New Senza Fili Verticals

Monica PaoliniSenza Fili Consulting

M2M Forum 2009 Milano, April 6, 2009

Bringing Wireless Broadband to Vertical Markets

Presentation to the Analyst Meeting at the M2M Forum 2009

| 2 | © Senza Fili Consulting LLC

About Senza Fili Consulting

April 6, 2009

Technologyfocus

• Mobile and fixed wireless broadband technologies• VoIP, convergence, mobile broadband applications • Network infrastructure and devices

Approach• Bridge between technologies and services• Quantitative analysis• International perspective

Services

• Business development and strategy • Business plans and financial modeling • RFPs, procurement and due diligence• Market analysis and forecast


Why vertical markets?

April 10 2009

• Stagnant ARPU (even taking into account growing data revenues)

• Wireless operators need to expand to new areas

Retail segment is approaching saturation in

developed markets

• New market currently underserved• Market opportunity with very low risk of cannibalization

Vertical applications allow to connect the entire

environment, not just people

• Low churn and customer acquisition• Long contract• High number of connections

Vertical applications bring a new revenue stream to

operators

• Better functionality• Reduction in operational costs

Enterprises see the benefit of wireless connectivity


Why now?

April 10, 2009

Growth in wireless broadband availability

• 3G, WiMAX, LTE• Better performance and capacity to meet vertical applications requirements

• Cost‐effective deployments lead to affordable services for the enterprise

Growth in demand for wireless connectivity

• Enterprise is looking at multiple wireless technologies

• Value proposition of wireless connectivity becoming compelling

• Improved functionality• Regulatory push for wireless connectivity for some services

Many vertical sectors are not affected by the financial downturn—and some stand to benefit from financial stimulus packages


What are vertical services?

• They cannot be purchased by individuals through retail channels

• They require:

– a contract between an operator and a company or public entity

– support for one or more vertical‐specific applications

– a custom device

• They exclude:

– Standard voice and data contract with enterprises

– Blackberry enterprise users

– CE devices like the Kindle

– In‐vehicle modules for cars targeted at the general market

April 10, 2009

Source: Senza Fili Consulting, 2008


Why haven’t cellular operators pursued vertical markets?

• Vertical applications have been so far considered niche markets – Market is too small, 1 to 2% of connections

• Understanding of vertical market requirements requires effort

• Limited capacity excludes high‐bandwidth applications

• Most profits come from voice services– Voice performance needs to be preserved

– Traffic from vertical applications may create network congestion

April 10, 2009

This is changing as cellular operators are under increased pressure to increase revenues

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http://download.intel.com/pressroom/kits/MobileAssistant/MobileAssistant_lrg.jpg


Aren’t vertical applications a niche market?

• Vertical markets are by definition fragmented

– Each enterprise vertical and each application represents a limited opportunity

• When considered together, vertical services represent a huge opportunity for operators

April 10, 2009


Bringing Wireless Broadband to Vertical Markets A high‐margin revenue stream for operators

and compelling services for enterprises

April 10, 2009

A new report from Senza Fili Consulting

• Vehicle telematics and mobile workforce are applications better suited to wireless broadband– High traffic requirements

– Support for mobility and wide coverage needed

• Service revenues are higher than for applications like M2M

– Attractive for operators

• Attractive business case for enterprise accelerates adoption of these applications


Vertical market devices and traffic requirements

April 10, 2009

Device Traffic

M2M

Vehicle

Hum

an

Uplink

Dow

nlink

Volume

Telemetry

Vehicle telematics

Financial transactions

Building monitoring

Surveillance

Content delivery

Mobile workforce

High, Mid, Low


What’s the difference between retail and enterprise services?

April 10, 2009

Consumer retail services Vertical services

High churn Low churn

High customer acquisition costs Low acquisition costs

High ARPU Some M2M applications have very low ARPC

Short‐term contracts Long‐term contracts (10 years is common)

Individual or family contracts High number of connections per contract

Growing traffic with few heavy users Predictable traffic

Mass market Fragmented markets

Best efforts Strict performance requirements

Subsidized devices, generally purchased directly from operator

Devices paid by customer (and may be purchased directly from manufacturer)


Why are WiMAX and LTE well‐positioned to support vertical services?

• Carrier‐grade reliability makes enterprise comfortable

• IP‐based core facilitates integration for enterprise

• WiMAX and LTE provide mobility support

– Required by in‐vehicle telematics and mobile workforce applications

• Enterprise needs Quality of Service (QoS) and traffic prioritization to move to public networks

• WiMAX and LTE provide better performance over private networks at a lower cost

• Low latency enables operators to deploy voice‐ and video‐based applications

• A wide range of affordable devices will expand the range of M2M applications that can be cost‐effectively rolled out

April 10, 2009


How can operators address vertical markets?

• Identify applications relevant to the customers that the operator is willing to support

• Understand the role that the application will play within the customer company

• Define the requirements of applications in terms of:

– Traffic generated

– Installation requirements

– Interaction with existing telecom infrastructure owned by vertical customer

– Devices needed

– Partnerships that are needed with system integrators, application developers, vendors

• Develop a flexible pricing approach and Service Level Agreements (SLAs)

April 10, 2009


How will the enterprise benefit from wireless connectivity?

• Monitor fixed and mobile assets in real time

• Keep constantly in touch with remote and mobile staff, using voice, video, and data applications

• Integrate wireless devices within existing and planned IP‐based applications

• Host multiple applications on the same device– E.g., a single modem may connect both an ATM machine and a

camera that monitors it to the network

• Bring infrastructure and devices to temporary or seasonal locations

April 10, 2009


What business models will prevail?

April 10, 2009

‐ A direct business model requires vertical‐specific expertise and focused sales efforts from operator

‐ Ideal for high priority applications‐ An indirect business model allows operators to address more markets through an MVNO that has expertise of the vertical segment

‐ Device vendors, application developers and system integrators may act as MVNOs as well

‐ A mix of business models is likely to be common for operators


Should the enterprise use public networks?

April 10, 2009

Operate own telecom infrastructure Rely on wireless operator

Expensive and difficult to access spectrum Operator is responsible for spectrum availability

Enterprise selects coverage areas and equipment

Coverage areas and capacity depend on wireless operator’s plans

Exclusive use of network infrastructure and control over access

Access shared with other vertical and retail users

Inefficient use of spectrum and network infrastructure

Performance may degrade rapidly at peaktime if QoS is not used

Single network (no redundancy option) Access to multiple networks, if needed

Proprietary equipment prevalent Standard‐based solutions

Operating network may be distracting or inefficient

Dependence on wireless operator for network to provide reliable performance


Vertical applications for utilities

• Metering

• Asset management

• Surveillance

• Mobile workforce

• Temporary networks

April 10, 2009


Requirements change for each application(even within the same segment, utilities)

April 10, 2009


What do utilities need?

• High throughput– GIS‐based applications require transmission of large files.

• Low latency and advanced multimedia capabilities– Mobile workforce

• QoS and advanced traffic management capabilities– E.g. deep packet inspection, virtual networks

• Secure access to protect the utilities’ communications, and, by extension, the safety of their staff and customers.

• IP‐based connectivity to facilitate integration of applications with the core IT functions within the utility. – No need for SIM cards

• Handoffs to support mobility access, mostly for in‐vehicle and mobile workforce applications.

April 10, 2009


In conclusion: emerging trends

• Vertical applications are going mainstream– Increasingly important source of revenue for operators

– May be critical to profitability for greenfield operators

• Especially WiMAX operators

• Especially WiMAX operators in the 3.5 GHz

• Equipment price points and functionality meet vertical players expectations– Business case can be easily made for operators and vertical

players alike

• By definition, vertical markets are fragmented– Requirements vary greatly across segments and applications

– Operators need to carefully select the best opportunities

April 10, 2009


Senza Fili Consulting+1 (425) 657 4991

www.senzafiliconsulting.commonica.paolini@senzafiliconsulting.com

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