D6.3 Business Plan Task 6.3 Ericsson 1

Purpose PURPOSE: Demonstrate the ADAMANTIUM system capabilities for project’s results commercial exploitation. AUDIENCE: This deliverable is addressed to people involved in commercialization of ADAMANTIUM results, especially financial staff that will use this document as a reference source for describing exploitation and financial scenarios. SCOPE: This document develops, proposes and presents the business plan aspects of ADAMANTIUM project, considering the results of the project as well as the market evolution.

Content Introduction ADAMANTIUM Market Value Chain Possible Business Models SWOT STOF Financial Analysis Exploitation Plans

From IMS… to ADAMANTIUM IMS entails novel business opportunities… IPTV VoIP video call ... But it fails due to the lack of user-centric management mechanisms ADAMANTIUM creates enhanced business models ADAMANTIUM proposes an IMS-compatible Multimedia Content Management System (MCMS) focused on performing dynamic cross layer adaptations for optimization of the user experience in terms of perceptual quality for media services

VoIP – Market Description VoIP Revenues Forecast by user type VoIP Revenues Forecast by region 5

Mobile VoIP – Market Description Total VoIP 3G active users base, 2006-2012 Consumers statements on mobile VoIP 6

IPTV – Market Description Global IPTV Subscribers per region (Yankee) IPTV Spend in Western Europe by subscription type 7

Value Chain VoIP IPTV Application Service Provider Network Provider EndUser Content Provider Service Provider Network Operator EndUser

User-Centric and Network effects BM QoE (Perceived QoS) Network QoS Network Management The network effects business model involves selling a product or service and the respective profit increases when other customers also use the same product or service. Typical examples are ADAMANTIUM services (i.e. VoIP, at least, 2 people required) Network Effects Business Model

Network Effects BM in ADAMANTIUM The main role affected by ADAMATIUM is the mobile network operator With improved PQoS VoIP/IPTV service, more users will access the Network operator’s mobile network The Network Operator will get more profit … BUT ADAMANTIUM model goes beyond the typical Network Effects model…

Proposed enhanced BM by ADAMANTIUM ADAMANTIUM BM proposed for mobile operators exhibits dominant enhancements and characteristics of Subscription Business Model Loyalty Business Model Razor and Blades Business Model ADAMANTIUM Business Model The subscription business model Customer pays a subscription to have access to the product / service ADAMANTIUM: increase of operator’s subscribers’ figures by offering innovative and quality aware services The loyalty business model Used in strategic management to increase the customer retention) ADAMANTIUM: quality of offered services lead to customer satisfaction, customer retention, and profitability The razor and blades business model Offering a product at a low price to generate a continual market for another, complementary, item or service The operator can decide not to charge for ADAMANTIUM improved quality if their offered services (VoIP and IPTV) generate a market for complementary related services (e.g., advertising, live events broadcasting, VoD)

ADAMANTIUM BM Analysis and Impact The newly formed ADAMANTIUM business model also creates a new Marketing Mix for the mobile operators Product An intelligent and PQoS-aware service Place/Distribution Mobile network operators have already a well-established sales network. No additional changes are required in the existing distribution network and used techniques Price Pricing models to be adopted by the market exploitation of ADAMANTIUM proposal should contribute towards balancing prices and demand Promotion Additional ways of promotion might be chosen and participation in several events of commercial interest as conferences, meetings, exhibitions

Mobile VoIP SWOT STRENGTHS Mobile VoIP provides the advantage of portability Mobile communication at lower costs New business models are developed, where communication is the core element of every business activity and function New market opportunities facilitated and reinforced by a continuous stream of accurate and valuable information at lower cost and at a mobile format Mobile VoIP comes with a host of advanced communication features at no extra cost Mobile internet is speeding up and consumption of content along with VoIP services is growing due to enhanced technology Flat-rate pricing packages are attractive in an increasingly complex multimedia environment combined with the possibility of a single and/or fixed bill per month for telecommunications Mobile VoIP helps service providers achieve economies of scale by reducing their investment, capital and operating costs WEAKNESSES Mobile Internet along with services such as VoIP is not yet mass market Lack of integrated services and policies Time lag due to standardization processes and continuous evolution of IMS platforms Interoperability issues between Internet services and PSTN/cellular networks Internet mobile marketing is not developed in a degree that will boost a usage need for the provided services High cost of mobile devices capable of offering mobile internet and VoIP Issues of QoS and Reliability Mobile VoIP services provided by operators without their own network/infrastructure are provided on a best effort basis only Dependence of Mobile VoIP availability of service upon factors such as strength of mobile signal reception, roaming policies, mobile internet services and third party service providers OPPORTUNITIES New revenue opportunities and greater choice of service and communication features Advancing the already developed Internet Model and Mobile VoIP communication by establishing new standards Interoperability and combination of cellular and WLAN Integration of various other value added services offered by upcoming technological advances in the Mobile Internet and VoIP framework Enhanced innovative potential through convergence of mobile services, internet, VoIP and technology THREATS Resistance by incumbents and established operators, which see Mobile VoIP as a threat to their established PSTN/Mobile revenues Regulatory uncertainty and lack of commonly accepted legislative framework VoIP spam or SPIT (Spam over Internet Telephony) Mobile Phone fraud known as Vishing Challenger actors such as virtual VoIP operators and third party client providers Lack of a consistent experience of service and quality across different providers Consumers’ lack of trust mainly because of insufficient protection of their communication content

ADAMANTIUM on Mobile VoIP SWOT Adamantium add-ons to STRENGTHS Existing business models add quality aspects in their value chain and become QoS and PQoS aware Higher consumer satisfaction as a result of improved quality of services Innovative services (in which higher quality is achieved) attract new consumers and increase levels of loyalty among existing ones Achieved economies of scale for mobile operators are reinforced by innovative technologies New services and pricing packages are offered by mobile operators and market competition becomes healthier Optimized quality of experience and service Adamantium improvements to WEAKNESSES Major issues of QoS and Reliability are overcome Improved QoS form a new basis for Internet Mobile marketing development Well established mobile operators are becoming interested in offering quality improved and reliable mobile VoIP services Improved mobile VoIP services offered by more operators will increase demand for VoIP-enabled mobile devices leading the high cost of these devices to fall Adamantium add-ons to OPPORTUNITIES New revenue opportunities and greater choice of service based on quality and reliability New QoS standards are set New market dynamics and potential for the creation of new marketing processes Opportunities for increased market penetration and new market targets/segments Modification of the 4Ps (Product, Price, Promotion, Place) of the offered services leads to new market opportunities Flexibility of pricing packages leads to increased competition which benefits the end consumer ADAMANTIUM improvements to THREATS Established operators will view Mobile VoIP as an opportunity to satisfy market demand for a new, reliable and lower cost voice communication service New improved quality standards will create a consistent base for experience of service and quality across different mobile operators Increase in consumers trust related to quality and reliability of VoIP service over mobile

Mobile IPTV SWOT STRENGTHS Innovative mobile service that reinforces mobile operator market position Convenience of live streaming and/or VoD when on the move Provision of a service even at places where landlines (communication, power) do not exist Key Market Players involved are ready to exploit new mobile services / products Mobile users are becoming more and more familiar with audio visual services and ready to pay for content and QoS Market Players in the mobile business framework are willing to provide value to services and customers New services lead to the creation of new pricing models which  drive the content consumption increase Increase in the sales of mobile devices with Internet/3G capability Mobile IPTV attracts new consumers and increase levels of loyalty Filling idle time while on move WEAKNESSES Service too complex for some mobile users to use or configure Cost for using services such as mobile IPTV is still high High cost of mobile devices supporting mobile IPTV Not satisfactory QoS for mobile IPTV Mobile device characteristics (size, screen, analysis, keypad) and drawbacks High dependence on quality of mobile network and reception conditions per location Recession/debt has slowed investment and has influenced consumers spending and habits The fragmented market of mobile services, devices and accessories Quality of delivery often gets squeezed by Content and Service priorities Non concrete and standardized mobile IPTV business models Usability of services, content and applications still an issue Standards issues still not fully addressed Limited access to investment funds for such innovative services OPPORTUNITIES New business models will drive growth in mobile communication and IPTV markets Investments to new innovative services (eg mobile IPTV) Open market for new entries and players willing to use edge tech Mobile multimedia content (Live, VoD) becomes a demand from consumers Technology/industry/quality push in place More sophisticated mobile devices enabling content playing Diversification opportunity for device manufacturers Standardization activities and security issues are promoted Mobile entertainment features are becoming the future of communications Facilitating customers access to content Consumption of content is growing THREATS New business roles and models may restrict some actors or affect existing market dynamics Content owners (records / media firms) are skeptical in adopting new business models Abuse of service and content Security and protection issues are slowing market exploitation Consumers’ actual needs which narrow down the type/variety of the content actually demanded (eg high interest only for live sport events, news) drives down operators’ interest for further investment in such technologies High dependence on mobile operators’ services/technology/ infrastructure and features of mobile devices Universal Service is still not a reality for a majority of consumers

ADAMANTIUM on Mobile IPTV SWOT Adamantium add-ons to STRENGTHS Existing mobile IPTV business models add quality aspects in their value chain and offered service becoming QoS and PQoS aware QoS and PQoS aware mobile IPTV service helps mobile operators to achieve economies of scale Higher consumer satisfaction as a result of improved QoS Optimized quality of experience and service More marketers, retailers and publishers are recognizing need for mobile presence and more sophisticated mobile devices Promoting the increase in sales of mobile devices with IPTV enabled features Improving financial ratios like ROI for mobile operators Enhanced personal viewing experience Adamantium improvements to WEAKNESSES Major issues of QoS for mobile IPTV are overcome Improved QoS form a new basis for Mobile multimedia marketing Improved mobile IPTV services offered by more operators will increase demand for IPTV-enabled mobile devices leading the high cost of these devices to fall Mobile IPTV service demand increases and existing business models are becoming more concrete and standardized Adamantium add-ons to OPPORTUNITIES New rich content along with QoS will increase consumer’s trust-satisfaction their mobile operators Improved entertainment methods lead to new business models and revenues Mobile operators become interested in offering quality improved mobile IPTV services leading to investment increases New revenue opportunities and greater choice of service based on quality Increased customer recognition of value Flexibility of pricing packages leads to increased competition which is in favor to the end consumer Improved financial indicators/ratios will lead to more investment initiatives Reliability and QoS standards are set New potential for mobile marketing and advertising with high and reliable QoS ADAMANTIUM improvements to THREATS Increase in consumers trust related to quality and reliability of IPTV service over mobile will raise demand for such services and the need for convergence of services, technology, infrastructure and products among mobile operators, content providers and mobile devices manufactures will be achieved Established mobile operators will view Mobile IPTV as an opportunity to invest and satisfy market demand for a new, reliable and lower cost type of multimedia entertainment while user being on move Improved standards and services will create a consistent base for experience of service and quality across different mobile operators.

ADAMANTIUM BM Evaluation Evaluation of proposed Business Model STOF framework with four domains Service Technology Organizational Financial Each domain Interacts with others Is affected by external factors market dynamics, technological advancements, regulatory framework

STOF Analysis Analysis of ADAMANTIUM Business Model based on STOF model and dynamics Externally (influences by external forces) Internally (four domains analysis) Spotting profitable parameters in each internal domain under positive external conditions, then the evaluation is proved to be successful, since all the parties will benefit from the specific business model

STOF: External Analysis Technological drivers for ADAMANTIUM VoIP and IPTV Innovative mobile communication advances and technologically enhanced mobile devices (Positive) An optimization in network resources allocation. (Positive) An increased ability to process user feedback via ADAMANTIUM developed. (Positive) Market-related drivers and conditions Growing usage of mobile services (Positive) Growing market demand for mobile VoIP and IPTV (Positive) Convergence of voice, internet, mobile services, information and TV industry leads to lower prices and joint-ventures, reassuring viability of various players (Positive) Regulatory conditions Regulatory climate in telecom sector has changed. Distinctive regulations between different services platforms are gradually being removed, helping the creation of synergies. (Positive)

STOF: Internal Analysis Service Domain Many mobile operators position VoIP & IPTV as services to be highly profitable in next years Mobile operators expect to take advantage of their expertise and of consumer loyalty in mobile market Bundling these services with other already widely used mobile services Portfolio focusing on exclusivity or on a wide range of niche markets Offering more value added services with higher QoS as proposed by ADAMANTIUM Technology Domain ADAMANTIUM results provide necessary supporting technological aspects for the success of the new PQoS-aware services IMS signaling and registration capabilities

STOF: Internal Analysis Organization Domain Key actors in the value network chain of mobile VoIP and IPTV services are considered telecom/mobile operators content providers telecom equipment middleware providers Advertisers consumers Each player can identify profitable actions within the proposed ADAMANTIUM business model Financial Domain See next slides

Financial Analysis Assumptions Initial cost of investment: 200 K€ Charge of VoIP/IPTV mobile services on duration of usage (not per data volume) Well established operator (Greek Mobile Operator, GMO) IMS and VoIP and IPTV Services infrastructure available Mobile subscribers with enabled 3G+ services taken into account for financial analysis ADAMANTIUM functionality will be considered as a feature that is included in the already installed policy node of the mobile operator Initial cost of investment: 200 K€ License: 50 K€ (CAPEX) Integration and training services: 150 K€ (CAPEX) Hardware: 0 € (feature included in existing policy node)

Financial Figures Financial figures of Greek Data Mobile Market 2007 2008 2009 2010 2011 2012 2013 Data Revenues (M€) in Greek Mobile Operators 48 116 198 319 431 545 625 GMO Data Revenue Share 45% GMO Data Revenue (M€) 21,6 52,2 89,1 143,6 194 245,3 281,3 GMO IPTV and VoIp Services Revenue Share 20% (3) GMO IPTV and VoIp Services Revenue (M€) 4,3 10,4 17,8 28,7 38,8 49,1 56,3

Analysis of different cases Two cases of different strategies dealing with aspects of ADAMANTIUM to be offered by the mobile operator Case 1 Offered to all the VoIP and IPTV service users Without any extra cost Combined with the already existing subscription packages for 3G+ services Case 2 Offered as a new separate package (premium package of ADAMANTIUM VoIP and IPTV services) Following a different pricing strategy compared to the normal packages of VoIP and IPTV services Financial efficiency (revenues and profitability) of these cases are evaluated in three scenarios Optimistic / Normal / Pessimistic

Case 1. Optimistic Scenario 4 Year period Y1 Y2 Y3 Y4 Initial Investment Cost (CAPEX) 200,000 € - Marketing/ Promotion Cost 100,000 € 90,000 € 80,000 € 70,000 € Maintenance Cost (OPEX) 25,000 € 15,000 € ADAMANTIUM DEVELOPMENT TOTAL COST 325,000 € 105,000 € 95,000 € 85,000 € Forecasted Average Annual Revenue (Optimistic) 28,710,000 € 38,790,000 € 49,050,000 € 56,250,000 € Annual ADAMANTIUM Revenues additional Increase in % 0.5 % 1% 1.5% 2% Annual ADAMANTIUM additional Revenues (in Euro) 143,550 € 387,900 € 735,750 € 1,125,000€ Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows 1,125,000 € Annual ADAMANTIUM CASH FLOW -181,450 € 282,900 € 640,750 € 1,040,000 € Cumulative Annual Cash Flows 101,450 € 742,200 € 1,782,200 € NPV= 1,119,127.82 € IRR= 90% Pay Back Time = 1.64 Years Very promising and Profitable investment

ADAMANTIUM investment Case 1. Normal Scenario 4 Year period Y1 Y2 Y3 Y4 Initial Investment Cost (CAPEX) 200,000 € - Marketing/ Promotion Cost 100,000 € 90,000 € 80,000 € 70,000 € Maintenance Cost (OPEX) 25,000 € 15,000 € ADAMANTIUM DEVELOPMENT TOTAL COST 325,000 € 105,000 € 95,000 € 85,000 € Forecasted Average Annual Revenue (Normal) 28,710,000 € 32,500,000 € 37,500,000 € 42,480,000 € Annual ADAMANTIUM Revenues additional Increase in % 0.5 % 0.5% 1.0% Annual ADAMANTIUM additional Revenues (in Euro) 143,550 € 162,500 € 375,000 € 428,800€ Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows 162,500 € 375,000 € 424,800 € Annual ADAMANTIUM CASH FLOW -181,450 € 57,500 € 280,000 € 339,800 € Cumulative Annual Cash Flows -123,950 € 156,050 € 495,850 € NPV= 268,615.25 € IRR= 40% Pay Back Time = 2.44 Years Attractiveness of ADAMANTIUM investment

Case 1. Pessimistic Scenario 4 Year period 5th year Y1 Y2 Y3 Y4 Y5 Initial Investment Cost (CAPEX) 200,000 € - Marketing/ Promotion Cost 100,000 € 90,000 € 80,000 € 70,000 € 50,000 € Maintenance Cost (OPEX) 25,000 € 15,000 € ADAMANTIUM DEVELOP. TOTAL COST 325,000 € 105,000 € 95,000 € 85,000 € 65,000 € Forecasted Average Annual Revenue (Pessimistic) 28,710 K€ Annual ADAMANTIUM Revenues additional Increase in % 0,5 % Annual ADAMANTIUM additional Revenues (in Euro) 143.550 € Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows 143,550 € Annual ADAM. CASH FLOW -181,450 € 38,000 € 48,550 € 58,550 € 78,550 € Cumulative Annual Cash Flows -143,450 € -94,900 € -36,350 € 42,200 € For the 4-year period NPV= -78,752.97 € IRR= - 5% Pay Back Time = on 5th Y For the 5-year period NPV= -34,413.55 € IRR= 5% Pay Back Time = 4.46 Y Investment attractive in a 5-year period even under most pessimistic conditions

Case 2. Optimistic Scenario 4 Year period Y1 Y2 Y3 Y4 Initial Investment Cost (CAPEX) 200,000 € - Marketing/ Promotion Cost 100,000 € 90,000 € 80,000 € 70,000 € Maintenance Cost (OPEX) 25,000 € 15,000 € ADAMANTIUM DEVELOPMENT TOTAL COST 325,000 € 105,000 € 95,000 € 85,000 € Forecasted Annual ADAMANTIUM Revenues (in Euro) from the Premium package 150,000 € 250,000 € 450,000 € 700,000 € Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows Annual ADAMANTIUM CASH FLOW -175,000 € 145,000 € 355,000 € 615,000 € Cumulative Annual Cash Flows -30,000 € 940,000 € NPV= 561,789.43 € IRR= 61% Pay Back Time = 2.08 Years Attractiveness of ADAMANTIUM investment

ADAMANTIUM investment Case 2. Normal Scenario 4 Year period Y1 Y2 Y3 Y4 Initial Investment Cost (CAPEX) 200,000 € - Marketing/ Promotion Cost 100,000 € 90,000 € 80,000 € 70,000 € Maintenance Cost (OPEX) 25,000 € 15,000 € ADAMANTIUM DEVELOPMENT TOTAL COST 325,000 € 105,000 € 95,000 € 85,000 € Forecasted Annual ADAMANTIUM Revenues (in Euro) from the Premium package 150,000 € 250,000 € 400,000 € Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows 150,000 € 250,000 € 400,000 € Annual ADAMANTIUM CASH FLOW -225,000 € 45,000 € 155,000 € 315,000 € Cumulative Annual Cash Flows -180,000 € -25,000 € 290,000 € NPV= 122,456.55 € IRR= 24% Pay Back Time = 3.07 Years Attractiveness of ADAMANTIUM investment

Case 2. Pessimistic Scenario 4 Year period 5th year Y1 Y2 Y3 Y4 Y5 Initial Investment Cost (CAPEX) 200,000 € - Marketing/ Promotion Cost 100,000 € 90,000 € 80,000 € 70,000 € 50,000 € Maintenance Cost (OPEX) 25,000 € 15,000 € ADAMANTIUM DEVELOP. TOTAL COST 325,000 € 105,000 € 95,000 € 85,000 € 65,000 € Forecasted Annual ADAMANTIUM Revenues (in Euro) from the Premium package (Pessimistic) 150,000 € 250,000 € 300,000 € Annual ADAMANTIUM Outflows Annual ADAMANTIUM Inflows Annual ADAM. CASH FLOW -275,000 € -5,000 € 55,000 € 165,000 € 235,000 € Cumulative Annual Cash Flows -280,000 € -225,000 € -60,000 € 175,000 € For the 4-year period NPV= -117,871.05 € IRR= - 6% Pay Back Time = on 5th Y For the 5-year period NPV= 14,780.33 € IRR= 11% Pay Back Time = 4.26 Y Investment attractive in a 5-year period even under most pessimistic conditions

Exploitation Plans Rohde & Schwarz (RS) Expected results New functionalities of the DVM protocol analyzer platform Extended SNMP MIB containing all parameters related to qPSNR measurement procedure including setting of independent thresholds for the qPSNR-over-time measurement and for qPSNR histogram New software module that allows a detailed analysis of received IPTV-over- DVB-H services Alarm Filter for user-defined combination of QoS parameters to monitor the related thresholds Expected results Enhancement of usability of DVM protocol analyzer family (and future successors) Estimated additional sales of 4 to 7 M€ Dependent on date of introduction of mobile IPTV services in major European countries and the US

Exploitation Plans Thomson Grass Valley/Thomson Telecom (TGV and TT) Enhance of the PQoS of IPTV service is a key issue for Thomson Grass Valley Acquired knowledge and know-how to improve IPTV and MRF servers by interfacing them to the future new IMS components (MCMS) in charge of PQoS Positioning: Improve Thomson IPTV solution, used by telecom operators to improve IPTV QoS offer Vodafone (VOD) Actual adoption depends on vendors’ technology roadmap Interested in offering optimized services and addressing the challenge of enhancing user perception, especially in the view of network evolution towards LTE Exploitation of possibilities offered by the MCMS could be adapted according to specific user categories/profiles and offered subscription packages

Exploitation Plans Ericsson (ERC) Need related to provide adequate PQoS in VoIP and IPTV services in order to Retain customers and increase number of users Add value to already offered services Ericsson portfolio include the SAPC (Service-Aware Policy Controller) A telecom grade policy manager, based on 3GPP standards Full interoperability with GGSNs, Packet Inspection or Application Functions (AF) Part of the Service Aware Charging & Control solution ADAMANTIUM results would be integrated with the SAPC module Exploitation activities planned Project presentations to Packet Core Units, SAPC and GGSN Product Lines, working on activities related to QoS and Packet core Study, analyze and define a Business Solution based on the ADAMANTIUM result Explain customers how ADAMANTIUM can be integrated in Ericsson solutions

Exploitation Plans Viotech (VIO) ADAMANTIUM streaming technology represents an important asset to VIOTECH’s exploitation strategy The V-HOME product range End-Users to access audio-visual content from different terminals (PCs, TV sets, etc.) Commercialized through Triple-Play or genuine operators, and directly to End-Users ADAMANTIUM results can enhance the IPTV solution capabilities through a dynamic adaptation of multimedia content The resulting Exploitation Plan will be brought forward Packaging of configured offers: V-HOME with Multi-Play functionalities for services provision within home platform, and the V-HOME Away solution for both residential and moving platforms, with dedicated market pricing strategies Targeted communication and promotion campaigns to foster buzz and notoriety throughout 2011 and 2012 Manufacturing in hardware series, primarily in commercial territories without major Triple-Play-similar offerings

Overall Conclusions The document includes for VoIP and IPTV services Market description and foreseen evolution Business idea and business models Possible business models SWOT and STOF analysis “Delivering value is vital for success”: End users of converged digital services will only use, and pay for services which they perceive deliver value to them Business and market analysis pinpointed different future possibilities and market conditions for market and business exploitation of ADAMANTIUM results Two cases have been analyzed In the optimistic and normal cases in both of them, investments for ADAMANTIUM are attractive in a 4-year period In the pessimistic scenario, investments are attractive in a 5-year period

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