................................................114 EBooks ...................................................................................................................................................116 Music industry being retuned .................................................................................................................118 Radio ......................................................................................................................................................120 Print media and the Web ........................................................................................................................122 Online advertising ..................................................................................................................................130 Mobile Internet ......................................................................................................................................132 Social networks ......................................................................................................................................134 Open data ..............................................................................................................................................136 Cloud computing ....................................................................................................................................138 E-commerce ...........................................................................................................................................140 M2M and the Internet of things .............................................................................................................142 Smart cities ............................................................................................................................................144
Chapter 2: Markets and players .........................................................................................................34
Chapter 3: Geographical shifts: just the way it is? ............................................................................56
Chapter 4: Access and devices............................................................................................................76
Contents
8
DigiWorld 2012
Chapter 5: Consumer services and content ........................................................................................98
Chapter 6: The new markets of the Internet ....................................................................................124
Part 2: DigiWorld chronicle

January .............................................................................................................................................148
Dahlia TV pulls the plug ...................................................................................................................................149
February ...........................................................................................................................................150 AOL buys The Hufngton Post .........................................................................................................................151 March................................................................................................................................................152

Net neutrality still sparking debate..................................................................................................................153
April ..................................................................................................................................................154
Telco consolidation in emerging markets .........................................................................................................155
May ...................................................................................................................................................156
Wholesale operators to perform large-scale LTE rollouts? ...............................................................................157
June ..................................................................................................................................................158
Launch of Google+ ..........................................................................................................................................159
July ...................................................................................................................................................160
Is cord-cutting really affecting Americas pay-TV market? ...............................................................................161
August ..............................................................................................................................................162
Just how far can the patents war go?..............................................................................................................163
September ........................................................................................................................................164
Spotify comes to Facebook ..............................................................................................................................165
October.............................................................................................................................................166
Netix at a turning point .................................................................................................................................167
November .........................................................................................................................................168 Decembre .........................................................................................................................................170

AT&T, T-Mobile: chronicle of a failed merger....................................................................................................171
Country proles
France ..............................................................................................................................................................174 Germany ..........................................................................................................................................................175 Italy ...............................................................................................................................................................176 Russia ..............................................................................................................................................................177 Spain ...............................................................................................................................................................178 United Kingdom...............................................................................................................................................179 Brazil ...............................................................................................................................................................180 United States ...................................................................................................................................................181 China ...............................................................................................................................................................182 India ...............................................................................................................................................................183 Japan ...............................................................................................................................................................184 South Korea .....................................................................................................................................................185
Annexes
Glossary ...........................................................................................................................................................187 Index ...............................................................................................................................................................189
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Contents
The price of 4G spectrum ................................................................................................................................169
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Introduction
DigiWorld 2012
Introduction
2011
Patent wars
belonged in many ways to devices a conclusion that led us to choose Will the device be king? as the central theme of our Summit in November. So let us start with that. Next, we shall look at what we believe are the three major disruptions at work in the digital world, and we shall nish with a few words about the state of the telecommunications sector, particularly in Europe.
1. The fourth quarter earnings of Apple in 2011 amounted to 46.3 billion USD, or 73% more than the year before in other words, more than Google enjoyed as revenue over the entire year (37.9 billion USD). Prots exceeded 1 billion USD a week. The company has 100 billion USD cash on hand, equal to that of HP and more than Verizon or Cisco. As for its market cap, it stood at 415 billion USD as of the latest published gures (Q4 2011), which puts in neck-and-neck with Exxon for the worlds highest market capitalisation. 2. Apple has sold more than 50 million iPads since March 2010. As happened with the iPhone, its rivals (notably Samsung and Amazon) will need more than a year before being able to compete with Apple in this new market.
3. It was in August 2005 that Google took control of startup Android. In November 2007, the Android SDK was made available to developers. It was not until October 2008 that the rst Android-equipped handsets were shipped (by HTC). Meanwhile, Steve Jobs unveiled the rst iPhone in January 2007 which was in shops by June of that year. 4. Microsoft also stood out for its takeover of Skype in 2011 for 8.5 billion USD. 5. They had a combined 55% share of the smartphone market in Q4 2011.
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The ongoing love affair between consumers and their smartphones, and now with their tablets and their many apps, continued to make headlines last year. A great deal of ink was devoted to the top two market players, Apple and Google. If we look only at the percentage of handsets operating on Android, it was Google who ended the year with a slight advantage on the smartphone front but it is Apple that emerges victorious if we look at the success of the latest iPhone. It had the highest sales of any smartphone on the planet in the last quarter of the year. Of course, these two rivals still occupy very distinct camps. On the one side, we have a seller of integrated and relatively closed system devices, with a business model built on the comfortable margin the company enjoys on the sale of these devices. Apple has broken all records in recent months in terms of revenue, prots, cash ow1 and market capitalisation. It has managed to make the iPad its second source of prots, doubling its tablet sales in a single year, as of Q4 20112.
On the other side, we have Google, a veteran Web player who earns most of its income from advertising thanks to sponsored links, and who more than ve years ago3 recognised that the mobile Internet was going to take over, a move which, if not faced up to, could threaten its position. In addition, its OS is open source and has been spectacularly successful adopted by all handset vendors, with the obvious exception of Apple and the two companies that have been losing ground these past few months, namely Nokia and RIM. After having been abandoned by HP, only Microsoft4, with which Nokia was forced to ally itself in early 2011, appears capable of sustaining a third mobile operating system over the long term. When looking at what appears to be a twohorse race between Apple and Google, it is hard not to mention the paradoxical position occupied by Samsung. It is the leading supplier of Apple components but, over the course of 2011, it also became the leading supplier of Android smartphones which are holding their own entirely against the iPhone5. As a result, Samsung became a favourite target for Apple who launched a series of lawsuits against manufacturers in the Android camp. The bitterness of the battle between Apple and Android played out on the patents front in 2011, with an impressive list of complaints involving virtually all of the markets major players. The ipside of all this drama is that the main protagonists have sought to strengthen their portfolio of patents at all costs, in order to defend themselves, counterattack and be able to negotiate. Google spent 12.5 billion USD to get its hands on Motorola
11
Introduction
Internet giants income statement, 2011

Billion $ Turnover Net income Capitalisation Main source of revenues
127.8
33.0
514.7
Smart devices
48.1
0.6
83.5
E-commerce
3.7
1.0
100 ?
Advertising
37.9
9.7
196.8
Advertising (search/sponsored links)
72.1
23.5
268.8
PC software
Source: IDATE
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DigiWorld 2012
Mobility and its 17,000 patents, after having been outbid by a consortium made up of Apple, Microsoft, EMC, Ericsson, RIM and Sony for the acquisition of a set of Nortel patents. At least two other players warrant a mention here: Amazon and Facebook. The rst earns most of its income from its online retail business, which is backed by tremendous IT and logistics skills. It made its mark on two fronts in 2011 in the arena of devices. Early in the year, it launched the Amazon app store for Android smartphones and tablets, competing directly with the Android market. Then, in the last quarter, it released an affordably-priced tablet called the Kindle Fire, with some degree of success. Facebook has not invested in producing its own devices, but is one of the top destinations on the mobile Internet, and now has more mobile than xed users. This popularity has not secured it any direct source of income as yet, however, so it can only lobby for access to the ecosystems dominated by the leading OS and smartphone players6. and platform battles Looking beyond the ferocious competition between smartphones and their operating
systems, there are at least three major points that really stood out in the discussions that took place during the DigiWorld Summit last November in Montpellier. The rst has to do with the new environment created around the proliferation of devices and displays. This is paving the way to new products, through a personal hotspot or a multi-device plan, and new services in areas such as social TV, combining a tablet and a TV screen. It is also creating sizeable challenges for app developers and vendors, the goal being to allow consumers to move seamlessly from their smartphone to their tablet, computer or TV screen. All this is expected to occur smoothly, regardless of whether they are employing a wireline or wireless network. Which leads us to the second point, namely that devices are only the visible portion of this ecosystem that is made up of a complex and still uncertain interplay of platforms located along the value chain, from the choice of processor7 and OS to app stores, online shops and data processing platforms, and to telcos access networks. Of course, to this scenario we need to add the meta-platforms of social networking sites and the Web itself. At every level, there are subtle strategies at
7. This is a erce battleeld that is currently dominated by Qualcomm (49% market share for smartphones) and ARM which licences its architecture for the vast majority of chipsets being used, while Intel has got its foot in the door with its Medeld SoC.
Introduction
6. HTML5 should help open things up, provided we do not end up with multiple versions of it, which will only replicate the fragmentation of proprietary ecosystems.
Two-sided markets
Consumers Networks access Devices
can cover most of the major trends at work by naming three core disruptions that are affecting all of the digital economys stakeholders: 1) mobile everywhere; 2) content in the cloud; and 3) big data. Mobile everywhere Probably two thirds of developers today are working on mobility. Operating cellular networks is the main source of income for telecom carriers the world over. This is truer still in emerging economies which are gaining access to telephony and the Internet through cellular networks. In Kenya, the M-Pesa mobile payment system is used by 15 million people who have no bank account. China recently reported having one billion mobile users. More than 1.4 billion mobile handsets were sold in 2011 which is around one for every ve people of which close to a third were smartphones. Smartphones will enjoy an increasingly large share of the market in the coming months thanks to models priced at 100 USD and less; they already outsold personal computers last year. Of the 845 million Facebook users around the planet at the end of 2011, 425 million accessed the site via mobile a number that is expected to keep on growing. Data now account for the majority of trafc on mobile networks, and doubling roughly every year. Fourth generation mobile networks which are being ushered in by the LTE now being deployed in several Western markets9 is poised to deliver connection speeds that are equal and often higher than what ADSL networks can supply. Of course, to be able to handle rising bandwidth, cellular networks are converging more and more with wireline and wireless (WiFi) xed networks. But there is growing talk of substitution.
Chips OS
Applications Store Store, Social, Web Networks
Content
Source: IDATE
work, based on two-sided approaches8, and which employ a dynamic combination of open access and lock-in techniques. So, will the device be king? Well, it is the ecosystem that makes the difference. Which brings us to the third main point to emerge from the discussions, namely the uncertainties over the position in the marketplace for telcos who are now having to reinvent themselves. But we shall come back to that later. The game changers Every year at this time, we debate which topic to choose as the central theme of our next conference, both in-house and with our members. The process naturally takes place in tandem with the writers of the various chapters of this report. Without overlooking the reductive aspect of this exercise, I think we
8. Two-sided markets are characterised by platforms that create interdependence between two types of user. This results in particular pricing strategies: for instance, consumers will be given access to a certain type of platform for free in a bid to maximise user numbers, while on the other side of the market (namely vendors, advertisers and the like), access will be charged for.
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9. IDATE estimates the number of LTE users around the globe at the end of 2011 at over 5 million, of whom more than 60% are located in the United States.
Introduction
LTE coverage, end 2011

100%
80%
60% USA Japan 40% South Korea Germany Sweden 20%
0% Verizon Wireless AT&T NTT DOCOMO LG U+ SKT Deutsche Vodafone Telia Telekom Sonera
Source: IDATE
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DigiWorld 2012
A few months back, Verizon10 was saying that for the 40% of its xed subscribers who did not have an optical bre line, LTE would be the solution used to supply them with superfast access. Cellular networks will also be vital to the Internet of things which will involve a growing number of connected products, machines and sensors. Mobile systems are also the ultimate in personal access, the ones that users carry with them at all time. They are the ones that allow us to connect to other devices, guarantee our identity and authorise transactions, and even monitor our health when necessary. This is the underlying thrust of the creation of a massive database on users, their behaviour, their preferences, their friends (social graphs) and location at any given time. Content in the cloud To have access anywhere, anytime, to our content and applications, and to nd them when switching from one screen to another, invariably requires congurations where these les and apps are stored in the cloud. The Internet giants have already deployed
10. It is true that in the last days of 2011, when acquiring the spectrum that belonged chiey to Comcast and Time Warner, Verizon was quick to sign a sales agreement with the two cable giants. Cable continued to dominate the American xed broadband market in 2011, which drove some analysts to advise Verizon and AT&T to focus their efforts on LTE.
gigantic data centres to deliver their communication, search, browsing and online shopping solutions. While by no means dismissing the major disruption that the switch to cloud computing represents in the development of businesses information systems, the explosion of consumer use of the Web has no doubt given the Internet giants a solid headstart in preparing for the IT environment of the future. Their brand name clout, their existing server capacity, their unparalleled expertise that comes from their control over these massive installations, all these elements can readily translate into solutions tailored to smaller enterprises. The best known examples are undoubtedly the infrastructure services sold by Amazon (AWS) and the Google desktop applications (Google Apps). Here we nd the consumerisation phenomenon which has acknowledged, for several years now, that the main source of change in hightech lies in innovation and the power of the consumer market. Getting back to the consumption side of the equation, the clearest illustration of content in the cloud over the past several months probably comes from the fact that streaming is now such a commonplace, ousting downloading and peer-to-peer. This change in the pecking-order is thanks to the popularity of music services like Spotify and Deezer, and the growing number of sites offering
Introduction
streaming of lms and TV programmes that may (Netix) or may not (MegaUpload) comply with copyright laws. Another contributor to this phenomenon are such services as iCloud11 and Dropbox that allow anyone to store their les, preferences, whatever, in the cloud, and so access them from anywhere, anytime. By combining streaming and storage capabilities, content in the cloud is certainly the main route to online delivery being taken by the entertainment industry today. It gives a starring role to the various distributors who have made their bones (meaning, who have achieved a deserved notoriety) on the Net. It is through them that content producers will need to fashion their online presence, and nd the best way to ensure their rights are respected (cf. the introduction to Chapter 5 by Gilles Fontaine). Big data Driving this huge surge in trafc is an explosion in the quantity of data, both personal and otherwise, that is available on users and their environment via the Internet of things. It brings a new dimension to the gathering and use of such information. The notion of big data rst emerged from data warehouses, data mining and analytics in traditional sectors such as retail, insurance and banking. Here too, Internet companies were quick to suss out the role they could have in the business models attached to these metadata. They began gathering this personal information through the proles which users complete themselves, and non-personal information through the cookies that track the behaviour of an IP address travelling the Web. This information gathering process has of late gained another dimension with the massive popularity of social networking sites, which drove Google to attempt to rival Facebook with Google+. Interaction with other websites and players, notably through
11. The unveiling of iCloud on 6 June 2011 was the last public appearance of Steve Jobs before he passed away on 5 October.
APIs and app stores, are another way of accessing third-party data. The availability of massive amounts of data, combined with structured and unstructured data processing technologies, makes it possible to create a new generation of services and to improve existing ones, such as search engines, automated translation and image recognition. This information is employed to boost the value of advertising space or to secure sales commissions. This only shores up the role of intermediary occupied by a few select companies of the likes of Google and Facebook, which have focused a great deal of energy on building juggernaut advertising departments and their own payment solutions such as CheckOut (Google) and Facebook Credits. In his introduction to Chapter 6, Vincent Bonneau believes that the only way to rein in the development of these practices is by reinforcing copyright compliance checks, and especially of how users and the law react to the issue of privacy and personal data protection. Let us steer clear here of the blackand-white view that big data equals Big Brother. Internet users are increasingly aware and street-wise. They do not like to divulge personal information, but they are willing to give their credit card number to a company like Amazon or Apple. They nd ads in line with their centres of interest less intrusive. They appreciate recommendations based on something one of their friends has bought. In comparison, the Internet heavyweights and advertisers remain circumspect. And it is here that we can no doubt glean considerable differences in the equity of top brands and their desire to protect it12.
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***
12. On this topic it is also worth exploring the work of Harvard professors and think-tanks on the concept of Vendor Relationship Management (VRM).
Introduction
With each of these three key points13, we nd the presence and skills of Apple, Google, Amazon, Microsoft and Facebook at work different though they may be amongst themselves. They are not alone, however, having paved the way for suppliers and partners, and thousands of enterprises devoting themselves to a new wave of innovation. The upcoming Facebook IPO, with a market cap that is expected to be spectacular14, chasing hard on the heels of Zynga, Groupon and LinkedIn, helps to underscore the extent to which Silicon Valley continues to lead the charge. Europe is, mind you, not without assets. It cannot lay claim to be home to any of the global Internet leaders, or to regional players that can rival them, as is the case in the biggest Asian markets and in Russia, for instance. Europe did nevertheless lead the way in the liberalisation of telecom markets, and in creating high quality solutions in terms of infrastructure and the services on offer. It has done well, although the difculties being faced by its telecommunications sector today are a real cause for concern.
An impoverished telecom industry? The European Union market for telecom services posted negative growth of 1.9% in 2011. This is nothing new for xed services. The double-digit growth enjoyed by broadband access only temporarily offset the decline in calling and landline subscription revenues. The steady drop in xed network income is equally signicant on both sides of the Atlantic. More surprising is the roughly ve-point gap in growth rates that
13. The new landscape to emerge from the combination of these three points will be the focus of the next IDATE DigiWorld Summit on 14 and 15 November 2012. 14. The expected valuation is between 75 and 100 billion USD. Data published by Facebook as part of the run-up to its IPO underscore three trends: 1) its protability, with 1 billion USD in prots for earnings of 3.71 billion USD, or 4.40 USD per user; 2) the potential to earn additional revenue with mobile, an area that is still under-exploited; and 3) a second source of income by building up its platform strategy which today accounts for only 17% of revenue, but up from 5% in 2010, the bulk of which is earned by Zynga (12% of Facebooks total revenue).
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has set in between the European and North American mobile markets since 2008: 0.5% growth for the EU compared with + 4.7% for North America in 2011. Three or four years ago, this could have been attributed this gap to the fact that Europe had a more mature mobile market. Today, this is no longer the case. We do nevertheless see higher penetration levels for smartphones15 and a substantially higher percentage of income coming from data in North America accounting for 38% of retail market revenue there, compared to barely 31% on average in the European Union. In addition to lagging behind when it comes to the mobile Internet, which is due in large part to the markets of southern Europe, other factors are also responsible for this gap. The decrease in call termination charges has had a negative impact on operator income, even if it has also meant a decrease in costs. The recession has also revealed some cracks in what was once thought to be an impervious sector. Over the past several quarters, Greek telcos have reported losses of 15% on the year, and Spanish and Portuguese telcos 7% to 9%. Increased competition is also having an effect. Here, it will be worth keeping an eye on France and how the situation resulting from the arrival of a fourth mobile network operator evolves, which we believe is largely counter-cyclical16. We are in danger of seeing a price war that would drastically reduce telcos income and their margins17. Consumers would only benet in the short term as the situation would probably hamper future investments. And this at a time when
15. Compare, for instance, average smartphone penetration levels amongst Vodafone subscribers in Europe (25% at the start of 2012) with the 45% penetration reported by its jointventure in the US, Verizon Wireless. 16. Consolidation seems the more widespread trend at work in such markets as the Netherlands and the UK, and we expect eventually to see a player drop out of the German, Swiss, Austrian and Belgian markets as well. 17. Optimistically, we can hope to see an accelerated differentiation in the marketplace, with a low-cost segment on the one side and, on the other, a segment offering a combination of QoS commitments in customer relations and network performance.
Introduction
Mobile services market growth in EU-27 and in the US

12% 10% 8% 6% 4% 2% 0% -2% 2007 2008 2009 2010 2011 2012
EU-27 USA
Source : IDATE
telcos in Europe are already spending less than their counterparts in America and Asia. It does seem like that by 2020 only just over half of Europeans will have access to a bre connection. As for LTE, it should be said that, despite pioneer rollouts in Scandinavia and Germany, Europe is no longer the leader in deploying new generation networks. So we have operators in Europe which, on the whole, are suffering from shrinking revenue and margins and which are investing less. And this at a time when the prospect of a single market enabling the emergence of huge pan-European operators still lies very much in the realm of theory. Even if the AT&T/T-Mobile18 merger was quashed in the United States following antitrust concerns and objections from the FCC, the state of the sectors consolidation there is a far cry from the Europe telecommunications market which is a checkerboard of 27 distinct markets, each with three or four competing telcos. It also seems likely that the failed AT&T merger, coupled with its need for spectrum, and the problems that T-Mobile and Sprint
are facing, will result in additional mergers in the US market. The situation in European telecommunications is thus mediocre at best, and at worst alarming. Financial markets have put the top carriers in the high-yield securities category: their performance is measured essentially by their ability to generate free cash ow that will guarantee their dividend commitments. No doubt, the liberty which Telefnica took in 2011 in announcing that it would be cutting its dividends will be followed in the coming months by similar announcements by other operators19. It is under these circumstances that telcos are having to contend with a radical change in their environment. Of course, they have had no shortage of hurdles to overcome since the markets were deregulated. That said, the explosion of the mobile sector did go a long way in softening the blow of liberalisation. Plus the unsustainable levels of debt resulting from the guilty exuberances of the early part of the 21st century have largely been eradicated by the revenue
17
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18. It is worth remembering that although AT&T was able to acquire T-Mobile for 39 billion USD, the two entities would have had a combined market share of 42%.
19. Even the analysts may change their minds and wonder, as some did recently when KPN published its latest results, whether the priority given over the past few years to cash on hand and dividends, at the expense of investments in the network and customer relations, did not make these companies especially vulnerable.
Introduction
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and operating margins that were scarcely affected when the bubble burst. Today, all operators, not only in Europe, need to adapt to a situation where applications are by and large out of their hands and controlled by overthe-top (online) players, and where trafc is going through the roof. The rst consequence of this is that their business models need to concentrate on creating value around providing access. The second is that they need to nd ways to monetise this growing volume of trafc to sustain ongoing investments in bandwidth. A clutch of solutions are already in view. For starters, telcos need to put an end to at-rate plans based on segmentation by number of calling minutes and which included unlimited data trafc although they did help to limit the rise of competing Voice-overIP services, and spurred the development of the mobile Internet. If they are to re-endow both mobile and xed access with value by designing a new way to segment the market, operators will need to introduce such factors such as quality (speed, latency), usage levels, integration of applications (guaranteeing QoS if necessary) and functions, especially through devices. Additionally, although probably in a secondary fashion, revenue can also be generated through deals with OTT players, allowing them to incorporate premium quality solutions into their line-up. We should point out that, if these changes in direction are opportunities to distinguish oneself from the competition, they will need to go hand-in-hand with an increased focus on cooperation to ensure that the services integrated into the access ecosystem are fully
interoperable20. It is no small challenge for telcos to hold their own against the global titans that are the leading Internet companies and device-makers. This paradigm shift is a difcult one get through, but it is abrupt enough for European and national public authorities to acknowledge, and to seek to provide operators with the means to evolve. Otherwise, we could see a real impoverishment of the sector in the coming years, caught between the top device makers21 and Internet platforms, and weakened by price wars. Luckily, we are not there yet. To end on a positive note, we can point out that the telecommunications does not appear destined to be classied a mature sector, given the growing amount of bandwidth being consumed by Internet users, and the demand generated by new applications. All of the players in the ecosystem need a robust telecom infrastructure. And here, the absence of many European players in the leadership of the new digital ecosystem is a major cause for concern. We should pay it more attention.
Introduction
Yves GASSOT, CEO, IDATE February 2012
20. Examples include mobile contactless payment systems using Near Field Communication (NFC) and integrated Rich Communication Suite (RCS) solutions designed to put initiatives back in the hands of mobile operators, and compete with OTT services such as Skype, Whatsapp and BlackBerry Messenger. 21. The prots alone of Apple in Q4 2011 exceeded the total revenue earned by AT&T Wireless which sold 7.6 million iPhones in 3 months!
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20
The DigiWorld in the global economy
DigiWorld 2012
21
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The continental divide
he markets of the DigiWorld managed to eke out a modest 4.3% rate of increase in 2011, up to close to 3,070 billion EUR. In addition to the still uncertain economic environment in most corners of the world especially in manufacturing and then, specically, in the Eurozone this average performance can be attributed to profound shifts taking place in ICT sectors. We shall take a closer look at these internal shifts in the next chapter.
Lasting changes Casting further back in time, it is interesting to measure how these markets have evolved over the past 20 years. Let us start with two series of gures. On the one hand, DigiWorld markets posted annual growth rates of over 15% throughout the 1990s more precisely since 1993 before suffering a brutal downswing after the dotcom bubble burst. Growth picked up again after 2003, but only managed to rise to the 7% mark in 2007 before the global nancial crisis hit in the autumn of 2008. The recovery since then has resulted in less than 5% growth over the past two years. DigiWorld markets have thus undergone three cycles over the past two decades: shorter and shorter cycles (even if we cannot predict for sure when the current one will end), and in particular ones that ended with successively lower growth rates. On the other hand, the ICT market share of global GDP, which rose from below 7% at the start of the period to close to 9% in 2000, has been shrinking ever since dramatically at rst and then slowly but steadily from 2003 onwards. There was, at best, a brief respite in 2009 at the height of the credit crunch, and, at the time, many paid tribute to the relative resilience of the ICT sectors. These long-term trends are, in fact, a reection of the fact that information and communication technologies have gradually become commodities in other words, basic mass market goods and services and so the trajectory of their value has followed in kind. Even new businesses
such as online services cannot escape the rule: their growth is entirely volume-based. As for prices, not only are they not rising, but they often have no correlation with those charged for the products and services they are replacing, VoIP and landline telephony being a prime example. Only smartphones appear, at rst glance, to be bucking the trend, capitalising both on high volume sales with users replacing their old handsets more quickly than usual and prices that have remained high. Even here we nd destructive elements, including embedded features on smartphones that make them rivals for other types of device; the way that spending on devices cuts into spending on services; plus those manufacturers that are being squeezed out of the market (cf. the plummeting Nokia share price). By the same token, when looking at things from a geographical perspective, the tremendous growth momentum being sustained by a few huge emerging markets is due to an increase in user numbers, and not in ARPU. Further, the impact of these growth pockets dwindles the more we move into the poorest regions: the rise of mobile telephony in rural areas of India over the past two years has brought down average per-user revenue there to among the lowest in the world. Decreasing growth rates, both intrinsic and relative, are therefore a reality: ICT sector revenues are progressing at an ever slower pace, and their direct contribution to the economy as a whole is also shrinking over time. However, we examine volume and the indirect impact of these sectors on the economy, an entirely other picture emerges. Never before has usage developed at such a pace: Internet trafc is growing by an average 60% a year in advanced economies, and mobile data trafc is doubling year on year. This is not without causing problems for those players operating the pipes and the connections through which all this trafc is travelling: they need to nd the means to invest in delivering ever more capacity, as well
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Introduction
1
as the means to monetise the growing number of services which their systems enable in both the retail and wholesale markets. This explosion in usage is very much a reality and, in a broader sense, as equipment levels rise, its trend is continuing to fuel economic growth as a whole. A recent report from CoeRexecode took a detailed look at this issue . ICT and growth The purpose of that report was to measure the direct impact of the accumulation of digital capital, and its indirect impact on total factor productivity in the United States and the major European markets. First conrming the steady decrease of the digital economys contribution to GDP throughout the 2000s, the measurements then revealed the very signicant contribution that digital capital made to growth. More specically, the report establishes that not all countries are equal when it comes to these indicators with especially sizeable gaps between America and Europe. The digital economys share of GDP is an average three points higher in the United States than in Europe. This is a gap we also nd when looking at business spending on ICT on either side of the Atlantic: telecom and IT hardware and software accounted for more than a quarter of company spending in the United States in 2008, compared to only 15% in Europe. Although this spending has dropped considerably since the start of the 2000s, it has been in virtually identical proportions for each: going from 32% to 26% in the US and from 19% to 15% in the EU-15. The digital sectors contribution to growth stands at more than 30%, on average, with a direct impact (as a production factor) which is generally less than its indirect effect (on productivity gains in the economy as a whole). A look at securities this time measured over a longer period, starting in 1980 reveals a contribution of 37% in the United States and only 26% in Europe, with a gap that has been widening since the early 2000s, with growth in the US at roughly half the rate of GDP growth and, on the contrary, slipping to less than a quarter in Europe. A new chance for Europe? When writing this chapter last year, we spoke of several recent national stimulus programmes that put ICT front and centre. This choice was rooted in the belief that ICTs are powerful levers of growth and that a euro (or a dollar) invested in these sectors can earn multiple returns. In the American stimulus package, it was said that For every dollar invested in broadband, the economy sees a ten-fold return on that investment. The European Digital Agenda expresses this expectation in a broader sense, underscoring that: The objective of this Agenda is to chart a course to maximise the social and economic potential of ICT, most notably the Internet, a vital medium of economic and societal activity The main questions at the time concerned the timeline, knowing that, in any event, the measures would only have an impact in the medium to long term. In light of the gures cited earlier, the issue takes on a geo-strategic aspect as well: will Europes efforts allow it, if not to catch up with the States, at least to narrow the gap? Nothing seems less certain. Up until the end of the 1990s, Europe in fact boasted a sizeable lead in the area of telecommunications, as a result of which it was able to impose a number of standards on the global market, but the IP era has stripped it of its assets. Among the key ingredients in competitiveness, we also need to mention spending on R&D although, here again, the United States has the upper hand. Other reasons can be given for why European ICT markets are struggling, among them the fact that it is made up of a host of national markets with different rules and cultures, alongside the particularly acute nature of the nancial crisis in the Eurozone. Even the European Commission has held up high this litany of handicaps (ranging from the lack of interoperability, of investment and of skills, through fragmented markets
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DigiWorld 2012
and disparate responses to the challenges at hand and over to a lack of condence) to shore up its argument that only a common policy could transform this scattered ecosystem into a well-functioning virtuous cycle of activity. Well said, but it is a long road from the point of formulating hope-lled utterances to the point of overhauling an entire industry.
As in past editions, this rst chapter is not divided into sectors, but rather takes a crosssectoral, all- encompassing approach to the DigiWorld and its position with respect to the economy as a whole.
Didier POUILLOT
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Introduction
1.1
Momentums compared
Europe on the wrong side of the gap
What is the DigiWorld?
We dene the DigiWorld as encompassing all those sectors that are already, or on the verge of being, based on digital technologies, namely: telecommunications services: xed and mobile telephony, data and image transmission; telecommunications equipment: public network equipment, private systems, handsets, software and associated services; computer software and IT services: data processing; computer hardware: mainframes, PCs and peripherals, data transmission equipment; television services; consumer electronics: audio and video equipment. On the periphery of these core segments, more and more services and applications are developing within the new digital economy, both at the intermediary level (as in search or e-commerce) and in the area of content aggregation (such as with online video or app stores). These new activities, which generate revenue for more traditional data transmission and processing markets, are the focus of a dedicated chapter (Chapter 6). growing by a mere 0.9% in 2011 whereas GDP gained 5.5% in current value. The gaps are smaller in the rest of the world, especially in North America where ICT markets grew by 2.7% and the economy as a whole by 3.8%. Although slowing, the momentum in emerging markets is still ensuring more than 10% growth on average, which is nevertheless one to three points below national GDP growth. Among the worlds largest markets, Japan stands out for having ICT markets that outperformed the economy as a whole. Growth there is, all the same, down on both sides; this is no doubt further proof of the resilience of ICT sectors that was observed during the height of the global nancial meltdown in 2009. Meanwhile, the opposite trend is playing out in the Africa-Middle East region, with ICT markets enjoying much stronger growth than GDP in 2010 standing at +10.2% and +3.4%, respectively.
Externalities greater than direct effects

What emerges above all from this quick comparison is that, although they are affected by the overall economic climate, ICT markets are less prone to dramatic uctuations and are not or at least no longer appear to be a balancing variable. In times of recession, as experienced three years ago, these markets remained relatively intact and were even held up as a central path to recovery in a great many national stimulus plans. As the recovery gets under way, their positive inuence on reviving the economy has been greater this time round than their own growth, at least in terms of revenue. This would strongly suggest, above all, that both their direct impact (capital output ratio of both ICT goods and services) and their externalities (the impact on productivity of ICT take-up) continue to increase. > Contact: d.pouillot@idate.org
More than 4% growth in 2011

After dipping by 2.1% in 2009 due to the grim economic climate worldwide, DigiWorld markets were back on a growth trajectory by 2010 increasing by 4.7% that year. Although this was above what had been projected a year ago, the industrys growth was nevertheless below that of the economy as a whole, as global GDP grew by 7.7% (in current value) during that time. A parallel trajectory appears to have played out in 2011, with DigiWorld markets reporting 4.3% growth, compared to 7.2% growth for global GDP. The momentum is not, however, the same across the board: the ICT markets of Europe now stand alone,
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DigiWorld 2012
DigiWorld contribution to global GDP

DigiWorld markets (million ) yoy growth Global GDP (million ) yoy growth DigiWorld as a % of GDP 2007 2 747 6.8% 41 832 8.0% 6.6% 2008 2 874 4.6% 44 468 6.3% 6.5% 2009 2 813 -2.1% 43 876 -1.3% 6.4% 2010 2 944 4.7% 47 269 7.7% 6.2% 2011 3 069 4.3% 50 671 7.2% 6.1%
Source: IDATE
Recovery in DigiWorld markets

Comparitive annual growth of current GDP and DigiWorld markets in North America
5% 4% 3% 2% 1% 0% -1% -2% -3% -4% 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 DW markets GDP
Source: IDATE
weaker than in the economy as a whole

Comparitive annual growth of current GDP and DigiWorld markets in Europe
6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 DW markets GDP
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Source: IDATE
Momentums compared
1.2
ICT and growth

The growing inuence of digital
When Europe takes backseat to the US in the area of ICT
Within the global trend of steadily declining ICT expenditures over the past four years reaching a nadir of -3.9% worldwide in 2009 growth trajectories still vary from region to region, with sometimes very sizeable gaps further back in the past. Of particular note is the fact that, although spending in Europe rose substantially over the course of the 2000s, it nevertheless remained well below spending in North America. The gap that began to appear in the 1990s was never closed, the result being that, since 2009, the recession has affected ICT spending in Europe even more than on the other side of the pond. All in all, the situation has gone from relatively equal per-capita spending at the start of the 1990s, to Europe now spending roughly one third less than the US (see Chapter 3 for details on average spending). Prices and market structure no doubt account for this gap to some degree, but it is nonetheless emblematic of the lead that North America enjoys in terms of ICT take-up and usage. Calling trafc, xed and mobile combined, stood at around 7.5 hours a month per person in 2010 in the United States, compared to an average of only 5 hours in the ve biggest European markets. Eighty two percent of American households had a computer at the start of 2011, compared to an average 68% in Europe, while American businesses spend twice as much on IT software and services, per employee, as Western European businesses revealed that ICT investments (in other words IT hardware and services and telecom equipment and services) as a percentage of gross xed capital formation (GFCF)2 in Europe are regularly 10 points below what is found in the United States. The UK is the sole exception amongst the top European markets. Even if this is due in part to chronically low spending overall, the British exception is conrmed when looking at current spending on ICT compared to GDP, with the UK outspending both Germany and France by 0.5 to 2.5 points depending on the year, while the United States is somewhere between the two. Japan stands out among the countries examined in the report3 for having among the lowest rates of ICT investments as a percentage of GFCF, but current ICT spending (as a % of GDP) that is well above average. The impact of the digital revolution on growth, both directly in other words the ICT sectors share of GDP and indirectly such as productivity gains thanks to the use of ICT is greater overall in the United States than in Europe. This conclusion is shared to some degree by a recent report from Oxford Economics4, according to which, if Europe were to raise its spending on ICT to match the United States, and keeping in mind that this would mean a 50% increase, then its GDP growth would get a vepoint boost by 2020.
> Contact: d.pouillot@idate.org
it hurts its economic growth

Europe also lags behind in the percentage of total capital expenditures that is devoted to ICT. In a study published in 20111, the market research rm coe-Rexecode
1. Lconomie numrique et la croissance: poids, impact et enjeux dun secteur stratgique, May 2011 2. Gross xed capital formation, namely the value of acquired physical assets (minus disposals) 3. The Coe-Rexecode report covers the United States, the UK, France, Germany, the EU-15 and Japan 4. Capturing the ICT Dividend: Using technology to drive productivity and growth in the EU, 2011
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Global spending on ICT by segment in EU-27

Information Technology expenditure EU-27 France Germany United Kingdom USA Japan Communications expenditure EU-27 France Germany United Kingdom USA Japan 2006 2.4% 2.6% 2.7% 3.2% 2.8% 2.5% 2006 3.0% 2.8% 2.9% 2.9% 2.8% 3.5% 2007 2.4% 2.5% 2.7% 3.2% 3.1% 2.8% 2007 2.9% 2.8% 2.8% 2.9% 3.1% 3.8% 2008 2.4% 2.5% 2.7% 3.7% 3.3% 2.8% 2008 2.9% 2.8% 2.6% 3.2% 3.3% 3.5% 2009 2.5% 2.5% 2.7% 3.9% na na 2009 2.9% 2.9% 2.7% 3.4% na na 2010 2.5% 2.6% 2.6% 3.8% na na 2010 2.8% 2.9% 2.6% 3.1% na na
Source: Eurostat, statistics of the Information Society
American businesses increasing their ICT spending

Private-sector productive investment levels in the US
12-month growth (%) 40 30 20 10 0 -10 -20 -30 -40 1970 1975 1980 1985 ICT 1990 1995 2000 2005 2010
Total excl. ICT
Source: Coe-Rexecode
and well outspending European and Japanese businesses

Evolution of investment in digital capitals share of GFCF, in current prices
37% 32% 27% 22% 17% 12% 7% 1980 1984 1988 1992 1996 2000 2004 2008 EU-15 Japan USA France UK Germany
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Source: OECD - Coe-Rexecode
ICT and growth
1.3
ICT production
Recovery is underway, but uneven
In 2011, several industrialised countries had regained the ICT production levels they had just before the global economic meltdown that began in the second half of 2008. Not all national markets or the various sectors have performed equally since then.
but more tentative for developed Asian markets and, especially, Europe
Over in Asia, Japan and South Korea have been experiencing relatively similar trajectories, albeit with different departure points and rather disparate variations in degrees of intensity. While Japan experienced a 40% decline in production between mid-2008 and the start of 2009, South Korea lost only 30%. Going from an industrial production index of 100 in 2000, Japan hit historical lows after 2008, falling below 80, whereas the record low for South Korea was 120. In both cases, production enjoyed a swift recovery in 2009, before dropping off more or less sharply from early-2010 onwards: in South Korea, production levels in 2011 even dropped to 2001 levels. Television and telecom hardware were the hardest hit in both countries while computer production fared better, and electronic components production in Japan reached an all-time high in 2011. The situation has played out very differently in the biggest European markets. After a serious slump in 2008-2009, production in Germany, and in Sweden for that matter, enjoyed a very healthy recovery sustained in large part by electronic components and TV sets. The Swedish recovery can of course be attributed to a large degree to telecom hardware production, thanks to its national champion Ericsson. France has made much slower progress, however, posting a decline of just over 10% in the second half of 2008 which was followed by a very timid recovery, sustained solely by media electronics. In the UK, the industry suffered a lengthy slump throughout the entire 2000s, during which the ICT sectors production dropped by more than half, and the dip and slight uptick in 2010 have done little to change the situation. > Contact: d.pouillot@idate.org
Solid performance for North American rms

Industrial production levels have improved the most in the United States during this time, going from an index of 100 in 2000 to 220 in 2011 in terms of volume. The US is also one of the countries that has enjoyed the steadiest recoveries since 2009. While not taking anything away from how American companies have performed, it should also be said that the recovery there began in spring 2009 three to 15 months earlier than in other parts of the world and started from a production level that had been only slightly affected. The 10%12% drop reported between mid-2008 and the start of 2009 in the States does indeed seem modest compared to the 20%25% decrease that German businesses posted between autumn 2008 and mid-2009, or the 40% decline suffered by the Japanese industry during that same period. Looking at the individual sectors, it was the manufacture of computer and electronic components that allowed the American ICT industry to revive its production momentum. Hardware production has remained more or less at since mid-2009, however, and is not yet back to its early 2008 levels, and still a far cry from the peaks enjoyed in late 2000 and in early 2007. Meanwhile, media electronics production levels have yet to recover from the dramatic drop that began well before the recession, back in 2005, with only a brief uptick in 2006.
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Growth of ICT goods output

Beginning France Germany Sweden United Kingdom USA Japan South Korea
2000 = 100 index
2008 101 181 114 55 202 134 157
2009 83 141 89 47 177 80 131
2010 89 146 83 46 192 121 154
2011 97 184 97 53 216 123 146
2012 96 195 100 na 226 105 123
Production levels in industrial countries still unstable

ICT production: communication equipment
(2000=100 - mm3) 400 250 150 100
(2000=100 - mm3) 150 100
60 40
60 40 20
20 15
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
10
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
France
South Korea
USA
Germany
Sweden
Japan
UK
in both telecoms and IT

ICT production: PCs
(2000=100 - mm3) 300 200 170 130 100 70 50
(2000=100 - mm3) 300 200 150 100
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
60 30 40 20
10
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
20
France
South Korea
USA
Germany
Sweden
Japan
UK
ICT production
1.4
ICT stock prices

Apple and all the rest
Concentration of market value on American exchanges
The sharp drop in stock market prices in autumn 2008, which affected every exchange around the globe, was followed by a more or less strong recovery whose variations were especially acute at the regional level. Tech stock prices in the United States, which are measured primarily through the NASDAQ Index, had climbed back to levels enjoyed in 2008 and earlier, though still far from the record highs of the Internet bubble in 2000. Only two mini-depressions spoiled the recovery, the rst in spring 2010 and the second in the summer of 2011. On the whole, tech stocks have performed at the same rate as all other sectors combined over the past three years, but better when viewed over a longer period, such as the past 15 years. It is also worth mentioning that, when speaking of the United States, these solid performances are coming chiey from IT and Internet companies, while telecom industry players have been much more shaken, still struggling to recover from the collapse that lasted from 2000 to 2002. The recovery that began in Europe in 2009 has been more moderate, and even some signs of weakness have been seen as Technology Media Telecommunications (TMT) stock prices fell during the summer to their lowest point since 1997. In addition, and unlike in the United States, tech stocks in Europe have performed below the market average over the past three years. The situation in Asia, when looking at ICT market momentums (see Chapter 3 for more details), requires the separation of Japan from the rest of the region. Market caps on the Japanese exchange continue to suffer from protracted crisis in the nations high-tech industry. Meanwhile, operators and manufacturers in the regions emerging nations and especially China continue to make tremendous strides, both in their domestic and in export markets.
sustained largely by IT and Internet stocks

Taken individually, the stock market darlings of recent months have clearly been the Internet giants, and more specically a few major IT industry players such as Apple and Microsoft. Along with Google, these two have among the highest market caps today: Apple, with 468 billion USD as of mid-February 2012, is among the most highly-rated company in any sector, and was worth as much as Microsoft (262 billion USD) and Google (197 billion USD) combined at that time. In terms of multiples, Internet companies stand out, however: Google has a price-earnings ratio (PER)1 of over 20 and Amazon stood at a remarkable 133 in mid-February 2012. This is a record that even Facebook which will probably have launched its IPO by the time this report is published will be unable to match: with a predicted valuation of around 100 billion USD, for net prots of 1 billion USD in 2011, the PER of the social networking giant will still be in the neighbourhood of 100. > Contact: d.pouillot@idate.org
1. The price-earnings ratio (PER) refers to relationship between a companys current share price and its per-share earnings.
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Change in share prices for a selection of ICT sector companies

Week beginning Apple (NASDAQ) Deutsche Telekom (Xetra) France Telecom (Paris) Google (NASDAQ) IBM (NYSE) Microsoft (NASDAQ) Nokia (NYSE) NTT (NYSE) Verizon (NYSE) Vodafone (London) Mar. 14 2008 100 100 100 100 100 100 100 100 100 100 Dec.12 2008 78 96 94 72 71 69 49 122 97 86 Sep. 11 2009 136 83 88 108 102 89 47 113 92 92 June 11 2010 200 82 77 112 111 92 30 94 84 93 Mar. 7 2011 281 88 76 135 139 92 26 118 106 119 Sept 9 2011 298 71 58 120 140 92 19 111 104 108 Feb. 15 2012 393 78 55 138 167 107 16 116 112 116
Source: Yahoo! Finance
Tech stock back in the pink in the US

Fluctuations in Nasdaq and SP500 stock prices in the US
January 1998=100 300 200 150 100 70 50 30
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10 20
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
NASDAQ Composite
SP 500
20
11
but on a downwards slide in Europe

Fluctuations in ICT and general stock prices in Europe (Eurostoxx)
31 december 1997=100 400 300 200 150 100 70 50 30
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94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
20
Telecommunication, Media and Technology Sectors
General Index
20
11
ICT stock prices
34
Markets and players
DigiWorld 2012
II
Markets and players
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36
Markets and players
DigiWorld 2012
Next Gen DigiWorld
here are several ways to interpret the moderate 4.3% growth posted by DigiWorld markets in 2011. After fairly solid performances in 2010, due in part at least to markets catching up after weathering the worst of the recession, the relatively similar momentum last year can be taken as a sign that things are clambering back onto solid ground. One may choose to emphasise the widening gap in the growth trajectories of DigiWorld markets and of the economy as a whole as explored in the previous chapter while still paying tribute to the enabling role of the ICT sector in this trend. Taking a more historical perspective, one can compare current growth rates with those of the mid-2000s and wonder about the 1.5 to 2-point drop in growth to be seen at present: is it just a temporary thing resulting from a still shaky economy, a structural change due to deep-seated changes in the ICT ecosystem, or a combination of the two? Structural changes Without a denitive answer one way or the other, a look at the gures would tend to point more to long-term adjustments at work, albeit with nuances depending on the sector and the region (see the next chapter for a more detailed look at geographical shifts). Proof of this can be found in the steady decline in growth rates for telecom services, alongside pressure on network equipment markets. We have also discovered that the relative resilience of the services sector during the worst of the credit crunch, as witnessed in 2009, does buckle under extreme circumstances. This was seen all too well in Greece whose market lost more than 27% in value between 2008 and 2011, but also to a lesser extent in Ireland (14% in three years), Spain (10.5%) and several countries in Central Europe, including the Czech Republic, Slovakia and Hungary. The devices side of the equation is also feeling the pinch from the transfer of a large chunk of market share from traditional consumer electronics
Industrial shifts Taken as a whole, hardware markets posted signicantly higher growth than services in 2011. This progress in equipment markets is especially noteworthy for being concentrated in two sectors: telecommunications (+8.1%) and IT (+7.2%) with consumer electronics markets worldwide having failed to grow. Over in the services sector, it is TV that performed the best (+5.4%), despite having slowed after an especially strong year in 2010. Reporting a 4.2% increase, IT software and services are nevertheless on the road to recovery in a still uncertain economic climate. Meanwhile telecom services are bringing up the rear, with a modest 3.2% growth rate last
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Introduction
markets to, rstly, telecom markets thanks to smartphones and, second, to IT markets thanks to tablets. This immediately impacted a portion of the industry, even if some voices in recent months have hinted at a possible revival of PC sales, for instance. In television services, meanwhile, we nd opposing forces at work although both appear to derive from enduring trends, whether pressure on ad revenue or, on the ipside, the rise of on-demand TV. Underpinning this is a host of questions over the shift of pay-TV to OTT applications, and the resulting shift, or even destruction, of revenue. Only the trajectory of IT markets services and software in particular appears to be reacting directly to the economic situation of the moment, having enjoyed a recovery, however slight, in 2011. Finally, alongside these various shifts that are hitting the core of DigiWorld sectors, more long-term trends are also being affected by the development of peripheral markets that rely on ICT to deliver innovative solutions. They embrace all the new Internet services such as search, social networking and online services whose value is rooted in new economic schemes and which often undermine the models that have sustained veteran players up until now.
2
year, which is telling of the ongoing pressure on telco business. Alongside consumer electronics, telecommunications is also the sector where the largest regional performance gaps are to be found. In a number of the worlds advanced markets, mobile services have stopped growing: this is especially true in the European Union where the segment actually shrank by 0.5% in 2011. Further, xed broadband revenue is now growing only slightly, while landline calling revenue continues its downward spiral: still in the EU, xed telephony revenue dropped to 7 billion EUR in 2011 (8.5%) while income from broadband access grew by only 1.5 billion EUR or +3.2%. The massive switch to IP is having a huge impact on the nancial situation of telcos, while the potential growth outlet that could be forged by the upgrade to ultra-fast broadband is not yet in view. Telco investments in new generation access networks have been limited up until now, and most of the really signicant developments in advanced markets have resulted from very specic competitive situations. These feature notably the cableco dominance of the broadband market in the US and the diminishing inuence of NTT in the Japanese ADSL market. In Europe, hesitations over technical choices, uncertainties over regulatory options and, in a number of instances, markets that are largely content with their existing solutions, be they ADSL or cable, have tempered many an enthusiasts penchant to move onto the next stage and to enter into very costly rollouts. The European Commission has actually assessed the cost of achieving the targets set out in its Digital Agenda at between 180 and 270 billion EUR. A cultural revolution Business in the sector, and more widely in all DigiWorld core services, has also been affected by new Internet services that both create value for the whole, but naturally grab some of it away for themselves. Given the way things are developing, the challenge now is to nd the right model to ensure that everyone along the chain gets their fair share, from supplying access and devices to supplying content, by way of all the intermediary and aggregation functions. The new Internet markets are very fragmented and still generate relatively little income: setting aside e-commerce most of whose income comes from the sale of goods and services and not from the platform itself these Internet markets account for less than 5% of DigiWorld sales in Europe, for instance. Half of that comes from the core activities of search and cloud computing, with the other half being spread out between a great many online services and content such as social networking sites, online gaming, video sites, music sites, print media and magazine apps. One of their most outstanding characteristics, however, is that they are enjoying very solid growth, in the double digits for most, at a time when traditional DigiWorld businesses are losing steam. A parallel can also be drawn here with what is happening in devices where a handful of players have taken the smart device market by storm, carving a canyon between this now thriving segment and the glum state of affairs in the rest of the industry. The upheavals caused by these innovations are, in fact, being felt throughout the entire ICT ecosystem. New generation networks, online services, smart devices and more are all ingredients in increasingly sought-after changes in the marketplace. Faced with the inevitable, the rst generation of digital economy players are working hard to bring on their business models, especially by reconguring their partnership strategies: telcos are siding with content and application providers, device makers are sizing up OS providers as partners, and TV networks are signing up new online distribution platforms. The gures on latest market developments are but the visible portion of a massive and far-reaching trend that stretches down to the very fundaments of DigiWorld industries. It is an overriding trend that strengthens the role
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Markets and players
that ICTs play at every level, and which places our introductory remarks in some long-term perspective. Yes, ICT markets are evolving in a way that is relatively separate from economic cycles. Yes, because of their inuence on the whole, ICT markets are bound to grow at a lesser pace than the activities they support.
And, yes, ICT markets will likely continue to experience a growing dichotomy between the rise in usage and their ensuing rise in revenue.
Didier POUILLOT
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Introduction
2.1
DigiWorld markets by sector

Looking beyond the gures
The recovery that began in 2010 continued on through last year, resulting once again in steady overall growth of 4.3% worldwide. Hardware segments again fared the best again in 2011, with telecom and computer sales revenue increasing by 7%. Growth rates in the services market were not as strong, ranging from between 3.2% for telecommunications to 5.4% for television, with IT and software services in between the two at 4.4% although services still account for 70% of DigiWorld markets. While their contribution to industry revenue is vital, they are helping above all helping to drive the momentum which is now being sustained by new Internet markets.
and services
The changes at work seem less dramatic in the services segment. At the height of the nancial crisis, services did suffer slower growth and even a slight setback for some namely IT services in general and telecom services in Europe but in many instances it was to a much lesser degree than in the economy as a whole. And it was indeed services that allowed us to measure the DigiWorlds resilience of the DigiWorld during that time. That said, it has not been all smooth sailing for these segments, and all are being increasingly affected by changes in technical architectures, in consumers behaviour and, ultimately, in prevailing business models. In the telecommunications market, it is the growing ubiquity of IP that is no doubt the biggest bringer of change, and now bound up as it now is with the future of the mobile Internet. In the world of IT, it is cloud computing and its various as-a-service iterations (SaaS, IaaS) that are revolutionising classic client-developer paradigms: these new architectures also constitute challenges for telcos who need to offer the right network solutions to match. If television markets appear to have been the least affected thus far, questions over ad revenue, of which a growing percentage could go to Internet players, will have to be faced eventually.
Nota: The data supplied here are end-market gures for each sector and may be counted twice in the case of consumption in overlapping sectors. We have nonetheless eliminated the possibility of double counts as much as possible in cases where the scope of two sectors overlaps, such as mobile handsets and home computers, were eliminated from CE markets and counted only in the telecom segment (mobiles) or the IT segment (computers). Furthermore, the data are based on consumption. For certain categories, disparities with production data may be signicant in cases of a very high volume international trade.
Big changes afoot in hardware

2011 will serve to conrm that equipment and device markets, which had been the hardest hit by the recession in 2008-2009, are indeed back to on track, reporting revenue levels signicantly above four or ve years ago. This nevertheless comes at the price of major upheavals on both the technological and industrial fronts. In the telecom market, the recovery has been due chiey to the huge popularity of smartphones which have driven up sales volumes with (more than 1.5 billion handsets sold worldwide in 2011, of which more than a quarter were smartphones ), and to the ongoing decrease in average prices. Over in the computer market, PCs are having to contend with growing competition from tablets, of which more than 60 million found their way into consumers hands in 2011, which is triple the number in 2010. Meanwhile, the consumer electronics sector as a whole is suffering directly from increasing overlaps with the two previous segments, and so it is focusing its efforts more and more on television sets, themselves which are feeling the pinch as well. These upheavals are all raising questions over about the future of veteran businesses, and especially over the transitions their core players will have to make through, and what risks this will entail.
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> Contact: d.pouillot@idate.org
Global DigiWorld market by sector

Billion Telecom services Telecom equipment Software and computer services Computer hardware TV services Consumer electronics Total 2009 1 047 237 675 296 282 277 2 813 2010 1 071 259 693 320 308 293 2 944 2011 1 105 280 723 343 325 293 3 069 2012 1 146 294 758 361 344 293 3 197 2015 1 277 368 885 389 386 293 3 598
Source: IDATE
Growth still driven by equipment except consumer electronics

Global DigiWorld market growth by sector
Billion 3 500 3 000 2 500 2 000 1 500 1 000 500 0 2009 2010 2011
Services
TV services Software and computer services Telecom services
Equipment
Consumer electronics Computer hardware Telecom equipment
Source: IDATE
but services markets still the biggest earners

Breakdown of global DigiWorld markets by sector, in 2011
9%
41
Telecom services Telecom equipment Software and computer services 11% Computer hardware TV services Consumer electronics 36%
9% 24%
Source: IDATE
www.idate.org
11%
DigiWorld markets by sector
2.2
Telecom services
Game change
Markets back on the up, except in Europe
After posting only slight growth in 2010, the global telecom services market reported moderate growth last year of around 3%, which is still well below its pre-recession rate of progress. This is due as much to the still uncertain economic climate as the structural changes taking place as a result of the maturity of several segments and regional markets. Emerging economies continue to be the key source of growth around the globe, while things remain tense in the more advanced economies, especially in Europe where the downwards slide is not over yet. The worldwide market for telecom services came to just over 1,100 billion EUR in 2011, with mobile services still accounting for the lions share (58%) while, over in the wireline segment, the switch in core business from telephony to the Internet, and especially to broadband and ultra-fast broadband access, is accelerating. Mobile data services have been enjoying very steady growth these past four years (2008-2011), which has helped at least partially offset the dramatic pause in growth in calling revenue growth. Web. As mobile connection speeds rise, and with 4G now in sight, mobile broadband offers an attractive alternative in those regions without a proper landline system, and where network overload is not yet an issue. The revenue generated by wireline data services continues to rise steadily, spurred by the revived momentum of xed Internet services, and especially broadband and superfast broadband access in advanced markets.
Advanced markets still suffering

Telecom services revenue in advanced markets is expected to have dropped slightly in 2011, for the second year in a row. Between the nancial crisis of 2009, the European debt crisis in 2011 and the spectacular spate of natural disasters that shook the globe last year, advanced telecom services markets lost more than 1.5% in value in the three years between the end of 2008 and the end of 2011. This unprecedented situation in the telecom market marks an historic turning point, and the end of an era. In Europe, we do one cannot expect to be out of the woods until 2014. Only a handful of European countries namely the Netherlands and Sweden in Western Europe, and Ukraine, Russia and Turkey if we stretch the borders are expected to see telecom revenue rise in 2011, while a few countries such as Greece and Spain are still in dire straits. In advanced economies outside of Europe, we are seeing huge disparities in market performance between the United States which is back on a solid footing and Japan which continues to lose ground.
Market sustained by volume and robust growth for mobile data services
Buoyed up by the explosion in mobile data trafc from smartphones, tablets and other connected devices, mobile broadband continues to breathe life into a market suffering from decreasing falling calling revenue, while volume is still a major factor in emerging markets. Landline calling has been on an apparently inexorable decline since 2002, due to the combined effect of users replacing their landlines with mobile lines, including in emerging countries/regions suffering from a chronic lack of wireline infrastructure, and their massive shift to the
Markets and players
> Contact: c.manero@idate.org
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DigiWorld 2012
Global telecom services market by region
Billion North America Europe France Germany Italy Spain United Kingdom Asia/Pacic China India Japan Latin America Africa/Middle East World 2009 260 305 41 50 30 26 39 303 85 17 108 108 70 1 047 2010 264 304 42 49 29 25 39 314 89 19 107 114 76 1 071 2011 267 301 41 49 28 24 38 333 97 22 106 120 83 1 105 2012 271 302 39 49 28 23 38 356 106 25 106 127 91 1 146 2015 288 315 39 50 29 24 40 418 124 37 109 144 111 1 277
Source: IDATE
Markets
Global telecom services market growth by segment
Billion 1 200
1 000
800 Data and Internet Mobile services Fixed telephony
600
400
200
0 2009 2010 2011 2012
Source: IDATE
Players
The worlds top telcos
AT&T NTT* Verizon Deutsche Telekom Telefnica China Mobile Vodafone* France Tlcom America Mvil KDDI* 0
43
+1.0% +1.2% -1.2% -3.4% +7.1% +7.3% +3.2% -1.0% +54% -0.2% 20 40 60 80 100 Billion
Note: 2010 Telecom service sales & growth 2009-2010 (%) * fiscal year ended March 31, 2011
Source: IDATE
www.idate.org
Telecom services
2.3
Telecom equipment
Industrial landscape shaken by more upheavals
Once again, we are witnessing deep-seated shifts in the telecom equipment industry which is being shaken up by changes in operators investment models, and this during already very tough nancial times. Mergers and acquisitions continued to make headlines, with Ericsson snapping up what remained of the dismantled Nortel, and Nokia Siemens Networks taking control of the Motorolas mobile business. The credit crunch affected the nancial results of the Alcatel-Lucent and Nokia Siemens Networks megamergers, both of which are losing ground and scrambling to shore up their margins. Nokia Siemens Networks is in the process of selling off its wireline operations, and laying off a quarter of its staff in the bargain. On the other end of the spectrum, equipment manufacturers in China continue their steady rise, now moving beyond their borders. Huawei has climbed to number three spot amongst the globes world infrastructure suppliers, behind Cisco and Ericsson, while ZTE is now in the top 10 too. Chinese hardware makers have made real strides and are contributing to the deployment of new generation networks (NGN). When it comes to LTE network deployments, operators are still being careful with their spending. The issue of nancing is on the table, and the players are looking at network sharing schemes. Telcos are exploring alternative solutions to handle their capacity problems, including more efcient spectrum solutions, ofoading more trafc via Wi-Fi and smaller cells, and by improving their trafc management techniques. This would mean only meagre revenue for equipment manufacturers compared to what 3G rollouts have brought in. Added to which, third generation deployments are now tapering off.
Acceleration of co-investment and open access models

Operators today are faced with a dilemma brought by weak growth of their revenue and the need to invest in infrastructure to meet the expected ongoing surge in trafc. So they are relying more and more on co-investment and open access models. Network sharing has become a necessity for operators, especially when seeking to achieve 3G coverage targets, and the economics of new access technology (FTTx and LTE) deployments are only accentuating the trend. These new schemes involve two or more operators sharing all or a portion of the network, which obviously allows them to save on infrastructure costs a prime example being Everything Everywhere, the network shared by T-Mobile and France Telecom-Orange in the UK. Open access networks, which can come in various forms, are also especially appropriate at this juncture and are being adopted more and more as a way to nance FTTx network rollouts, especially in sparsely populated areas where the classic model of combining the supply of access and a service may not be nancially feasible. > Contact: t.ramahandry@idate.org
Opportunities opened up by new gen networks
Markets and players
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DigiWorld 2012
Equipment suppliers are hoping to benet from broadband network rollout plans. The initiative taken by the European Commission whose Digital Agenda requires Member States to adopt the target of providing all citizens with a connection of a minimum 30 Mbps by 2020, of which half with bandwidth of at least 100 Mbps is clearly aimed at encouraging operators to invest in their networks, especially in more sparsely populated areas. This programme will likely involve both public and private investments estimated at more than 270 billion EUR to reach the target.
Global telecom equipment market by region

Billion North America European Union France Germany Italy Spain United Kingdom Asia/Pacic China India Japan Rest of the World World 2009 58 56 8 9 7 6 10 72 29 10 18 51 237 2010 63 57 9 10 7 6 10 79 32 12 19 59 259 2011 65 59 9 10 7 6 10 92 39 15 19 64 280 2012 68 62 9 10 7 7 11 98 42 16 19 67 294 2015 74 71 11 12 8 8 13 138 59 26 22 86 368
Source: IDATE
Markets
Global telecom equipment market growth by segment
Billion 300
250 Other Infrastructure services Core network equipment Mobile access Wireline access Enterprise equipment End-user devices
200
150
100
50
0 2009 2010 2011 2012
Source: IDATE
Players
The worlds top telecom equipment suppliers
Cisco Nokia Samsung Ericsson Huawei Alcatel-Lucent Motorola Nokia Siemens Networks LG NEC ZTE Sony Ericsson 0 5 10 15 20 25 30 35 Billion
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Note: 2010 Telecom equipment sales
Source: IDATE
Telecom equipment
2.4
IT and software services

The integration challenge
Of all the DigiWorlds services sectors, that of IT services is clearly the most vulnerable to the state of the economy. It was hit hard in 2009, and still today in Europes most nancially fragile European countries like such a Greece, Italy and Portugal, businesses continue to slash their IT spending for the foreseeable future. On the ipside, in Australia, the United States and the BRIC countries, stakeholders have begun investing heavily in solutions that will allow them to boost their performances. Among client sectors, banking, and especially investment banking, along with the public sector are still feeling the pressure of the debt and decits. By comparison, manufacturing sectors as a whole have begun spending again, although the local political and economic situation can naturally have a sizeable impact on market behaviour: French car-makers, for instance, are still being much more cautious than their German counterparts in Germany, while where, on another plane, the Germanys plan intent to put an end to its nuclear energy programme has thrown cold water on the plans of German countrys power companies. Even in the search for innovative solutions, where IT often plays a key role in sectors with growth potential, economic worries are being felt affecting at the operational level in other words, clients want to get more for less from their IT providers. solutions for the business world, along with sharing solutions and offshoring. Cloud computing is a key part of this trend. and by cutting back on the number of suppliers they use employing a smaller group of vendors who are capable of meeting the needs of their customers various areas of activity, and in the different parts of the world where they do business. As a result, the IT services industry, which has traditionally been very scattered, is tending to tighten up a little more.
Innovation hubs
There are three areas of innovation that have begun to redraw the IT landscape, and expected to gain in prominence over time: mobility, or the connected enterprise, which is manifesting itself especially through the development of tablets and smartphones which businesses are using for sales and marketing, and for customer support functions, but also for their own in-house management, production and logistics activities; analytics, going beyond the classic concept of analysing data to measure, compare and steer a companys business, and moving into real-time analytics and big data to improve their reactivity and the efciency of their decision-making; the integration of various communication media within the enterprise combining such legacy networks like as the telephone and the post, with e-mail and online services, social networking, etc and the like. A major source of concern across the board, security remains one of the major biggest challenges for businesses IT activities. > Contact: f.nassah@pac-online.com
Markets and players
More for less

There are several ways for businesses to cut their IT costs: by consolidating the different elements of existing solutions, infrastructures, devices, applications and more to create a more exible system. by virtualising their system, which involves pooling and outsourcing their most expensive components. This means using standard solutions with a minimum amount of customisation, reusing consumer market
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DigiWorld 2012
Global IT services and software market by region

Billion North America Europe France Germany Italy Spain United Kingdom Asia/Pacic China India Japan Latin America Africa/Middle East World 2009 275 230 35 46 15 12 46 132 13 6 79 23 15 675 2010 282 232 35 47 15 12 45 138 16 7 80 25 16 693 2011 295 239 37 49 15 12 46 144 18 8 80 27 18 723 2012 310 244 37 51 15 12 46 155 22 10 83 30 19 758 2015 350 275 41 57 16 13 51 194 36 15 92 39 27 885
Source: PAC
Breakdown of the global IT services and software market

by region, in 2011
6%
20%
North America Europe Asia/Pacific RoW
41%
33%
Source: PAC
Players
The worlds top IT services and software providers
IBM Microsoft HP Oracle Fujitsu Accenture SAP CSC NEC Hitachi
+ 9.2% + 6.3% + 1.8% + 7.4% + 8.4% -1.0% + 16.8% + 6.3% + 10.2% + 14.3% 0 10 20 30 40 50 60 Billion
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Note: 2010 sales & growth 2009 - 2010 (%)
Source: PAC
IT and software services
2.5
IT equipment
Growth despite it all
After the recovery in 2010, the IT hardware market conrmed that it was back on solid ground in 2011, reporting 7.6% growth (source: Gartner). Are the concerns that were raised in late 2010 over the impact of a double-dip recession that were raised in late 2010 truly a thing of the past? Not entirely. The situation in the PC market is still tough and, from a broader perspective, IT hardware markets are not progressing at the same pace across the board. While the trend is still only nascent 50 million tablets sold in 2011, compared to 360 million computers these new devices are catching on like wildre and, in advanced markets at least, analysts believe the PC market has reached its peak. So the hour of choice is at hand on the manufacturing side of things. In other words, manufacturers of computer and PC components (such as chipsets, and hard drives, etc.) manufacturers can either remain focused on their current business and set their sights on emerging markets where new devices are still out of reach. Pressure on prices is growing and cutting into suppliers margins. Or they can go with the ow and invest in mobile devices, like as Intel and AMD have already started to do, shifting the balance of production by moving into components for these new devices, and like as Cisco and HP have done by focusing more on mobility.
Growing pressure on the PC market

More than 350 million PCs were sold worldwide in 2011, which marks a 4% increase over the year before, and well below the growth rate in 2010. Beyond the cyclical aspect the surge in sales in 2010 having in large part been compensation for the huge slump the previous year it is the growing competition from tablets, smartphones and other types of reader that is weighing on the traditional PC market more and more1. Analysts are predicting that 2012 will prove much the same: tablet sales will continue to skyrocket, with growth expected to top 60% which translates into over 100 million units sold during the year. Plus, the economy as a whole is still struggling and, more locally, the crisis in the Eurozone has been detrimental to spending. In any event, even if we expect the consequences to be felt even more acutely in 2012, and possibly to spill over into 2013, the hard drive supply problems caused by the oods in Thailand throttled the supply chain in the second half of 2011.
1. In one of his last interviews, Steve Jobs spoke in mid-2011 of signs that we are entering the post-PC era.
Change in balance in the server market

The server market is evolving in disparate ways in the different corners of the globe, enjoying solid performance in emerging markets, especially in Asia and Eastern Europe, but losing revenue in Western Europe and North America. On the whole, it is x86 servers that continue to drive the market but, like what just as is happening with computers, the strong upswing and solid sales in 2010 were automatically followed by a decline, at least in the most heavily equipped regions. With close to 30% of sales worldwide, HP is still the leader in the server market in terms of volume, even if along with Dell and IBM it is losing ground to smaller players like Lenovo. In terms of revenue, however, IBM is moving up the ranks and is now neck- and- neck with HP.
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DigiWorld 2012
Global IT equipment market by region
Markets and players
Source: PAC
Breakdown of the global IT equipment market

by region, in 2011
13%
27%
North America Europe Asia/Pacific RoW 30%
29%
Source: PAC
The worlds top PC manufacturers as of Q3 2011
49
HP Lenovo Dell Acer Group Asus Others + 5.3% + 36.1% -1.6% -20.6% +30.2% + 0.5% 0% 5% 10% 15% 20% 25% 30% 35% 40%
Note: global market share (units sold in Q3 2011) & sales growth in volume (Q3 2010 - Q3 2011)
Source: IDC
www.idate.org
IT equipment
Shake up in global PC-manufacturer rankings
2.6
Television services
Relatively unscathed market
TV services generated a total income of close to 325 billion EUR in 2011, which is 5.4% more than in 2010. While progress was weaker than the 9.5% growth posted in 2010, that had been on the heels of extremely slight (+0.9%) growth in 2009. Progress does appear to be healthier in emerging markets (+14.8% in Latin America, +7.2% in Asia-Pacic) than in Western ones (+2.6% in the European Union, +3.0% in North America). the terrestrial network as their chief source of television programming in 2006, this gure had dropped to 37% in 2011, in other words equal to cable subscribers. If Whilst cable increased its market share slightly during that time, from 34% to 37%, it is satellite that has benetted the most from the decline of terrestrial TVs decline, increasing its market share from 15.5% to 22% in ve years. IPTV in the meantime is thriving, though it still only accounts for 3.3% of the worlds TV households. While terrestrial broadcasting is expected to keep losing market share across the board, cable is likely to start stagnating and even lose ground in some of the more mature markets, suffering especially from the fact that coverage is naturally conned to the most densely populated areas, and from competition from new networks, namely satellite and IPTV.
Pay-TV still driving growth for now

The chief source of income for the television industrys chief source of income since 2009, pay-TV continues to be the core driving force for now, increasing by 6.8% in 2011. Only the American market is reporting a signicant decline, as much in terms of revenue (+2.5%) as subscribers (+0.6%). With a pay-TV penetration rate of close to 89% of households, the North American market is nearing saturation, and we expect to see growth gures will likely start slipping into the red in 2014. Everywhere else, the growth outlook is positive, especially in Latin America and in Africa and the Middle East. Europe, and Western Europe in particular, is nevertheless expected to follow the same trajectory as North America. In both these regions, competition from online services, notably those delivered over connected television, is expected to start having a real impact in 2014-2015 drawing subscribers away from pay-TV services and giving advertisers a reason to shift their spending to new TV platforms.
Disparate levels of digitisation

Both cable and terrestrial are paying for lagging behind in their digitisation. Whereas 98% of satellite networks have been digitised, 56% of cable households and 77% of terrestrial households are still analogue, which means they have access to a smaller number of channels and a lesser picture quality. More than 80% of households in the European Union and 88% of North American households have access to a digital offering, either free-to-air or paid, compared to only 35% in Asia-Pacic, 45% in Africa and the Middle East and 55% in Latin America. All the same, things are progressing quickly: while North America and the EU accounted for 55% of the worlds digital households in 2006, that gure had fallen to 40% by 2011. > Contact: f.leborgne@idate.org
Markets and players
Terrestrial broadcasting losing steam

Of course pay-TV services are increasing their market share at the expense of the main source of free TV programming, namely terrestrial broadcasting. While 50% of the globes world TV-owning households were using
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Global TV services market by region
Source: IDATE
Markets
Global TV services market growth by segment
Billion 350 300 250 200 150 100 50 0 2009 2010 2011 2012 Subscription fees Advertising revenues Public fundings
Source: IDATE
Players
The worlds top media companies
DirecTV Walt Disney Time Warner News Corp.* Comcast NBC Universal Viacom Dish Network ARD** BSkyB** 0
+11.8% +6.8% +5.3% -6.4% +2.5% +3.6% -1.6% +8.3% +2.5% +13.2% 5 10 15 20 Billion
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Note: 2010 audiovisual sales & growth 2009-2010 (%) * fiscal year ended June 30, 2010 ** 2009 fiscal year
Source: IDATE
Television services
2.7
Consumer electronics
Caught in a vice
Consumer electronic sales1 increased at roughly the same pace in 2011 as they had in the previous year (4%), conrming that the sector is on solid ground. When we take a closer examination, however, we see shows that this average rate of growth hides very widely varying regional trajectories and, at least in the most advanced regions, the consumers swift consumer adoption of multipurpose Internet-ready devices. This trend is not enough, especially not in Europe, to offset declining revenue. So the market is being sustained chiey by emerging economies where equipment levels still have tremendous room to grow. Indeed, given the still limited development of digital access (broadband) and broadcasting (DTT, cable and satellite) networks in these countries, the bulk of the devices being sold are not Internet-ready. It is the swift development of mobile networks and the coinciding outlook for affordably-priced smartphones (the digital Swiss army knife) are nevertheless changing the game. In developed markets, the situation is playing out very differently, although all are losing momentum. Sales revenue dropped by close to 5% in the US and Canada in 2011, and the North American share of global revenue dropped below 25% for the rst time ever. Home video equipment, which includes televisions along with cameras and camcorders, was especially hard hit, reporting -8% to -14% decreases in sales revenue, whereas video game consoles and embedded devices (GPS or built-in video systems for cars) fared quite well. plummeted by more than 20% in Italy, the UK, Spain and the Netherlands, and by close to 10% in France, the second half of the year remained tense, with losses dropping further still in France. Of all the major markets in the region, only Germany managed to stay the course and even then it was more or less. In terms of volume, sales in the core segments were not necessarily down but the impact of lower prices was keenly felt. In France, for instance, television sales reached 8.7 million units in 2011, which is 200,000 more than the previous year and a record high but, despite the popularity of new generation units (LED, and an encouraging start for 3D sets), market value dropped by 10%. Analysts believe the market enjoyed a one-off high last year due to the analogue broadcasting switch-off, and that any future growth in sales revenue will necessarily be driven by the popularity of large screens and the adoption of connected televisions, while unit sales will be sustained by users buying multiple sets.
and substitution
The growing popularity of multi-purpose devices, such as DVRs and new-generation game consoles (see section on the connected home) is also pulling down sales for veteran audio and video peripherals. Users are replacing these classic devices with IT and telecom hardware i.e. smartphones and tablets , in addition to IP boxes and DVRs. And, nally, in Japan, if the impact that of the terrible catastrophe of March 2011 had on the consumer electronics market was apparently short-lived and relatively minor, that market nonetheless still continues to feel the effects of structural shifts that are causing a strain in all of the worlds advanced markets.
Markets and players
European market suffering from shrinking prices

The European market shrank further still in 2011. After a very bleak rst six months, during which sales revenue
1. Audio-video equipment, for the most part, as most other consumer electronics devices, are included in telecommunications (xed and mobile phones, IP boxes) or IT (home PC, both desktop and laptop in all their different permutations).
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Consumer electronics market in the US

Billion $ In-home technologies* In-vehicle technologies Anywhere technologies** CE enhancements Total 2007 35 12 36 19 102 2008 37 13 40 20 110 2009 34 8 38 19 100 2010 31 9 41 20 100 2011 28 9 38 20 96 2012 27 10 38 20 95
* excluding home IT (PC, printers) ** excl. portable communication (mobile handsets, smartphones)
Source: CEA
The TV market has reached its peak in France

Growth of TV sales in France, 2005-2012
Millions 9
6 low growth scenario high growth scenario
0 2005 2006 2007 2008 2009 2010 2011 2012
Source: Simavelec
Very disparate equipment levels in TV homes

% of TV homes equipped with
100%
53
80% 60%
Europe USA Japan
40%
20%
0% Flat screen TV HDTV DVD player/recorder DVR Blu-ray player
Source: Screen Digest, IP Network
www.idate.org
Consumer electronics
2.8
Internet services
Strong growth despite the crisis
The Internet services market is thriving. It is a relatively young market, so still has a lot of room to grow in terms of value. The revenue generated by the sale of Internet access products still outweighs revenue earned on services strictly speaking. However, with the rise of Web 2.0 services, and social networking sites in particular, along with the mobile Internet, apps and online video combined with the already established and monetised search, calling and e-commerce markets, the Internet services sector is booming and expected to overtake the access market in the coming years. services with a roughly 30% share of the market (20% in Japan), then e-commerce with only around 7% to 10%. There are some specically regional trends, however, such as the relative signicance of e-commerce in the EU-27 (10% of the market), of content-based services in the US and of software-based services in Japan. Taking the market as a whole, the United States led the way in 2011 with earnings of 51 billion EUR, followed by the EU-27 at close to 37 billion EUR, then Japan whose market was worth just over 16 billion EUR last year. In terms of relative value, however, although the United States leads the way here as well, with 154 EUR per capita, it is Japan that is in holds second spot with 126 EUR, well ahead of the EU-27 at 72 EUR per capita.
Internet services segmentation

IDATE denes the Internet services market as the sum of the following segments: software-based services and applications, which include not only SaaS/cloud computing and Web services, but also the Internet of things and mobile software; content-based services and applications: both online and mobile content, free and paid; e-commerce, through the value-added provided by the Internet and not the total value of the goods and services sold online. Software and content-based services have two main sources of income: advertising and paid services. Online search, for instance, which is a software-based service, earns all of its income from advertising, whereas cloud computing, which is also software-based, earns its income from charging users for the service. Meanwhile, social networking sites generate their earnings from both sources of income. Although they are primarily adfunded, they can also earn direct revenue from the sale of virtual goods that are used on the site.
All Internet services segments growing steadily

A further breakdown of software-based services shows that search and cloud computing accounted for the majority of revenue in the EU-27 in 2011, generating 35% and 34% respectively. Paid gaming came in second with 16%, followed by social networking at 6% and paid mobile apps at 4% with other online advertising accounting for the remaining 5% of income. Looking at contentbased services, video accounts for more than half (53%) of the segments revenue, followed by print media which generates 28%, then music and e-books with 12% and 7%, respectively. And each every one of these markets is enjoying very healthy growth. Online videos ad revenue increased by an annual average of 95% annually between 2009 and 2011, for instance, while the revenue earned by paid services climbed by 94% a year on average between 2007 and 2011. Meanwhile the markets two main market segments, namely search and cloud computing, have enjoyed a CAGR of 30% between 2006 and 2011 for the former, and 28% between 2008 and 2011 for the latter.
Markets and players
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Software-based services the prime source of value

When comparing the various online service markets, we it can be seen that software-based services still have a roughly 60% market share in the United States and the EU-27, and 73% in Japan. Next come content-based
> Contact: v.bonneau@idate.org
Internet services market in selected countries, in 2010

Billion Software-based services Content-based services E-commerce margin Total USA 25.9 8.6 3.2 37.7 EU-27 18.2 5.3 3.2 26.7 Japan 9.8 2.3 1.1 13.2
Source: IDATE
Stronger productivity for Internet services in the US

Internet services revenue per capita in 2010
35 30 25 20 15 10 5 0 USA EU-27 Japan Content-based services Software-based services
Source: IDATE
Search, video and cloud computing by far the Webs biggest earners
Breakdown of Internet services revenue in Europe in 2010
Software-based services
5%
Content-based services
55
4% 6% Search Saas/Cloud computing Games (paid services) Social networks Paid mobile applications Other online advertising 12% 35% Video Press Music E-book 28% 53% 7%
16%
Source: IDATE
www.idate.org
Internet services
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DigiWorld markets by region
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III
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Geographical shifts: just the way it is?
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North America leads the charge, more strongly than ever North America alone accounts for 30% of the all DigiWorld markets, which is just 0.5 points less than in 2010. The overall growth rate of the ICT industry, 2.7%, in 2011 is well below the 3.8% of the previous year. The IT, hardware, software and services markets are the chief driving forces of the ICT industry in North America, enjoying a healthier momentum than other sectors of the DigiWorld last year. This has only served to consolidate their inuence which was already stronger in North America than anywhere else in the world. At 42%, these segments are by far the largest income earners, ahead of telecommunications (36%) which is the top earner in the rest of the world. North America also stands
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while Europe continues to slide Although on a downwards slide, Europe is still the number two region in terms of revenue, accounting for close to 28% of the global market but is now on equal footing with Asia-Pacic. Of course, it is hard to compare two such different regions. It nevertheless remains that European markets have been steadily losing ground on the
Introduction
he ongoing shift in regional power between DigiWorld markets that got underway early in the 2000s is nowadays increasingly driven by structural inuences, having already had an accelerating jolt from the global nancial meltdown. In 2011, emerging regions increased their share of the global ICT market by close to two points, up to 32.2%, thanks to a higher growth rate than advanced regions. After levelling off slightly during the early part of the recovery in 2010, the gap widened once again last year, with emerging regions reporting 10.7% growth compared to only 1.5% for developed regions. A closer look, nevertheless, reveals sizeable nuances on both sides: in advanced regions, Europe is again lagging behind North America. This was already the case in 2010 and was truer still last year, with revenue growth dropping on both sides of the pond but down to less than 1% in Europe in 2011. Accounting for more than two thirds of the world market, advanced regions still have a solid inuence over global trends. Their relative contribution to ICT sector sales still outweighs their economic weight: in 2011, the combined GDP of advanced economies represented just under 64% of global GDP.
out for having a very well developed television market, generating 12% of DigiWorld revenue, even though it suffered signicantly in 2011 from pressures in the pay-TV market. Although the telecom market generates a smaller percentage of income than it does in the rest of the world, it is still one of the worlds largest in terms of volume. This is true as well on the technological front, especially in the mobile segment where LTE networks are already covering 50% of the American population, and where close to 42% of mobile users had a smartphone at the end of 2011. Consumption levels are high as well, not only in calling minutes but especially when it comes to data, with the momentum in the North American market helping to drive a steady rise in revenue in areas where European markets appear to have stalled. In the mid-2000s, mobile services revenue in the United States was growing steadily, by ve to six points more than in Europe: in 2011, growth in the US stood at 4.5%, while on the other side of the pond average growth rates shrank by an average 0.5%. The equipment market also got a real boost from North American telcos investments, even though a lot of their money in 2011 was spent on acquiring spectrum. Handset sales are skyrocketing, to such an extent that the leading telco subsidies, especially for smartphones, have been a real drain on cash ow. Meanwhile, aside from handsets and computers/tablets, the consumer electronics (CE) market suffered a real setback of close to 5% last year, in large part due to plummeting prices, especially for at screen TVs.
3
global stage, dropping close to a point over the past two years, and reporting virtually zero growth in 2011. In the largest markets in Western Europe, growth in two countries has actually slipped into the red: Italy for the third year in a row, and Spain, after enjoying a brief respite in 2010. At the other end of the spectrum, Germany has climbed back to more than 2% growth. Excluding IT, whose growth has been steady (4% for hardware) and even increasing in the software and services (by 2.9% compared to 0.8%) in 2010, all DigiWorld sectors are pulling the European market down. Even though there has not been a massive difference from year to year, telecom services are hugely inuential there: rst, because they account for close to 36% of the entire ICT market and, second, because even a slight decrease hurts this sector that is already in the red (-0.8% in 2011). Another sector that had a very tough time last year is consumer electronics. The CE situation is especially worrisome its 8% decrease in revenue comes despite a signicant increase in unit sales. In addition to growing pressure on prices, also being felt in North America, a portion of sales are being lost to other devices, and especially to handsets which are increasingly feature-rich and putting such unitaskers as portable MP3 players and GPS devices out of business. Meanwhile, TV services are still major breadwinners and appear to be back on track, after having played catch-up in 2010, reporting 4% growth and a steady momentum in 2011. This is thanks especially to pay-TV subscriptions and less to licensing fees which, although they account for close to a quarter of sector revenue, are largely conned to Europe. Asia is an especially disparate region, with a heavy representation in its advanced markets, namely Japan, South Korea, Australia and New Zealand. Together they account for half of DigiWorld markets revenue in that part of the world, but their momentum is agging and even moving into the red. This is especially true of Japan whose ICT markets have been shrinking steadily since the mid-2000s. The many faces of emerging markets On the other side are developing countries which continue to post very solid growth rates: their top two regional representatives, China and India, even enjoyed accelerated ICT market growth in 2011 of 13% and more than 15%, respectively. At this rate, China will become the worlds second largest market by 2015, still well behind the United States but pulling ahead of Japan. Alongside these two regional titans, a number of smaller Asian markets are enjoying equally spectacular growth, sharing several features with China and India. One perfect case in point is Vietnam whose mobile customer base has grown by close to seven times over the past ve years, to reach 133.5 million at the end of 2011, of which 10% are 3G customers. Licences to perform LTE trials were issued back in 2010. Of course, ARPU levels are a far cry from are seen in the most advanced markets mobile retail ARPU in India has fallen below 1.50 EUR a month but the massive inux of new customers is more than compensating and, more signicantly, is allowing telcos in these countries to generate positive margins despite tiny per-customer revenue. The situation in Latin America is somewhat different. It includes telecom markets that have been liberalised for 15 to 20 years now in a great many countries, which makes them more mature markets with naturally lower growth rates that that found in Asia. The overall state of the economy is nonetheless sustaining demand, as much for IT from the business segment as for handsets and communication and entertainment services from consumer segment. Television services grew more than 50% from 2008 to 2011, spurred by pay-TV whose revenue almost doubled during that period: the popularity of the small screen has also boosted consumer electronics sales.
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Finally there is the Africa and Middle East region which still has real potential to grow, given the present low equipment levels in virtually every category. Even in the area of mobiles, which are often cited as an example of these countries ability to embrace new technologies, the 600 million SIM cards inventoried in Africa still translate into only three out of 10 inhabitants with a cellphone, of which very few have a smartphone. The economic and political situation in very numerous countries in the region is still fragile, and a cautious approach is called for regarding any forecasts for the medium term despite (or because of?) the role that communication
technologies have played in many of the uprisings that have occurred there since the start of 2011. All in all, while it is true that the balance of power will continue to shift in favour of emerging markets, the rate and scope of the shift, and especially how it shapes up within the two sides, is still up for grabs: has Europe denitively lost its lead to the United States? Will Africa manage to live up to its potential? More broadly, will local ICT markets continue to have distinctive features, or will current differences gradually disappear?
Didier POUILLOT
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Introduction
3.1

Recovery conrmed, except in Europe
Shift in the balance of power slowly accelerating
As in previous years, the overall steady growth rate in 2011 hides very disparate realities in the different regions. European markets were especially sluggish last year, reporting less than 1% growth on average, which also includes negative growth for countries like Italy and Spain, and for sectors such as telecommunications and especially CE. The overall growth momentum in North America is slight (+2.7%) but even slighter than in 2010, especially in the consumer electronics market. The rest of the world fared better, with most emerging markets still posting double-digit growth. Despite the bleak situation in Japan which in 2010 enjoyed the sole (very meagre) increase of the past ve years the Asia-Pacic region is powering forward thanks to China and India, and to a lesser degree thanks to newly industrialised and smaller developing nations such as Vietnam and Malaysia. Latin America and the Africa and Middle East region are still enjoying solid growth: over 8% and 10%, respectively. These gaps in growth rates are driving a slow shift in the balance of power between the regions. Although advanced economies as a whole encompassing Europe, North America and the industrialised countries of Asia-Pacic still account for close to 68% of the global market, they did lose close to two points in 2011, and have slipped from 75% in 2007. The global recession thus really serves to accentuate the structural changes occurring naturally in the regions. in the various regions. Average per-capita spending on ICT services and equipment in North America stands around just over 2,600 EUR, and rising steadily (+1.5% in 2011, following +2.3% in 2010), with among the highest equipment levels of anywhere in the world: 70% of households have broadband access, around 40% of mobile customers have a smartphone and close to 90% of TV households have a digital service. In Europe as a whole, average per-capita spending rose a mere 0.7% compared to 2010, up to 1,091 EUR. The continent naturally encompasses very different national situations, but even in looking solely at the ve big Western European markets Germany, France, the UK, Italy and Spain then per-capita spending is still only 1,675 EUR on average, or two thirds what it is in North America. Furthermore it decreased in 2011, with the drop in large part attributable to the gloomy situation in Spain and Italy. With per-capita spending of more than 2,450 EUR, Japan is closer to North America, and home to very high equipment levels. These gures are naturally much lower in emerging countries, rst because of proportionately smaller customer bases, but especially because of much lower percustomer spending which especially when it comes to services is largely due to the standard of living. Average per-capita spending in Asia-Pacic is a mere 120 EUR, but has increased by more than 10% annually for the past two years. Average per-capita spending in Latin America stands at around 470 EUR and at just over 150 EUR in the Africa and Middle East region, in both cases having increased by 7% in 2011.
Average spending ranges from 2,600 EUR to 120 EUR depending on the region
This shift is not, however, erasing the huge gaps in equipment levels, and especially in customer spending
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Billion North America Europe Asia/Pacic Latin America Africa/Middle East World 2009 868 847 725 224 148 2 813 2010 904 861 771 245 163 2 944 2011 931 872 825 263 179 3 069 2012 960 883 880 280 194 3 197 2015 1 008 946 1 067 335 241 3 598
Source: IDATE
North American markets still out front

Breakdown of DigiWorld markets in 2011, by region
6% 9% 30%
North America Europe Asia/Pacific Latin America 27% Africa/Middle East
28%
Source: IDATE
but growth coming from Asia/Pacic

DigiWorld markets contribution to growth, by region
Billion 150 120 90 North America 60 30 0 -30 -60 -90 2008-2009 2009-2010 2010-2011 Europe Asia/Pacific Latin America Africa/Middle East
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Source: IDATE
3.2
DigiWorld markets in North America

Back to normal?
The North American share of the global ICT market shrank again in 2011, down to just over 30%. It is still the worlds largest earner, ahead of Asia-Pacic and Europe which is remarkable for a region that accounts for 25% of global GDP and only 5% of the worlds population. More signicant still, of all advanced economies, it is the one that has enjoyed the strongest recovery since 2009: +3.8% in 2010 and +2.7% in 2011, and this in virtually all segments of the DigiWorld. Even those sectors that are reporting very slight growth, such as telecommunications services which were up by a mere 1.1% in 2011, and those posting negative growth (-4.8% for CE), are all outperforming Europe as a whole and Japan. The specic features of the North American ICT markets include the overrepresentation of IT, especially software and services, and TV to a lesser extent. Telecom services account for a smaller share of income than they do in any other region, including Europe, despite being very mature and boasting high ARPU. In fact, the multiple handset phenomenon is less common in North America than it is in other parts of the world 90% of North American customers are pay-as-you-go while more than 50% of Americas broadband customers access the Web via cable, and the TV component of triple play bundles is still supplied by legacy systems for the most part, and not by IPTV solutions. sales have been at. Although performing better than their European counterparts in terms of relative value, the top American telcos are being very careful with their spending. Growth for IT hardware and systems is still high, buoyed by a replacement cycle that the recession pushed back two years. On a bleaker note, consumer electronics posted a noticeable decrease of around 5%, on the heels of a very slight recovery in 2010, and the markets value appears caught in an inexorable decline.
Revolving trends in services

Over in the services sector, it is telecom services that are performing the worst due in large part to huge pressure on landline calling. Mobile services are still riding high, with relatively steady growth thanks to data services, while the broadband market, whose customer growth rate is shrinking automatically, is nevertheless enjoying a steady rise in average revenue per user spurred in particular by the deployment of superfast access and associated premium solutions. Growth for IT services and software stepped up in 2011, no doubt reecting the desire of businesses to take back control and improve their management systems a trend that goes hand-in-hand with the above-mentioned hardware replacement cycle. The TV services market has been struck by a dramatic setback, however, after enjoying a boost from a revived advertising market in 2010. This sharp decrease in growth is the sign of a market grappling with a new set of competitive pressures, with telcos as the chief culprits, and this in an already saturated pay-TV market and erce rivalry with the Web for advertising dollars.
Slower growth in equipment markets

After spending 2010 catching up, North American equipment markets posted lower growth rates in 2011. In the telecom sector, while device sales have been sustained by the popularity of smartphones, network equipment
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Billion Telecom services Telecom equipment IT software and services IT equipment TV services Consumer electronics Total 2009 260 58 275 82 108 82 865 2010 264 63 282 88 117 83 897 2011 267 65 295 94 121 79 921 2012 271 68 310 98 125 78 950 2015 288 74 350 91 124 74 1 000
Source: IDATE
Advanced IT markets
Breakdown of DigiWorld markets in North America by segment, in 2011
9%
13% Telecom services Telecom equipment IT software and services IT equipment 10% TV services Consumer electronics
29%
7%
32%
Source: IDATE
contributing to growth more than ever before

Annual growth of DigiWorld markets in North America, by segment
6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% 2008-2009 2009-2010 2010-2011 Telecom IT Media Total
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Source: IDATE
3.3
DigiWorld markets in Europe

Gloomier and gloomier
DigiWorld markets grew by a mere 1% in Europe in 2011, which is by far the weakest performance of any region. Down slightly compared to average growth rates the year before, the slim progress in achieved in 2011 does hide some considerable adjustments that come to light upon closer inspection. While the momentum in telecom markets has ramped up only slightly, with meagre growth rates in both 2010 and 2011, and even negative when looking at services, a stronger recovery can be seen in IT service markets and steadier progress in hardware. One outcome of these trends is that the balance of power between telecom and IT markets continues to shift in Europe, with telecommunications now accounting for 42% of the ICT market, and IT for 40%. The European TV and consumer electronics markets are both reporting a dramatic drop in growth rates, which has translated into real losses for the industry. With the sector as a whole on a downwards slide, the European market share of the global DigiWorld has shrunk by close to one point annually for the past two years, falling to 27.7% in 2011. 2010, then took a turn for the worse last year. This can be attributed in large part to the situation in the French telecom services market where growth tumbled from 0.8% in 2010 to -2.4% in 2011. The resulting trepidation of telcos to spend naturally had a negative impact on the equipment market. The French ICT market as a whole grew by less than 0.5% in 2011, which is still better than most of the regions largest markets, aside from Germany, but is by no means exceptional.
in a European market that is losing its footing

Europe as a whole is being outperformed by all other regions, in all ICT sectors except television where it is faring better than North America. Even here, the regions relatively steady growth is due chiey to the healthy momentum in Eastern Europe. The poor performance of European markets compared to the rest of the world was already visible in 2010, and the gap has remained at just over three points for the past two years. Not all sectors, however, are following the same trajectory, with weak performances for telecom services and especially consumer electronics, but the gap is narrowing more or less in the four other sectors. In most instances, however, it has been the signicant decrease in global market growth in a given sector that has allowed Europe to recover somewhat, rather than any home-grown impetus. The only exception here is IT services which enjoyed a sizeable recovery in 2011, with a growth rate that rose from 0.8% in 2010 to 2.9% last year.
The end of the French exception

In addition to disparate situations in the sectors, European markets have also been behaving very differently in recent months. Some, notably Greece and Spain, have been falling deeper into recession, whilst others have inched towards recovery, namely Germany and the UK to a lesser extent, and one particular case, namely France. After weathering the nancial meltdown relatively well, the French ICT market enjoyed a solid 3.1% increase in
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Billion Telecom services Telecom equipment IT software and services IT equipment TV services Consumer electronics Total 2009 305 56 230 93 80 66 829 2010 304 57 232 97 86 66 842 2011 301 59 239 101 89 61 849 2012 302 62 244 102 93 60 862 2015 315 71 275 105 103 54 923
Source: IDATE
Telecom markets leading the charge

Breakdown of DigiWorld markets in Europe by segment, in 2011
7%
11% 35% Telecom services Telecom equipment 12% IT software and services IT equipment TV services Consumer electronics
7% 28%
Source: IDATE
dragging down the market

Annual growth of DigiWorld markets in Europe, by segment
5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% -8% 2008-2009 2009-2010 2010-2011 Telecom IT Media Total
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Source: IDATE
3.4
DigiWorld markets in Asia-Pacic (1/2)

Still strong potential
ICT market growth in the Asia-Pacic region slowed slightly in 2011, but held steady at +6.3%. The decrease is due primarily to trends in two very different sectors: on the one hand, telecom equipment which enjoyed extremely strong growth in 2010 and drove the regional DigiWorld industry forward that year, before falling back to a more reasonable rate of growth in 2011 (+6.5%). On the other hand is the consumer electronics sector whose growth fell to 0% last year. The momentum in other sectors has remained solid, offering proof of the huge needs still left to ll, at least in the regions emerging economies (see below). Although their decline had been less dramatic, revenue growth atlined last year in other DigiWorld sectors all of which enjoyed a slight recovery in 2010, with IT hardware and TV services getting the heaviest bump. The economic situation, further aggravated by the severe natural disasters that shook the country early last year, is of course partly to blame for these poor performances, with the Japanese GDP having shrunk by 2%. As a result, the Asia-Pacic region share of DigiWorld markets has shrunk from 41.2% in 2009 to 36.6% in 2011.
even to the regions other advanced economies

The South Korean market seems to be under less pressure. Telecom services, for instance, are growing at a lesser pace but have been gradually getting back on track since 2009, with growth in 2011 estimated at 1.7% and expected to starting climbing in the near future. Much like Japan, South Korea is a frontrunner in new generation networks and services, spurred by a political will and sustained by a very solid industrial fabric. In terms of government policies, also worth citing are the national programmes that have got underway in several other advanced countries in the region, particularly those devoted to ultra-fast broadband rollouts. The prime example is the Australian NBN1 which aims to build a single nationwide infrastructure delivering connection speeds ranging from 12 Mbps to 1 Gbps depending on the technologies employed, and at a cost estimated at around 30 billion EUR.
1. The National Broadband Network is a government initiative to build a superfast broadband network and resell access (bre, wireline and satellite) to private sector operators.
Japan losing ground

The markets are much less dynamic in the regions advanced countries, however, and singularly in Japan. The Japanese telecom services market has not grown at all since the mid-2000s, in fact on the contrary, revenue dropped by more than 10% between 2006 and 2011. This is not a sign that equipment or consumption levels are declining there: Japan continues to be a frontrunner in the mobile Internet, with a usage rate among the highest in the world, and is still by far the country with the most homes passed for bre access. Virtually the whole of Japan is covered by now, with rate of penetration that stands at 42%: 46 million premises have been passed for FTTH, or a fth of the global total. Price decreases, usually for the sake of competition, have naturally brought down ARPU. Still, with average per-customer revenue of around 840 EUR for telecom services alone, Japan is still home to one of the highest levels of customer spending. To compare: ARPU in the United States stands at 760 EUR.
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DigiWorld markets in Asia-Pacic

Billion Telecom services Telecom equipment IT software and services IT equipment TV services Consumer electronics Total 2009 303 72 132 84 63 88 742 2010 314 79 138 93 69 98 792 2011 333 92 144 102 74 103 849 2012 356 98 155 112 80 103 903 2015 418 138 194 135 95 106 1 087
Source: IDATE
A slowly evolving structure

Breakdown of DigiWorld markets in Asia-Pacic by segment, in 2011
12%
9% Telecom services Telecom equipment IT software and services IT equipment 12% TV services Consumer electronics 39%
17% 11%
Source: IDATE
for fast-growing markets

Annual growth of DigiWorld markets in Asia-Pacic, by segment
12% 10% 8% 6% 4% 2% 0% -2% -4% 2008-2009 2009-2010 2010-2011
69
Telecom IT Media Total
Source: IDATE
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3.5

Growth still steady in emerging economies
The regions emerging markets, with China and India leading the charge, are back on track, once again posting double-digit growth last year. in India: 4.9% compared to 4.3% in China. A steady decrease in this gure is discernible over time which, as in advanced countries, underscores the relationship between ICT and growth. Second, the Indian market growth rate has been consistently higher than that of China over the past several years, both in ICT sectors and in the economy as a whole. Lastly, looking specically at ICT markets, India is reporting spectacular rates of increase in terms of customer numbers especially in telecommunications where the mobile customer base has gone from 347 million at the end of 2008 to 929 million at the end of 2011, which means close to 170% growth during that time. More impressive still is the net increase of 582 million customers in three years or more than 16 million a month, on average. Of course, it is also the case that the already low average per-user revenue has continued to drop over time: mobile retail ARPU slipped below 1.50 EUR a month in 2010, and landline access is still very little developed. On the whole, however, the Indian telecom services market is the one reporting the highest increase in revenue: a very respectable 16% in 2011. In addition to these two giants, a number of other emerging countries in the region have been experiencing solid rates of increase in ICT equipment and usage levels since the mid-2000s. The rate of mobile penetration is close to or over 100% in a number of these markets, with a special nod going to Vietnam and its 133.5 million mobile customers at the end of 2011, which translates into a density of close to 150%. The situation is much more disparate when looking at xed broadband access where, trailing behind Malaysia whose equipment levels are roughly the same as in China, and well behind Thailand and Vietnam, the situation in most of the regions other emerging countries is closer to that found in India.
Accelerated growth in China

China is in fact reporting an accelerated rate of growth for 2011, up to 13%. The telecom equipment market has enjoyed an especially strong recovery, with annual growth of around 20%. Equipment levels are rising, for mobile phones of course with 140 million new customers in 2011 but not only this: broadband and superfast broadband access networks are also developing at a spectacular pace. At the end of 2011, there were 101 million premises passed for FTTH/B, for a subscriber base of close to 21 million out of a total broadband customer base of 150 million. The services market is growing less dramatically, a sign of ongoing pressure on ARPU: in the mobile market, revenue has dropped by an average 4% to 5% over the past three years, compared to 10% to 12% for landline calling which is being offset to some extent by the rise of broadband access. IT markets, both services and hardware, are very dynamic, still boasting annual growth rates of around 20%, whereas media, TV services and consumer electronics have slowed signicantly due, as it is everywhere else, to the impact of substitution with TV losing out to the Web in particular. The decrease in China is nowhere near as dramatic as it is in the West, however, with growth rates still hovering around 10%: slightly more for TV services and slightly less for CE.
but still behind India

The regions second largest emerging market in terms of revenue, India, still trails behind with a market worth roughly one third that of China. There are, nevertheless, some three indicators that add some nuance to this gap. First, the DigiWorld market share of GDP is slightly higher
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Geography of DigiWorld markets in the Asia-Pacic zone

Billion Japan China India Other countries Total 2009 306 183 53 200 742 2010 312 203 62 215 792 2011 311 229 71 238 849 2012 314 253 79 257 903 2015 325 327 117 318 1 087
Source: IDATE
Chinese and Indian markets

Breakdown of DigiWorld markets in Asia-Pacic by country, in 2011
28%
37% Japan China India Other countries 8%
27%
Source: IDATE
still Asias powerhouses

Annual growth of DigiWorld markets in Asia-Pacic, by country
20%
71
Japan China
10%
5%
India Other countries
0%
Total
-5%
-10% 2008-2009 2009-2010 2010-2011
Source: IDATE
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15%
3.6
DigiWorld markets in Latin America

Lasting growth
The DigiWorld markets in Latin America made solid progress again in 2011 +8.2% all segments combined and, at 271 billion EUR, their share of the global market grew by 0.3 points to 8.5%. As in 2010, gaps in performance levels between the various sectors were narrow, with each contributing more or less equally to overall growth: the only standouts, and slight in stature at that, were TV services with a remarkable 14.8% growth rate and, down on the bottom rung of the ladder, telecom services at 6%. to expand and upgrade their networks. As it gears up to hosting major international sporting events World Cup Football in 2014 and the Summer Olympics in 2016 Brazil is being especially splashy with its cash. IT markets are also powering ahead, with rates of progress topping 9% in 2011, and this for both hardware and services: spending has kept up with regional economic growth itself in the double digits since 2003, with the sole exception of 2009.
Fruits of market liberalisation

These same telecom markets have nevertheless been progressing steadily over the past 20 years, and account for 45% of the ICT industry revenue in the region, their only rival here being the Middle East and Africa. The early deregulation of the bigger national markets in the late 1980s/early 1990s in primarily Argentina, Mexico and Brazil helped to create a strong momentum in equipment levels. Today, the region boasts particularly high penetration and usage levels: the average mobile density stood at 110% at the end of 2011, with Latin America being home to more than 10% of the global base. Looking at xed broadband access, a few countries, including Argentina, Chile, Mexico and especially Uruguay, are reporting equipment levels close or equal to what we nd in Eastern Europe. Brazil still trails behind in this area, however. After the surge in 2010, telecom equipment markets grew at a lesser pace last year, although still by a healthy 7.6% proof positive of ongoing efforts by operators
A thriving television market

As mentioned earlier, TV services have enjoyed especially strong growth recently, carrying through from previous years, except for the hiccup in 2009. Even taking this bad year into account, the Latin American television services market nevertheless grew by more than 50% between 2008 and 2011 or by 15% annually, on average. It has been sustained by a relatively healthy advertising market, but especially by the phenomenal success of pay-TV: even at the height of the global recession, pay-TV revenue rose by 17% (2009) followed by more than 25% last year. Television generates 11% of the DigiWorld sector revenue in the region, which is close to that fond in the advanced markets of Europe and North America. One corollary of this growing prominence of TV is that consumer electronics are in relatively good shape in Latin America, with a sizeable portion of ICT spending being on TV products, added to which there is still real room for growth in areas where advanced markets have hit their apex.
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Source: IDATE
Still leading edge telecom markets

Breakdown of DigiWorld markets in Latin America by segment, in 2011
13%
11%
Telecom services Telecom equipment IT software and services IT equipment TV services Consumer electronics 44%
9%
10%
Source: IDATE
but growth driven by other sectors

Annual growth of DigiWorld markets in Latin America, by segment
20%
73
Telecom
15%
10%
IT Media
5%
Total
0%
-5% 2008-2009 2009-2010 2010-2011
Source: IDATE
www.idate.org
13%
3.7
DigiWorld markets in Africa-Middle East

Potential remains high
Taken as a whole, the DigiWorld markets of Africa and the Middle East are estimated at 178 billion EUR in 2011, which marks just over 10% growth compared to the year before. This solid progress meant the region gained some weight on the international scene, although it still only accounts for 6% of total revenue worldwide. Added to this, the development gap between on the one hand, North Africa and the entire Middle East, which today concentrate most of the regions ICT markets, especially in terms of income with more than 60% of revenue and barely one third of the population, and, on the other hand, sub-Saharan Africa, excluding South Africa, is still substantial and underscores the tremendous room for growth in the latter group. In terms of momentum, growth rates have consistently been higher in the South, and the gap is widening: the average rate of increase for telecom services revenue in 2011 was around 9% in the north and 12% in the South, and as high as 14% if we remove South Africa from the equation. In the mobile segment, where the two sides are slightly more balanced, growth rates are substantially higher again in the southern part of the region: excluding South Africa, revenue there grew by 15% in 2011 compared to 10% in MENA while, in terms of volume, customer numbers continued to rise by more than 20%.
Can mobile deliver universal access?

If the penetration rate has now climbed to over 60% in Africa as a whole, actual equipment levels are much lower than that, especially because of the trend of using multiple SIM cards: according to the most positive estimates, one out of every three African has a mobile phone. So the market still has tremendous room to growth, rst in terms of new customers and second thanks to the mobile Internet. Enabled by the introduction of affordably priced smartphones (50 to 80 USD), the mobile Internet indeed represents a real opportunity for the development of a broadband market that is currently hampered by the lack (and the high price) of xed access solutions. The other DigiWorld sectors in the region are progressing in various ways. After performing remarkably well in 2010 (+16%), telecom hardware markets were much less dynamic last year, though they still grew by around 10%. IT markets as a whole enjoyed accelerated growth, while media, TV services and consumer electronics grew by slightly less than the year before.
North-South divide is still very strong

Africa and the Middle East continue to be the region where telecom services account for the largest share of the DigiWorld: 47% compared to 44% for Latin America and less than 40% in all the other regions. In terms of its relationship to GDP, however, it is slightly below Latin America. The contrast between North and South is especially visible in this sector. In terms of revenue, the countries of MENA (Middle East/North Africa) still accounted for 62.7% of the regional total in 2011, despite the recent political turmoil in that part of the world, starting with Tunisia, Libya and Egypt. During the chaos, telecommunications networks, and singularly the Internet access they allowed, offered a remedy to the difculties the people had in accessing traditional communication and media networks. In sub-Saharan Africa, South Africa alone accounts for roughly a third of that blocks 37.3% share of the regional total.
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Source: IDATE
Markets sustained by telecoms

Breakdown of DigiWorld markets in Africa-Middle East by segment, in 2011
9%
6%
Telecom services Telecom equipment 12% IT software and services IT equipment TV services Consumer electronics 10% 47%
16%
Source: IDATE
but growth coming from a variety of sources

Annual growth of DigiWorld markets in Africa-Middle East, by segment
12%
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10%
8% Telecom 6% IT Media Total 4%
2%
0%
2008-2009
2009-2010
2010-2011
Source: IDATE
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Fixed and mobile networks go super-fast, while devices swirl in an endless cycle of innovation
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Major transformations underway on wireline and wireless networks Superfast broadband is making its way to access networks, with pipes that are forever expanding. On wireline networks, the switch to optical bre and FTTx in particular appears conned to only a few regions, and ill-suited to developing countries. Some developed countries are betting instead on legacy copper networks to deliver the last mile, using VDSL2 vectoring which can supply 50 Mbps but cannot extend more than 1 km from the cabinet. Mobile infrastructures are being continually upgraded with the deployment of HSPA+ and LTE, which will be followed by LTE-Advanced for high-speed networks. In addition, mobile networks are expected to no longer be burdened by conicting standards, as has been the case with 2G and 3G. This results from LTE and the future LTE-Advanced which the ITU is calling true 4G, delivering 1 Gbps in low mobility and 100 Mbps in high mobility having virtually eclipsed their sole competitor, mobile WiMAX. As a result, future developments for 4G are already taking shape, with the integration of macro-cellular, micro-cellular, femtocell and WiFi networks, along with the functionalities of heterogeneous networks, also known as HetNets. Here, South Korea appears to be one of the driving forces behind 4G and one of the best positioned to usher in 5G further down the road. Meanwhile, Europe will have trouble making up for time lost in largescale LTE rollouts and in making additional spectrum available. Further, there are sizeable disparities between European operators who are investing less than their counterparts in the United States and in a great many Asian markets. Mobile trafc explosion forcing changes to network architecture The most pressing issue today is bringing the needed changes to mobile networks to handle the ongoing surge in data trafc. While video now accounts for the majority of trafc
on all access networks, its optimisation is becoming vital on mobile networks. Cellular network congurations now take optical bre systems into account as bre is being used more and more for backhauling. One shockwave is that, at a time when mobile data trafc is exploding, simply having access to additional spectrum alone will not be enough to handle the need for increased capacity, and the size of network cells will need to be reduced as well. A mobile infrastructure in a large Western European country is made up of between 12,000 and 20,000 base stations, whereas China Mobile has a network of 800,000. These gures are expected to expand tenfold over the coming decade, with the deployment of myriad small cells with a range of only several metres. The growing trend of baseband processing in the cloud is another key change in mobile access systems, even if it is chiey only visible in Asia for now. In addition to the deployment of LTE and the acquisition of additional spectrum, mobile operators are working to better integrate carrier-grade WiFi into their networks to have an efcient means of ofoading trafc. The latest improvements make it possible to integrate WiFi into network management with the same authentication, security and quality of service features. IP continues to change the approach to access: after having accelerated the decline of switched wireline access, IP is now steadily making its way to mobile systems, even if 99% of calling trafc is still handled by packet switching. With the introduction of LTE, VoLTE (Voice over LTE) will be making its way to the United States this year, and so mark the (slow) beginning of the end for packet-switched calling on cellular networks. The transition will nevertheless take ve to ten years, given the roadmaps for LTE rollouts and LTE-compatible handsets.
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Introduction
4
Is a single network inevitable for both high-speed mobile and broadcasting? One of the overriding trends in todays television market is the growing prominence of pay-TV, although premium OTT content will no doubt give it a run for its money. While the latest World Radiocommunication Conference (WRC-12) wrapped up with an agreement to look into a second digital dividend for Europe, Africa and the Middle East in 2015, it is worth wondering about the respective roles that broadcasting and LTE-Advanced networks will play by the end of the decade. In developed countries, TV programmes are broadcast chiey over cable, DSL (IPTV) and satellite networks, while terrestrial broadcasting uses the frequencies best suited to broadband coverage. The question, then, is whether LTE-Advanced will ultimately be able to replace terrestrial broadcasting networks using its broadcast component. It is also worth wondering about the role which wireless broadcasting networks will be given over the next ve years in backing up classic cellular systems. With the failure of MediaFlo in the US, and of mobile TV in general, new projects are popping up in both the United States and Europe, but there is no guarantee they will be successful, especially given mobile operators reluctance to sign deals with new entrants. Increasingly powerful and varied devices The variety of Internet-ready devices is growing in terms of both size and shape, while the devices themselves are getting smarter and taking on a growing array of tasks. 2011 was the year of the smartphone, which meant an accelerated decline for the good old feature phone. Any doubts over the future of tablets were put to rest, and predictions are that they could overtake PC sales in the not too distant future. The market will continue to evolve with the upcoming release of midrange smartphones priced at under 100 EUR; this will usher them into the mass market. Manufacturers market share will be shaken up, and Chinese and Taiwanese players will prove redoubtable rivals in this segment. Samsung which will have the highest mobile handset sales in 2012, overtaking Nokia which is now losing steam is going head-tohead with Apple in the smartphone and tablet segments. Apple rose to the Number Three spot in terms of mobile sales in 2011, pulling ahead of LG which also failed in its bid to enter the smartphone fray. Meanwhile, Nokia, which nds itself in the same boat and which still did not believe in the future of tablets just 18 months ago, appears to have found the glimmer of an answer to its troubles with its rst ever smartphone, the Lumia, born of its collaboration with Microsoft. These two companies will enjoy the support of mobile operators eager to see a third environment develop, alongside Android and Apples iOS. A wide variety of devices populates the home: game consoles, Blu-ray players, multimedia gateways and hard drives, connected TVs, IPTV boxes, M2M modules, wireless routers, to name but a few. The digital home is tending to move towards better integration of the various displays, managing ubiquity and multiple interfaces. ADSL boxes are becoming increasingly feature-rich with the gradual integration of femtocells, gaming capabilities, the ability to manage content sharing between devices and, coming soon, to control a home networking system. These various developments will probably be a good source of growth for operators triple and quadruple play bundles, and wireless access will gradually be incorporated into this environment. Also worth mentioning is that triple play IP boxes, which are always on, are heavy consumers of energy. Providing them with a sleep mode would help make them less of a drain on power resources, which is also an issue with data centres. A thriving sector The effervescence of the access market is reaching a peak as mobile operators work to build ever faster networks, with the range
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Introduction
and variety of devices continually expanding and the Internet becoming increasingly mobile. At a time when calling revenue is down, competition from OTT services is up, and pressure is growing on call termination and roaming charges, the challenge for European cellular operators is how to increase their data services revenue to offset declining calling revenue. A partial response can be found in the major changes that have been introduced over the past two years in the way mobile data trafc is billed. They will accelerate as unlimited data plans gradually disappear and are replaced not only with capped plans and tiered pricing, but also as a further segmentation of prices emerges, according to the type of device (smartphone, tablet, router, M2M or video device) or usage. Innovation in the arena of mobile services will go by way of support for connected devices, creating faster services, cloud computing and embedded telematics systems. Two other main factors in the equation are market consolidation and pooling network resources. Because of declining prot levels,
there could well be an accelerated market consolidation in the European mobile sector, especially in Germany, Italy and Spain, and in the United States, particularly around AT&T and Sprint/Clearwire. A growing number of network sharing agreements will likely emerge, and help bring down the cost of LTE rollouts. Over in the wireline market, mergers can be expected between business-market companies, as illustrated by the interest of Vodafone in Cable & Wireless. This year will also present an opportunity to assess the viability of the wholesale LTE projects of various operators: although LightSquared in the US has lost any chance of entering this segment, due to GPS interference issues, its fellow operator Clearwire along with Yota in Russia is in the process of switching from mobile WiMAX to LTE. Likewise, in an interesting twist, the idea of creating a single shared LTE network in certain developing countries, such as Kenya and Mexico, appears to be taking hold.
Frdric PUJOL
4.1
Wireline access
The inexorable rise of broadband
Dial-up user numbers shrinking steadily
The number of POTS lines is shrinking year by year. The trend that started in advanced countries in North America and Japan in the early 2000s, and two to three years later in Europe and South Korea has been spreading to a number of emerging countries, starting with China and India since the mid-2000s. The base of classic phone lines shrank by more than 10% worldwide between the end of 2005 and the end of 2011, to just under 1.1 billion which translates into 16.4 lines per 100 inhabitants, and an even more dramatic decrease in terms of revenue (27%). In the United States and France, the two countries most affected by this trend, the landline base has decreased by more than 40% in ten years, and this in terms of both user numbers and revenue. This decline is due chiey to users switching to new solutions. Initially, they opted for mobile which delivers more universal access and is more immediately available in regions poorly served by wireline networks, but gradually they also took on board other applications such as VoIP and instant messaging. The growing ubiquity of broadband is helping to amplify the trend, while also opening the way for a much broader array of services (see Chapter 6). is the still sluggish growth in most emerging countries, with the notable exception of China. Over the past few years, China has been singlehandedly responsible for more than a third of global growth, and is now home to over a quarter of the worlds broadband subscribers. In terms of equipment levels, several European countries have caught up with South Korea, the world leader for quite some time: today, over 90% of households in the Netherlands have a broadband connection, while the rate of equipment across Scandinavia stands at around 80% (Eurobarometer survey, March 2011). Among the largest European markets, France and the UK are reporting the highest broadband penetration rates: at close to 70%, France is now on an equal footing with the United States and both are well ahead of Japan.
From broadband to ultra-fast broadband

National markets nevertheless differ on the technological front as well and, as a result, in the connection speeds and services on offer. Close to six out of 10 high-speed connections worldwide are delivered over DSL, a gure that rises to an average 7 out of 10 in Europe. Cable modem is in second place, with a particularly solid foothold in the United States where it accounts for around 50% of broadband connections, and in several countries in Europe, including the Netherlands and Belgium where it has a roughly 40% share of the market. Today, however, deployments are geared more and more to bre, either as upgrades to existing networks switching up to VDSL or FTTLA or with new FTTH/FTTB system rollouts, as detailed in the following section. > Contact: d.pouillot@idate.org
Access and devices
More than one xed broadband connection for every two landlines in 2011
There were an estimated 600 million broadband connections in use around the globe at the end of 2011. The base has practically tripled since 2005, although the rate of increase has been slowing steadily as take-up levels in most industrial countries are already high, which means relatively little room for further growth. Added to this
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Fixed broadband subscribers worldwide
Million subscribers North America Europe France Germany Italy Spain United Kingdom Asia/Pacic China India Japan Latin America Africa/Middle East World 2009 91 155 20 25 12 10 19 188 103 8 32 33 10 477 2010 93 168 21 27 13 11 20 222 126 11 34 39 12 534 2011 96 179 23 28 13 11 21 260 152 14 35 47 16 599 2012 100 195 24 28 14 12 22 304 179 20 36 56 21 676 2015 115 239 27 29 17 14 25 457 242 71 40 85 45 942
Source: IDATE in World telecom services market
The switch to VoIP the French example

Comparative xed voice customer base growth, by type of service
Millions 35
30
25
20
15
10
5 2006 2007 2008 2009 2010 2011
PSTN subscriber lines
Broadband lines with VoIP
Source: IDATE, in World telecom services market
DSL still ahead

Breakdown of xed broadband subscribers worldwide, by technology
2006
283 million subscribers 9% 3% 14% DSL 23% Cable modem FTTH/B Others
(WiMAX, LAN)
2011
600 million subscribers 9%
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59%
DSL Cable modem FTTH/B Others 64% 18%

(WiMAX, LAN)
Source: IDATE inFTTx watch service
Wireline access
4.2
The bre issue

The inevitable future of access networks
In mid-2011, there were more than 112.6 million FTTx subscribers around the globe, which marks a roughly 15% increase since the start of the year. This rate of increase is well below the approximate 39% growth reported during the previous six months which saw a spike in FTTx subscriber numbers in China, although the pace there has since levelled off. FTTH/B continues to be the most widely deployed architecture, accounting for more than 67 million subscribers worldwide, and around 180 million homes passed. Growth could well continue, with FTTN+VDSL connections making real strides in the medium term, if recent announcements from operators investing their hopes in technological developments around VDSL2 are anything to go by. FTTLA (bre to the last amplier), which is being deployed by cable companies, still lags well behind but has real potential to grow, especially in North America where more than 65 million homes can already access this new network. We also nd sizeable disparities within the regions. Whether in Europe or Asia, some countries are making tremendous strides in the area of FTTx rollouts, such as Russia, Ukraine, China and India, while others are progressing much more slowly. On the whole, the most dynamic markets are those where classic broadband networks are not reliable enough to support the services that users want, and especially TV and video. Meanwhile, the more stable markets have reached a certain degree of maturity having achieved peak coverage and penetration rates or are in the midst of a structural phase of establishing a regulatory framework or assessing investment requirements and the like.
The FTTx migration issue

Ultra-fast broadband coverage continued to be a major priority for a number of access providers in 2011, as they prepare to meet a considerable rise in demand. They will truly need to put efcient marketing and sales plans into place very quickly if they are to offset their massive expenditures, as subscriber migration to a superfast service is by no means a foregone conclusion. According to a survey of broadband and ultra-fast broadband subscribers in four countries France, Sweden, Japan and the United States expected price hikes and satisfaction with their current service are, in fact, proving to be major impediments to switching. Furthermore, residential customers tend not to be proactive, and the switch to bre will need to be steered by strong vendor-led marketing campaigns that explain the benets of upgrading to FTTx, other than just having a faster connection think of innovative services and applications, pricing and more even if increased bandwidth remains the chief selling point.
Regional hierarchy unchanged

Asia-Pacic still boasts a comfortable lead over the rest of the world, accounting for 73% of the world FTTH/B subscribers. Japan is still the biggest market with 20.8 million FTTH/B subscribers as of mid-2011, but things are picking up in China which posted 14% growth in the rst half of the year, compared to 5% for Japan. This will no doubt affect national rankings in the not too distant future. Thanks to the healthy growth momentum in the East, combined with solid potential in Russia, Europe comes second in the regional rankings, with more than 10 million FTTH/B subscribers in June 2011. This leaves third place to the United States, home to 7.3 million FTTH/B subscribers and with a more even distribution of the different types of bre access network: FTTN+VDSL accounts for close to 36% of the countrys FTTx connections.
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> Contact: v.chaillou@idate.org
FTTx subscribers worldwide by technology, mid-2011

Source: IDATE in FTTx watch service
Million subscribers North America Western Europe Central & Eastern Europe Asia/Pacic Latin America Africa/Middle East World
FTTH/B 7.4 2.9 7.3 49.5 0.1 0.4 67.5
VDSL 5.1 2.6 0.0 0.5 0.9 0.3 9.4
FTTLA 0.0 3.0 0.7 0.0 0.0 0.0 3.6
FTTx+LAN 0.0 0.2 2.0 30.0 0.0 0.0 32.2
Total FTTx 12.5 8.7 9.9 79.9 1.0 0.7 112.7
FTTH/B nally making headway in Europe

FTTx subscribers in the main regions around the world
Million subscribers 250
200
150
Rest of the World Asia/Pacific
100
Europe North America
50
0 2009 2010 2011 2012 2013 2014 2015
Source: IDATE, in FTTx watch service
Ongoing technical progress

Connection speed by technology
ADSL2+ ~ 10-20 Mbps PON/P2P 100+ Mbps VDSL2 ~ 40 Mbps
85
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FTTB/C VDSL2 Vectoring ~ 100 Mbps CO
FTTN
VDSL2 ~ 40 Mbps
FTTN FTTB/C FTTN VDSL2 ~ 50 Mbps VDSL2 Bonding ~ 80 Mbps
VDSL2 Vectoring ~ 100 Mbps
Source: IDATE, from Alcatel-Lucent
www.idate.org
FTTH
The bre issue
4.3
Mobile access
Momentum interrupted
Equipment levels still rising in emerging markets
Totalling some 6 billion customers at the end of 2011, the world mobile user base grew by 14% during the year, with especially strong rates of increase in emerging economies in Asia-Pacic, Latin America and in the Africa and Middle East region. More than one in three new customers comes from China or India whose penetration levels at the end of 2011 were a very solid 74% and 78%, respectively. Customer numbers in Europe and North America, on the other hand, have been growing at a much slower pace in recent times, largely due to equipment levels there already being very high. These two regions, which accounted for 30% of the worlds mobile customers at the start of 2011, contributed less than 8% of new customers during the year. In several European countries, the morose economic climate only aggravated the decreased growth rate, with some even posting negative growth: in Greece, for instance, cellular customer numbers dropped from 20.8 million at the end of 2009 to 14.4 million at the end of 2011, or by 30% in two years! the steady decrease in average per-minute prices (-13% in France between mid-2009 and mid-2011, for instance) but is further aggravated by a decrease in calling trafc. Not only is individual per-customer trafc decreasing, but so too is mobile calling trafc in general in such countries as the UK, Hungary and New Zealand. On the data services side of things, it is estimated that around 50% of revenue today is earned on text messages a segment where pressure on prices, especially due to high-volume offers, has been weighing on operator income for several years. The huge surge in data trafc has, though, helped to sustain a strong increase in revenue, albeit more so in North America, which is reporting around 20% annual growth, than in Western Europe and developed markets in Asia where growth is closer to 10%.
Increasingly ubiquitous 3G
From a technological standpoint, the switch to 3G has made solid progress. Beyond Japan and South Korea, the two pioneers where 3G is the most common form of cellular access, European and North American markets have made tremendous strides in this area in recent years. This can be put down to the increased coverage since the mid-2000s and, more recently, to the staggering popularity of smartphones: in the United States and the UK especially, the breakdown between 2G and 3G customers was reversed in 2011. In the European Union, more than a third of mobile customers was 3G-equipped at the end of the year. This trend will continue and gradually make its way to those emerging countries that are still trailing behind: in China, for instance, 3G customer numbers more than doubled in 2011 and accounted for 12% of the base by year-end. The pace is relentless: before we can even catch our breath, the rst footsteps of 4G are already making their mark, as detailed in the next section.
The ARPU challenge

The average revenue per user (ARPU) varies a great deal between Asia and the countries of the West, however: although they account for less than 30% of the world mobile customers, advanced markets generate around 60% of all mobile services revenue. Shrinking ARPU is a concern across the board, but not necessarily to the same degree. In emerging markets, the massive inux of low-cost customers automatically brings its own average revenue to such a degree that, in a country like India, it now stands at only just over 2 USD a month. In advanced countries, the focus is more on achieving a balance between calling and data revenue, in other words the extent to which the decline in average calling revenue can be offset by the increased use of data services. This decline in calling revenue is due, rst, to
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> Contact: m.baudry@idate.org
Mobile customers worldwide

Million customers North America Europe Asia/Pacic Latin America Africa/Middle East World 2009 308 978 2 124 508 617 4 535 2010 329 997 2 635 568 735 5 263 2011 345 1 031 3 110 634 865 5 987 2012 359 1 060 3 545 684 981 6 628 2015 387 1 117 4 461 783 1 270 8 017
Source: IDATE
Asia/Pacic gaining weight

Breakdown of mobile customers by region, in 2011 and 2015
2011
6 million customers 14% 6% 16% 17% 11% North America Europe Asia/Pacific Latin America Africa/Middle East 10%
2015
8 million customers 5% 14% North America Europe Asia/Pacific Latin America Africa/Middle East
52%
56%
Proportion of 3G/4G customers in Europe and North America
80% 70% 60% 50% 40% 30% 20% 10% 2008 2009 2010 2011 2012 EU-27 2013 2014 2015
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Mobile access
Switching to 3G and beyond
4.4
LTE (Long Term Evolution)

Coming soon: true 4G
Relatively swift take-off and very healthy growth prospects
After the pioneer launch by TeliaSonera in Stockholm in late 2009 and the rst deployments in 2010, LTE rollouts picked up speed in 2011. By the end of the year, there were more than 9 million LTE subscribers of whom more than half were Verizon Wireless customers in the United States employing more than 30 LTE networks worldwide. The 4G ecosystem is spreading quickly, and over 200 cellular operators are now deploying the technology. There will likely be more than 800 million LTE accounts worldwide by the end of 2016, thanks to conrmed operator interest in long term evolution and in true 4G, LTE-Advanced. The tug will come with massive growth potential in Asia-Pacic led by China and India with TD-LTE, but also South Korea and Japan and increased competition in the United States now that Clearwire, Sprint and Dish have elected to invest heavily in LTE, to be followed by LTE-Advanced starting in 2013. The adoption of 4G in Europe has been slower, with mobile operators investing only gradually, apace with the increase in data trafc. No-one doubts that LTE will dominate the 4G landscape and will overshadow mobile WiMAX, especially since LTE TDD and FDD duplex schemes will cohabitate and complete one another on both networks and devices starting this year. There are nevertheless still some stumbling blocks for LTE, not least the fragmentation of LTE spectrum and, of course, as is the way in the early days of every new generation of mobile system, the lack of compatible devices. Even though a number of LTE-compatible devices have been available since early 2011 smartphones, tablets, dongles, routers, M2M modules manufacturers having been concentrating on the American market, and on supplying Verizon Wireless in particular.
Upsets on the horizon

In terms of spending on mobile network, operators in Europe are working to minimise the impact of LTE, with expenditures that grew by a very slight 2.6% in 2010, whereas over in North America cellcos increased their spending on mobile networks by around 10 billion USD from 2009 to 2012. LTE could give operator income a boost, and new rate plans are being introduced that have raised both bitrates and monthly caps on trafc. In terms of services, telematic and HD video capabilities, along with services in the cloud such as online gaming, will make use of the increased bandwidth supplied by LTE. Further down the road, we can expect to see a broad range of LTE-enabled solutions such as smart metering, home automation and remote surveillance. The wholesale operator model appears bound to emerge with LTE in a number of countries. In developed countries, LightSquared, Dish and Clearwire in the United States, along with Yota in Russia, are all adopting roughly the same business model, with strategies that involve distribution via MVNOs and/or mobile operators. In developing countries, sharing a single LTE infrastructure will enable market players to earn a swift return on their investments.
Access and devices
LTE bolsters technical performances and helps bring down mobile access costs
One of the main reasons mobile operators are deploying LTE is to deliver faster connections up to a maximum 50 to 70 Mbps downstream and to handle the tremendous surge in data trafc. These fourth-generation systems are more spectrum-efcient than 3G, and with LTE-Advanced they are expected to reduce per-Gb prices by 10 times on wireless channels, while supplying even faster connections than LTE. In January 2012, the ITU announced that LTE-Advanced and 802.16m (or WirelessMAN Advanced, the evolution of mobile WiMAX) standards had been accepted as the standards for the next generation of mobile systems, referred to as MT-Advanced or true 4G. They enable bitrates of up to 1 Gbps in low mobility and 100 Mbps in high mobility, with low latency and the ability to use to large channels of up to 100 MHz.
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> Contact: f. pujol@idate.org
LTE subscribers worldwide

Source: IDATE in LTE watch service
Thousands North America Western Europe Central & Eastern Europe Asia/Pacic Latin America Africa/Middle East World
2009 0 1 0 0 0 0 1
2010 70 65 7 2 0 0 144
2011 6 039 1 368 46 1 815 0 126 9 393
2012 31 623 4 816 1 547 9 846 769 883 49 484
2015 139 248 86 405 24 286 165 539 34 770 32 266 482 513
Emergence of LTE in the main geographical regions

LTE commecial rollouts
2009 3GPP WCDMA Operators
2010
2011
2012
2013
TD-SCDMA
3GPP 2 CDMA operators
Sizeable rise in connection speeds

Technical properties of mobile networks
Throughput Format GSM (1 slot) (10 users, freq. reuse=4) GPRS (4 slot) EDGE (4 slot) UMTS (Rel-99) HSDPA (Rel-5) HSDPA (Rel-7) HSDPA (Rel-8) LTE(Rel-8) 4x4 LTE-A (Rel-10) 4x4
Occupied bandwidth
Peak (single user)
Average (10 users/cell)
Cell Edge (10 users/cell)
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1 MHz 4 MHz 4 MHz 5 MHz 5 MHz 5 MHz 10 MHz 20 MHz 20 MHz
9.6 Kbps 81.6 Kbps 236.8 Kbps 384 Kbps 3.6 Mbps 42 Mbps 84 Mbps 300 Mbps 600 Mbps
9.6 Kbps 50 Kbps 70 Kbps 100 Kbps 250 Kbps 350 Kbps 800 Kbps 5.34 Mbps 7.4 Mbps
9.6 Kbps 36.2 Kbps 36.2 Kbps 30 Kbps 80 Kbps 120 Kbps 240 Kbps 1.6 Mbps 2.4 Mbps
Source: Agilent Technologies
LTE (Long Term Evolution)
Source: IDATE
4.5
Mobile handsets
Smartphone: the little growth engine that could
After a sluggish time in 2009, the years 2010 and 2011 were especially kind to the mobile handset market, with unit sales increasing by 15.1% and 12.1%, respectively. This all happened without any real novelty to lend a hand. Smartphones account for a growing percentage of mobile phone sales going from only 20.5% of total sales in 2010, they accounted for 27% of the 1.46 billion mobile phones sold worldwide in 2011, which translates into a 44% increase year-on-year. Although initially conned to advanced markets, the smartphone has been making its way across the globe as economies of scale have enabled manufacturers and component suppliers to lower handset prices, and offer a wider range of price points. We predict that, by 2015, just over 51% of mobile phones sold worldwide will be smartphones. worlds largest supplier of smartphones, ahead of both Apple and Nokia; the new partnership of the latter with Microsoft has yet to bear fruit.
App stores: a still edgling ecosystem

The battle over applications is less clear-cut. The Google Android OS runs more than 46% of the smartphones sold last year, but is still struggling to make a dent in the tablet segment. There Apple reigns supreme with a 60% share of the market, thanks to a stable operating system and a very large community of developers. Although the selection of Android apps has grown considerably, the delayed release of Honeycomb (Android 3.0) for tablets, along with its lack of stability, have punished the development of applications for this new platform. From an economic perspective as well, the relatively different models used by the app stores in terms of payment system, validation process and in-app purchase are some of reasons why Google will have a harder time turning a prot. For applications that are available for both systems, it is estimated that the iOS version will earn four times more revenue, on average, than its Android equivalent. This question of protability, along with the issue of protecting both the device and the interests of rights holders from hacking and copyright violations, are among the core challenges for the platforms development. They all lie within an environment where business models are not yet set in stone, notably when distributing content through recurring payment schemes. > Contact: b.carle@idate.org
An industry in upheaval: veterans under pressure

This deep-seated change in the marketplace has also resulted in economic upheavals in the industry, marginalising veteran players. This has been both in the arena of hardware the troubles that have hit Palm, Nokia, LG and RIM come to mind and in that of services where, thanks to their role as retailers and their control over the network powering the handsets, operators have traditionally enjoyed a position of strength. On the manufacturer side of the equation, Samsung appears to have been the big winner this year, well exceeding its initial sales target of 30 million smartphones. With an outstanding performance of more than 75 million units sold, the South Korean manufacturer is now the
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Access and devices
Mobile handset sales worldwide

Million units North America Europe Asia/Pacic Latin America Africa/Middle East World 2009 180 260 454 120 119 1 133 2010 186 287 528 159 144 1 304 2011 182 289 654 164 172 1 461 2012 185 305 670 173 166 1 500 2015 202 325 797 174 182 1 680
Source : IDATE estimates
Smartphones redrawing the competitive landscape

Market share for the globes top mobile handset suppliers (all types combined)
100%
Others* Sony Ericsson
80%
Motorola HTC
60%
RIM ZTE
40%
Apple LG
20%
Samsung Nokia
0% 2007 2008 2009 2010 2011
* in 2011, development of local suppliers from emerging markets, esp. India & China
Source : IDATE estimates
Huge surge in available applications

Number of applications available, by platform
91
600 000 500 000 End 2008 400 000 300 000 200 000 100 000 0 End 2009 End 2010 End 2011
Apple App Store
Google Play (ex Android Market)
Nokia OVI Store
RIM App World
Microsoft Windows Phone 7 Market
Source: IDATE estimates
www.idate.org
Mobile handsets
4.6
Spectrum: the mobile broadband bottleneck

Radio spectrum challenges and options
Mobile data trafc continues to skyrocket, putting pressure on mobile operators to increase bitrates and network capacity, which has resulted in their growing interest in securing new frequencies and in refarming the bands currently being used for 2G and 3G. The main trends in the realm of spectrum in 2011 included ongoing digital dividend allocations in Europe (Italy, Spain, Sweden and France), 2.6 GHz-band spectrum auctions and progress in refarming the 1800 MHz band for use by LTE systems. In the United States, where digital dividend frequencies were auctioned off in 2008, LTE services have been developing since 2010 with some success. Other developments worth mentioning include work on the possible reassignment of L-band from digital radio to mobile broadband, along with the onset of investments in white space networks in the United States and the UK. The Radio Spectrum Policy Plan (RSPP) continues its slow progress in Europe, while the US, along with South Korea and Japan to a lesser extent, continue to have a two- to three-year lead in freeing up and assigning new frequency bands to mobile broadband.
Highly fragmented LTE spectrum

Five frequency bands were being used for LTE systems in 2011, and more than 30 have been identied worldwide for 4G. (cf. see table below). The 1800 MHz band has become a very attractive choice for LTE as GSM trafc in this band is declining quickly, and a great many countries in Asia-Pacic and Europe can potentially reassign it to LTE. The rst commercial services in this band have got off the ground with dongles. Fourth generation mobile networks will make use of various combinations of frequency bands in the different parts of the globe. In the United States, LTE was rst deployed in the 700 MHz and AWS (Advanced Wireless Services) bands. In Japan, NTT DOCOMO employs the 2.1 GHz band; in Europe, the 2.6 GHz, 800 MHz and 1800 MHz bands are being used for pioneer rollouts. There is a real risk of fragmentation, however, which is putting pressure on chipset and handset manufacturers.
but successful auctions for premium spectrum

Auctions for the 2.6 GHz and 800 MHz (digital dividend) frequency bands are ongoing in Europe, with the latter bringing in considerable sums to State coffers. The prices paid for spectrum in Western Europe rose to impressive heights in 2011: the digital dividend frequencies sold for the equivalent of 0.85 EUR per MHz per person in Italy, 0.5 EUR in Spain and 0.31 EUR in Sweden. In Germany, the price came close to 0.70 EUR in 2010, and roughly the same in the United States in 2008. > Contact: f.pujol@idate.org
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Access and devices
In addition to increasing the amount of spectrum assigned to wireless broadband, North American and European authorities are pushing for more exible rules for available frequencies. The European Union is having to contend with the additional challenge of harmonising spectrum policies within its area, as they are managed individually by each Member State.
Main frequencies used, by region

Countries Europe USA South America China Japan South Korea Rest of Asia-Pacic Existing frequency bands 900 MHz - 1800 MHz -2.1 GHz 850 MHz - 1.7/2.1 GHz (AWS) 1900 MHz (PCS) - 2.6 GHz 1.7/2.1 GHz (AWS) - 1800 MHz 1900 MHz (PCS) 850 MHz -1.7/1.9 GHz - 2.1 GHz 1800 MHz - 2100 MHz 1800 MHz New frequency bands 800 MHz (790-862 MHz - digital dividend) - 2.6 GHz 700 MHz (698-806 MHz) 1.4 1.6 GHz (LightSquared) - S-band (Dish)? 700 MHz (698-806 MHz) - 2.6 GHz
Source: IDATE
2.3 GHz - 2.6 GHz 700 MHz (698-806 MHz planned) - 1.5 GHz 800 MHz 700 MHz (698-806 MHz planned) - 2.3 GHz - 2.6 GHz
Currently used by LTE Likely used by LTE Other mobile frequency bands
The frantic search for new radio spectrum

Main spectrum trends
White Spaces: first developments in the USA and in the UK 200 100MHz 300 400 500 380 430 450 600 700 800 Digital Dividend: auctions in many countries, first commercial services in the USA and in Germany 900 862 915 960 GSM 925 1GHz Mobile Services (IMT) PMR Broadcasting Fixed services Unlicensed 1GHz 1350 L-Band 1427 1479 1492 1785 1900 2GHz 2010 Satellite
VHF 174 223 410 470 1375 1400 1452
UHF 790 1517 1710
IMT 880
1164
180518801920 1920 S-Band
2010-2015 2110 2170 2200 2300 2GHz UMTS core S-Band
2400 2483 2.4 2500 IMT 2690 2.6 GHz band: more auctions in Europe, LTE services in Europe 3GHz
IMT
Source: IDATE
Shrinking gap in premium spectrum prices in developed countries

Price of premium spectrum in a selection of countries
cent per MHz per inhabitant 600 500 400 300 200 100 0 Australia 850 MHz 2004 France UMTS core band 2001 France Free 2009 Germany 800 MHz T-Mobile 2010 Germany UMTS core band Spain 800 MHz 2001 France 2.1 GHz Orange 2010 France 2.1 GHz SFR 2010 Sweden 800 MHz 2011 Canada AWS 2008 Germany 2.1 GHz 2010 USA 700 MHz 2008
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Source: IDATE
Spectrum: the mobile broadband bottleneck
L-Band in Europe: towards use as a supplementary downlink band?
LTE in the 1800 MHz band: growing interest in Asia/Pacific and in Europe
4.7
TV access
Is cord-cutting really a threat?
Pay-TV market expanding steadily
More than half of the worlds TV households subscribe to pay-TV. Cable is by far the leading system, accounting for close to two-thirds of pay-TV households. Satellite ranks second with close to a quarter of the customer base, followed by IPTV in a distant third place with just a 6% share of subscribers. Terrestrial television, which is largely free, accounts for only 1% of world pay-TV households. The pay-TV sector is enjoying a steady rate of increase, reporting a 5.8% rise in subscriber numbers in 2011, which is nevertheless below the 7.6% growth posted in 2010. Although to a lesser degree, this growth momentum is also found in the sectors revenue, which grew by close to 5% in 2011. Hulu offers some of its content for free and charges 9.99 USD/month for its premium service, while Netix charges 7.99/ USD month per service and unlimited access to premium quality content, both companies have quickly become very popular. Netix had a base of around 24 million subscribers in autumn 2011, while Hulu was logging more than 27 million unique visitors in September 2011, consuming an average of more than 3 hours of video a month. Meanwhile, cable companies are having to contend with a sizeable rise in cancelled accounts and satellite pay-TV providers are experiencing much more sluggish growth. Top US cable company Comcast lost 442,000 subscribers in the rst three quarters of 2011, while Number Two satellite pay-TV provider Dish Network, which was hit harder than market leader DirecTV, lost 188,000 customers.
Sizeable disparities between networks and regional markets

If cable still dominates the pay-TV sector, its growth today is weak standing at a mere 2% in 2011 and it is starting to lose market share to satellite and especially to IPTV which enjoyed a very solid 32% rate of increase in 2011, while satellite pay-TV is still in good shape, reporting close to 12% growth last year. The markets are not all developing at the same pace. Those in North America and Europe are showing major signs of saturation growing by 1.2% and 4.9%, respectively, in 2011 while emerging countries are in the process of catching up and enjoying steady growth: pay-TV subscriber numbers rose by 7.1% in Asia-Pacic, by 8.4% in Latin America and by 12.4% in the Africa and Middle East region.
Veteran players keeping up with the times

Although cord-cutting is a reality for pay-TV providers in the US, it does need to be put into perspective, at least for the here and now. The rst reason is because these new premium offers have proven somewhat fragile, as revealed by the swift decrease in Netix subscribers when the company changed its pricing models in the summer, and by the termination of its distribution deal with Starz after it refused to pay a tenfold increase for streaming rights. Second, veteran pay-TV providers are responding quickly to changes in the marketplace, and rolling out rival solutions designed to allow viewers to access all or a portion of their usual programming, either live or on-demand, on their TV, their computer, their mobile phone or tablet, and on any other customised platform. In any event, cablecos and telcos continue to have ties with consumers: Comcast in fact reported 823,000 new broadband customers in rst nine months of 2011.
Access and devices
Premium OTT likely to give pay-TV a run for its money

The pay-TV market in the United States is feeling the impact of two relative newcomers, Hulu and Netix, both of whom appear capable of undermining the classic pay-TV market. By selling affordably-priced services
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> Contact: f.leborgne@idate.org
Pay-TV households worldwide

Million households North America Europe Asia/Pacic Latin America Africa/Middle East World 2009 113 148 353 30 10 654 2010 113 156 385 36 11 702 2011 114 163 413 43 12 745 2012 115 169 440 50 14 787 2015 115 185 490 66 20 877
Source: IDATE
Terrestrial loses a sizeable chunk of viewers to satellite and IPTV

Change in the various broadcasting networks share of viewers worldwide
2011
3.3%
2015
6.4%
29.9% 37.4% IPTV Cable Satellite Terrestrial 37.2% IPTV Cable Satellite Terrestrial 36.0%
22.1%
27.7%
Source: IDATE in World television market
Connected TV will be a slow grower
Billion 8 7 6 5 4 3 2 1 0 2011
USA
Billion 8 7 6 5 4 3 2 1 0
EU-5
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OTT over Connected TV OTT over PC
2015
2011
2015
Note: includes advertising and paying revenues
Source: IDATE
TV access
Comparison of OTT revenue on PC and connected TV
4.8
The digital home: era of the Internet-ready device

Internet-readiness driving CE industry growth
Close to 560 million Internet-ready (or connectable) devices were sold worldwide in 2010: mobile phones, tablets, Blu-ray players, multimedia gateways, multimedia hard drives, game consoles, televisions, IPTV boxes and more. They represent just over half of all consumer electronics devices sold that year. Close to 300 million of these devices are portable (game consoles, tablets, smartphone) and able to connect to the Web, either directly or through a home network. Smartphones alone accounted for 45% of connectable devices sold in 2010. to improve the efciency and ow between the user and her devices. 4. Enhance and improve the television operating system and user interface. The connected TV will be able to make use of the Internet connection to browse the Web and to network with other devices in the home, for content management services and for distributing interactive services tied to TV programmes. 5. Encourage the emergence of a new brand of interactivity that lessens the space between TV viewers and their programmes. This is a challenge primarily for TV broadcasters who are working to win back a portion of viewers who have left them for the Web. 6. Develop content and service distribution solutions on connected devices. The Internet connection needs to be exploited to deliver a library of value-added content and applications. Video-on demand is naturally one of these services, along with video games, app stores and home services such as energy management applications. 7. App stores have been key to the success of MP3 players, smartphones and media tablets. They will need to adapt to a sedentary environment and make their way to xed connected devices in the digital home, including TVs, STBs and digital media boxes. 8. Allow content to be ubiquitous in the digital home. Once acquired, content needs to be able to travel from one device to another inside the home and nearby, easily and at no extra cost to the user. 9. The digital home will only ourish and become protable once appropriate business and pricing models, which include ubiquitous payment solutions, are available. 10. Continue to track user behaviour patterns to keep pace with their evolution, which is going the way of greater interactivity. Here, facial expression and gesture recognition would enable the emergence of new customised solutions. > Contact: l.michaud@idate.org
User experience a crucial ingredient in the digital home

In their bid to conquer the digital home, device makers are working to provide consumers with two types of user experience: a multimedia one with video, social media, gaming, applications, home shopping and customisable capacity, and an end-to-end one stretching from searching for content to buying and delivering it. This objective is centred rmly around the user and the user experience, with the technology acting only as the enabler. This comes as the result of the convergence between a technology whose frontiers are continually expanding, and increasingly exacting user behaviour.
Access and devices
Ten keys to digital home development

There are 10 factors that will ensure the successful development of the digital home. 1. Connected devices with intuitive, immersive and reactive interfaces. Consumption will only develop within a uid environment offering easy and natural interaction. 2. Develop interoperable, multiplatform interfaces. They will help improve the seamless ubiquity of services, applications and content from one device to another. 3. Accessories enabling interaction in the digital home are still poorly suited to their purpose. Remote controls need to be outtted with an accelerometer, a pointer, a secondary screen (possibly a touch-screen) and a keyboard, while TV sets need to be equipped with a camera
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Connected device sales worldwide

Million units North America Europe Asia/Pacic Latin America World 2011 191 212 279 53 735 2012 226 264 382 71 943 2013 258 316 503 91 1 167 2014 287 375 629 117 1 408 2015 306 426 727 145 1 605
Source: IDATE
Explosion of multimedia mobile devices

Breakdown of connected device sales worldwide, by type of device
2011
735 million units 6% 6% 6% TV sets STB Digital Media Boxes Computers 58% Portable Media Devices 24% 63%
2015
1 605 million units 10% 6% TV sets STB Digital Media Boxes Computers Portable Media Devices 9%
12%
Asia/Pacic increasing its market share

Breakdown of connected device sales worldwide, by region
97
100% 80% Latin America 60% Asia/Pacific Europe 40% North America
20%
0% 2011 2012 2013 2014 2015
Source: IDATE
www.idate.org
The digital home: era of the Internet-ready device
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Consumer services and content
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The new fundamentals of the content industry
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A wholesale industry In the old media economy, the core business of producers and publishers alike was to sell cultural goods: books, records, video games, DVDs and such like. The rst phase in the shift to electronic distribution involved a transposition of traditional models: from the sale of CDs to the sale of MP3 les, from marketing games on cartridge or disc to selling their downloadable versions, from renting DVDs to renting lms in VoD. This initial phase quickly ushered in new distributors who gained a foothold through various avenues such as technological innovation in the case of Amazon, bundling services with a device (Apple, Microsoft Xbox) or offering a combination of a physical and a digital rental service (Netix). These new retailers now dominate online content distribution, and it appears that brick-and-mortar retailers, who are suffering especially from a lack of a broad sales area, are the big losers in the electronic switchover. The newcomers triggered a profound change in revenue models by introducing ad-based funding for content, and by promoting unlimited consumption plans. More fundamentally still, they severed the ties between the production of content and its ultimate consumption. As a result, the content industry is steadily becoming a wholesale industry targeting a set of third-party distributors. Regardless of how successful the distribution schemes being tested by iTunes, Netix, Amazon and Steam are, producers and publishers still need to review their business models. Disintegration of traditional functions The various segments of the content industry nd themselves at different stages of this disintegration of ties between the production of content and its distribution. In TV and cinema production in particular, a distinction needs to be made between lms and television programmes. Films have traditionally been designed to be shown on various media: in theatres, on DVD and on television. So digital
actually opens up new windows for them: principally in catch-up TV, PPV and subscription VoD. The change is a more recent one for TV programmes, but new online video sites are putting a great deal of emphasis on TV series, and so breaking the link between TV production and classic TV broadcasting networks. The news industry is a segment unto itself. The production of news and its distribution by newspapers and magazines are still largely intertwined. The economics of content are thus hard to apply to news: while other segments produce a unique piece of content, newspapers actually produce very similar information, albeit with their particular editorial bent. Here, wire services could expand their role of producing a single piece of content that is then picked up by the various media. Copyright (ever more) crucial In the old economy, copyright offered a legal security blanket when distributing content over various channels. In the digital world, creating copyright and optimising distribution channels has become a business in itself for producers and publishers. The problem is a familiar one for TV and cinema, and one that is steadily making its way into the music industry, while it is only just emerging in the book publishing, news and gaming sectors. Attaching value to a piece of content lies chiefly in the ability to set a price according to the customer and the sales window. This principle is commonplace in the world of lm production, and increasingly so with television, with distribution windows that set the sequence for showing a lm or programme, based on the idea that the more recent it is, the higher the price for distributing it. Depending on the country, these windows may be set by regulation or governed by contractual relations. Such windows exist in a more informal fashion in other segments of the content industry as well. In the world of book publishing, the traditional sequence is of hardcover release, availability in public libraries and later the release of the paperback edition. Meanwhile,
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Introduction
5
over in the gaming sector, a window has opened up for the sale of used games, to which publishers have responded by creating collections of low-priced games. Similarly, compilation albums offer the music industry a window to capitalise on old material. The growing number of distribution channels, using different pricing models, should give rights holders an incentive to be systematic in their approach to distribution windows. Some have suggested replacing this approach of different price tiers for different windows to having all content made available on all distribution channels and in all markets at the same time. The main arguments for this approach include the ability to limit piracy of works, and the need to expand the marketplace for European content to help amortise production costs. The reality is that it has yet to be proven that the additional income generated by this approach would offset the revenue lost on adapting the price of content to each market and each distribution window. Here, ongoing discussions inside the European Commission over facilitating a Europe-wide digital copyright scheme appear to have a poor understanding of the particular economics of content, and of the role that classic distribution has in creating copyright1. What is a producer? Creating and managing copyright requires a raft of talents: creativity, control over production, pre-nancing and the ability to optimise distribution windows. Does a single company need to assume all of these functions? In the American movie industry, studios essentially play two roles: nancing lms and managing their distribution rights. The creation and production of TV programmes are largely the dominion of independent production companies. In the gaming industry, the main publishers rely on a stable of development studios to design and produce the games. To some extent, this model is found in the music industry, too: record companies farm out production to the labels which, it is true, are often their subsidiaries but which have a relatively wide berth on the creative front. Similarly, all the major publishing houses are made up of a variety of smaller imprints. Here, the role assigned to TV and lm producers in Europe seems to be a special case. Being in charge of production, nancing and distribution, they are having to wear a great many hats without necessarily having the required expertise or the nancial chops to do so successfully: without the needed capital, they will be unable to turn out enough product to amortise their distribution apparatus. This lack of critical mass becomes all the more troublesome as the digital revolution creates a more complex system of distribution windows. A few lm industry players in Europe, such as Studio Canal and Europa Corp, are working to promote a model that involves a separation between pre-production and production on the one side, and nancing and distribution on the other. They are, though, coming up against regulatory architecture that places the producer at the centre of the entire system. New media economics The new media distribution models are fairly well documented: producers having to choose between live TV, catch-up TV and VoD; music services switching from ad-funded to subscription-based models; and the impact of eBook readers on the book distribution channel. What remains to be examined are the new economics of content production within an industry whose core business is, increasingly, generating and optimising distribution rights. This is, in fact, one of the key research themes selected by the DigiWorld Institute being launched by IDATE.
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1. For further reading, see Olivier BOMSEL, Do You Speak European? Media Economics, Multilingualism and the Digital Single Market Communication & Strategies No. 82 Q2 2011
Gilles FONTAINE
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5.1
Future challenges for TV networks

Is channel-less TV inevitable?
The tides of change, both technical and in viewer behaviour, are affecting TV channel viewership, their nancing and even their programming. consumption of several media, usually TV and the Web, which will therefore boost audience gures for both at once. Around 40% of smartphone and tablet owners in the United States say they use their device while watching television.
Increased pressure on viewership

Several factors are converging to create an added threat to TV channel audiences, and so directly to their ad revenue. Key among them is the audience fragmentation in itself not a new phenomenon caused by the rapid development of multi-channel offers on both free-to-air and pay-TV services, and their popularity with viewers. There is also the increase in time-shifted viewing and in the use of digital video recorders by now a common feature in pay-TV set-top boxes along with the growing numbers of followers of catch-up TV services.
To stay in the game, channels are having to reinvent themselves

Yesterdays core television industry players, the TV networks, are gradually becoming the weak link in the chain. They will have contend with aggressive tactics from consumer electronics manufacturers and Internet companies seeking to move their way up the value chain by acquiring the rights to content, and by developing their own on-demand services. They also need to curry the favour of rights holders who may be tempted to target viewers directly and do away with the middlemen, namely TV channels and pay-TV providers. This presents TV broadcasters with the following mustdo tasks: guarantee a quality of service that the Internet cannot: this includes guaranteed bitrates and the ability to deliver high-denition programming, and later 3D; offer a better user experience: in an increasingly complex environment, users need simple and customised tools that allow them to have full control over their viewing experience; make the job easier for end-users by guiding them through a universe where the amount of content to choose from is growing virtually exponentially. TV channels need to reclaim their leadership by providing viewers with the nest possible service, combining quality, innovation, design, breadth and depth of choice, recommendations and safety. Otherwise Apple, Samsung and Google could well become the television stars of the future. > Contact: f.leborgne@idate.org
despite steady viewing gures

Live TV viewing nevertheless continues to increase with a global average of 3 hours and ten minutes a day in 2010, which is two minutes more than in 2009 even in developed countries that are already home to heavy TV viewers. At the same time, we are seeing a tremendous rise in the time-shifted viewing of these same programmes, both in terms of viewer numbers and individual viewing time. At the start of 2011, around one third of people in Britain, the United States and France said they used catchup TV services and watched time-shifted programming. This marks a 12.2% increase over 2010, with users in the United States engaging in this type of viewing for an average 10 hours and 46 minutes a month.
Managing the switch to multiscreen and multitasking

There are two other major trends at work: the use of displays other than the TV set starting with desktop and laptop computers, but also portable devices such as smartphones, multimedia players and tablets and multitasking. This is best summarised as the simultaneous
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Growth of the installed base of connected TV sets

Source: IDATE in Connected TV markets
Million units North America USA Europe (27) France Germany Italy Spain United Kingdom World
2011 25 22 22 3 6 3 1 3 69
2012 41 37 45 7 11 6 2 5 136
2013 60 54 76 11 16 10 3 7 223
2014 78 70 113 16 21 15 4 8 323
2015 95 85 157 20 25 18 5 8 435
OTT threatening managed services

Growth of the global video market, by distribution mode
Billion 450 400 350 300 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Mobile OTT Managed
Source IDATE in Future TV 2020, taking in to the Web Source:
The challenge for ad departments & brokers

Breakdown forecast for video ad revenue in France in 2020
Billion 5
105
Productors
2.5
Distributors TV networks
0 Core scenario TV networks lose control of advanced services Distributors earn a fraction of live TV advertising revenue
Source: Source IDATE in Future TV 2020, taking in to the Web
www.idate.org
Future challenges for TV networks
5.2
Connected TV & OTT content

United States still has an edge over Europe
The United States is home to the widest selection of over-the-top (OTT) content for the connected television. They have a jump on Europe thanks to a selection of online content that was already more vast, and to a larger number of connected television platforms since TV manufacturers are having to compete with independent set-top box/DVR makers such as TiVo, Roku and Boxee. Over in the UK, the success of the BBC iPlayer has stirred the market, but the future success or failure of the YouView standard, which is due out in early 2012, will provide a good metric of the potential for multiple platform deployments. In France, Italy and Spain, meanwhile, the leading terrestrial channels have a spotty record when it comes to connected TV. In all three countries, the public service (France Televisions, RAI and RTVE) stands out for its virtual absence from the scene.
Online video is driving the connected TV momentum in the US

TV programme suppliers are especially proactive in the United States, particularly in the realm of sport with such renowned players as ESPN, Fox Sports, NBA and NHL. Added to this, catch-up TV is made available chiey through connected TV solutions through a central platform, Hulu Plus, which handles the online distribution of programming from ABC, NBC, Fox and dozens of thematic channels and rights holders, all of which makes it easier for viewers to embrace the service. The connected VoD market is being sustained by the sectors heavyweights and Internet veterans, Netix and Amazon. Only those companies that offer a combination of device and services have made their way across the Atlantic, namely Apple TV/iTunes and Sony (Qriocity/ Video Unlimited).
A market spurred by television manufacturers

It has been TV suppliers that have rolled out the most connected TV solutions, all of them proprietary thus far, and the richest selection of OTT services. This situation warrants these observations about prevailing features: the difculty that Internet companies, notably Google and Yahoo!, are having in becoming full-edged providers of connected TV solutions, given that all the top TV manufacturers have developed their own proprietary solution; the need for other players, and especially the makers of Internet-ready set-top boxes to differentiate themselves through the high-end features outtting their media centres, and by the quality of their interface, more than with content which is rarely exclusive; the crucial need for the platforms to be standardised to enable the development of applications. In Europe, HbbTV is competing with YouView in the UK and MHP in Italy; the temptation for TV manufacturers to try to capture the revenue generated by OTT service aggregation and distribution, either by launching their own service, as Sony has done with Qriocity/Video Unlimited, or by developing an online store, as with Samsung Apps. > Contact: j.bajon@idate.org
European connected TV services offer very little catch-up

On the whole in Europe, national services featuring catch-up TV, VOD and local Internet services are few and far between, especially in countries such as France where they have to compete with managed IPTV and digital cable. Here, Germany stands out with a wealth of catch-up TV offers. The services run by ProSiebenSat.1, ZDF and ARD (RTL being conspicuously absent) are available on at least two connected TV platforms.
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Evolution of the global market for OTT video on TV

Million USA Europe Rest of the World World 2010 7 1 1 9 2011 61 21 7 89 2012 279 131 49 459 2013 492 255 107 853 2014 745 449 206 1 400 2015 1 233 753 411 2 397
Source: IDATE
Professional video sites attractive to viewers

Most popular video sites and programmes watched online
80% 70% 60% Short clips 50% 40% 30% 20% 10% 0% Base: Broadband Internet users Catch-up TV Streaming platforms Premium VOD Live streaming
Source: IDATE survey 2010 (USA, UK and France)
Todays connected TV market run by manufacturers

Positioning of 10 key players in the connected TV distribution chain
Content production
Services packaging
Delivery
Platform
Connected Devices
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LG Apps TV
Source: IDATE, in World connected TV market
Connected TV & OTT content
5.3
The DTT comeback

The rise of hybrid solutions
Until now, the digitisation of TV services has penalised terrestrial broadcasting whose revenue has been threatened by the fact that it costs as much to deliver one analogue TV channel as a multiplex of digital channels. Furthermore, its market share is being affected by the development of other forms of reception, starting with satellite pay-TV, and by the development of two-way solutions from cable and IPTV providers. Certain recent events may nevertheless put DTT back at the heart of things. marketing a hybrid solution that combines Internet and OTT video with DTT channels.
Are connected devices the way back in for DTT operators?

The next stage in the development of digital terrestrial TVs could lie in making the network bidirectional, relying on connected solutions to supply Internet connectivity. This would provide a solution to the main weakness of broadcasting networks, allowing them to overcome the obstacle of one-way distribution to become, if not a fully-edged platform, at least a partner for new-generation and on-demand video services. A more specic advantage for the terrestrial networks is that virtually all connected televisions have a DTT tuner, which makes it possible to: target secondary televisions in the home; deliver hybrid DTT + Internet solutions that do no require users to subscribe to a pay-TV service (whether bundled or not). This development could also generate positive externalities for general-interest TV channels, giving them the opportunity to take back control of the content being broadcast and enhance the selection without the need of intermediaries. All the same, the market will not develop without harmonised standards for hybrid solutions. Today, uncertainty reigns in Europe as several standards are developing at once: HbbTV (a in France and Germany); the YouView standard which is expected for 2012 in the UK, and which currently employs MHEG-5 IC; while over in Norway and Italy, MHP is driving the development of hybrid television. > Contact: j.bajon@idate.org
The second wave of analogue switch-offs, scheduled for 2011-2012 in Europe

Thanks to the switchover from analogue to digital TV broadcasting, which is due to occur in a great many countries, digital terrestrial television (DTT) is back in the news. It will in fact play a central role in optimising the use of scarce spectrum resources. We expect to see new TV multiplexes that will help enhance the selection of programming available to viewers, usually for free. It will also be interesting to see how much room is given to high denition services. Added to this is the digital dividend: it will enable mobile network operators to recoup what are known as the golden frequencies to launch new services, notably LTE.
More and more hybrid broadcasting solutions

After the rst IPTV providers had shown the way, signs are emerging of the combined distribution of DTT and IPTV, enabled by hybrid set-top boxes. This will make it possible to expand the coverage of triple play services to include live broadcasting offerings. Mobile operator Bouygues Telecom has already begun doing so in France, while Telecom Italia is taking things one step further with its Cubovision service, having decided to put an end to its managed IPTV service and to focus instead on
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Growth of DTT households

Million households North America Europe France Germany Italy Spain United Kingdom Asia/Pacic China Japan Latin America Africa/Middle East World 2009 12.8 44.0 8.5 1.6 8.6 9.5 10.7 36.3 11.0 9.4 2.5 0.2 95.7 2010 13.5 50.4 10.1 1.6 9.9 11.6 10.3 48.2 16.2 11.3 13.6 0.3 126.1 2011 14.2 54.6 10.3 2.3 10.9 11.8 10.2 53.2 19.9 11.0 17.1 0.4 139.4 2012 14.3 62.3 9.8 3.0 14.0 11.7 10.0 56.7 24.3 9.7 19.2 0.5 153.1 2015 18.0 67.8 9.6 1.7 12.8 10.9 8.3 76.9 42.0 7.1 22.3 1.4 186.5
2012: the end of analogue broadcasting in Europe

Planned analogue switchoff dates
2006 2007
Netherlands Finland Sweden Switzerland Germany Denmark Norway Belgium Spain Austria, Latvia Estonia Croatia Luxembourg
December September October January November October December March April June July October December
2011
Slovenia Czech Republic, France Portugal Hungary, Ireland, Lithuania, UK Greece Bulgaria, Italy, Serbia, Slovakia Poland Iceland Ukraine Romania Belarus, Russia Turkey
June November April October November December July
2012
2008
2009
2013 2014 2015 2018
2010
June End
Source: IDATE in Economics of the digital transition
Increasingly hybrid TV distribution services

Percentage of households with an OTT-compatible system (digital cable, IPTV)
IP enabled networks 60%
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50%
40% 2010 30% 2015
20%
10%
0% France Germany Italy Spain UK USA
Source: IDATE in Hybrid TV outlook, implications of Connected TV
The DTT comeback
5.4
Economics of the cinema: the great shake-up

What will replace the DVD?
Film revenue under threat
The three pillars of the lm industry economy are in crisis. Box ofce receipts are stagnating, at least in developed countries although they do still have considerable room to grow in developing countries. The steady rise in ticket prices is nevertheless enabling a slight increase in box ofce takings. This is due to the growing ubiquity of multiplexes and their additional services, along with the steadily growing number of 3D lms in cinemas. The physical video market is in steady decline, if not in volume at least in terms of revenue, as DVD sellers continue to cut their prices in a bid to sustain their market. Although growing quickly, VoD is not offsetting the shrinking sales of DVDs. The role that TV channels play in distributing lms is being called into question. The top network channels have been gradually pulling lms from their roster, at least in prime time, and replacing them with TV programming generally sitcoms and dramas. Free specialty channels have picked up the slack to some degree, but do not have the same budget as the major networks when acquiring the rights to lms. A more recent development has been the stagnation and even decline in subscriptions to cinema channels, as more and more content comes available online which goes to conrm that TV channels may well have a much smaller hand in nancing lms in future. compared to a third for British lms, for instance, and probably around 50% for French lms. Theatrical release is a much larger part of a lms nancial equation in the United States than it is for European lms. The fact that Hollywood movies are such popular fare in the export market means that a blockbuster can earn more in foreign box ofce receipts than in domestic sales. European lms generally sell around 300,000 to 400,000 tickets in European cinemas, while an American lm will sell around 1.5 to 2 million tickets in those same theatres. European lms are generally exported to only a few markets outside their own.
A fragmented lm industry
In addition to national tastes that differ a great deal, and which appear to only converge when it comes to American lm, this lack of exposure is due to the fragmented state of the European cinema industry. There are some 600 lm production companies in France, 400 in the UK and 200 in Germany. Operating on very small budgets, they are unable to invest in several projects at once which would allow them to pool their risks nor to invest enough in scripts, or in splashy international marketing campaigns. European lm distributors, which are responsible for nancing prints of a lm and for marketing campaigns, are also small companies. Fourteen of the 20 largest European distributors are subsidiaries of American rms which, in most cases, handle both production and distribution. Very few European distributors operate in several markets, which means that a European lm needs a different distributor to handle each national release. > Contact: g.fontaine@idate.org
Hollywood cinema more diversied

The American lm industry naturally benets from the development of television at home and around the globe, and particularly the spread of pay-TV. We nevertheless estimate that revenue from TV channels accounts for 20% to 25% of an American lms total income,
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European Union box ofce gures

Millions France Germany Italy Spain United Kingdom EU27 2004 196 157 116 144 171 1 013 2005 176 127 106 128 165 899 2006 189 137 106 122 157 932 2007 178 125 116 117 162 920 2008 190 129 112 108 164 925 2009 201 146 111 110 173 980 2010 (prov) 207 127 123 97 169 961
Source: EOA
Fewer people going to the movies

Evolution of box ofce sales in a selection of countries
Index 100 : 2004 100
95
Germany Spain France
90
85 UK 80 Italy USA 75 Japan 70 2004 2005 2006 2007 2008 2009
Source: Observatoire Europen de lAudiovisuel
Theatrical release only a fraction of a lms earnings

Breakdown of box ofce receipts in the UK in 2009
14% 26%
111
Free channels Pay TV DVD VOD Cinemas Box office 16%
3%
41%
Source: UK Films Council
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Economics of the cinema: the great shake-up
5.5
Video games powered by innovation

Digital distribution and online gaming: potential conrmed
All gaming platforms now have digital capabilities
At the end of 2011, all platforms combined, half of the income of the video game sector in all, 41.1 billion EUR came from the digital distribution of games and online gaming. This included the sale of virtual goods, subscriptions, commissions on exchange operations and virtual real estate deals. IDATE estimates that, at the end of 2015, 73% of the sectors revenue will be generated through a digital channel. Although this concerns all devices, the impact of digital sales is coming more slowly to the home console segment. Despite this, consoles are providing access to an increasingly broad array of content that is more likely to interest other members of the family, typically featuring music, video, Web browsing, e-commerce and TV. are helping revive the gaming experience and gameplay, and so keeping up with gamer expectations. IDATE also predicts that the afliation between smartphones and tablets via app stores and in their complementary usage is such that, the more interaction between them develops, the greater will be their combined growth.
Facebook, the latest gaming platform!

The social networking site and its partners have managed to create a solid match between gaming content and audience. A good audience for a social game is measured in the tens of millions of active players per month. Cityville, from the gaming house of Zynga, boasts up to 90 million. The social network has introduced a new paradigm based on the way these sites are used: gamers have broader interests than on specialty sites, and are developing a particular taste for the ephemeral and for short games. The audience for a game can skyrocket in no time and experience huge uctuations, and spikes over a lifecycle that rarely exceeds 24 months.
Convergence between smartphones and handheld consoles is now a reality
Mobile phone manufacturers have been successful in transforming their handsets into game consoles, while console-makers are now able to equip their devices with calling features. At the end of 2011, Sony Computer Entertainment released a WiFi and a 3G version of its latest handheld console, the Playstation Vita, and this will give a real boost to digital distribution on these devices. Revenue generated worldwide by digital sales for handheld consoles could climb from 195 million EUR in 2011 to 522 million EUR in 2012.
Emergence of games on connected TV and cloud gaming

The next challenge on the horizon for the gaming industry is the connected television. Video games will prove their ability to gain a foothold on these new devices that make use of their Internet connection in the same way that IPTV does today. By using the cloud to stream games in the home, the connected TV will make home consoles obsolete. This will induce a tremendous inux of innovation further down the chain. A host of companies are working to deploy cloud gaming platforms that target computers, smartphones, tablets, connected TVs and set-top boxes, of which the most proactive include Onlive, Playcast Media, Otoy, Gaikai and G Cluster. > Contact: l.michaud@idate.org
Tablet gaming: expected to take off in 2011-2012

The popularity of gaming is also giving the tablet market a boost, and more and more games are being downloaded for tablets. These devices have lled a gap in home devices and in gaming practices. Their particular features such as the large touchscreen display and inclinometer,
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Global video game market (hardware and software)

Billion North America Europe France Germany Italy Spain United Kingdom Asia/Pacic Latin America Africa/Middle East World 2009 17.9 16.9 2.9 2.4 1.2 1.2 4.4 16.9 1.9 1.5 55.1 2010 16.8 16.2 2.8 2.3 1.2 1.2 4.0 16.9 2.0 1.3 53.2 2011 16.3 16.3 2.7 2.3 1.2 1.3 4.0 17.5 2.0 1.2 53.3 2012 15.5 16.7 2.8 2.3 1.2 1.3 4.1 20.7 2.1 1.0 56.0 2015 22.1 22.9 3.7 3.3 1.7 1.6 5.8 29.5 3.2 1.3 78.9
Source: IDATE, in World video game market
Solid growth outlook

Growth of the global video game market, 2011-2015
Billion 80 70 60 50 40 30 20 10 0 2011 2012 2013 2014 2015
Mobile Game Market Online Computer Software Market Offline Computer Software Market Handheld Console Software Market Handheld Console Hardware Market Home Console Software Market Home Console Hardware Market
Online gaming outperforming other platforms

Online gaming revenue by platform
Billion 50
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40
30 Online 20 Mobile Home console Handheld console 10
0 2011 2012 2013 2014 2015
Video games powered by innovation
5.6
Bundles loosening the strings

Sell content or sell a service?
More exible bundles
Telecom carriers have systematically sought to bundle a video service with their Internet access solutions. At the same time, cable companies, at least those that have begun digitising their networks, have also combined a pay-TV offering with their access products. These bundling practices have taken on a variety of formats: video options, a single triple play or a range of bundles while all bundling policies deliver the same advantages, namely offering users a simple one-stop solution, increasing per-customer revenue and decreasing churn rates. Some changes in bundling practices have been seen in recent months. Examples include Verizon which was bundling its top-tier access service with its most expensive pay-TV package, but now allows customers to combine a high-end access product with a basic TV package. Over in Germany, Deutsche Telekom is marketing a TV and telephony bundle without Internet access, called Entertain Pur. In both instances, these are products being offered in saturated broadband markets and aimed at a segment of the clientele overlooked by heavy trafc and all-inclusive bundles. By developing high-end set-top boxes that are billed on top of the price of a basic package, telcos are also paving the way to more appealing pay-TV products.
Video without IPTV?

Telcos have become content distributors, albeit with mixed success in Europe, but they do run the risk of being cut out of the loop by video services available on the open Web. Some nevertheless view over-the-top content as an opportunity. To tap into this opportunity, the rst approach involves incorporating the top Internet destinations into a package of services managed by the telco. The second involves distributing these packages on the Web, by targeting the connected TV market, for instance. The third, more radical approach views the Web as an alternative to IPTV: an alternative in that small portion of the country where it is too expensive to offer IPTV (as with Telecom Italia and Vodafone in Spain); or, more generally, by building a video solution that is only available online, such as Telstra has done in Australia. These offers are delivered through a hybrid DTT-broadband access set-top box that makes it possible to combine a package of live TV channels and OTT, on-demand services. The business model is based on the sale or rental of the box, plus a commission on the video services being distributed. This approach helps to diversify telcos spending on content, as well as relying on existing services possibly the ones that enjoy strong brand equity. In addition, it alleviates trafc congestion on the bandwidth allocated to IPTV and, nally, it banks on consumer appetite for multifunctional devices. > Contact: g.fontaine@idate.org
Enhancing media services

The content services being delivered by telcos are getting mixed reviews, at least in Europe, including the inability to access the premium channels of top pay-TV companies, very low prots for VoD services, free catchup TV services, unappealing subscription VoD services. The British pay-TV provider Sky provides a good example of how enhancing a service will give a considerable boost to revenue. The recent uptick in its ARPU can be attributed to the introduction of two new options: multiroom, in other words the ability to access programming on several TVs in the home, and especially the release of a high-denition DVR with a hard drive.
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IPTV households worldwide

Million households North America Europe France Germany Italy Spain United Kingdom Asia/Pacic Latin America Africa/Middle East World 2009 5.2 11.4 4.9 1.1 0.7 0.8 0.1 8.9 0.1 0.1 25.8 2010 6.8 16.0 6.4 1.8 0.7 0.9 0.1 12.1 0.2 0.2 35.2 2011 8.5 19.6 7.5 2.2 1.0 0.9 0.1 16.8 0.2 0.4 45.5 2012 10.2 23.1 8.4 2.6 1.2 0.9 0.1 22.2 0.4 0.6 56.6 2015 13.6 33.4 9.8 3.7 1.8 1.2 1.4 42.7 3.5 2.3 95.5
Distributors weight in the equation

Breakdown of pay-TV resources in France
Billion 6 4 2 0 2005 2006 2007 2008 2009 2010 Distributor Editor Producer
Source: IDATE
Free-to-air TVs reliance on advertising

Breakdown of an ad-funded TV channels resources, in 2011
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30%
TV channel operation Transport & distribution Programmes 60%
10%
Source: IDATE
Bundles loosening the strings
5.7
EBooks
A new chapter for this thriving marketsor
A market ready for take-off
The electronic book market is gathering a real momentum, and now accounts for 4.5% of book sales in developed countries (North America, EU-5, Japan). Englishspeaking countries dominate the market, and especially the United States where eBook sales exceeded 1 billion EUR in 2011, or close to 10% of total book sales. This leadership is due to the array of titles on offer, the lack of regulation which allows for low prices and the widespread adoption of e-readers and tablets. Japan also has a solid edge, with a market totalling more than 600 million EUR in 2011 and a particularly strong readership on mobile phones. aggressive thus far, with its 3G-compatible Kindle, a large selection of digital titles and especially very aggressive pricing in some instances selling at a loss. Coming at it from a different angle, Google has been involved in digitising the worlds library for years now and had digitised more than 15 million works by 2011, most of which are in the public domain. The business model is based chiey on sponsored links, although Google also operates a paid service. Meanwhile, Apple has incorporated eBooks into its content strategy through iTunes and the App Store, but is having to contend with opposition from publishers wanting to reduce the commissions they pay the platform. These three digital titans are going head-to-head with national retail chains such as Barnes & Noble and Fnac, pure players like Kobo and a variety of niche players.
Upcoming adjustments in the digital ecosystem

Pricing models are starting to change from per-book purchases, as is the norm with printed books, to subscription formulas and even ad-funded rentals. The cloud model, which makes content available to any device, is also being pushed by Amazon, Apple and Google. A decisive element in the markets development, the price of an eBook, is also being adjusted according to its printed version, and especially to the paperback release. There are some changes occurring along the digital value chain, with the centre of gravity shifting towards retailers, such as heavyweights like Amazon, and driven by the ability of digital distribution to cut out the middleman: the author of Harry Potter, J.K. Rowling, for instance, plans to distribute her books directly in digital format on a dedicated site. Similarly, publishers with strong brand recognition, such as Harlequin, Disney or Lonely Planet, are also able to sell their eBooks directly. On the other end of the value chain, we even nd telcos operating retail platforms.
Relatively little value destruction between now and 2015

The printed book is suffering from a recession in most parts of the world, shrinking by 1% to 5% depending on the country with only Germany reporting growth. Meanwhile, the electronic book market is powering forward, with expected growth rates of more than 60% in Europe for the years ahead. This tremendous rate of progress will not, however, be enough to offset the publishing industrys overall decline, with losses of around 4% expected between 2010 and 2015. This destruction of value is nevertheless relatively meagre when compared to other content industries, such as music and print media. Plus the advent of digital is opening up new opportunities for publishing: decreased production costs for publishers, along with the ability to create new formats such as enhanced books that incorporate video, access to social networking sites, games and applications. > Contact: s.lubrano@idate.org
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Disparate competition landscape

The electronic book market is also a new battleeld for the Internet giants. Amazon has been the most
The e-book market

Million North America USA Canada EU-5 Germany France Italy Spain United Kingdom Japan Total 2009 331 315 15 56 17 19 2 9 10 494 881 2010 794 769 25 105 24 25 9 13 33 558 1 457 2011 1 211 1 170 41 400 72 84 28 122 94 627 2 238 2012 1 585 1 512 73 674 149 151 59 159 156 708 2 967 2015 2 259 2 093 166 1 472 389 282 218 269 314 1 718 5 449
Source: IDATE in E-books, markets & forecasts
Rising e-book sales not offsetting the decline of print

Evolution of the book market (North America, EU-5, Japan)
Billion 60
50
40
30 Digital Paper 10
20
0 2008 2009 2010 2011 2012 2013 2014 2015
Digitisation creating new opportunities for the sector

The e-book value chain
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Author Publisher Conversion house Aggregator & digital warehouse Retailer Communication network Device Reader
Author
Link also present in the print value chain New link of the ebook value chain
Network
Optional link of the ebook value chain New forms of intermediation
Device
www.idate.org
EBooks
5.8
Music industry being retuned

Is subscription the right model?
Digital growth: the beat goes slower
Record company music sales continue to decline, having skidded down from 21.3 billion USD in 2006 to 15.9 billion USD in 2010, or a decrease of close to 26% in ve years and a 40% drop over the past ten years. Digital music sales are on the rise, and now account for 29% of all revenue generated by recorded music. Their waning growth dropping from 29% in 2008, to 10% in 2009 and 5% in 2010 conrms that digital music will not offset losses in physical sales. The American market, where music has been selling online for the longest, digital sales account for 50% of recorded music sales, but growth there slowed to a mere 1% in 2010.
Majors adapting to the new world

Of the four largest record labels in the world, it is Universal Music Group, a Vivendi subsidiary, which appears to be the one that has adjusted best to the consequences of a digitised music market. The worlds largest, it benets from the economies of scale generated by the global rights to its artists works, combined with a number of local giants. The company has also taken a proactive approach to the concert business, which is as big a market as recorded music, and to promotional services and merchandising the aim being to capitalise on its investments in its artists through a variety of channels. Sceptical about its advertising revenue being able to nance online music sites, the Universal policy is geared to getting users to adopt a paid model. While Sony Music has managed to maintain an even keel, the two other major labels, Warner and EMI, are both suffering from overhead costs that are much too high for their level of business and given the instability of their shareholders.
New models emerging

Ringtones have become an only marginal segment of digital music, accounting for 7% of revenue in the United States, and have been replaced by song and album sales which generate 78% of recorded music revenue. Online music shops are the emerging model, and sites are sharing ad revenue with record companies, but it does not add up to much. Paid online services, on the other hand, are starting to generate a signicant income, accounting for 5% of digital revenue in the United States, 7% in Germany and the UK and 17% in France thanks especially to an Orange broadband bundle that includes a subscription to Deezer. Subscription services, on the other hand, are still only edgling: Spotify was reporting just one million paid subscribers in March 2011.
Brick and mortar retailers: the big losers in the digital revolution
Retailers are the biggest losers in the traditional music value chain. In the third quarter of 2010, Apple had a 66.2% share of music sales in the United States, ahead of Amazon (13.3%). Chains such as Wal-Mart are steadily losing their share of record sales, and brick and mortar shops have been unable to carve themselves a place in the digital market. > Contact: l.michaud@idate.org
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Recorded music sales in a selection of countries (record companies)

Billion $ USA France Germany Italy Spain United Kingdom China Japan World 2006 6.7 1.3 1.6 0.4 0.4 1.8 0.1 4.8 21.6 2007 6.1 1.1 1.5 0.4 0.3 1.6 0.1 4.8 20.1 2008 5.2 0.9 1.5 0.3 0.3 1.5 0.1 4.8 18.4 2009 4.6 1.1 1.5 0.2 0.2 1.6 0.1 4.3 17.4 2010 4.2 0.9 1.4 0.2 0.2 1.4 0.1 4.0 15.9
Source: IFPI
Digital music generates around 30% of revenue

Breakdown of recorded music revenue (record companies)
2006
2010
10%
3%
5%
29% Physical Digital Performance rights Physical Digital Performance rights
66% 87%
Source: IFPI
Digital growth is slowing

Digital music sales in Europe
Million 1000 250%
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800
200%
600
150%
400
100%
200
50%
0 2004 2005 2006 2007 2008 2009 2010
0%
Digital revenues
Annual growth rate
Source: IFPI
Music industry being retuned
5.9
Radio
Whats the best way to tune in to the Web?
Dependence on ad revenue
Unlike television and print media, virtually all radio industry income comes from advertising. As such, it is especially vulnerable to changes in the economic climate. The downturn in 2008-2009 resulted in a 14% decrease in ad revenue, followed by a slight recovery in 2010-2011. Radio was earning 7.1% of global ad revenue in 2010, a percentage that has been shrinking steadily down from 8.9% in 2000. There are, nevertheless, sizeable disparities in different regions, with radio occupying a more signicant place in North America (10.8% of ad revenue) since advertising markets are local, compared to Western Europe where it earns only a 5.6% share of ad monies, with the notable exception of Spain (9.4%) due largely to language-related factors. to Internet-only stations. Regular online listeners spend close to 10 hours a week tuned into the radio, or around half the amount of listening time reported by the traditional radio audience. Time-shifted listening in the form of podcasts is also becoming increasingly popular: according to that same survey, a quarter of consumers in the US are podcast listeners.
The Pandora model

An IPO in 2011 based on a valorisation of 2.6 billion USD brought the Pandora model to many peoples attention. Although currently in the red, the company is enjoying a swift increase in ad revenue: reporting a turnover of close to 140 million USD for the scal year ending in January 2011, of which 86% is ad revenue. Although convergent with online music services such as Spotify and Deezer, Pandora has maintained its radio roots and offers listeners a selection of customisable radio stations, rather than just a series of tracks. Pandoras strength lies in the accuracy of its customisation algorithm which is based on analysing listener tastes. Unlike classical radio stations, listeners can also skip over a song. Although Pandora generates a solid amount of trafc, the viability of its business model still remains to be proven. Around half of the companys income is paid out in royalties and, although this percentage is decreasing, it still cuts into Pandoras prot levels. Unlike online music services, the company is not planning on introducing paid services, which is a good thing since subscription radio has consistently failed to catch on. > Contact: g.fontaine@idate.org
Growing array of devices

Radio is the ubiquitous medium, available on an impressive range of devices. It is estimated that any household listens to the radio on six or seven different devices. Relatively few people use their mobile phone to listen to the radio today, but numbers are growing steadily. A sizeable portion of listening (25%) is done in the car, and radio is contributing to the gradual incorporation of online services into vehicles. The Internet is also increasing radio listening in the workplace, adding to the time spent listening on a good old wireless receiver.
Internet radio becoming a commonplace

A survey conducted by Arbitron and Edison Research in the United States in 2011 reveals that 34% of consumers had listened to Internet radio in the past month. The audience is broken down equally between listening to FM and AM stations on the Web and listening
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Spending on radio advertising

Source: Zenith Optimedia
Billion $ (current prices) North America Western Europe Asia/Pacic Rest of the World World
2009 17.8 5.7 4.6 3.6 31.7
2010 17.4 5.9 4.8 3.8 32.0
2011 17.8 6.1 5.0 4.0 32.8
2012 18.5 6.2 5.1 4.2 34.1
2013 19.1 6.3 5.4 4.5 35.2
Radio losing popularity

Radios share of global ad spending
9.5% 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
The medium of mobile use

Breakdown of radio listening in France in 2009
4%
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26% At home At work In-car Other 50%
20%
Source: Mdiamtrie
Radio
5.10
Print media and the Web

Economic and structural crises
Print media not bouncing backe
Circulation gures for newspapers and magazines continue to shrink, despite the occasional spikes when a major news story hits. In the UK, circulation for the top 12 papers shrank by 23% between 2005 and 2010. Over in the United States, it is dropping by 4% to 5% a year. Magazines are also feeling the pinch, with subscriptions for the top 100 British publications down by 4.1% in 2010. In addition to lost revenue from single issue sales and subscriptions, the decline in circulation is impacting advertising revenue it took a hit during the nancial meltdown in 2008-2009. Unlike other media, however, the 23% decrease in advertising income that newspapers and magazines suffered over the course of those two years was not followed by a recovery. The industry took more painful blows with further losses in 2010 and 2011. The decreased ad spending on print media is affecting all major world regions, with the exception of Latin America, North Africa and the Middle East. The third biggest source of income for newspapers, classied ads, are quickly moving over to the Web which offers much more rened search and location-based features. In France, for instance, the Internet has gone from having a less than 1% share of the classied ad market in 2000 to 17% in 2005, and up to around 50% in 2010 (source: DGMIC/Xer). All this has made for tough times for print media. Even though trafc on newspaper Websites is rising, the ad revenue they are earning is not offsetting the revenue lost from their print versions. Added to this is the fact that the Web is evolving quickly from a text-based to a video-based medium: this is penalising newspapers in terms of the time spent on their site, and their share of online newshounds is tending to shrink. To turn the tide, newspapers can either become a portal, incorporating content from other sites and videos which help increase the time users spend on a site. The critical path here involves starting out with user-created content which is free, before investing in low-cost video such as with Reuters mobile journalism. Some outlets are opting to create a series of specialty sites, on the one hand to attract targeted advertising and, on the other, to esh out the news with services that will, for print media, become their core online business model. Other outlets are trying, once again, to bring back the paywall, either on a set of devices or only for mobile phones and tablets even though we have yet to see any solid proof that users are willing to pay for general news. Furthermore, for the mobile version of their publications, print media are nding themselves in a power struggle with app stores that want to earn a commission on every sale.
The weight of print media weight on the Internet

Print media was the rst content industry to be slammed by the Internet juggernaut. News is both abundant and free on the Web, and print media has to compete not only with other mass media, namely TV and radio, but also giant aggregators. This is a booming profession, embracing both general interest aggregators such as Yahoo! and more specialised ones, along with citizen journalist sites such as Politico and the Hufngton Post (recently taken over by AOL), and even certain wire agencies which are addressing themselves directly to users, as is already the case with Reuters or, as with AFP, are planning on doing so.
Balancing act between print and digital

A still very small number of newspapers and notably local papers in the United States, such as the Monroe Observer as well as niche magazines are opting to forego their print versions entirely and go fully online. Others, such as the Aurora Sentinel, have elected to put out only a single weekly issue. All, however, are working to achieve a balance between breaking news which is posted to the Web, and more in-depth analysis which is reserved for their print editions. > Contact: g.fontaine@idate.org
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Ad spending on print media

Billion $ North America Western Europe Asia/Pacic Rest of the World World
2009 54 41 30 18 143
2010 51 41 30 18 140
2011 48 41 30 19 138
2012 45 41 31 20 137
2013 43 41 31 21 136
Decreasing circulation of print media

Circulation of the top 12 newspapers in the UK
Million units 14 13 12 11 10 9 8 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Revenue under pressure

Comparison on print media revenue structure in France
Billion 12
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8 Announcements 6 Advertising Sales by subscription 4 Sales per copy
0 2000 2010
Source: DGMIC
Print media and the Web
Source: Audit Bureau of Circulation
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The new markets of the Internet
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Internet services: data ad innitum
The stunning development of online services, rst on computers and now on a wide range of devices, can be revisited and analysed through the prism of data, both personal and not. The core stakes in the battles between the Internet giants (primarily Google, Facebook, Amazon, Apple, Microsoft, Yahoo! and Twitter) revolve around four main data-centric operations whose development taps into the inner reaches of the Web. D is for declarations and discovery For any Internet company, the rst step is to collect as much data as possible. They can go about this in several ways. The rst involves developing an online service that allows them to amass a host of personal data through their interaction with users, as much through the proles that users complete themselves as the use of cookies that track their digital footsteps. This approach has become increasingly prevalent with the development of social networking sites where users leave a great deal of information (including interaction with friends on their walls, with applications and status information.). This is driving players such as Google to launch their own solutions based on personal data (Gmail, Google+). The growing trafc on new devices (principally todays smartphones, tablets, consoles and connected TVs) is also creating new opportunities to collect data and accelerate the shift to storing data and personal content in the cloud, using solutions of the likes of Dropbox and iCloud. The process of gathering information will also increase in line with the development of sensors (for movement, environment, medical or location), both on phones and dedicated devices connected to the Web, either directly or via a smartphone. A virtually innite range of possibilities is opened up by the Internet of things (IoT) in terms of generating data, even if it is taking shape very gradually, due to a lack of a proper large-scale business model.
The second option also makes it possible to collect an array of data beyond the personal information supplied by users. Service providers can collect information not from users but rather from other service providers that have their own database. Several approaches enable interaction between service providers. Internet players swap data when developing a service such as identication through a third-party system like Facebook Connect but can also be collected freely and easily from various parties notably public agencies that make their data available through open data schemes using API. Meanwhile, some players are building massive databases by collecting information more or less legally, sometimes only just staying within the bounds of copyright laws through crawling or via requests, especially around the invisible Web which is a goldmine of untapped information (often accessibly only by lling out forms), and which represents more than 90% of the Internet. A is for analysis and automation Of course, the mere accumulation of raw data, both personal and not, is not an end unto itself. The availability of large quantities of non-personal data allows companies to create new generation services and to improve existing ones. By making use of big data technologies, and taking advantage of cloud architectures and data mining solutions, online players can create innovative services based on a combination of data. Such is the case with search engines, automated translation, image recognition and analytics solutions that deliver streamlined analysis of how services perform, in terms, for instance, of advertising. Such an approach requires sophisticated infrastructure, which naturally creates a barrier to entry and means that it is really only available to a handful of heavyweights such as Google and Amazon, and probably Facebook in the not too distant future. Other key developments around the Web also help improve existing services. Structured
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6
data and semantic Web technologies enable services that are based on better ltering of (manually or automated) tagged information and on mapping the meaning of the exchanges of information, and so providing natural and intuitive interfaces. Analysis of the social graph, in other words of friends activities and centres of interest, enables more streamlined recommendations here again improving the efciency of the services rendered as well as social advertising. With or without the social graph, personal data are naturally treated separately, as their analysis allows for increasingly streamlined user targeting. All of these new technologies supply increasingly automated data processing, all in real time, which allows Internet players to target not only a huge number of users but also partners and advertisers. T is for transformation and tracking The goal of collecting and analysing all of this data, and especially personal data, is to transform trafc into revenue. This monetisation of online services and their data is achieved primarily through advertising and commissions on the sale of digital and physical content and services, even if other forms of indirect value-creation also exist, such as customer service. To maximise the revenue earned on monetised data, the Internets titans have developed either on their own or through acquisitions tools that allow them to monitor their nancial streams. Most have their own advertising department/brokerage that targets the various formats and key devices, and makes use of leading-edge analytical tools. We have seen a slew of takeovers in this arena, including the mergers and acquisitions in recent years around DoubleClick, AdMob and Quattro Wireless. The Internet giants are also developing their own payment systems, such as Google Checkout and, more recently, Facebook Credits which guarantee them relatively juicy commissions on digital goods sales with a 70-30 split. Internet companies are also innovating in the realm of statistical tools and original payment solutions, such as in-app and subscription systems, which are probably just as important as the services themselves when it comes to monetisation. Here, Google is outperforming Facebook by a solid margin, despite lighter usage. By the same token, Apples App Store generates more revenue for developers, even though Android is the most widely used OS. The ability to transform trafc into revenue will also be improved by accurate targeting of the user who is being tracked more and more as she travels from site to site, and from page to page within a site. Cookies are used to track user digital footprints, but there are other solutions that are helping with behavioural targeting and retargeting. A is for aggregation and app store To achieve maximum monetisation, Internet companies are working to monitor a maximum amount of data directly, in particular by aggregating third-parties data. This not only gives them guaranteed access to a huge amount of data, but also restricts their competitors access to that information. To this end, they are operating platforms built around their services and/or devices, such as Apple does with its smartphones and Facebook on social networking sites. These platforms provide easy access to a multitude of applications, which in turn generate data that help further improve their targeting capabilities. The role that these platforms play has become crucial, triggering a variety of initiatives from Internet companies: expanding their platform via partnerships (as with GoogleTV, or the deal between Nokia and Microsoft), deploying one platform on another (Amazon app store on Android), deploying a dedicated platform (the Zynga Project Z), circumventing the main platforms, such as France Telecom has done, to take back control of customers data which the platform often owns only thanks
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to its CRM, which limits how much information can be exchanged with developers and minimising the amount of revenue they share. The development of HTML5 has the potential to undermine the dominance enjoyed by platforms by springing open certain technological locks, and so allowing third parties like Facebook to forge themselves a stronghold without having their own OS or browser. Any more for any more? The innumerable possibilities opened up by the collection, aggregation, analysis and monetisation of data, both personal and not, on a multitude of devices, are dramatically reducing time-to-market for new innovations. This in turn enables the emergence of newcomers beneting from an inux of capital, especially from the stock market with the return of huge IPOs (LinkedIn, Zynga, Groupon and soon Facebook), which ultimately benets users. The real Internet leaders are those
who are capable of excelling in at least one of the four arenas of data exploitation described here or, even better, in all four. Aside from the eternal question of security, the only real limits to all these developments, which are rooted in the lives of increasingly hyper-connected users, lie in the realm of protecting copyright, privacy and personal data the latter being in a state of constant ux. Users are increasingly aware and conscious of the risks surrounding use of their data (as with identity theft or targeting by advertisers) without it necessarily altering their behaviour. At a time when data management policies are continually evolving with recent examples that include the changes Google made earlier this year and the Facebook conguration systems regulations for governing data (imposed both by NRAs and users themselves) will naturally become a major issue.
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6.1
Online advertising
Recovery and strong long-term outlook, despite a downturn in 2012
The bulk of online advertising revenue around the globe estimated at more than 53 billion EUR in 2011 is divvied up between sponsored links and display ads, including new innovative formats and video ads. Spurred by the nancial climate, and especially the credit crunch in 2009, an accelerated change was seen in how money was being spent on online advertising, with advertisers increasingly demanding performance-based rates and heavily favouring sponsored links as a result of which there is a clear rise in performance-based display ads (billed in CPC). These segments will be key to enabling the market to weather the recession expected in 2012. The development of in-video ads, and especially pre-roll ones as advertisers transfer their monies from old to new media, will also help drive a solid increase in the online ad market, even in 2012. Growing at an average annual rate of 15.8% between 2011 and 2015, the global online advertising market is forecast to stand at 96 billion EUR in 2015, and this despite the tough times expected this year.
Monetising new key Web applications (mobile, video, social networking)

The main branches of the Web today, namely mobile, video and social networking, have not yet translated into a signicant increase in ad revenue for these areas, in many instances due to massive inventory that is hard to monetise through classic ad formats. All the same, those who now dominate these segments primarily Facebook, YouTube, Dailymotion, Hulu, Apple and catch-up TV services are enjoying considerable success, especially the social networking sites which made headlines throughout 2011 and will continue to do so this year with their IPOs. Although small when compared to the trafc they generate, the ad revenue earned by these three major segments nevertheless totalled 9.9 billion EUR in 2011, and was generated chiey by traditional formats carried over to these new services. Formats specic to these applications, such as overlay, location-based ads, and social graph targeting, still only generate a marginal portion of income, but will help sustain solid growth over the long term, with revenue forecast to total more than 29.7 billion EUR in 2015 or close to one third of the online advertising market.
Still a concentrated market, but a few major newcomers on the scene

Online advertising is a very concentrated market in terms of its purveyors. Google singlehandedly accounts for close to half of all online ad revenue, or almost 27 billion EUR in 2011. Facebook is still a relatively small player in the market, earning just over 3 billion EUR last year, which is only slightly less that Yahoo! whose ad revenue has been plummeting. Facebook and Microsoft have joined forces to better compete with Google, Microsoft and Yahoo!, which only served to consolidate the market oligopoly. The hegemony of Google is being progressively challenged by the burgeoning inuence of mobile and social networking, which are Apple and Facebook strongholds.
Mobile boasts the most promising long-term outlook

Earning its ad revenue more from display than from search, mobile advertising will join video in helping spur the display market. Mobile advertising will also benet from an inux in spending from local advertisers thanks to location-based solutions, but it will come up against limitations set by user demands for privacy. Thanks to the success of mobile, growth is expected to pick up considerably in the coming years. Of all the new markets, mobile has the strongest long-term growth prospects and will take over from todays juggernaut, social networking. Mobile trafc is set to explode, while other markets are gradually setting their sights on such paid solutions as VoD and virtual money to generate additional revenue streams. > Contact: v.bonneau@idate.org
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The online advertising market

Billion North America EU-27 USA France Germany Italy Spain United Kingdom Asia/Pacic China Japan World 2009 13.8 9.9 1.9 2.3 0.6 0.7 2.7 8.2 1.9 3.9 38.3
Source: IDATE in World Internet services markets
2010 15.5 11.0 2.0 2.7 0.7 0.8 3.0 10.0 2.8 4.4 44.7
2011 18.1 12.7 2.2 3.3 0.8 0.9 3.4 12.0 3.8 4.7 53.1
2012 20.6 13.9 2.4 3.6 0.9 1.0 3.6 13.7 4.9 5.0 60.2
2015 30.1 20.7 3.4 5.4 1.4 1.5 5.1 23.4 9.9 6.7 95.5
Video and mobile halt the decline of display ads

Below/above the line breakdown for online advertising
2011
10% 6%
2015
34% Other Display Search marketing Other Display Search marketing
36%
56%
57%
New key advertising markets

Breakdown of ad revenue on new platforms
27% 33%
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44%
EU 2011
EU 2015
18%
29%
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53%
USA 2015
48%
Online advertising
6.2
Mobile Internet
Is the mobile Internet recession-proof?
Mobile Internet penetration stood at over 23% worldwide at the end of 2011, representing approximately 1.4 billion users, and IDATE expects this to have risen to 2.7 billion users by 2015, or a 33% mobile Internet penetration. Spurring this growth is the rise of smartphones which accounted for 26.5% of mobile handset shipments worldwide in 2011, a gure that is expected to more than double to 51.7% by 2015, resulting in over 2 billion subscribers. The two main sources of revenue for mobile Internet services are mobile apps and mobile advertising. The former represented 7.3 billion EUR as of year-end 2011, and is forecast to rise to 27.8 billion EUR by 2015. The latter is estimated at 3.1 billion EUR for 2011, and expected to reach 10.4 billion EUR by 2015. platforms provide an alternative to native OS control, guiding users to their own platform leveraging their already established brand and services. Thus all of the players are indeed competing, but often for different interests. All of this is an attempt to aggregate user data, in order to monetise and enhance their business.
Impact of HTML5 on the platform battle

IDATE believes that HTML5 is a potential game changer for the mobile Internet market. HTML5 allows such players as Facebook to provide an alternative to the current dominant OS platform model. The Facebook mobile platform is based on HTML5, and then optimised for native apps (a hybrid solution where the bulk of the app is written in HTML5, and then tweaked to comply with each native OS). Since it is HTML5-based, developers do not have to create separate applications for each native OS. In fact, some of the big name games developers such as Electronic Arts and Zynga already provide apps via this route, as does the Facebook application itself. However, HTML5 is currently a work-in-progress rather than a complete solution. In particular, considering that the most popular genre for mobile apps is games, HTML5 cannot cope with the graphic intensiveness of advanced games and thus a hybrid solution is likely to remain strong for the time being. This also has the advantage that the app can benet from native phone capabilities such as the camera and push messaging, currently unavailable to pure HTML5 apps. In fact, migration to HTML5 is already happening for non-graphic intensive services already; for example the Financial Times, unhappy with the strict controls placed by Apple, has now created their own Web app for the iPhone, and are encouraging users to switch immediately to the new Financial Times Web app. Other players, such as Amazon (distributing eBooks) and VUDU (distributing online video) are also taking a similar route. With HTML5 closing the gap on native capabilities, more similar cases are likely to follow. The battle of platforms is truly underway, with HTML5 a potential game changer. > Contact: s.nakajima@idate.org 2010 1 145 907 133 162 112 67 199 4 167 610 2 635 7 542 2011 1 780 1 352 189 238 160 96 295 5 316 879 3 219 10 431 2012 2 938 2 263 315 392 257 161 479 7 619 1 483 4 447 16 040 2015 6 988 6 629 966 1 215 681 493 1 177 16 087 3 993 8 178 38 219
From the battle of the OS to a broader battle between platforms

What was once referred to as the OS battle is now all but over, with Apple and Google having emerged victorious. However, other players who do not have their own OS, such as Facebook and Amazon, are also presently shaping up in a battle to become the dominant platform which links the user and the content. Content is not exclusive to a given platform, and thus the same content can be offered for the same price and the same experience on varying platforms. The platform providers are ghting to become the dominant platform provider, to be able to control the ow of user data and the revenue that will comes with it. IDATE identies three main types of platform providers; device-centric (such as Apple and RIM), OS-centric (such as Google and Microsoft/Nokia partnership), and content-centric (such as Facebook, Amazon and the WAC initiative). The ultimate goal for device-centric platforms is to sell their devices. The interests of OS-centric platforms lie outside the device, for example with Google aiming to gain more user data to supplement their advertising revenue, and Microsoft aiming to supplement their Ofce licensing business by extending their reach into mobile. Finally, content-centric
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The mobile Internet services market

Million North America Europe-27 USA France Germany Italy Spain United Kingdom Asia/Pacic China Japan World 2009 706 617 94 113 83 45 138 3 229 413 2 111 5 405
Source: IDATE in Apps and the mobile Internet
Europe lagging behind

Mobile Internet penetration
% of population using mobile Internet 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 2014 2015
USA
Europe-27
Asia/Pacific
Japan
Do you need to control the device to control the platform?

USA Europe-27 Asia/Pacific Japan
The top three mobile platform models
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iCloud by Apple
Nokia OVI Store Windows market place
Amazon appstore available on Android
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6.3
Social networks
A global phenomenon
Social networking is today a global phenomenon. According to our estimates, there were over 1 billion social networkers as of end-2011, which equates to 63% of Internet users, making social networking one of the most popular online activities. We expect growth in social networkers to continue, to give a CAGR of 10.9% from 2011 to 2015. Facebook is by far the leading social networking service in the world, with more than 730 million visitors in June 2011, and it is still showing an impressive growth with an increase of 33% from the previous year. Twitter comes in at a distant second with 144.4 million visitors, but nevertheless the growth is impressive with a 56% increase from the year before. It should also be noted that whilst Facebook is the dominant force worldwide, it is not necessarily the leading social network in every country and faces challengers in specic countries such as Skyrock in France, Bebo in the UK, Hyves in the Netherlands, Mixi in Japan, Orkut in India and Brazil and Renren in China. open platform. Whilst this is limited to games at present, it has the potential to spread to other digital or even physical goods, should Facebook decide to go down this route in the future.
Virtual worlds as part of the social networking value Virtual worlds, such as Second Life, WeeWorld and Habbo, can be included in the wider denition of social networks, since the core service of social relations remains the same, the only difference being the representation of the user is in the form of an avatar, and interactions take place within a virtual world. As such, virtual worlds tend to be carefully targeted in terms of age group, the majority of which target teens and under (Second Life being the notable exception). In the case of virtual worlds, it is in fact the sale of virtual goods that take the lions share of revenues; the majority of which are avatar customisation goods (such as face parts, clothes, pets and furniture). Such virtual goods are often created by the users themselves and then traded within the virtual world, or made in collaboration with celebrities and brands. Brands and media can also create their own space within a virtual world, to interact directly with their fans and to promote their products, both in the virtual and real world.
Facebook strengthening paid service revenue through virtual currency

There are two main sources of revenue for social networks: advertising, and paid services. For the majority of players advertising takes the lions share of revenues, but it has become apparent that Facebook is aiming to explore the latter revenue source, through its virtual currency, Facebook Credits. During 2010, Facebook struck deals with several high prole games developers working on its platform (such as Zynga), making Facebook Credits the exclusive payment mechanism in their games. Whilst such gaming apps are virtually always free to play, they often offer in-app purchasing whereby users can buy extra weapons, levels, characters or other facets. Facebook then receives a 30% commission on all purchases made with Facebook Credits. In return, Facebook can help developers meet their user growth targets. Then, in January 2011, Facebook announced that it will make Facebook Credits mandatory for all games (though not exclusive), with the rule going into effect on 1 July 2011. In this way, Facebook has started to really exploit the revenue stream of paid services on social networks, through the use of their own virtual currency on their
Google attempting to challenge the dominance of Facebook

Google launched their new social networking service, Google+, in June 2011. Initially, it was an invite-only service but it opened publicly in September 2011. Google has made several attempts to enter the social networking market in the past, most notably with Google Buzz and the acquisition of Jaiku (a service comparable to Twitter), but ultimately with limited success. They also launched a virtual world, Lively, in 2008 but that was shut down by the end of that year. In October 2011, Google announced on their ofcial blog that Buzz and Jaiku will be discontinued, together with the social features on iGoogle, with the aim of focusing solely on Google+. One senses that Google+ is Googles biggest attempt yet to challenge the dominance of the social networking giant Facebook > Contact: s.nakajima@idate.org
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The social networking population

Social networkers (million users) % among Internet users 2009 670 48.9% 2010 953 59.7% 2011 1 173 63.4% 2012 1 333 65.7% 2015 1 734 70.1%
Source: IDATE
Moving from advertising centric to more paid service based business models
Ratio of social networking revenues for EU27: advertising vs paid services
2011
2015
38% Paid services Advertising revenues 62% 49% Paid services Advertising revenues 51%
A new source of income for social networking sites

Overview of Facebook Credits, the virtual currency micropayment system
Micropayment system
Device
Interface
Billing method
Credit info compulsory
Authentification
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Open On PC and mobile web apps, but not on native OS (iPhone...)
Various Facebook account

(email and password)
Source: IDATE
Social networks
6.4
Open data
Whats the best business model?
A growing trend in both the private and public sector
Making data and applications openly available is one of the Webs underlying trends, and the natural progression of the Web 2.0 ethos of sharing and collaboration, and especially of open innovation. Open data involves making data that are produced, owned and collected by public or private undertakings, and which had been previously kept for in-house use only, freely available on the Web. These open data can then be freely accessed and reused, although there may be some licensing terms that apply. In reality, however, free access does not necessarily mean free of charge, and some open data may in fact be behind a paywall. The public sector is the most widely affected by this trend since it has considerable public data resources, which theoretically belong to citizens. This open data movement has actually existed for some time in the private and semi-private sector to some degree in such forms as private and public transport, print media and weather. Major Internet destinations, Google, Amazon and Facebook, initiated the movement by making their databases available to the public. Google is the best example, offering up its mapping data through API, namely software interfaces that allow third-party developers to link their applications to the companys databases. The development of open data has also been driven forward by several citizen-led initiatives, including the Sunlight Foundation in the United States, the Open Knowledge Foundation in the UK and LiberTIC in France. Some initiatives are making use of crowdsourcing, in other words collecting data thanks to a crowd of users, as is the case with OpenStreet Map. It is a more complex matter for the public sector, however. Governments can generate savings directly with open data schemes, by reducing the cost of making information available to the public, especially compared to print documents. There are other indirect but equally important gains to be had: supporting innovation in a number of areas that are due to make substantial progress in the medium term, such as mobility, smart cities and sustainable development. This could include the supply of detailed data on building insulation and energy consumption, which are vital to manufacturers working in the arena of renewable energy; a new and enhanced cross-section approach to services, doing away with the silo model and sharing common methods to design power, water, road and sewerage networks; create competition between public entities by publishing performance indicators for example, releasing mortality rates by pathology for hospitals could result in increased efciency; opening up access to data can also help public and private entities to work together, which would in turn improve the quality of public services and create incentives for citizens to become involved in public life. The fact of making data freely available also creates opportunities for other types of player. Developers play a key role in these initiatives as they use the data to design innovative applications, imbuing raw data with value added. They can generate income from the sale of these apps, and possibly earn a share of ad revenue. Platforms that provide access to data are another link in the value chain, and one which is becoming key as such a massive amount of data becomes available and is in need of cross-referencing. Open data also creates a number of market opportunities for the platform operators Google is one such, having launched a service called Google Public Data Explorer. > Contact: s.lubrano@idate.org
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Disparate business models

The business model to apply is a relatively simple affair for private sector players: they can earn income directly on the sale of information, or access to information. Open data initiatives can also help boost their sales, as Amazon has done by opening up its product lines to other Websites.
United States paving the way

A selection of public open data initiatives in mid-2011
3 11 Australia Canada China France Germany New Zealand Norway 3 Russia Spain UK USA 13 8 2 3 2 42 16 1
Source: IDATE
Rising tide of local initiative

US
Number of public open data initiatives around the world in June 2011, by administrative level
50
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30
20
10
Source: IDATE
Open data
13
6.5
Cloud computing
The new way to deliver IT services
The cloud computing concept
Cloud computing enables the supply of upgradable and usually virtualised resources over the Internet. These resources are generally sold in the form of Infrastructure as a Service (IaaS), or of the Platform (PaaS) or of Software (SaaS). The concept of cloud computing can also refer to providing on-demand access to IT resources, known as utility computing. A cloud computing solution can be private (on an companys internal information system whose infrastructure it fully controls), public (external resources supplied and operated by a third-party) or a combination of the two. It can be seen, to some extent, as a new stage in the development of data centres, involving a blend of the Internet and mainframe architectures. These centres employ a variety of recent technologies such as virtualisation and green energy, both of which make for more protable and exible operations. expenses. This is especially true for small and medium businesses, as cloud computing allows them to replace their spending on software licences with a usage-based fee, usually monthly, for the cloud service. The principle of a multi-tenant architecture, whereby several customers share a server or an application, is also helping bring down costs. The concept of big data, or put another way the challenges posed by the need to manage massive datasets, will have cloud computing at its core, allowing businesses to make use of data without having to invest in massive new systems. Some hurdles still have to be overcome. An enormous initial investment is required, particularly in data centres, to be able to supply cloud solutions which necessarily limits the number of players that can deliver them over the long term. In addition, a great many companies are concerned about protecting the security and condentiality of their data. Lastly are concerns over quality of service, keeping in mind that cloud computing services rarely come with SLA (Service Level Agreements). These obstacles will need to be overcome for companies to embrace cloud computing without any qualms.
Sizeable spending over the next two years in both the private and public sector
Cloud computing is a fast-growing means of delivering IT services. Its adoption today is being driven chiey by pragmatic considerations, but it is expected to continue to prosper as it provides a response to businesses core needs in terms of cost optimisation, efciency and savings. Over the next several years, one can expect to see a great many businesses and public authorities deploy a variety of cloud computing models, both in-house and over public systems. Once security and quality of service issues (amongst others) have been resolved, more and more companies will adopt cloud computing, making use of the IT resources of the different cloud systems available over the Web and internally.
A great many players vying for share of the market

As in the software sector, most of the top cloud computing companies today are headquartered in the United States, whether former start-ups like Salesforce.com or Google, or computing veterans like IBM and Oracle/Sun. Some telcos could take advantage of the current trend to expand into the supply of cloud-based solutions. Because it is built on data centres deployed across the Web, the cloud computing model is a good t with large telcos infrastructure. Indeed, they may well become major players in this market, not only in the IaaS segment, which will become a key part of the market, but also in SaaS which is the biggest segment today. > Contact: j.gaudemer@idate.org
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Growth enablers and obstacles

There are several factors that are driving the growing demand for cloud solutions, starting with protability, exibility, simplicity and giving end-users the ability to convert a portion of their capital expenditures into operating
The SaaS cloud computing market

Source: Gartner, August 2011
Million North America Europe Asia/Pacic Latin America Africa/Midlle East World
2009 3 942 1 316 318 203 51 5 830
2010 4 889 1 697 455 238 65 7 344
2011 5 805 2 101 580 286 90 8 862
2012 6 774 2 516 736 328 106 10 460
2015 9 766 3 826 1 280 475 190 15 537
SaaS: prime beneciary of cloud computing

Breakdown of cloud computing revenue in the EU-27
Billion 12 10 8 6 4 2 0 2009 2010 2011 2012 2013 2014 2015 IaaS PaaS SaaS
Source: Bearing Point, 2011
Profusion of cloud computing initiatives

Cloud computing architectures
SaaS
Client Services Application
Specific software client for delivery of cloud services (e.g. Google Gears) Web services, from the provider or from a third party (e.g. OpenID, Google Maps) Remote application, SaaS (e.g. Google Apps, Salesforce, Skype)
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PaaS
Platform
Application framework development (e.g. Django, Ruby on Rails, Microsoft's Azure, Force.com)
IaaS
Storage Infrastructure
Databases and storage systems (e.g. S3, SimpleDB, BigTable) Datacenters spread over the world, accessible through virtualization and/or parallel computing (e.g. MapReduce, EC2)
Source: IDATE
Cloud computing
6.6
E-commerce
Growth opportunities
E-commerce still has room to grow
Online retail sales continue to enjoy double-digit growth in developed countries: +18% in the United States between 2010 and 2011, +22% during that same period in France. This rate of increase is being spurred, rst, by a rise in the number of online shoppers who now account for 80% of Internet users in the US and in the UK and, second, by the fact that online shoppers are tending to spend more. Average annual spending per online shopper rose from 660 EUR to 1,115 EUR in four years in France (Source: Fevad, between 2006 and 2010). Still, e-commerce only represents a tiny fraction of retail sales: 4.7% at the end of 2011 in the United States and 4.1% in France in 2010. Online shopping is still very much focused on a few products: travel, cultural goods (especially digital media les), high-tech goods and clothing. Major retail sectors such as groceries and furniture are only just entering the digital fray, and less than 1% of their sales are online. So Internet shopping still has tremendous room to grow, and will continue to develop: IDATE is forecasting average annual growth rates of around 9% in Europe and 10% in the United States from 2011-2015. Asia will enjoy even higher rates of progress during that time (16% annually) as the region is being sustained by the growing adoption of e-commerce in China. well as business-to-customer (B2C) sites like 360Buy are especially popular. Over in Japan, Rakuten has remained the leading online retailer and has begun to expand internationally through a number of takeovers, including Buy.com in the United States, Play Holdings in the UK and Tradoria in Germany, one year after having taken over the French company, PriceMinister. Rakuten is also going head to head with Amazon in the eReader market, following its takeover of Kobo the Kindles Canadianborn rival. Amazon is nevertheless by far the worlds largest online retailer, with over 34 EUR billion in sales in 2010 and unagging growth in 2011 (+50% in Q2 2011 compared to Q2 2010).
New opportunities created by social media

Social networking sites are opening up new channels for online retailers, including possibilities for targeted advertising based on users tastes or recommendations made on Facebook or Google Plus. To this end, Amazon is beta testing an Amazon-Facebook interface. When users connect to Amazon through their Facebook page, the application displays their friends birthdays and suggests gifts based on their preferences (to be precise, the recommendations they have made on Facebook). Another part of the screen displays products that their Facebook friends have rated highly, as another form of recommendation. All of the leading brands use social networking to complement their corporate sites, creating a page devoted to their brand which can also serve as an e-commerce platform.
The rise of international titans

As far as the industrys structure is concerned, American heavyweights Amazon and eBay have managed to establish an international footprint, and are market leaders across Europe despite the success of a handful of national players. Asian countries have been more successful in protecting their markets. This is true of China where local customer-to-customer (C2C) platforms such as Taobao as
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Growth of gross income for e-commerce

Billion North America Europe Asia/Pacic Latin America Africa/Midlle East World 2009 191 165 124 12 1 492 2010 214 198 154 15 1 581 2011 253 232 191 23 1 700 2012 283 267 231 35 1 818 2015 367 358 360 88 2 1 175
Source: IDATE
Online sales continue to make strides

Growth of the online retail market in the United States
Billion $ 1200 1000 800 600 Online 400 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 2009 2010 2011 Physical
Source: Census Bureau
Top online shopping destinations: sales gures
Billion 50
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2005 2006 2007 Amazon 2008 eBay 2009 Rakuten 2010 2011
40
30
20
10
Source: IDATE
E-commerce
Amazon keeps on growing
6.7
M2M and the Internet of things

Very healthy growth for the M2M market
Machine-to-Machine (M2M) refers to communications between machines with machine referring here to a smart object that operates independently and has only a single function, outtted with connectivity capabilities that allow it to communicate. It could be a car, a photocopier or an eBook, but not a multipurpose device like tablet or a computer. The M2M market continues to grow steadily: in 2011, the global cellular M2M market represented 90 million modules and revenue of 18 billion EUR of which 4.3 billion EUR for connectivity. In 2010, the market grew by around 32% in terms of revenue and 56% in terms of volume. North America overtook Europe in module numbers in 2010, thanks in particular to the success of M2M consumer electronics (CE), although Europe still has the lead in terms of market value. The annual growth rate between now and 2015 is expected to be 15% in terms of revenue and 30% in terms of volume, creating a global market of 31.8 billion EUR and 250 million modules by that time. will likely take a step back as they wait to see how the global economic situation plays out in 2012.
Telcos working to grab a share of the market

Two thirds of the machine-to-machine market is composed of software and associated IT services, as M2M solutions have greater value-added if connected to existing systems. As a result, the biggest rollouts involve veteran IT integrators using M2M building blocks provided by telecom carriers and module suppliers. While some telcos were reticent to enter this business directly a few years back, most are now working to carve themselves a solid foothold in this market. They are trying to forge a distinctive position through technical initiatives (such as IPv6, embedded and more robust SIM cards and Internet portals) and sales techniques like a one-stop international PoP for sales and rentals. The prospects offered by M2M are attractive in that, despite low per-customer revenue, the solutions have a long lifespan, little churn out and contracts involving several million SIM cards. Access services alone are forecast to represent 8.2 billion EUR in 2015 worldwide, and 3 billion EUR in Europe.
Vehicles, CE and utilities will drive the M2M market

Internet-ready consumer electronics products, such as connected eReaders, came on the market only a couple of years ago. Since then, their popularity has done much to spur the M2M market forward, especially in terms of units while also masking some of the problems the traditional M2M market is facing. There are several obstacles that may well hamper the progress of vehicle and utility markets. Some applications in these core vertical sectors will be burdened by ongoing delays in the short term, including eCall regulation in Europe and largescale rollouts by utilities. This latter market is in fact being considered less attractive than it once was as nancial opportunities are slim: most smart meters will be connected to the cellular network using a concentrator outtted with a SIM card. Several M2M industry players
The Internet of things is the next stage for M2M but is still some years away
Looking beyond classic M2M solutions, new prospects are being opened up by the Internet of things (IoT) wherein any item, even if it does not contain the electronics needed to connect directly to the network, could connect to the Web to obtain information that would enhance its intrinsic value. The Internet of things will not be a reality for some time to come, however, as RFID technology needs to be widely deployed, along with NFC devices these being the best options today for outtting objects with virtual tags and an entirely new infrastructure to fully manage the massive databases needed for open loop solutions. In the medium term, then, most IoT solutions will be closed-loop B2B projects. > Contact: s.ropert@idate.org
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Celular M2M modules worldwide

Million units North America Europe Asia/Pacic World 2009 14 15 8 42 2010 23 22 12 65 2011 32 28 18 91 2012 38 34 23 110 2015 72 78 50 241
Source: IDATE in M2M markets
Widespread growth
World M2M markets by region
Billion 8 7 6 5 4 3 2 1 0 2009 2010 2011 2012 2013 2014 2015 Asia/Pacific North America Europe
Growing number of M2M applications

M2M development by vertical industry
143
Consumer electronics Healthcare Utilities (Water and gas) Smart grid Indutrial equipment (machines monotoring and maintenance) Consumer electronics Home automation Environment Smart cities (Intelligent transport) Office equipment Auto insurance (PAYD) Health (advanced apps) Automotive (infotainment)
Security Industrial (SCADA) Point-of-sale Transport (Fleet) Already in use
Consumer electronics Tablets and dongles Utilities (energy) Automotive (TeleMatics)
Current deployments
Pilots and short term
Mid-long term
www.idate.org
M2M and the Internet of things
6.8
Smart cities
Multiple denitions, but ICT is the common denominator
The concept of the smart city has been taking hold over the past several years as a vital future direction for world metropolises. It is part of a virtuous outlook for the city that embraces the imperatives of economic and social development, sustainable development and improving quality of life. The smart city arises from two conclusions: the city is the dominant spatial structure 80% of the population of Europe live in cities and will have to rise to a number of challenges to ensure harmonious growth in the years ahead. ICT affect all urban functions today, and are disruptive factors in the way cities are organised, the way they run and the way they are managed. It is hard to give a single denition for smart city as the concept encompasses multiple facets. The smart city goes beyond the realm of the digital city in that ICT developments (infrastructures, services and applications) need to keep pace with changes in organisational and operational systems to deliver a set of services efciently and effectively. It is made up of a set of modules which are inherently bound up with economics, social and human capital, citizen involvement in governance, mobility, the environment and quality of life.
A rich and complex ecosystem of players

A great many players are involved in the development of a smart city. It requires a complex value chain with a growing number of agents and shifting positions. Among them are, rstly, the conventional batch of wireline and wireless telcos, telecom equipment manufacturers, IT and network hardware suppliers, infrastructure managers and R&D labs. Then there is a packed raft of digital industry players that specialise in certain smart city functions, a host of start-ups positioned in mobile services proper to the city, such as dynamic car-pooling, augmented reality solutions for tourists, location-based sales and marketing solutions for mobile users, along with the citys own civil society and, of course, its citizens.
but where do public authorities t in?

Within this rich and complex ecosystem, the city corpus itself in other words the public institution that governs it, along with its various departments has a central role in the way the ecosystem is organised, in achieving cohesion and in directly producing services for end-users. City authorities are involved in developing digital services that ensure a better quality of life and a more efcient and effective system. In addition to this role as producer of services, the city acts as a facilitator through a range of initiatives which can reach from making public data available, through innovation in supporting living labs and ideas crowdsourcing, across to new forms of consultation such as social ideation platforms. A number of municipalities are already involved in smart city initiatives in several ways including working on ones they instigated themselves; working in tandem with private sector players; acting as a test bed for new solutions; or as partners for European R&D projects. The development outlook for smart cities in the coming years is considerable, and is expected to be a signicant source of local value creation.
Smart city cornerstones

The digital aspect of the smart city starts with a generic, cohesive architecture made up of a set of building blocks (see diagram), covering infrastructures and IT systems supporting applications and services. In promoting a new approach to ICT, the smart city works towards achieving unied, interoperable systems. The data thus produced or captured at different levels within a city structure can be used by different applications. By breaking free of the silo approach, this contributes to creating digital services with real value-added for end-users. The Internet of things is becoming an increasingly vital component in current discussions by local authorities over the future of the smart city, and provides a perfect response to this search for the unied and interoperable architecture so sought after. The ITU is in fact working on standards in this area, under the name of Ubiquitous Sensor Networks, or USN.
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> Contact : p.baudouin@idate.org
The smart city: cohesive telecom and software architecture

Smart city architecture
Fields of application Smart city architecture Smart city governance Citizens services Business services Transportation services City services management Risk management services
IS & citizen relations management API Service platform SaaS User-generated data Open databases
Essential infrastructures Sensors and terminals RFID/NFC, M2M, Data centres Cloud-based systems Urban furniture Ultra high-speed fixed mobile networks
Supply of high-speed wireline and wireless networks A network of data collection and delivery/display devices Harmonised and open data management A cohesive citizen-centric information system
Source: IDATE
Who makes the smart city run?

Wide array of stakeholders, in France
Businesses
Administrations Local chambers Museums
Citizens R&D/Training hospitals Universities/ labs IBM Bull
Associations
Libraries Competitive cluster Google Thales
Etc. Tourist board Cisco Accenture Property developers Decaux Local authorities Alcatel Etc.
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Etc.
Amazon Ericsson
Volia Lyonnaise des Eaux Orange PIN contractors
GDF Municipal utilities Iliad SFR
EDF Public housing Data centres Bouygues Telecom
Etc.
Altitude Local authorities
Numericable
Source: IDATE
Smart cities
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French smartcard maker Gemalto is outsourcing the management of its 9,000 workstations to IT service company T-Systems, under a global contract covering 40 countries. Gemalto was also selected by Japanese mobile operator Softbank for its new contactless mobile payment programme in Japan, which is the rst in Asia to offer secure transactions from different back accounts. A recent decision from Italys communications regulatory authorities to assimilate video sites with TV broadcasters gives the latter increased responsibility over the content made available online. Apple launches an online app store for its Mac computers, similar to the one for iPhones. Telecom equipment manufacturer Motorola has now been split into two separate, publicly-traded entities: Motorola Mobility which covers mobiles and set-top boxes, and Motorola Solutions which is in charge of consumer and enterprise solutions. Smartphone chipset maker Qualcomm acquires wireless chipset specialist Atheros for 3.1 billion USD, and thereby strengthens its position in the smartphone and tablet component segment. American semiconductor manufacturer Intel unveils a new generation of microprocessors outtted with a content protection mechanism. Called Sandy Bridge, these chipsets will allow lm studios to secure the movies sold in VoD and on DVDs against piracy and unlawful distribution on P2P networks. Amazon ofcially launches the portal for Android applications developers waiving the $99 registration fee for the rst comers working to build up some stock for its future app store. Skype will be taking over Qik, a service that allows users to produce videos on their mobiles then share them over a 3G or Wi-Fi network, on social networking sites, blogs, YouTube, etc. The deal is intended to allow Skype to strengthen its leadership in video communications by adding recording, sharing and storage to its line-up. After two years of talks with Apple, Verizon announces the arrival of an iPhone compatible with its CDMA network. Deal-of-the-day site Groupon, which had turned down a 6 billion USD takeover bid from Google, announced that it had raised 950 million USD from several venture capital rms and late-stage investors. At the request of the Government of India, Canadas RIM shared the interception keys for consumer IM and e-mail services, but said that it could not do the same for its BlackBerry Enterprise Server secured enterprise messaging service, because of the nature of its encryption system.
After getting the green light from American authorities, cable company Comcast will be taking control of NBC Universal which is currently 80% owned by General Electric for 30 billion USD. Comcast will initially have a 51% stake in the corporation, with an option to acquire the remaining 49% in seven years. Vivendi, which had already sold off a portion of its 20% share, will complete its divestiture to the tune of 5.8 billion USD. American telco Verizon which already attracted attention back in September 2010 for its joint proposal with Google that included the recommendation that neutrality not apply to the mobile Internet is going to court to contest the FCCs right to impose its neutrality regulation on wireline and wireless networks. Telecom carriers Telefnica and China Unicom are consolidating their strategic alliance by each investing an additional 500 million USD in the other. Telefnica thereby increases its stake in China Unicom to 9.7%, while China Unicom ups its ownership of Telefnica to 1.4%. Amazon takes over LoveFilm, a European streaming and DVD rental service of which it already owned 42%. Social networking titan Facebook conrms that it has raised 1.5 billion USD, which puts the companys worth at 50 billion USD. A rst round of 500 million USD had been raised in December 2010 from several sources, while the second was led by Goldman Sachs with investors from outside the United States. British public broadcaster, the BBC, announced a 25% cut in their Internet budget over two years which will include shutting down 200 sites and cutting up to 360 jobs as part of a massive austerity plan. The European Commission announced the launch of a formal enquiry into telecom carriers Telefnica and Portugal Telecom, suspected of illegal non-compete arrangements. After its partnership with Deezer, France Telecom-Orange has entered into exclusive talks with video site Dailymotion to acquire a 49% stake for 58.8 million EUR. The German regulator has said that it would not introduce ex ante regulation for the last mile of optical bre networks, and so allowing Deutsche Telekom to set its own prices. Microsoft has led a complaint with the ITC (International Trade Commission) against TiVo, accusing it of infringing at least four of its video purchasing and distribution patents, and asking for a ban on imports of TiVo digital video recorders.
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Dahlia TV pulls the plug

Dahlia TV is a low-cost digital terrestrial (DTT) pay-TV service that was launched in Italy in March 2009. Run by AirPlus, creator of the Boxer DTT service in Sweden whose shareholders also include ad producer, Filmmaster, and Telecom Italia Media. Dahlia TV is a good example of the drive to develop the pay-TV market on DTT. pay-TV on digital terrestrial is still very marginal, so much so that several providers have handed back their licences. Only the countrys top pay-TV provider, Canal+, which already operates on analogue terrestrial, has a substantial customer base. In Hungary, MinDigTV was reporting a mere 37,000 subscribers in September 2011. Africa, which had 200,000 subscribers at the start of 2011, along with GoTV, a subsidiary of Multichoice which rolled out its pay-TV offer in Zambia and Uganda in August 2011, before moving into Kenya. Over in Ghana, two DTT pay-TV offers; Skyy and SmartTV, are competing for viewers. DTT could do well in Africa given the lack of cable networks and the high cost of satellite reception.
DTT pay-TV subscribers around the world

Million households 6
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0 2008 2009 2010 2011 2012 2013 2014 2015
Source : IDATE
January
Because of the scarcity of available Digital terrestrial TV in fact accounts for less than 1% of the worlds frequencies, DTT cannot offer pay-TV subscribers. an abundance of channels like The switch-off of analogue cable, satellite or ADSL systems broadcasting and the frequencies New paid services do offer a can. Plus, the rights to premium freed up in the process continues tailored response to DTTs programmes, which would make to bring up the question of digital particular position in the it possible to create a high-end terrestrial pay-TV services raison marketplace. Britains Top Up pay-TV offer, are generally already dtre. Public authorities need to TV was originally a package of owned by a rival service. decide between concentrating live channels, then renamed TV the DTT offering on free-to-air Favourites and focused on push What operators in several countries channels, and so allow them to VoD. The offer includes a selection have tried to do, then, was upgrade to high denition, or to of lms and TV programmes to distinguish themselves by count on a greater selection of supplied over a DVR, and so developing a low-cost offer. This channels to increase the appeal allowing for on-demand viewing. resulted in a rst wave of failures of pay-TV services. But at a time Completing the offer is a small in the UK and in Spain. Boxer TV when the pay-TV sector appears package of sports channels. A in Sweden, which appears to be to have hit its apex in developed similar push VoD service, called an exception, saw its customer countries (and even started to SelecTV, has been available numbers spike then start to decline in some cases), only a since 2011. shrink. And even though it had premium offer will have the been awarded a licence, the Outside of developed countries we power to attract viewers. company opted not to deploy its nd several pay-TV offers on DTT. service in Ireland. Over in France, Examples include Top TV in South Contact: j.bajon@idate.org
February
Norways incumbent carrier, Telenor, plans on billing content providers according to the number of videos they make available online. Having to contend with an explosion in data trafc caused by the massive popularity of tablets and smartphones, the telco would be asking video and media sites to pay a fee, in exchange for a guaranteed quality of online distribution. French pay-TV leader Canal+ announces that it has stopped selling subscriptions in Algeria and Morocco where the company had introduced its agship channel via satellite in 2009. Saudi public holding company, Kingdom Holding, has made a buyout offer for the Saudi Arabian subsidiary of Kuwaiti telecom giant Zain, of an estimated 700 million USD. Internet portal AOL acquires the most famous online publication, the Hufngton Post, for 315 million USD in cash. AOL also takes over Goviral, a distributor of online video with 15,000 partner sites, for 97 million USD. Orange, SFR, Bouygues Telecom and Atos create a joint venture for a single, secured online and m-payment system intended to provide an alternative to the PayPal, Google and Apple solutions in France. Baptised Buyster, the joint venture got the stamp of approval from the Banque de France in April and plans on launching its service in September.
American rm Motricity, which specialises in integrated portal solutions for mobile operators, has taken over French m-marketing agency Adenyo (ex-SBW Paris) for 100 million USD, of which at least 50% in cash. After having targeted books, Google is now working to digitise ne arts museums with its Art Project. Associated with Street View, this new service allows users to take a virtual tour of 17 of the planets nest museums. Michael Boukobza has applied for the fth mobile licence in Israel. The former head of Iliad, now living in Israel, has unveiled his ambitions for the Israeli cellular market, which include expenditures estimated at more than 4 billion EUR. The Egyptian governments shut down of the Internet for ve days is calculated to have cost the country 90 million USD, and its impact over the long term could be greater still, according to an initial estimate published by the OECD. Verizon has announced that it reserves the right to throttle the bandwidth on any unlimited data plan customers who hog the network and cause congestion. Italian cable manufacturer Prysmian gets the green light from the European Commission for its takeover of Dutch competitor Draka for 870 million EUR. In a bid to hold its own against Apple and Google, Finnish mobile manufacturer Nokia, which had been pushing its own OS and especially Symbian, announces an alliance with Microsoft for the supply of the operating system that will run its future smartphones, Windows Phone 7. American satellite pay-TV provider EchoStar will be taking over Hughes Communications for 2 billion USD. UAE carrier Etisalat signs a contract with Alcatel-Lucent to install a national LTE network by the rst quarter of 2012.
DigiWorld chronicle
Google accuses Microsoft of copying its search results for Bing. Google provided proof showing that Bing had copied its rivals search results. According to a study from Cisco, data trafc on mobile networks now exceeds the volume of Internet trafc in 2000 by three times. After having tripled in 2010, it is expected to increase by an astounding 26 times by 2015, to reach 6.3 exabytes a month, half of which will be concentrated in Europe and in Asia. Apple and Rupert Murdoch launch the Daily for iPad, which will be sold solely via subscription $0.99 a week or $39.99 a year and produced by a team of some 100 journalists.
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AOL buys The Hufngton Post

In February 2011, AOL acquired news and commentary site, The Hufngton Post for $315 million. First created as a blog in 2005, The Hufngton Post became one of the top commentary sites in the United States and an emblem of the rising tide of pure players in the news market. A ranking of the top 15 news sites reveals the increasingly erce competition coming from new entrants who have managed to secure 40% of traditional media trafc, i.e. print and television. development, through local branches in the US and plans to expand internationally in every instance with a local partner: Le Monde in France, El Pas in Spain. But the start-ups integration into AOL appears problematic. Trafc was down in the US in 2011 and the takeover does not appear to have done much to attract new ad revenue. editorial investments. At the same time, content aggregators like Google and news agencies like Reuters are already offering comprehensive direct access to news to a sizeable portion of readers. As a result, HuffPo may be caught in a tough spot in an intermediary segment being occupied increasingly by veteran print players and aggregators.
The Hufngton Post was able to combine commentary on a small range of subjects, celebrity commentators and build a community, encouraging reader comments and discussions and so helped usher in a new approach to news on the Web.
Since pulling out of the access business, AOL has been repositioning itself as a content aggregator and publisher. Going head to head with chief rival Yahoo!, which has also been focusing on content, and Google which is still the biggest aggregator and not a producer of content, AOL needs to develop its original content production, and especially news. But, in early 2012, one year after having taken over The Hufngton Post, the reviews are mixed. AOL provided the site with a huge inux in capital to step up its
More than anything, the online Traditional media are beeng up press needs to break free of their presence on the Web. Print the vicious cycle where a free media has clearly embraced the intermediary service being offered digital world and, despite various by pure players is forcing veteran trials with paywalls, the dominant players to also deliver their goods model is still ad-funded free for free, and relying on advertising access. So a pure players low-cost revenue that has yet to offset their model has its limitations: it is hard print editions dwindling revenue. to compete in terms of depth if it Contact: g.fontaine@idate.org has no print version to amortise
The worlds top news sites
Unique Monthly Visitors 110 74 73 65 59 54 32 25 25 25 25 24 20 18 17
Classement 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Site Yahoo! News CNN msnbc Google News The New York Times The Huffington Post Fox News Digg The Washington Post The Times MailOnline Reuters ABC News USA Today BBC News
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February
March
Digital dividend frequency (800 MHz) auctions are underway in Sweden. Each bidder is allowed to purchase a maximum of two of the six 2 x 5 MHz blocks of spectrum available. After VDSL (10 million homes passed at the end of 2010), Deutsche Telekom has conrmed plans to pass 160,000 premises with FTTH in 10 cities over the course of 2011. Germanys incumbent carrier is also due to upgrade a substantial portion of its HSPA/ UMTS network to 21 Mbps, and increase coverage by 10% up to a total 83% of the population. Deutsche Telekom and Astra have joined forces to market a pay-TV service that combines satellite and DSL. France Telecom and Iliad, parent company of Free, have signed a roaming agreement that will allow the future mobile network operator to use Oranges 2G and 3G networks in France. Taken over by Google in August 2010, the provider of virtual money and micro-payment solutions for online games and social networking sites, Jambool will be shutting down its Social Gold micro-payment solution to launch a similar product in May, this time carrying the Google brand. Skype has introduced advertising in the Windows version of its VoIP software for the rst time, starting in Germany, the UK and the United States. The two winners of auctions for 850 MHz and 900 MHz-band spectrum conducted by Hong Kongs Ofce of the Telecommunications Authority, or OFTA, are SmarTone-Vodafone and Hutchison Telephone Company who bid a combined total of 1.95 billion HKD (around 200 million EUR) for their frequencies. Norways Opera Software launches the Opera Mobile Store, an app store available in 200 countries and compatible with most of the main operating systems today Android, BlackBerry, Java, Palm, Symbian and Windows Mobile with the notable exception of iOS. Warner will become the rst Hollywood studio to distribute lms through Facebook in the United States. The move involves the social networking site opening Facebook credits up to cultural products other than games. Telefnica O2 UK has been awarded a multi-millionpound contract to provide a bespoke remote network for gas and electricity supplier G4S Utility Services. 200,000 SIM cards will allow G4S to monitor and manage its meters. France and Spain will be brought up before the European Court of Justice over telecom taxes introduced in the two countries in 2009 to compensate for the end of advertising revenue on public TV channels a move which could be incompatible with European law.
The Chinese fourth generation mobile standard, TD-LTE, is being tested in seven cities across the country by China Mobile and several equipment manufacturers, including ZTE, Huawei, NokiaSiemens and Ericsson. China plans on rolling out a 4G network nationwide in 2014. France Telecom-Orange and Kuwaiti rm Agility acquire a 44% stake in Iraqi mobile operator Korek Telecom. The French incumbent will pay 245 million USD for 20% indirect ownership. AT&T has decided to charge a premium to the 2% of its customers who exceed the monthly allowance of 150 GB. Ofcom has asked for an 80% decrease in mobile termination rates, which British operators must have brought down to 0.69/minute by 2015. Following a dispute between Mexicos biggest mobile operator, Telcel, and wireline carrier, Alestra, the Mexican regulator has decided to reduce Telcels call termination rate from 95 to 39 MXN a minute ($0.03). Swisscom has taken over streaming TV and video rm Solutionpark, and so beeng up the product line of its Swisscom Broadcast branch. Russian mobile telco MTS is launching an online app store offering a selection of 7,000 applications, most of which are free. The European Commission has ruled the emergency tax being levied on Hungarys telecom sector to be incompatible with EU law. AT&T announces plans to acquire T-Mobile USA from Deutsche Telekom for 39 billion USD. Facebook acquires Snaptu, an Israeli mobile applications start-up, for an estimated 70 million USD. French payment device maker Ingenico has been selected for a trial on contactless payment solutions being conducted by Google in the United States. The company also has a partnership deal with Apple for a solution that transforms an iPhone into a universal payment terminal. South African mobile operator MTN has launched a life assurance programme via mobile phone in Ghana which is aimed at the countrys poorest residents. France Telecom and Deutsche Telekom want to share their mobile networks in Romania and Austria, under a network sharing scheme similar to the one they already have in Poland, and which will allow them to save hundreds of millions of euros between now and 2015. The freeze on the assets belonging to the President of Orange Tunisie, the son-in-law of the fallen Tunisian President, means the State has conscated his 51% share of the telco. Seven operators, including ve private equity rms, are candidates for the acquisition of Vodafones Polish subsidiary, whose worth has been estimated at around 5 billion EUR.
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Net neutrality still sparking debate

In June 2011, the Dutch Parliament adopted Net neutrality legislation that includes a provision clearly forbidding mobile operators from blocking or throttling access to unlawful content, but also imposing an additional charge on consumers who use OTT applications such as those marketed by Skype. and clarity of the information given to customers on the trafc management techniques employed. federal regulator believes justies lighter non-discrimination restrictions on access to services and applications. Despite opposition from Republicans, and the lawsuits led by Verizon and MetroPCS, the Obama administration is expected to pass the law early in 2012. Ultimately, at the end of 2011, and despite the stance taken in the Netherlands, we have the impression that consensus is building amongst national regulators and governments over the need to proceed cautiously with Net neutrality regulation. Debates are likely to continue on through 2012 and beyond, playing out through disputes settled by NRAs or in court, through codes of conduct in a spirit of selfregulation, and through much more detailed schemes on the quality of service attached to offers and how Internet markets operate, under the careful eye of regulators1.. Contact: y.gassot@idate.org
1. We suggest that readers wanting to explore this topic further consult our special issue of Communications & Strategies: Net Neutrality: Act II (No. 84/ 4th. Quarter 2011. Edited by Vincent Bonneau, Nicolas Curien & Winston Maxwell).
Recommendations from the US National Broadband Plan and the European Universal Service Directive
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The National Broadband Plan Recommendation 4.3: The FCC, in coordination with the National Institute of Standards and Technology (NIST), should establish technical broadband measurement standards and methodology and a process for updating them. Recommendation 4.4: The FCC should continue its efforts to measure and publish data on actual performance of fixed broadband services. The FCC should publish a formal report and make the data available online. Recommendation 4.5: The FCC should initiate a rulemaking proceeding by issuing a Notice of Proposed Rulemaking (NPRM ) to determine performance disclosure requirements for broadband. Recommendation 4.6: The FCC should develop broadband performance standards for mobile services, multiunit buildings and small business users.
Directive 2002/22/EC, amended in Nov. 09

(Universal Service Directive)
Article 22: Quality of service 1. Member States shall ensure that national regulatory authorities are able to require undertakings to publish comparable, adequate and up to-date information for endusers on the quality of their services 2. National regulatory authorities may specify, inter alia, the quality of service parameters to be measured and the content, form and manner of the information to be published in order to ensure that end-users, including disabled end-users, have access to comprehensive, comparable, reliable and user-friendly information 3. In order to prevent the degradation of service and the hindering or slowing down of traffic over networks, Member States shall ensure that national regulatory authorities are able to set minimum quality of service requirements.
March
The British watchdogs position of applying soft regulation appears to be in line with that of the European Commission and BEREC. Over the course of 2011, the Body of European Regulators for Electronic This provision comes on the heels of Communications devoted efforts the latest review of the Telecoms to the four guiding principles: Package out of Brussels which, a) transparency, b) quality of while incorporating the core service, c) justied and legitimate principles of Net neutrality, leaves trafc management practices; d) it up to each Member State to efcient and non-discriminatory decide on specic measures. interconnection and this The decision in the Netherlands despite a resolution from the nevertheless surprised both the European Parliament calling on Commission and NRAs across the Commission and national the EU which were not, in theory, governments to demand clearer planning on going that far. and more specic regulations British regulator Ofcom made its governing operators. position public late last year. It Over in the United States, in can be summed up by a desire late 2010 the FCC had issued to maintain optimal best effort principles that also emerged access while also permitting from a spirit of compromise, managed access offers in other given the host of complaints words that give priority access to triggered by its earlier initiatives. certain types of application, such The main distinction from the as IPTV, for a price. Ofcom believe positions taken by Ofcom and that it is possible to move forward the European Commission lies on a path of self-regulation, but in the FCCs explicit recognition that it would need to be closely of the singular nature of the monitored, putting special cellular network, which the emphasis on the transparency
April
Vodafone pays 5 billion USD to acquire Essars 33% share of the Vodafone-Essar joint venture (exHutchison Essar), which is Indias fourth largest mobile operator. Ericsson sues Chinese telecom manufacturer ZTE for patent law violations. Vivendi buys the 44% of SFR owned by Britains Vodafone for 7.95 billion EUR, giving it full ownership of the French telco. Indias former Minister of Telecommunications, Andimuthu Raja, was formally indicted for corruption, theft and fraud for his part in the sale of mobile telephony licences in 2008. Google enters into exclusive talks with Canadian telecom equipment manufacturer Nortel for the acquisition of its patents of which there are 6,000 in all, in the areas of cellular technology, 4G, optical networks, Internet, semiconductors and even social networks for the sum of 900 million USD. With its NFC payment system, American mobile operator Sprint is offering an alternative to Isis, the m-payment joint venture created by AT&T, Verizon and T-Mobile USA. Greek carrier OTE, whose majority shareholder is Deutsche Telekom, has raised 500 million EUR on the international market to help renance its debt.
regulator for abuse of dominant position in the mobile search market. New Zealand has adopted a new law against illegal downloads, forcing the guilty parties to pay damages. China Unicom chooses ZTE to build its HSDP+ and PTN (Packet Transport Network) system. Mexican mobile operator America Mvil has been ned 12 billion MXN (around 1 billion USD), the biggest ne ever imposed by the countrys competition authority, for monopolistic practices. France Telecom and Deutsche Telekom will be creating a joint venture to pool their acquisitions in the areas of equipment (client and network), service platforms and IT infrastructure starting with four pilot projects in this last arena. Apple has led suit against Samsung for plagiarism, for its Galaxy line of telephones and tablets. Philips has chosen to pull out of the television market, and before the end of 2011 will be transferring its division to a joint-venture with Taiwans TPV Technologies which will pay royalties to continue to use the brand. Samsung Electronics is selling off its American hard drive business, Seagate Technology, for 1.4 billion USD in cash and shares. Wal-Mart has acquired Kosmix, a start-up specialised is social media, for an estimated 300 million USD. Americas number three mobile operator, Sprint Nextel, will pay at least 1 billion USD to Clearwire for two years to use its 4G network. eBay has taken over Where, a location-aware mobile app and advertising service that will help the company consolidate its m-commerce assets. Alcatel-Lucent and China Mobile will be working together on developing cellular networks of the future, combining their research on wireless networks, smart antennae and alternative energy sources. German TV network ProSieben has sold its Belgian and Dutch divisions for 1.23 billion EUR to consortia led by Finnish media conglomerate Sanoma. Amazon has signed an agreement with the United States 11,000 public libraries to launch a new electronic book lending service called Kindle Library Lending. American and German authorities have green-lighted a deal involving the sale of 882 patents belonging to Novell to a consortium composed of Microsoft, Apple, EMC and Oracle, for the planned sum of 450 million USD. Sony has conrmed that personal data from PlayStation Network and Qriocity service users accounts have been hacked. This theft involves 77 million users.
DigiWorld chronicle
Texas Instruments has taken over its rival, National Semiconductor, for 6.5 billion USD, in a bid to consolidate its weight in the mobile chipset market. Mexican rm Televisa, which is the globes biggest Spanish-language TV network, acquires a 50% stake in Mexican mobile operator Iusacell for 1.6 billion USD. China Mobile chooses equipment manufacturer Ericsson to test its 4G mobile network. The Department of Justice in the United States has given the go-ahead, with caveats, for Google to acquire travel data provider, ITA Software, for 700 million USD. Google pays 25 million USD for Canadian start-up PushLife which designed a content management system that makes it possible to sync an iTunes or Windows Media Player library on Android and BlackBerry handsets. Level 3, one of the biggest Internet backbone players, wants to take over rival Global Crossing. The deal would be worth an estimated 3 billion USD including 1.1 billion USD in debt takeover and allow the two companies to beef up their service line. The new Panda search engine algorithm being rolled out by Google uses referencing rules that are meant to put quality sites and original content at the top of results. Two search engines, Daum and NHN, have led a complaint against Google with the South Korean
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Enterprise software provider Infor announces the takeover of publisher Lawson for close to 2 billion USD. CenturyLink, a provider of telecom solutions in the United States, will be buying Savvis, a company that specialises in hosting and cloud computing solutions, for 2.5 billion USD in cash and shares.
Yahoo! sells off social bookmarking service Delicious to YouTube. Visa acquires a stake in the start-up Square, which markets a mini bank card reader that connects to an iPhone, iPad or Android handset. Huawei and ZTE are going after each other for 4G technology patent violations.
Telco consolidation in emerging markets

After Indian operator Bharti Airtel took control of Africas second largest mobile operator, Zain, in 2010 for 9 billion USD, the merger in early 2011 of the assets of Russias Vimpelcom with those of Orascom in a deal estimated at 5 billion USD, is a further example of the stakes that telcos in emerging economies represent. And especially telcos whose main business is mobile: the reorganisation of telecommunications in China a few years back was in fact aimed at increasing competition in this high-potential segment while, over in Latin America, America Mvil has emerged as the regional champion in a matter of years1. A total of 16 operators from emerging or newly industrialised countries are now among the globes 50 biggest telcos (see table below). Although some continue to be purely national players notably Chinas three carriers which are nevertheless at the top of the rankings due to the size of their domestic market many have a more regional business, especially those in Africa and the Middle East. A good example is South Africas MTN which does business in more than 20 countries, of which 18 on the African continent: with close to 100 million mobile subscribers in the region, one out of every
1. In addition to building up its own business, the consolidation of the conglomerate owned by Carlos Slim was furthered in 2010 by its takeover of sister company, Telmex.
16 operators from emerging economies in the global top 50

2010 sales (billion ) 54 115 36 322 24 520 19 104 16 480 (1) 12 652 11 827 10 427 9 819 6 856 6 564 5 700 5 637 5 452 5 358 5 291
Rank 6 9 15 17 19 24 27 29 32 38 41 43 44 48 49 50
Company China Mobile America Mvil China Telecom China Unicom Vimpelcom Tele Norte Leste MTN STC Bharti Airtel Rostelecom Etisalat PT Telkom Qtel Turk Telekom MegaFon BSNL
Country China Mexico China China Russia Brazil South Africa Saudi Arabia India Russia UAE Indonesia Qatar Turkey Russia India
(1) The merger agreement with Vimpelcom does not include Egyptian assets of Orascom
Source IDATE, Company reports
overlooking the international six customers there belongs to reach of a few European players MTN. With its takeover of Zain, such as France Telecom/Orange, Bharti Airtel has half as many Vodafone and, to a lesser extent, customers as MTN, but is present Vivendi via Maroc Tlcom. in 16 African countries, in addition to enjoying a 20% share of the Meanwhile, in addition to the Indian market boasting a base tremendous presence of America of 180 million customers on its Mvil, Latin America is also a home turf at the end of 2011. Also major stomping ground for Spains worthy of mention are Etisalat, Telefnica. which operates in 13 countries This expansion trend will no doubt in Africa/the Middle East in continue, especially in markets part thanks to its takeover of where equipment rates are Atlantique Telecoms African shooting up mobile sales in business in 2005, adding to its emerging countries have tripled in operations in India, Sri Lanka, ve years but where conditions Afghanistan, Pakistan and are often tough. ARPU is regularly Indonesia and Orascom, with below $10/month, and even 2 or without Vimpelcom , without hovering around the $2 mark in countries like India.
2. The merger with Vimpelcom does not include Orascoms assets in Egypt
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April
May
Google shuts down its Google Videos streaming service. TiVo wins its appeal against Dish Network/EchoStar which it accused of using TiVo technology in its DVRs without permission with Dish being ordered to pay 500 million USD in reparation. Chinese social networking site Renren launches an IPO on the New York exchange that brings in 743.4 million USD. American microprocessor maker Nvidia has announced its takeover of Icera, a company specialised in the production of 2G, 3G and 4G processors for mobile handsets, for 367 million USD. Microsoft will be buying Skype for more than 8.5 billion USD in cash, debt included, provided it gets the go-ahead from the competent authorities (the European Commission gives its approval in October 2011). In France, a new MVNO, la Poste Mobile, enters the market using SFR as its host network. The European Commission has also approved the award of the fourth mobile network operator licence in France to Free, rejecting a complaint led by its three competitors which claimed it enjoyed preferential treatment. In light of the difculties encountered with the joint venture they announced in January, France Telecom and Canal+ have opted for a nancial agreement, with the pay-TV provider acquiring a less than 40% stake in Orange cinema series. The deal goes through in July, and the acquisition is ultimately for 33.33%, which still gives Canal+ a solid minority share. The dispute between LimeWire and the RIAA (Recording Industry Association of America) which was demanding a 1.4 billion USD settlement from the company and its founder for copyright violations, ultimately ended with a pay-out of 105 million USD, which will be divided up between the top four record labels in the US. Software publisher Autonomy acquires Iron Mountain, a provider of information management services, for 380 million USD. In the counterfeit conict between Kodak and Apple, the ITC (International Trade Commission) has sided with Kodak, rejecting Apples accusation that it had violated two of its digital photography patents.
The European Commission plans on extending current European roaming tariffs up to 2016 for voice calls, SMS and mobile data services. The maximum price that operators can charge for a mobile call made from abroad, which currently stands at 0.39, excl. VAT, per minute, will be reduced to 0.32 on 1st July 2012, to 0.28 on 1st July 2013 and then to 0.24 on 1st July 2014. Nokia has killed the Ovi brand for its app store, and will gradually be replacing it with the Nokia brand around the globe. The French Parliament has approved a law on electronic books which requires all publishers selling digital books in France to set a retail price. This applies to French and foreign distributors by virtue of the extraterritoriality clause, which is nonetheless contrary to European legislation. Mobile operator Clearwire has signed a sevenyear contract with Ericsson, which it has hired to manage its high-speed mobile network. Toshiba will be taking over Swiss smart meter manufacturer Landis+Gyr for 2.3 billion USD, including debt. LinkedIn is the rst major social networking site in the US to go public, raising 352.8 million USD with its IPO which puts the companys value at 4.3 billion USD. Yandex, Russias main search engine, has announced that it will be oating around 18% of its capital on the stock market, which should allow it to raise close to 1.5 billion USD. Symantec will be buying Clearwell Systems, a private enterprise specialised in eDiscovery, a eld that includes data search technologies regardless of format (email, documents, IM.), for 390 million USD. Semiconductor manufacturer Freescale will be selling 200 patents to Apple, including descriptions of Wi-Fi connectivity, phone signal and data encryption technologies, all trademarked or pending with the USPTO (US Patent Trademark Ofce). PayPal and eBay are ling a suit against Google over the launch of its new Google Wallet, accusing the search giant of stealing trade secrets on m-payment and point-of-sale strategies.
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Wholesale operators to perform large-scale LTE rollouts?

customers, T-Mobile, Leaps and In the United States, newcomers like LightSquared is a start-up that was MetroPCS, and a group of regional LightSquared and Dish based their originally involved in building carriers. So LightSquared was strategies on the availability of LTE networks based in part on aiming to supply this second tier new frequencies that could supply satellites covering the United with a wholesale solution. Early capacity, at a time when the load States, using L-band frequencies this year, however, interference on mobile networks is growing at and positioned as a capacity problems with GPS signals led the a tremendous rate. LightSquared wholesaler. Its spectrum was FCC to quash the launch of the had quickly managed to sign to be its chief selling point: companys service as it stood, and deals with resellers (MVNOs, only two market heavyweights, LightSquared has been working to regional mobile operators, cable Verizon Wireless and AT&T, have TV providers and electronic nd a replacement ever since. the resources to deploy LTE. But hardware vendors) to secure its the two market leaders already In any event, the wholesale model business plan. serve two thirds of the countrys designed by LightSquared has mobile customers with some since been adopted by several But, in addition to the technical 102 and 95 million subscribers, new entrants who were able to problems the company has since secure spectrum without planning respectively, at the end of 2011. encountered, recent events have on competing head on with Plus, they get more than 80% altered the American markets incumbent operators. From an of all new business, in a market and are likely to reshufe the operational standpoint, this model that is growing by 6% annually deck. The top three operators covers both wholesale activities in both customer numbers and need for additional spectrum and cost-sharing agreements for revenue, and their combined and especially AT&T since its LTE rollouts (see graphic). spending comes to more than merger with T-Mobile USA fell three times what the rest of the Countries like Kenya and Mexico through is driving all towards industry is investing So the appear to even be considering consolidation in some form. market seems condemned to be a using regulation to order the Although the wholesale market virtual duopoly in most areas, and creation of a wholesale market seems the most likely path, other especially for the mobile Internet for LTE. The goal is to expand the players like Dish or Clearwire (mobile data already generates supply of services into regions could also seek to monetize their more than 35% of both telcos where LTE infrastructure rollouts frequencies by selling them (for income), and a set of second would not be economically top dollar) to the highest bidder. viable for the operators that do string players which includes business there. Contact: f.pujol@idate.org Sprint, who continues to lose
Wholesale LTE market players
USA
Will sell LTE capacity Provides cells sites and helps building theterrstrial LTE network
$ Major shareholder Sells Mobile WiMAX capacity + network sharing deal Sharing agreement? Will sell LTE capacity $ Shareholder? Poland $ Owns 50% Builds a wholesale LTE in the 1800 MHz band (Poland) Builds a wholesale LTE network in the 2.3 GHz band for rural areas Australia
Plans to build wholesale LTE network in the S-band (USA) Sweden $ Owns 50%
Builds a common GSM and LTE network (Sweden)
Source: IDATE
www.idate.org
Will sell LTE capacity to MVNOs and distributors
Russia Will sell LTE capacity? $ Shareholder?
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May
June
Ericsson is awarded a ten-year 1 billion AUD (745 million EUR) contract by the Australian government to build and manage an LTE 4G superfast network in the countrys rural and remote areas, as part of its NBN (National Broadband Network) rollout scheme. Apple unveils iCloud, a cloud storage service that allows user to access their data online from any device operating under iOS. It will be offered for free, and rolled out at the same time as iOS 5. Orange Cameroun and MTN Cameroun will have two new mobile market rivals by December which, according to the Ministry responsible for Post and Telecommunications, will likely be local subsidiaries of two major telecom groups. Google acquires AdMeld, a company that provides websites with a system for optimising the sale of their ad space, for 400 million USD. In France, Universal Music les a complaint against Deezer for counterfeit, saying it is still offering the labels catalogue on its free site, even though their licensing agreement expired in January. The US Supreme Court upholds the order for Microsoft to pay Canadian rm i4i 290 million USD in damages to settle a patent dispute. Apple agrees to pay royalties to Nokia to settle all of their conicts over the use of Nokia patented technologies. Online music site Spotify has put a cap of ve free monthly listens for any song, as a way to steer users to its paid service. It has also signed a licensing agreement with Universal to use its catalogue in the United States. Online music service Pandora launches an IPO in the United States that valorises the company at more than 2.5 billion USD. American cable company Comcast has joined forces with VoIP specialist Skype to provide video calling services on the TV. Well-known hackers LulzSec, who gained attention with their attacks against Sony Pictures, Nintendo and even the US Senate, opened a phone line to take hacking requests. LulzSec also claimed responsibility for hacking into the CIAs system on 15 June 2011.
HP is ling suit to oblige Oracle to revoke its decision to stop offering support for Intel Itanium chips. Toshiba, Sharp and at least 13 other LCD display makers are being sued for price xing and deciding how many units to produce. ICANN (Internet Corporation for Assigned Names and Numbers) will accept domain name requests with new sufxes starting in mid-January 2012, and so expanding the list that includes classic ones such as .com and .gov. Video game publisher Sega has been hit by data theft affecting 1.3 million customers connected to its Sega Pass online service. Google takes over SageTV, a data centre specialist that is developing proprietary software for Windows, Mac OS X and Linux on devices with a TV tuner. The Peoples Daily, the Chinese Communist Partys ofcial newspaper, has launched its own search engine called Jike, with technological support from home-grown online search leader, Baidu. Polands incumbent carrier, TPSA, which is a France Telecom subsidiary, has sold is Emitel subsidiary to private equity rm Montagu, for 432 million EUR. The European Commission nes TPSA 127.6 million EUR for abuse of dominant position in broadband access markets. Nokia will be merging its Navteq digital map subsidiary with its services division to develop a new unit for services that combine social networking and location-based services. Viacom les a complaint against Cablevision, accusing the cable company of distributing its programmes on the iPad without permission. After Brussels, the FTC (Federal Trade Commission) is launching its own enquiry into Google for abuse of dominant position in the online advertising market. Google announces the upcoming closure of its Health online medical information storage service, and of its PowerMeter service which allowed users to measure their energy consumption.
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Launch of Google+
Launched for beta testing in networking site. This integration In early 2012, Google is still June 2011 then open to the public between services has translated working to further incorporate in September 2011, Google+ into a unied management policy its search engine into Google+. marks another attempt from for personal information stored on One option would be to include the search giant to carve itself a the different Google services. the users personal content in the foothold in the social networking top search results, such as photos The swift increase of the number universe, which today is solidly posted or chats. Twitter, which of Android mobile phones is dominated by Facebook. has stopped allowing Google to also a key point of leverage for index its content, is concerned The innovative features offered by Google+. The default inclusion of about this new possibility which Google+ include more streamlined Gmail helps to recruit new users would encourage users to post to management of networks of to Google+, plus the Messenger Google+ rather than to Twitter to friends, using the principle of function makes for easier instant be visible in Google search results. circles, the incorporation of video messaging between members of From a more general perspective, chats and several hangouts. the same Google+ circle. Google+ marks a decisive step While Googles earlier features for Google, working to change and forays into social networking In late 2011, only four months its massive base of anonymous were shut down in 2011, Google+ after launch, sources estimate users into a base of identied appears better interwoven with the number of people registered users, thanks to the appeal the companys core services. The for Google+ at between 60 and of the companys wealth of integration of the search engine, 90 million, even if some users contextual analysis technologies. Gmail and other services like only feed their account through This explains Googles particular Picasa (online photo albums) and other Google services. Despite this emphasis on having Google+ Google Music (available only in swift expansion, Google remains users identify themselves with the US), thanks to a single ID, a minor player in the social naturally feeds both the Google+ networking universe: at the end of their real names rather than a pseudonym. user base and the ow of 2011, Facebook had an estimated Contact: v.bonneau@idate.org information posted on the social 800 million users.
The top social networking sites user numbers
(Million users) Facebook Twitter Linkedin Google+ Tagged My Space 800 100 135 90 30 30 Active users Active users Users Users Active users Single monthly users
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Source: IDATE estimates, end 2011
June
July
The Italian government has unveiled its optical bre deployment plan: public company FiberCo, which was created to lead the operation, will begin by running trials in six cities starting in September, and is due to have passed 50% of households by 2020. A consortium of high-tech giants including Apple, Microsoft, Ericsson, Sony, as well as EMC, the global leader in data storage solutions, and RIM, maker of the BlackBerry has spent 4.5 billion USD to acquire a set of more than 6,000 patents coveted by Google, covering mobile telephony, 4G, optical networks, the Internet, online video and semiconductors. Because of the scandal that has erupted around the publishers of News of the World who are accused of hacking the phones of a host of celebrities and victims of crimes, Rupert Murdoch shuts down the paper and News Corp. withdraws its offer to take full control of BSkyB. Google has announced the release of an e-Reader called Story HD, tailored to the companys Google Books digital library. The device will be on sale in the United States starting on 17 July with a price tag of $140. The lobbying group for the American lm industry, the MPAA, has been authorised to go after Hotle for encouraging users to download les illegally, and for the presumed prots earned on their business. Counterfeiting charges have been dropped, however. Electronic Arts (EA) has announced the takeover of PopCap Games, a company that specialises in producing games for mobile phones and social networking sites, for 750 million USD. The International Trade Commission (ITC) in the United States has ruled that HTC has infringed on two Apple patents. If upheld on appeal, this decision will threaten the import of these devices into the US. American Express has signed a partnership deal with Facebook that will enable users who link their cards to the site to enjoy coupon-less deals: when they use their American Express card to buy one of the items on special, the discount will be applied automatically. Chinas Baidu has signed an agreement with three major record labels, Universal Music, Warner Music and Sony Music, to offer legal music sales online through its search engine. Dell acquires Force10 Networks, a networking solutions specialist for data centres. Google announces the closure of Google Labs, its site devoted to experimental projects. Some projects have been abandoned, and others reallocated, notably those tied to Gmail and maps. On the Android kiosk, developers can offer paid options directly within their Web applications.
Consumers buy the apps with their Google account, and the search engine earns a 5% commission on each transaction. Google announces the acquisition for an undisclosed sum of Fridge, a young start-up specialised in developing social networking tools and services for sharing instant messages, content and events. These will come to expand Google+. Free and France Telecom-Orange have signed a co-nancing deal for FTTH network rollouts outside of very high-density areas in France. According to the terms of the contract, France Telecom will deploy the network and be its ultimate owner, while rival Free will obtain rights of use to the network or the option to buy access rights. American rm Impulse Technology has led suit against Microsoft which it accuses of infringing seven of its patents with its Kinect motion sensing device. Eight game publishers are also being sued. Chinese online giant Alibaba announces the release of its rst smartphone, which runs on the companys own operating system. Google has bought PittPatt (Pittsburgh Pattern Recognition), a company that specialises in pattern recognition and articial vision. Manufacturer Qualcomm, which specialises in components for telecom products, has acquired technologies initially developed by GestureTek, a company dedicated to man-machine gesture recognition, in a bid to improve the design of its future smartphones. Orange and Google have teamed up to develop services available on the mobile Internet in Africa. The partnership makes it possible to use the GSM network and have access to services, such as email and instant messaging that had previously been available only to broadband customers. Japanese e-commerce specialist Rakuten has acquired an 80% stake in German e-commerce rm Tradoria. On the heels of its takeover of PriceMinister, this acquisition further consolidates Rakutens foothold in the European market. At the request of the Motion Picture Association (MPA), the British courts have ordered incumbent carrier BT to block access to sites that allow users to download lms illegally. This is the rst time that the courts are called on to force an ISP to block access to a site, to uphold copyright protection laws. Google and Hachette Livre have concluded a deal that allows Google to digitise 40,000 to 50,000 out of print works in French whose rights are owned by Frances largest publisher.
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Is cord-cutting really affecting Americas pay-TV market?

are improving their services not in other words users switching least by beeng up their online to cheaper pay-TV packages. Of presence and developing onthe top three pay-TV channels, demand versions of the channels, HBO, which is the most expensive, such as HBO Go. And, second, they is seeing its customer numbers are revising their pricing policies, shrink while the other two, and delivering less expensive Showtime and Starz, are posting packages. These two strategies a slight increase. It should combined could in turn weigh on nonetheless be said that these both ARPU and overhead. latter two regularly offer huge discounts, and sometimes even Looking ahead to the medium-term, months for free. SNL Kagan some pay-TV providers appear to estimates that monthly perPay-TV subscriptions are subject be gearing up to a shift in their subscriber revenue comes to to seasonal variations: the two business as a way of handling $7.30 for HBO, $2.10 for Starz straight quarters of decline cord-cutting. In mid-2011 Time and $1.72 for Showtime. in 2011 were followed by an Warner Cable CEO, Glenn Britt, upswing in customer numbers said that the cable company now Pay-TV providers and channels in last quarter of the year and viewed Internet access as its core have no doubt suffered from the the rst quarter of 2012. The service. The broadband access growing popularity of Netix credit crunch is also to blame market continues to grow, and whose service, which combines for a certain inertia in pay-TV is clearly more protable than DVD rentals and streaming, penetration levels. distributing TV channels and video boasted 26 million subscribers as services. Should online video of mid-2011. But Netix has come For the rst time, however, this services prove successful, the up against real hurdles as well, decrease affected all three payability to deliver a high-quality and customers switching from TV systems. If cable had earlier access service, applying tiered DVD rental to (unlimited) VoD been the only one affected by the pricing, will be a crucial valuesubscriptions resulted in a price gradual deployment of telcos added. This is a likely outlook hike, an increase in programming IPTV services, satellite pay-TV also for the United States where the reported a decrease in subscribers. costs and even an inability to xed access market is already secure exclusive premier TV rights This cord-cutting phenomenon, structured around tiered pricing, for lms. which still remains to be i.e. based on connection speed. conrmed, could also be Pay-TV platforms are reacting to the accompanied by cord-shaving Contact: g.fontaine@idate.org strained environment. First, they The pay-TV sector lost 378,000 subscribers in the second quarter of 2011, which rekindled the debate over cord-cutting in other words the trend of consumers cancelling their classic pay-TV service and switching to video services on the Web. This unprecedented loss of customers (around 3% of the total subscriber base) nevertheless needs to be put into perspective.
7.3%
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59.2%
Cable 33.5% Satellite Telcos
Source: BoA Merrill Lynch Global Research Estimates
July
Pay-TV market share in the United States, mid-2011
August
4G spectrum auctions in Spain have brought in 1.647 billion EUR to the State coffers, which is well below the 2 billion EUR they had projected. The frequencies were acquired by the countrys four existing telcos: Telefnica, Vodafone, Orange and TeliaSonera. EADS has announced that its subsidiary Astrium will be spending 673 million EUR to take control of Vizada, a satellite services company born of the merger of the satellite communications businesses of Norways Telenor and France Telecom. After having acquired 60% of its parent company, Telmex, for roughly 23 billion USD in 2010, Mexicos America Mvil which is Latin Americas largest mobile telco announces that it will be buying the remaining 40% for 6.5 billion USD, in shares and cash. This merger comes at a time when the state of virtual monopoly is coming under re from Mexican competition authorities. Twitter conrms a major round of fund-raising by Russian private equity rm, DST, which already owns a stake in Facebook, Zynga, Groupon and Airbnb. The take from the operation, which outside sources estimate at 800 million USD, puts Twitters value at around 8 billion USD. Telenet, a cable company that operates in Flanders, Belgium, and Tecteo, its counterpart in the Frenchspeaking part of the country, will be spending 74 million EUR over 10 years to acquire the fourth 3G mobile telephony licence in Belgium, and so coming to compete with Belgacom, France Telecom and KPN. Cable company Time Warner Cable has announced the acquisition of competitor Insight Communications, the ninth largest cableco in the United States, for 3 billion USD. The merger is expected to enable TWC to save 100 million USD a year, especially on programming. Eight months after the split of Motorola, Google buys Motorola Mobility and its portfolio of patents for 12.5 billion USD. This deal, which is the biggest ever for Google, will allow the company to secure the Android ecosystem. Due to be nalised in early 2012, the takeover still needs be approved by authorities in the United States and Europe. HP conrms its takeover of British software company Autonomy for 10 billion USD. Practically a year to the day after the Google saga that ended in the company pulling out of China and setting up shop in Taiwan to prevent its search results from being censored, it is rival Baidu that is suffering
the wrath of Beijing. Several ofcial media outlets have severely condemned the Chinese rm that was created in 2000 and has become the countrys undisputed leader in online search. These attacks appear to be an ofcial warning, at a time when the power of new Internet giants is causing Chinese authorities some concern. After a 10-year wait, 38 million Germans have had access to digital terrestrial radio (DTR) since 1st August. DTR services are already available in the UK, Switzerland, Australia, Denmark, Norway and Singapore but not in France where it appears to have been fully abandoned, even though it was provided for by law in 2007. French telecoms regulator ARCEP has been given increased powers, including the ability to order functional separation on the incumbent carrier should it become too powerful in its market and no other remedy will sufce. ARCEP is also empowered to regulate Internet companies, especially for the sake of protecting Net neutrality. Steve Jobs steps down as CEO of Apple and hands over the reins to COO, Tim Cook. Even if Apple will need to prove its ability to continue to innovate once Jobs, who has always been the face of Apple, has gone, the markets greeted the news with aplomb. With a market value of 348 billion USD, Apple still has the second highest market capitalisation in the world, behind Exxon Mobil (353 billion USD), and the highest of any tech stock well ahead of Microsoft, China Mobile and IBM. Germanys incumbent carrier Deutsche Telekom will be creating a subsidiary to manage FTTH rollouts. The new company, FTTH GmbH, will have 1.5 billion EUR in funding and a total staff of 1,500 employees. Its target is to have 160,000 homes passed for bre by the end of 2011. Australias anti-trust authority, the ACCC, has called out incumbent carrier Telstra, saying it needs to be treating the competition more fairly by the 2018 deadline for structural separation, and that these separation plans for the wireline phone network negotiated with the Australian government in June 2011 will need to be reviewed. Under the terms of the agreement, Telstra would relinquish control of the countrys only copper long-distance network by July 2018, in exchange for 11 billion AUD (8.1 billion EUR), to make way for the deployment of the National Broadband Network (NBN) which is expected to cost a total 36 billion USD.
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Just how far can the patents war go?

The tremendous wave of innovation in the device sector, and especially in smartphones and tablets, has triggered a heated war over patents. so opening the way to overturning the earlier ruling. This handful of examples is telling of the heated state of affairs and the endless controversies in high-tech markets. chance at survival: should the company go bankrupt, these same patents would be sold at auction, and the money they bring in would help pay off the companys creditors.
We are seeing both a growing This situation has rekindled number of court battles and huge In the arena of acquisitions, the drama began with Googles discussions over the two facets of sums being spent, especially to failure to secure Nortel patents, patents: they can be an efcient secure a solid portfolio of patents. losing out to a consortium led by and legitimate incentive to Apple, Microsoft and RIM which On the rst count are Oracles protect innovative companies, agreed to shell out $4.5 billion lawsuits against Google over but they can also be the source for the lot. Google reacted the use of Java, Microsoft vs. of abusive strategies that stie by bidding 12.5 billion USD Motorola, Apple vs. HTC then competition. What can we hope for Motorola Mobility and its versus Samsung with the latter to see emerge from this situation? portfolio of 17,000 patents. All in being forbidden to sell its tablet Two possibilities: heavier nes for all, Googles series of takeovers in Germany in early 2011, and in companies that are relentlessly in 2011 resulted in the company Australia later in the year and litigious, and a reform of patent increasing its stock of patents by Samsung vs. Apple, the most ofces. 20 times, and so strengthened in serious being an accusation of In the meantime, it remains to the area of intellectual property counterfeit in the French market be seen whether the defensive and in a better position to defend in autumn in 2011, which was stances the main stakeholders are its interests in the many court eventually dismissed. The South taking with their smartphones cases it faces. For Kodak, which Korean manufacturers ban on will allow them to secure their is in court battles with Apple and selling its tablet in Australia was platforms with no risk of being HTC for patent infringement, the to be lifted just before Christmas, attacked, or with the ability sale of its portfolio of 1,100 image while local courts in Germany to swiftly enter into reciprocal processing patents has become a also ruled late last year that the licensing agreements. vital matter, with the cash it earns new tablet did not infringe on on the sale being seen as its sole Contact: y.gassot@idate.org Apples intellectual property, and
Growth of quarterly smartphone sales, by vendor
Million units 40 35 30 25 20 15 10 5 0 Q1 '09 Q3 '09 Q2 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11
Q4 '11
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Samsung Source : Strategy Analytics (Oct. 2011)
Apple
Nokia
RIM
HTC
August
September
Japanese titans Sony, Toshiba and Hitachi have joined forces to combine their tablet and mobile phone display operations. Baptised Japan Display K.K., the joint venture is due to start doing business in spring 2012 and will be the sectors biggest player, with a 21.5% share of the market. Seventy percent of the venture will be owned by Japanese public-private fund, Innovation Network Corporation of Japan (INCJ), which will inject 200 billion JPY (1.8 billion EUR) into it, while Sony, Hitachi and Toshiba will each have a 10% share. Spanish incumbent carrier Telefnica is reorganising its business into three divisions: a new division called Telefnica Digital, a unit created by the merger of Telefnica de Espaa and Telefnica O2, and the new Telefnica Recursos operational unit. Dell, the globes third biggest PC maker, has created a partnership with Chinas top search engine Baidu, to provide tablets for the Chinese markets, as well as phones. Dell will provide the hardware and Baidu the operating system. French pay-TV network Canal+ acquires 60% of two channels belonging to the Bollor group: Direct 8 and DirectStar, for 279 million EUR in (parent company) Vivendi shares. Bollore thereby acquires a close to 1.4% stake in Vivendi and so becomes one of the 11 biggest shareholders, and the biggest among industry players all the others being investment funds. Frances Competition Authority quashes the CanalSat-TPS merger and nes Canal+ 30 million EUR, considering that the pay-TV network deliberately and systematically violated 10 of the 59 commitments it had made under the terms of the merger. At the request of Apple which has led similar suits in several countries around the world, as part of its battle with Google the Court of Dsseldorf conrms that South Korean manufacturer Samsung is forbidden from marketing its new Galaxy Tab 10.1 tablet in Germany. American mobile phone chipset maker Broadcom announces the takeover of NetLogic, a fellow US rm that specialises in communications processors for the Web, data centres and wireless systems, for 3.7 billion USD. The Belgian government is exploring several privatisation scenarios for Belgacom, and especially a two-stage sale of the incumbent carrier, rst decreasing its stake from 53.5% to around 26%, before selling off all of its remaining shares within two to three years. Google ofcially launches its Google Wallet e-payment system. Based on NFC contactless technology, this electronic wallet, which has been in trials in New York and San Francisco since May,
will initially be available only in the United States on mobile operator Sprints network, and will only work with the Nexus S 4G Android smartphone. Without giving a denite timetable, Google is also planning to launch the service in Europe. After Swiss authorities blocked its planned merger with Sunrise in 2010 due to dominant position, France Telecom-Orange has begun the process for selling off mobile operator Orange Switzerland, which could bring in more than 1.5 billion EUR. The French conglomerate is also working on its withdrawal from the Austrian and Portuguese markets, to focus its energies on consolidating its operations in those markets where it already enjoys a strong position, to be able to deal with growing competition. The sale of a rst block of spectrum 14 blocks of frequencies in the 2.6 GHz band, reserved chiey for urban areas brings in 936 million EUR to the French government: 236 million EUR more than the reserve price. National regulatory authority ARCEP awarded spectrum to the countrys four mobile network operators, all of which had led an application by the 15th September 2011 deadline: Orange (20 MHz duplex for 287 million EUR), Free Mobile (20 MHz duplex for 271 million EUR) Bouygues Telecom (15 MHz duplex for 228 million EUR) and SFR (15 MHz duplex for 150 million EUR, and no commitment to host MVNOs). 4G spectrum auctions in Italy have brought in 3.945 billion EUR, which well exceeds the Italian governments most optimistic forecasts. Frequencies were allocated to the countrys four main operators: Telecom Italia and Vodafone (two blocks each in the 800 MHz band, one block in the 1800 MHz band and three blocks in the 2.6 GHz band, for 1.26 billion EUR), Wind (two blocks in the 800 MHz band and four in the 2.6 GHz band, for 1.1 billion EUR) and Hutchison Whampoa subsidiary 3 Italia (one block in the 1800 MHz band and four blocks in the 2.6 GHz band, for 305 million EUR, but none in the golden 800 MHz band). The European Commission has ruled that the award of bonus channels to TF1, M6 and Canal+ in exchange for putting an early end to their analogue contracts and the added cost of providing dual analogue/digital services for several years is contrary to European law. Having failed to sell a stake in Nokia Siemens Networks (NSN) to private equity rms, Nokia and Siemens will each be injecting 500 million EUR in their joint venture, and could soon take it public. Amazon unveils its touchscreen tablet, the Kindle Fire, positioned as a direct rival for Apples iPad and which will be in shops in mid-November, starting in the United States.
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Spotify comes to Facebook

In September 2011, the Spotify online music service signed a major agreement with Facebook. Integrated into the social networking site, Spotify now offers users and subscribers several social media features, including the ability to listen to friends playlists and recommend songs. Although negative reactions from some consumers forced Spotify to include a private listening feature, turning off sharing information with Facebook, the service benets both from a major enhancement of its features and a distribution platform that allows it to convert free users into paid subscribers. The deal with Facebook also gives a huge boost to Spotifys international footprint. decisive improvements to the design of the service, integrating users personal library and the titles offered by the service into a single interface. So iTunes is also incorporated into Spotify; streams: subscription, music sales and advertising the latter having not generated enough income to put the company in the black. Although Spotifys revenue in 2010 did increase substantially from 13 million in 2009 to 72.2 million it also posted huge losses: 30.3 million versus 19 million in 2009.
the launch of a download service alongside the initial streaming offer, which makes Spotify a direct rival for iTunes and helps diversify Royalties to record companies its revenue streams; continue to be the companys main cost centre and, because lastly, the company is aggressively of the guaranteed minimum promoting its subscription they require, actually exceeded solutions by limiting free users Spotifys income in 2010. Record listening time and the number of companies are in fact encouraging times they can play a song. Plus the development of paid services new subscribers are given free as they believe ad revenue does unlimited access for the rst six not allow them to fully exploit months. All subscriptions also online music rights. allow customers to listen to their The terms of use imposed by rights songs ofine and on their mobile This agreement completes a series holders has resulted in a more phone. of initiatives that Spotify has concentrated market and a mad taken to make the move from a So the service is now built on a dash from all the players achieve free to a paid model: combination of three revenue critical mass. To this end, Deezer signed a distribution deal with Spotifys income statement, 2009-2010 French telco Orange, Napster has announced the takeover of Million Rhapsody, and MOG and Rdio cut 70 60 their prices.
50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 2009 2010 Revenues Cost of sales Loss
Contact: g.fontaine@idate.org
www.idate.org
Facebook is not Spotifys only ally, however. After signing a deal with Swedish telco TeliaSonera in 2009, the company joined forces with Virgin Media in the UK in October 2011 to market a cobranded Internet access/Spotify offer. These deals are also revealing of the competition between websites and services for revenue streams from online content.
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During a meeting of European network operators, the European Commissioner for digital strategy, Neelie Kroes, announced her plans to push incumbent carriers to invest in optical bre networks, by reducing the revenue they earn on their legacy copper networks. According to Kroes, 270 billion EUR will be needed to provide all Europeans with superfast broadband access by 2020. At the same time, the European Commission announced plans to invest 9.2 billion EUR between 2014 and 2020 in panEuropean ultra-fast broadband network rollouts, in the form of direct investments, loans and subsidies. This aid is meant to help complete local, regional and national spending, both private and public, and the assistance provided by European structural funds. Microsoft announces some 40 agreements around the globe aimed at integrating TV and entertainment offers into its Xbox 360 console, and so entering the content fray head on. France Telecom and China Telecom have signed a framework agreement for a partnership to take advantage of the complementary nature of their networks and services, starting with improving the quality of access and services provided to Orange business customers in China, and China Telecom customers in Europe, as well as improving access to international cable networks for both companies. Alcatel-Lucent will be selling its Genesys call centre and videoconferencing software business to European fund Permira, for 1.5 billion USD. The France Telecom group acquires operator Congo China Telecom (CCT) for 12.4 million EUR with a corporate value for CCT of 143 million EUR. The Democratic Republic of Congos fourth largest mobile operator was previously owned by Chinese equipment manufacturer ZTE (51%) and the Congolese State (49%). The French telco has also negotiated the award of a 3G licence once it begins operations in the DRC.
The unprecedented global blackout due to a defective switch in the RIM network core, which affected more than 10 million BlackBerry users for three days, could seriously harm the Canadian companys reputation at a time when it is quickly losing ground to its main competitors. Japanese giant Sony will be acquiring Ericssons 50% stake in their Sony-Ericsson mobile handset joint venture for the sum of 1.05 billion EUR in cash. Having full control of the division will allow Sony to consolidate its multi-screen strategy. In the bargain, the company will also acquire 4,000 patents led by Sony-Ericsson, plus those bought from Nortel in summer 2011. IT heavyweight HP has changed its mind about spinning off its Personal Systems Group (PSG) division which manufactures its PCs, believing the process will generate excessive costs. Announced in August 2011, along with other stimulus measures for the group, the split did not garner investor support and resulted in a drop in HPs share price. Meg Whitman, who was brought in to replace CEO Leo Apotheker in late September, therefore undertook a complete overhaul of the companys strategy. Apple announces the death of Steve Jobs who had founded the company back in 1976, and who had handed over control on 24th August 2011 due to illness. In a preliminary decision which is to be conrmed in a plenary session in February 2012 the International Trade Commission (ITC) in the United States has rejected the complaint led by US rm S3 (since taken over by Taiwans HTC) in May 2010 against Apple for infringing on four of its patents. In the meantime, HTC has led new complaints, and is being backed by Google whose Android OS runs most of its smartphones, and which sold the company nine patents on 29 August 2011.
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Netix at a turning point

American video on-demand Netix was forced to split its and so a potential competitor for service Netix is entering into a business into two: video rental on PPV, or at least for pay-TV; and an critical stage in its development. the one side and streaming on the unlimited access offer built chiey Originally offering DVD rental other. The goal was to generate around older TV programmes, by mail, whose novelty was specic income from streaming, which account for 60% of Netix charging a at fee for unlimited to create a balance between the streams, and which offers an rentals, Netix later expanded into price of acquiring online rights alternative to basic cable, satellite streaming. To secure the rights and the income earned from and IPTV packages. The rst model to the programmes and lms to them, and so turn the tide on the will increase programming costs be streamed, the company had companys ongoing decline in very quickly and will be competing enjoyed a good deal with pay-TV ARPU. with rights holders own online channel Starz which had subservices, while the second is a This split resulted in the price being licenced the online distribution low-cost alternative in the pay-TV almost doubled for customer rights it had obtained from market, which is a wise choice for who wanted to subscribe to both studios. The streaming service the American market given the services. Because of the impact was initially offered for free to high prices charged by incumbent this hand on subscriptions, Netix DVD customers, so grew to such pay-TV providers, but perhaps a backtracked to some degree by an extent that it actually caused harder sell in other markets. deciding not to create a separate a strain on network trafc in the brand (Qwikster) for DVD rentals, The way Netix is positioned United States. although it did not pull back on its will inuence the companys When it came time to renegotiate price increases. international strategies, as it rights, American studios were will be constrained by specic At the same time, the company aware of Netixs potential impact is working to build a library regional and local regulations. on the traditional VoD market, After Canada and South America, of premium programming by and they put pressure on Starz to Netix plans on expanding making deals with the likes either up the price of online rights, of DreamWorks, for instance. gradually into European markets. or prevent them from farming out Fundamentally, though, Netix the rights to the programmes. is running two businesses: a Faced with a potential hike in the price of its programming rights, premium service built, like its DVD businesses, on recent lms Contact: f.leborgne@idate.org
Growth of Netix subscriber numbers and ARPU
25
20
20 15 15 Subscribers ARPU 10 10 5
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0 2005 2006 2007 2008 2009 2010 2011 (Q2)
Source : Netix,IDATE
October
Million subscribers
US$/month
November
Yahoo! acquires Interclick, a company that specialises in targeted online advertising, for 270 million USD. Dutch consumer electronics maker Philips transfers its longstanding TV business to a joint venture with TPV which will own a 70% stake of the business. Three years after its creation, deal of the day specialist Groupon launches an IPO, based on an average valuation of 10.8 billion USD. Japanese e-commerce giant Rakuten buys Canadian e-Reader and digital solutions producer Kobo for 315 million USD, in an attempt to stand up to Amazons global offensive in this fast-growing market. Vivendi subsidiary Universal Music will be taking over British record label EMI for 1.2 billion GBP provided it gets the go-ahead from regulatory authorities. After having acquired BMGs music publishing business in 2007, Universal Music is hoping this deal will create a growth outlet in a music market that is still in the throes of its transition to digital. Greeks Telecommunications and postal regulatory commission has issued 15-year mobile telephony licences in the 900 MHz and 1800 MHz bands to the countrys three main operators: Cosmote, an OTE subsidiary which will pay 118 million EUR for its licence, Vodafone-Panafon (168 million EUR) and Wind (93 million EUR) bringing in a total 380.5 million EUR for the State. American billionaire Warren Buffet has bought 64 million shares in IBM over the past eight months, through the rm Berkshire Hathaway. As a result, he now owns a 5.5% stake in the IT giant which has cost him around 10.7 billion USD. Three years after the aborted takeover of Yahoo!, Microsoft signs a condentiality agreement with the former, giving it access to nancial data and making it ofcially one of the candidates for the acquisition of a portion of Yahoo!s business, along with private investment rms, Silver Lake and TPG Capital. Chinese telecommunications giant Huawei Technologies will be acquiring American rm Symantecs 49% share of their Huawei Symantec joint venture for 530 million USD.
After several months of testing, Google has launched its online music shop and storage service, Google Music, which hopes to rival Apples iTunes, Amazons MP3 Store and the Facebook-Spotify duo. After a public consultation launched in March 2010 to determine whether European regulation governing universal service obligations should be extended to reduce the digital divide, the European Commission ultimately announced that it would not be imposing Europe-wide legislation requiring a universal service for high-speed Internet access and mobile telecommunications, not least because of the potential cost. Finnish telecom equipment manufacturer Nokia Siemens Network (NSN), which is in dire straits and having to contend with stiff competition from Asian rivals such as Huawei and ZTE, will be cutting 17,000 jobs worldwide, or more than a quarter of its total staff. It will also be selling off certain divisions, to focus on high-speed mobile Internet. Hutchison 3G makes a 1.4 billion EUR buyout offer for Orange Austria, of which France Telecom owns 35%. If it gets the green light from authorities, the deal will allow the subsidiary of Hong Kong conglomerate Hutchison Whampoa to move from fourth to third position in Austrias mobile market. The winners of 4G spectrum auctions in Belgium are as follows: Belgacom which has been allocated two blocks of 20 MHz for 20.2 million EUR, BUCD bvba one 45 MHz block of spectrum for 22.5 million EUR, KPN Belgium two blocks of 15 MHz for 15.04 million EUR and Mobistar two blocks of 20 MHz for 20.02 million EUR. They will be awarded 15-year licences that will be valid as of 1st July 2012. The European Commission launches an enquiry to determine whether Apple and Samsung violated competition law with patents acting as standards in the mobile telephony sector. The European Court of Justice has been called on to rule on a dispute between Belgian rights society, Sabam (Socit belge des auteurs compositeurs) and ISP Scarlet Extended, over whether demanding that an ISP lter sites that violate copyright is contrary to European law.
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The price of 4G spectrum

Since the rst 4G licences were issued in Japan in late 2007, allocation procedures have been gradually taking place in other advanced countries around the globe: in the United States in 2008, Europe beginning in 2009, starting with Scandinavian countries, other developed markets in Asia, along with a few emerging countries, including Saudi Arabia, Uzbekistan and the Philippines. Germany was the rst of the big European markets to hold spectrum auctions for 2.6 GHz and 800 MHz band frequencies, in spring 2010, followed in 2011 by Spain (July), Italy (October) and France where allocations occurred in two stages for the 2.6 GHz band in September and for the 800 MHz band in December while the UK is due to hold its procedures in 2012. These various spectrum allocations provide us with an opportunity to compare the economic terms attached to frequencies in the different countries, particularly to the digital dividend golden frequencies (700-800 MHz). Prices do vary from country to country, but to a much lesser degree than they did for 3G frequencies. In the big European markets, the average price measured in MHz per capita for 800 MHz band spectrum varies between 0.491 for one of the three Spanish operators (Orange Spain) and 0.86 for Vodafone in Italy. Over in the United States, an average 0.71 was paid for 700 MHz band spectrum while, in Japan, like for earlier mobile systems, LTE spectrum was not auctioned off but rather allocated by the State for free. But even in these countries, the process is probably not yet over as operators will need additional capacity to handle the explosion in mobile data trafc and discussions are underway over a second digital dividend. In Europe, services could be introduced in frequencies below the currently available 790-862 MHz band, with hopes of achieving better international harmonisation in the bargain. Europe could in fact try to adopt Asias frequency plan for the 700 MHz band. But this is still some way off: around 2020 according to the French governments timeline. The topic is also being discussed in the United States where the FCC and public authorities view auctions for TV broadcasters as a way to encourage them to free up UHF bands. Contact: f.pujol@idate.org
The price per MHz for golden frequencies

Price in cent 85.80 72.68 54.51 36.94 70.38
169
Germany (Mar. 2010, 15 years Sweden (Mar. 2011, 25 years Spain (July 2011, 20 years Italy (Oct. 2011, 16 years France (Dec. 2011, 20 years
Source : IDATE
www.idate.org
November
December
Zynga, a four-year-old California-based company that makes games for Facebook, has launched an IPO. Based on an estimated valuation of 7 billion USD, the 14% to 15% of equity that was oated should allow the company to raise between 850 million and 1.1 billion USD, which makes it the biggest IPO for an Internet company since Google in 2004. Mobile operator Verizon Wireless will be giving 3.6 billion USD to cable companies Comcast (2.3 billion USD), Time Warner Cable (1.1 billion USD) and Bright House Networks (189 million USD), to acquire 4G spectrum. Subject to the approval of regulatory authorities, the deal also includes cross-selling partnerships: the cablecos will sell Verizon LTE services, and the telco will sell the cablecos services. Verizon has also said that it would no longer be expanding its FiOS optical bre solution geographically and will be using its LTE system to provide uncovered areas with superfast access. After Apple, Oracle, Microsoft and eBay, British carrier BT goes after Google saying the American companys Android operating system is infringing on BT patents. American rm Adtran will be taking over Nokia Siemens Networks (NSN) xed line broadband access business.
The rm Kingdom Holding, belonging to Saudi billionaire Al-Walid, announces a 300 million USD (230 million EUR) investment in Twitter. After more than a month of exclusive talks, Canal+ signs an agreement with Polish media company TVN and its majority shareholder ITI to merge their pay-TV services (Cyfra+ for Canal+ and n for TVN) and so create the second biggest satellite pay-TV business in Poland, behind market leader Polsat. Provided it receives the approval of public authorities, France Telecom will be selling off the entirety of its cellular subsidiary in Switzerland to an investment fund managed by Apax Partners for 2 billion CHF (1.6 billion EUR). Dutch telco KPN has sold its KPN France subsidiary to Bouygues Telecom. At the outcome of a selection procedure, Frances telecom regulator ARCEP allocates 4G spectrum in the 800 MHz band the golden digital dividend frequencies to SFR (two blocks of 5 MHz each, for 1.06 billion EUR), Orange (one block of 10 MHz for 891 million EUR) and Bouygues Telecom (one block of 10 MHz for 683 million EUR). Although it came away empty-handed, Free could, as stipulated in its application, be offered roaming rights with the operator that was awarded two blocks, which turned out to be SFR. AT&T has got the green light from regulators in the United States to acquire spectrum from Qualcomm, which will allow it to increase the capacity of its 4G network considerably. Japanese consumer electronics giant Sony will be selling Samsung Electronics its 50% stake in their S-LCD display joint venture for 1,080 billion KRW (719 million EUR). Qatari investment fund Qatar Holding now owns more than 10% of Lagardre, making it the largest shareholder in the French media conglomerate. The European Court of Justice conrms a decision from the European Commission which had ordered France Telecom-Orange to reimburse the French State some 1 billion EUR, which corresponds to the amount of aid the carrier received between 1994 and 2002 in the form of corporate tax exemptions.
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AT&T nally decides to halt plans on a 39 billion USD agreement with Deutsche Telekom to acquire the German incumbents American subsidiary, T-Mobile USA in light of the many regulatory obstacles the deal encountered, and will instead pay Deutsche Telekom 4 billion USD in compensation, and offer it a roaming agreement. This means that Germanys incumbent carrier now has to seek out other options for its American subsidiary, which is the fourth largest cellco in the US, given the massive investments that need to be made in LTE rollouts. Options include selling its stations to tower companies, merging with the number three operator, Sprint, or taking part in restructuring second-tier operators. Meanwhile, AT&T, which is watching chief rival Verizon Wireless acquire cablecos spectrum, could nd other arrangements that are more compatible with regulators stance.
AT&T, T-Mobile: chronicle of a failed merger

In March 2011, the United States aggressive and innovative telco countrys No. 3 carrier, Sprint second largest telco, AT&T, (HSPA+, MIMO antennae). In which is already embroiled announced plans to take over November 2011, the FCC voiced in complicated standards deals the markets number four player, its opposition to the merger which (since the merger with Nextel) T-Mobile, for $39 billion. The deal would have resulted in layoffs and several difcult partnerships was to enable AT&T to move back and was not in the public interest. (Clearwire, LightSquared) would up to top spot, which it had lost AT&T thus withdrew its plans and be tricky to say the least. Other when Verizon Wireless bought sought to amend them saying remaining options include a Alltel in 2008 (for $28.1 billion), it would set aside $4 billion to merger with a second-string telcos like LeapWireless and MetroPCS and to get its hands on T-Mobiles cover commitments to T-Mobile to create a national operator, frequencies. Meanwhile the owner should the deal fall apart. The or handing its subscribers and of T-Mobile, Deutsche Telekom, telco apparently considered frequencies over to a bold new saw the deal as an opportunity to other options as well to persuade entrant, such as Dish. As for an put an end to the woes of its its authorities, including selling off a alliance with cable companies, American subsidiary which has sizeable chunk of T-Mobile after Verizon Wireless already got a haemorrhaging customers and having acquired it. But it found jump on DT last December with struggling to compete with the no support from authorities to its takeover of SpectrumCo (a market leaders who had already continue exploring these options. consortium of cablecos, including begun rolling out LTE, and to rid Ultimately, on 19 December 2011 Comcast and Time Warner Cable) itself of its debt. AT&T announced that it was and its 20 MHz of AWS spectrum, In August 2011, however, the US putting an end to the deal. for $3.6 billion. The deal includes Department of Justice led suit Compensation for Deutsche a variety of arrangements, to block the deal, believing it Telekom was considerable, including the cable companies would be bad for competition. including $3 billion in cash (well selling Verizon Mobile LTE More specically, its anti-trust above the $450 million in legal services. arguments were as follows: the fees the German incumbent deal would create a company that had racked up), spectrum in Meanwhile, AT&T did manage to controlled 45% of the countrys 128 areas in the country it did end the year with more spectrum mobile customers, so result in too not yet cover, and a seven-year to its name. In late 2011, the great a degree of concentration roaming agreement for AT&Ts FCC gave the go-ahead for the in 96 of the countrys 100 biggest 3G network. Deutsche Telekom telcos acquisition of Qualcomm 1 markets (HHI > 2,500 ). The DoJ will not, however, be able to spectrum (6 MHz in the UHF band rid itself of its debt as it had also underscored the fact that assigned to the aborted MediaFLO planned. This could also mean this merger would eliminate an mobile TV service) in a $1.9 billion a cut in investments planned deal that had been announced in for Germany (bre, LTE). The 1. The HHI index (Herndahl-Hirschman Index) December 2010 and interrupted carrier will take time to consider is a measure of market concentration. It is by the planned merger with calculated by adding the sum of the squares of other, probably less favourable T-Mobile! the market share of each rm competing in the options for its North American market, with a maximum of 10,000 to qualify a subsidiary. An alliance with the market monopoly. Contact: y.gassot@idate.org
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Americas increasingly concentrated mobile industry

3.000 2.500 2.000 1.500 1.000 500 0 Dec. 03 Dec. 04 Dec. 05 Dec. 06 Dec. 07 Dec. 08 Dec. 09 Jun 10 Moderately Concentrated (1500 < HHI < 2500) Highly Concentrated (HHI > 2500)
Source : FCCs 15th report
December
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France
Markets
(billion ) Telecom services Fixed telephony Internet & data Mobile services TV services Public fundings Advertising revenues Subscription fees 2008 41.1 10.4 10.7 20.0 11.0 2.1 3.4 5.6 2009 41.4 9.0 12.2 20.2 11.1 2.4 2.9 5.8 2010 41.8 8.2 12.9 20.7 12.4 2.5 3.5 6.4 2011 40.8 7.1 13.4 20.2 12.6 2.5 3.6 6.6
Country Proles
Subscribers
(millions) Fixed telephone lines as a % of inhabitants Cellular customers as a % of inhabitants Broadband subscribers as a % of inhabitants Pay-TV homes as a % of TV homes Digital TV homes as a % of TV homes 2008 26.3 40.8% 58.0 89.9% 17.8 27.6% 13.2 51.8% 18.0 71.0% 2009 24.1 37.2% 61.5 94.8% 19.9 30.6% 14.0 52.6% 21.1 79.4% 2010 21.5 33.0% 65.0 99.7% 21.3 32.7% 15.3 57.2% 24.9 93.0% 2011 19.1 29.1% 68.5 104.5% 22.8 34.8% 16.5 60.4% 26.6 97.5%
174
DigiWorld 2012
Macro-economic data
Population (million inhabitants) TV homes (millions) GDP (billion ) 2008 64.5 25.4 1 931.4 2009 64.9 26.6 1 889.6 2010 65.2 26.7 1 931.4 2011 65.6 27.3 1 987.6
Germany
Markets
Subscribers
175
www.idate.org
Macro-economic data
Country Proles
Italy
March
Country Proles
Subscribers
176
DigiWorld 2012
Macro-economic data
Russia
Markets
Subscribers
177
www.idate.org
Macro-economic data
Population (million inhabitants) TV homes (millions) GDP (billion ) 2008 140.7 51.2 1 026.3 2009 140.0 51.4 964.4 2010 139.4 51.7 1 117.3 2011 138.7 51.9 1 331.0
Country Proles
Spain
Markets
Country Proles
Subscribers
178
DigiWorld 2012
Macro-economic data
United Kingdom
Markets
Subscribers
179
www.idate.org
Macro-economic data
Country Proles
Brazil
Markets
Country Proles
Subscribers
180
DigiWorld 2012
Macro-economic data
United States
Markets
Subscribers
181
www.idate.org
Macro-economic data
Country Proles
China
Markets
(billion ) Telecom services Fixed telephony Internet & data Mobile services TV services Public fundings Advertising revenues Subscription fees 2008 80.6 19.2 9.0 52.4 9.6 5.6 4.1 2009 84.7 16.1 10.9 57.8 10.4 6.0 4.5 2010 89.3 13.1 12.4 63.8 12.5 7.5 5.0 2011 96.7 10.8 14.2 71.7 14.0 8.6 5.4
Country Proles
Subscribers
182
DigiWorld 2012
Macro-economic data
Population (million inhabitants) TV homes (millions) GDP (billion ) 2008 1 317.1 374.6 3 665.3 2009 1 323.6 376.1 3 959.5 2010 1 330.1 377.6 4 607.9 2011 1 336.7 379.5 5 297.1
India
Markets
Subscribers
183
www.idate.org
Macro-economic data
Population (million inhabitants) TV homes (millions) GDP (billion ) 2008 1 140.6 129.0 899.4 2009 1 156.9 136.0 1 011.2 2010 1 173.1 142.0 1 240.4 2011 1 189.2 148.0 1 444.1
Country Proles
Japan
Markets
Country Proles
Subscribers
184
DigiWorld 2012
Macro-economic data
South Korea
Markets
Subscribers
(millions) Fixed telephone lines as a % of inhabitants Cellular customers as a % of inhabitants Broadband subscribers as a % of inhabitants Pay-TV homes as a % of TV homes Digital TV homes as a % of TV homes 2008 21.8 45.1% 45.6 94.3% 15.5 32.0% 15.2 0.9 4.9 0.3 2009 19.9 40.9% 47.9 98.8% 16.3 33.7% 15.8 0.9 6.3 0.4 2010 18.3 37.6% 50.8 104.4% 17.2 35.4% 16.8 0.9 8.3 0.5 2011 17.7 36.2% 52.3 107.3% 18.0 37.0% 17.4 1.0 9.9 0.5
185
www.idate.org
Macro-economic data
Population (million inhabitants) TV homes (millions) GDP (billion ) 2008 48.4 17.5 670.4 2009 48.5 17.7 695.6 2010 48.6 18.0 766.0 2011 48.8 18.2 822.6
Country Proles
186
Glossary
DigiWorld 2012
Glossary
3G 4G ADSL AM API ARPU AWS B2B B2C BRIC C2C CAPEX CE CPC CRM DMB DSL DTT DVD DVR FDD FM FTP FTTB FTTH FTTLA FTTN FTTx
3rd (cellular) Generation 4th (cellular) Generation Asymetrical Digital Subscriber Line Amplitude Modulation Application Programming Interface Average Revenue Per User Advanced Wireless Services Business to Business Business to Consumer Brazil - Russia - India - China Consumer to Consumer Capital Expenditure Consumer Electronics Cost Per Click Consumer Relationship Management Digital Media Box Digital Subscriber Line Digital Terrestrial Television Digital Versatile Disc Digital Video Recorder Frequency Division Duplex Frequency Modulation File Transfer Protocol Fiber To The Building Fiber To The Last Amplier Fiber To The Home Fiber To The Node Fiber To The x (Home, Building, Premises, Curb) GDP Gross Domestic Product GPS Global Positioning System HD High Denition HDTV High Denition Television HSDP High Speed Downlink Packet HSPA High Speed Packet Access HTML5 HyperText Markup Language 5 IaaS Infrastructure as a Service ICT Information and Communication Technologies IMT-Advanced International Mobile Telecommunications-Advanced IoT Internet of Things IP Internet Protocol IPO Initial Public Offering IPTV Internet Protocol Television IPv6 Internet Protocol version 6 ISP Internet Service Provider IT Information Technology LCD Liquid Crystal Display LED Light-Emitting Diode LTE Long Term Evolution M2M Machine to Machine
MHEG-5 IC MHP MP3 MVNO NFC NGA OPEX OS OTT P2P PaaS PC PPV PTN PVR RFID RSPP SaaS SD SIM SLA SMEs SMS STB SVOD TDD TD-LTE TMT TV UFB UGC UHF UMTS USN VDSL VHF VOD VoIP VoLTE WiMAX WRC VDSL VHF VOD VoIP VoLTE WiMAX WRC
Multimedia and Hypermedia Experts Group-5 Interaction Channel Multimedia Home Platform MPEG Audio Layer 3 Mobile Virtual Network Operator Near Field Communication Next Generation Access Operating Expenditure Operating System Over-The-Top Peer-to-Peer Platform as a Service Personal Computer Pay-Per-View Packet Transport Network Personal Video Recorder Radio Frequency Identication Radio spectrum Policy Plan Software as a Service Standard Denition Subscriber Identity Module Service Level Agreement Small and Medium Enterprises Short Message Service Set Top Box Subscription Video On Demand Time Division Duplex Time Division - Long Term Evolution Technology/Media/Telecommunication TV set Ultra-Fast Broadband User Generated Content Ultra High Frequency Universal Mobile Telecommunication System Ubiquitous Sensor Network Very High Speed Digital Subscriber Line Very High Frequency Video on Demand Voice over IP Voice over Long Term Evolution Worldwide interoperability for Microwave Access World Radio Conference Very High Speed Digital Subscriber Line Very High Frequency Video on Demand Voice over IP Voice over Long Term Evolution Worldwide interoperability for Microwave Access World Radio Conference
187
www.idate.org
Glossary
188
Index
DigiWorld 2012
Index
3: Chron. Sept. 360Buy: 6.6 ABC: 5.2 Adenyo: Chron. Feb. AdMeld: Chron. June AdMob: Intro. Chap. 6 Adtran: Chron. Dec. AFP: 5.10 Agility: Chron. March Airbnb: Chron. Aug. AirPlus: Chron. Jan. Alcatel-Lucent: Chron. April, Oct., 2.3 Alestra: Chron. March Alibaba: Chron. July Alltel: Chron. Dec. Amazon: Chron. Jan., April, Nov., General Intro., 1.4, Intro. Chap. 5, 5.2, 5.7, 5.8, Intro. Chap. 6, 6.2, 6.4, 6.6 AMD: 2.5 America Mvil: Chron. April, Aug. American Express: Chron. July AOL: Chron. Feb., 5.10. Apax Partners: Chron. Dec. Apple: Chron. Jan., Feb., March, April, May, June, July, Aug., Sept., Oct., Nov., General Intro., 1.4, Intro. Chap. 4, 4.5, Intro. Chap. 5, 5.2, 5.7, 5.8, Intro. Chap. 6, 6.1, 6.2 ARD: 5.2 Astra: Chron. March Astrium: Chron. Aug. AT&T: Chron. March, May, Dec., General Intro., Intro. Chap. 4 Atheros: Chron. Jan. Atos: Chron. Feb. Autonomy: Chron. Aug. Baidu: Chron. June, July, Aug., Sept. Barnes & Nobles: 5.7 BBC: Chron. Jan., 5.2 Bebo: 6.3 Belgacom: Chron. Aug., Sept., Nov. Berkshire Hathaway: Chron. Nov. Bharti Airtel: Chron. April Bing: Chron. Feb. BMG: Chron. Nov. Bollor: Chron. Sept. Bouygues Telecom: Chron. Feb., Sept., Dec., 5.3
Boxee: 5.2 Boxer TV: Chron. Jan. Bright House Networks: Chron. Dec. Broadcom: Chron. Sept. BSkyB: Chron. July BT: Chron. July BUCD bvba: Chron. Nov. Buyster: Chron. Feb. Cable & Wireless: Intro. Chap. 4 Cablevision: Chron. June Canal+: Chron. Jan., Feb., May, Sept., Dec. CenturyLink: Chron. April China Mobile: Chron. March, April, Aug., Intro. Chap. 4 China Unicom: Chron. Jan., April, Oct. Cisco: 2.3, 2.5 Clearwell Systems: Chron. May Clearwire: Chron. April, May, Dec., Intro. Chap. 4, 4.4 Comcast: Chron. Jan., June, Dec., 4.7 Congo Chine Telecom: Chron. Oct. Cosmote: Chron. Nov. Dailymotion: Chron. Jan., 6.1 Daum: Chron. April Deezer: Chron. Jan., June, Sept., General Intro., 5.8, 5.9 Delicious: Chron. April Dell: Chron. July, Sept., 2.5 Deutsche Telekom: Chron. Jan., March, April, Aug., Dec., 5.6 DirecTV: 4.7 Dish Network / Echostar: Chron. May, Dec., 4.4, 4.7 Disney: 5.7 DoubleClick: Intro. Chap. 6 DreamWorks: Chron. Oct. EADS: Chron. Aug. eBay: Chron. April, May, 6.6 Electronic Arts: Chron. July, 6.2 EMC: Chron. April, July, General Intro. EMI: Chron. Nov., 5.8 Emitel: Chron. June Ericsson: Chron. March, April, May, June, July, Oct., General Intro., 1.3, 2.3 ESPN: 5.2 Essar: Chron. April Etisalat: Chron. April Europa Corp.: Intro. Chap. 5 Exxon Mobil: Chron. Aug.
189
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Index
Facebook: Chron. Jan., March, June, July, Aug., Sept., Nov., General Intro., 1.4, 5.5, Intro. Chap. 6, 6.1, 6.2, 6.3, 6.4, 6.6 FiberCo: Chron. July Filmmaster: Chron. Jan. Fnac: 5.7 Force10 Networks: Chron. July Fox: 5.2 France Telecom / Orange: Chron. Jan., Feb., March, April, May, June, July, Aug., Sept., Oct., Nov., Dec., 2.3, 5.8, Intro. Chap. 6 France Televisions: 5.2 Free: Chron. March, May, July, Sept., Dec. Free Mobile: Chron. Sept. Freescale: Chron. May Fridge: Chron. July G Cluster: 5.5 G4S Utility Services: Chron. March Gaikai: 5.5 Gemalto: Chron. Jan. General Electric: Chron. Jan. Genesys: Chron. Oct. GestureTek: Chron. July Global Crossing: Chron. April Google: Chron. Jan., Feb., March, April, May, June, July, Aug., Sept., Oct., Nov., General Intro., 1.4, 4.5, 5.2, 5.7, Intro. Chap. 6, 6.1, 6.2, 6.4, 6.5
Illiad: Chron. Feb., March Impulse Technology: Chron. July Infor: Chron. April Ingenico: Chron. March Insight Communications: Chron. Aug. Intel: Chron. Jan., June, 2.5 Interclick: Chron. Nov. Iron Mountain: Chron. May ITA: Chron. April ITI: Chron. Dec. iTunes: Chron. Sept. Iusacell: Chron. April Jambool: Chron. March Kingdom Holding: Chron. Feb., Dec. Kobo: Chron. Nov., 5.7, 6.6 Kodak: Chron. May, Aug. Korek Telecom: Chron. March Kosmix: Chron. April KPN: Chron. Aug., Nov., Dec. La Poste Mobile: Chron. May Lagardre: Chron. Dec. Landis+Gyr: Chron. May Lawson: Chron. April Leap Wireless: Chron. Dec. Lenovo: 2.5 Level 3: Chron. April LG: 4.5 LIAA: Chron. May LightSquared: Chron. May, Dec., Intro. Chap. 4, 4.4 LimeWire: Chron. May LinkedIn: Chron. May, General Intro., Intro. Chap. 6 Lonely Planet: 5.7 LoveFilm: Chron. Jan. M6: Chron. Sept. Maroc Telecom: Chron. April MediaFLO: Chron. Dec., Intro. Chap. 4 Megaupload: General Intro. MetroPCS Communications: Chron. March, May, Dec. Microsoft: Chron. Jan., Feb., March, May, June, July, Aug., Oct., Nov., General Intro., 1.4, Intro. Chap. 4, 4.5, Intro. Chap. 5, Intro. Chap. 6, 6.1 MinDigTV: Chron. Jan. Mixi: 6.3 Mobistar: Chron. Nov. MOG: Chron. Sept.
Index
Goviral: Chron. Feb. Groupon: Chron. Jan., Aug., Nov., General Intro., Intro. Chap. 6 Hachette Livre: Chron. July Harlequin: 5.7 HBO: Chron. July Hitachi: Chron. Sept. Hotle: Chron. July HP: Chron. June, Aug., Oct., General Intro., 2.5 HTC: Chron. July, Aug., Oct. Huawei: Chron. Feb., March, April, Nov., 2.3 Hufngton Post: Chron. Feb., 5.10. Hulu: 4.7, 6.1 Hutchison 3G: Chron. Nov. Hutchison Telephone Company: Chron. March Hutchison Whampoa: Chron. Sept., Nov. Hyves: 6.3 i4i: Chron. June IBM: Chron. Aug., Nov., 2.5, 6.5
190
DigiWorld 2012
Motorola: Chron. Jan., Aug. Motorola Mobility: Chron. Jan., Aug., General Intro. Motricity: Chron. Feb. MTN: Chron. March, April MTN Cameroun: Chron. June MTS: Chron. March Multichoice: Chron. Jan. Napster: Chron. Sept. National Broadband Network: Chron. June, Aug. National Semiconductor: Chron. April NBA: 5.2 NBC Universal: Chron. Jan., 5.2 Netix: Chron. July, Oct., General Intro., 4.7, Intro. Chap. 5, 5.2 NetLogic: Chron. Sept. News Corp.: Chron. July Nextel: Chron. Dec. NFC: Chron. April NHL: 5.2 Nintendo: Chron. June Nokia: Chron. May, June, Sept., General Intro., Intro. Chap. 4, 4.5, Intro. Chap. 6 Nokia Siemens Networks (NSN): Chron. March, Sept., Nov., Dec., 2.3 Nortel: Chron. April, Aug., Oct., General Intro., 2.3 Novell: Chron. April NTT: Intro. Chap. 2 NTT DOCOMO: 4.6 Nvidia: Chron. May Ofcom: Chron. March OFTA: Chron. March Onlive: 5.5 Opera Software: Chron. March Oracle: Chron. April, June, Aug., 6.5 Orascom: Chron. April Orkut: 6.3 OTE: Chron. April, Nov. Otoy: 5.5 Ovi: Chron. May Palm: 4.5 Pandora: Chron. June, 5.9 Paypal: Chron. Feb. Permira: Chron. Oct. Philips: Chron. April, Nov. PittPatt: Chron. July
Play Holdings: 6.6 Playcast Media: 5.5 Polsat: Chron. Dec. PopCap Games: Chron. July Portugal Telecom: Chron. Jan. PriceMinister: Chron. July, 6.6 ProSieben: Chron. April, 5.2 PushLife: Chron. April Qatar Holding: Chron. Dec. Qik: Chron. Jan. Qualcomm: Chron. Jan., July, Dec. Quattro Wireless: Intro. Chap. 6 Rai: 5.2 Rakuten: Chron. July, Nov., 6.6 Rdio: Chron. Sept. Renren: Chron. May Reuters: Chron. Feb., 5.10. Rhapsody: Chron. Sept. RIM: Chron. Jan., July, Aug., Oct., General Intro., 4.5, 6.2 Roku: 5.2 RTL: 5.2 RTVE: 5.2 SageTV: Chron. June Salesforce.com: 6.5 Samsung: Chron. April, Aug., Sept., Nov., General Intro., Intro. Chap. 4, 4.5, 5.2 Sanom: Chron. April Savvis: Chron. April Scarlet Extended: Chron. Nov. Seagate Technology: Chron. April Sega: Chron. June SFR: Chron. Feb., April, May, Sept., Dec. Sharp: Chron. June ShowTime: Chron. July Siemens: Chron. Sept. Sky: 5.6 Skype: Chron. Jan., March, May Skyrock: 6.3 SmarTone-Vodafone: Chron. March Snaptu: Chron. March Softbank: Chron. Jan. Solutionpark: Chron. March Sony: Chron. April, July, Sept., Oct., Dec., General Intro., 5.2
191
www.idate.org
Index
Samsung Electronics: Chron. April, Dec.
Sony Computer Entertainment: 5.5 Sony Music: Chron. July, 5.8 Sony Pictures: Chron. June Sony-Ericsson: Chron. Oct. Spotify: Chron. June, Sept., Nov., General Intro., 5.8, 5.9 Sprint: Chron. April, May, Sept., Dec., General Intro., Intro. Chap. 4, 4.4 Square: Chron. April Starz: Chron. July, Oct., 4.7 Steam: Intro. Chap. 5 StudioCanal: Intro. Chap. 5 Sunrise: Chron. Sept. Swisscom: Chron. March Symantec: Chron. May Taobao: 6.6 Tecteo: Chron. Aug. Telcel: Chron. March Telecom Italia: Chron. Jan., Sept., 5.3, 5.6 Telefnica: Chron. Jan., March, April, Aug., Sept., General Intro. Telenet: Chron. Aug. Telenor: Chron. Jan., Aug. Televisa: Chron. April TeliaSonera: Chron. Aug., Sept., 4.4 Telmex: Chron. Aug. Telstra: 5.6
Toshiba: Chron. May, June, Sept. TPSA: Chron. June TPV Technologies: Chron. April, Nov. Tradoria: Chron. July, 6.6 T-Systems: Chron. Jan. TVN: Chron. Dec. Twitter: Chron. June, Aug., Dec., Intro. Chap. 6, 6.3 Universal Music: Chron. June, July, Nov., 5.8 Verizon: Chron. Jan., Feb., March, General Intro., 5.6 Verizon Wireless: Chron. May, Dec., 4.4 Viacom: Chron. June Vimpelcom: Chron. April Virgin Media: Chron. Sept. Visa: Chron. April Vivendi: Chron. Jan., April, Sept., Nov., 5.8 Vizada: Chron. Aug. Vodafone: Chron. March, April, Aug., Sept., Nov., Intro. Chap. 4, 5.6 VUDU: 6.2 Wal-Mart: Chron. April, 5.8 Warner: Chron. March, July, 5.8 Where: Chron. April Wind: Chron. Sept., Nov. Yahoo!: Chron. Feb., April, Nov., 5.2, 5.10., Intro. Chap. 6, 6.1 Yandex: Chron. May Yota: Intro. Chap. 4, 4.4 YouTube: Chron. April, 6.1 Zain: Chron. Feb., April ZDF: 5.2 ZTE: Chron. March, April, Oct., Nov., 2.3 Zynga: Chron. July, Aug., Dec., General Intro., 5.5, Intro. Chap. 6, 6.2, 6.3
Index
Tencent: Chron. July Texas Instruments: Chron. April TF1: Chron. Sept. Time Warner Cable: Chron. July, Aug., Dec. TiVo: Chron. Jan., May, 5.2 T-Mobile: Chron. March, May, Dec., General Intro., 2.3
192
DigiWorld 2012
193
www.idate.org
SMART THINKING THE DIGITAL ECONOMY

Founded in 1977, IDATE has gained a reputation as a leader in tracking telecom, Internet and media markets, thanks to the skills of its teams of specialized analysts. Now, with the support of close to 40 member companies which include many of the digital economys most inuential players the newly rebranded DigiWorld Institute has entered into a new stage of its development, structured around three main areas of activity: DigiWorld Institute, a European forum open on the world. The DigiWorld Institute will take existing IDATE initiatives, such as the DigiWorld Summit, the DigiWorld Yearbook and the monthly clubs in Paris, London and Brussels, to the next level. Members have the opportunity to participate in think tanks on the core issues that will shape the industrys future, drawing on the knowledge of outside experts and our own teams. IDATE Research, an independent observatory whose task is to keep a close and continual watch on digital world industries, collect relevant data and provide benchmark analyses on market developments and innovations in the telecom, Internet and media sectors through its comprehensive collection of market reports and market watch services. IDATE Consulting, time-tested analysis and consultancy solutions. Our multi-disciplinary teams of economists and engineers established their credibility and independence through the hundreds of research and consulting assignments they perform every year on behalf of top industry players and public authorities.
www.idate.org
TRACKING GLOBAL MARKETS AND STRATEGIES

Our 2012 catalogue of market reports is a natural extension of the work performed by our teams of dedicated analysts, and our ongoing investment in a system of databases and market/corporate strategy watch solutions. More than just a library of publications, it represents a concrete manifestation of our drive to create a unique way to understand and keep up with developments in the telecom, Internet and media sectors. Report formats designed to provide readers with complete information on their markets: Market & Data Reports Market analysis (report in PDF + Excel database) Innovation Reports In-depth analysis of key innovations Watch Services Continuous market tracking
Networks & Equipment Netx Gen Devices VDSL2 Femtocells Telcos Backhaul Strategies LTE Telcos Strategies Mobile Radio Spectrum Mobile VoIP Mobile Payment Mobile Video Broadband/FTTx - Satellite FTTx World Survey Ultra-Broadband via Satellite Satellite Markets Satellite M2M Internet Services Net Neutrality OTT video & CDN markets LBS Cloud & Big Data Word Internet Services Market TV & Video Next Gen TV: Scenario 2020 Digital Terrestrial Television Social Video Telcos TV Strategies Cable & IPTV face to cord-cutting World Television Market Telecom Strategies Future Telecom: Scenario 2020 Changes in Offers & Bundles Vertical Markets Pricing Strategies Restoring Margin World Telecom Services Market Digital Home & Entertainment In-game Advertising Market Cloud Gaming Appstores Games Digital Home eBook World Video Game Market ICT business markets Smart Cities M2M Open Data Serious Games SME Survey Smartphones Survey Watch Services World FTTx Markets World LTE Markets Connected TV Monitoring
www.idate-research.com
THE DIGITAL ECONOMY AS SEEN BY THE WORLDS TOP ACADEMICS

COMMUNICATIONS & STRATEGIES is a quarterly review devoted to exploring public policy, industrial organization and corporate strategy issues in the telecommunications, IT and media sectors. Since its creation in 1991, COMMUNICATIONS & STRATEGIES has been making its mark as an independent European publication, focusing on the industrys key issues and offering a forum for the nest socio-economic analysis of the telecom, IT and media sectors. A veritable reference for analysis of convergence phenomena, COMMUNICATIONS & STRATEGIES has the CNRS seal of approval and is listed in a host of scientic databases around the globe. Published in English, and managed by an editorial board following a careful selection process by a team of reviewers, each issue delivers a thematic Dossier that includes papers and interviews with academic, institutional or industry personalities. Also included in each volume is a selection of articles that typically cover issues related to innovations in the sector, along with short papers (Features) offering factual analyses of recent developments, and a book review or two.
Published in 2011: The Economics of Cybersecurity No. 81 (1st Q.) A Single EU Market for eCommunications? No. 82 (2nd Q.) ICTs and Health No. 83 (3rd Q.) Net Neutrality: Act II No. 84 (4th Q.)
To be published in 2012: Cloud ecosystem and platforms competition - No. 85 (1st Q.) Development of ICT in Africa No. 86 (2nd Q.) Internet of things: new challenges for research - No. 87 (3rd Q.) Privacy, openness and trust No. 88 (4th Q.)
www.comstrat.org
Printed in April 2012 Imprimerie Pure Impression, Montpellier Copyright May 2012
Printed on PEFC-ceried paper, using vegetable-based ink, by an ISO 14001-certied printer now performing its carbon audit.

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telecom internet media

DigiWorld Yearbook 2012

DigiWorld Yearbook 2012

Game changers for a new digital world H

DigiWorld Yearbook 2012

IDATE creates the DigiWorld Institute

DigiWorld Yearbook 2012

> 14 & 15 November 2012

Franois BARRAULT Chairman of IDATE

Part 1: DigiWorld Atlas

Chapter 1: The DigiWorld in the global economy...............................................................................20

Chapter 2: Markets and players .........................................................................................................34

Chapter 3: Geographical shifts: just the way it is? ............................................................................56

Chapter 4: Access and devices............................................................................................................76

Chapter 5: Consumer services and content ........................................................................................98

Chapter 6: The new markets of the Internet ....................................................................................124

Part 2: DigiWorld chronicle

November .........................................................................................................................................168 Decembre .........................................................................................................................................170

The price of 4G spectrum ................................................................................................................................169

Internet giants income statement, 2011

Advertising (search/sponsored links)

Consumers Networks access Devices

Applications Store Store, Social, Web Networks

LTE coverage, end 2011

60% USA Japan 40% South Korea Germany Sweden 20%

Mobile services market growth in EU-27 and in the US

Yves GASSOT, CEO, IDATE February 2012

The DigiWorld in the global economy

The continental divide

The DigiWorld in the global economy

The DigiWorld in the global economy

Externalities greater than direct effects

More than 4% growth in 2011

DigiWorld contribution to global GDP

Recovery in DigiWorld markets

weaker than in the economy as a whole

ICT and growth

The DigiWorld in the global economy

> Contact: d.pouillot@idate.org

it hurts its economic growth

Global spending on ICT by segment in EU-27

Source: Eurostat, statistics of the Information Society

American businesses increasing their ICT spending

Total excl. ICT

and well outspending European and Japanese businesses

Source: OECD - Coe-Rexecode

ICT and growth

Solid performance for North American rms

The DigiWorld in the global economy

Growth of ICT goods output

2008 101 181 114 55 202 134 157

2009 83 141 89 47 177 80 131

2010 89 146 83 46 192 121 154

2011 97 184 97 53 216 123 146

2012 96 195 100 na 226 105 123

Production levels in industrial countries still unstable

(2000=100 - mm3) 400 250 150 100

(2000=100 - mm3) 150 100

in both telecoms and IT

(2000=100 - mm3) 300 200 170 130 100 70 50

(2000=100 - mm3) 300 200 150 100

ICT stock prices

sustained largely by IT and Internet stocks

The DigiWorld in the global economy