The New Incumbents: Anti-trust in the Digital Economy

www.informatandm.com The New Incumbents: June 2012 @cmendler © All rights reserved

THE NEW INCUMBENTS Anti-trust in the digital economy

Camille Mendler

Principal Analyst

Informa Telecoms & Media

June 2012


2012: A year of anniversaries

200th AnniversaryBirth of

Charles Dickens

60th AnniversaryQueen Elizabeth II’s coronation

100th AnniversarySinking of the Titanic


Here’s onethat’s been forgotten

30th AnniversaryModification of Final Judgment


A landmarkanti-trustsettlement

Leads to break up ofThe Bell System

By 1984, seven RBOCs arise

Picture: Flickr/Hiddenpower


Then, AT&T’s incumbencywas deemedharmful AT&T’s

vertically integrated

organizationhad

stifled competition

(notably in long-distance communications and telecom equipment)

Picture: Flickr/Jenkinslawlibrary


Now, anti-trustfocuses elsewhere

“Accumulating data about you

isn't just a strange hobby

for these corporations.

It's their whole business model.

And you are not their client. You are their product.”

U.S. Senator Al FrankenSpeech to the American Bar Association

March 29, 2012


While telcos decidewhat’s core

O&M

R&D

Access

Streamliningactivities Over

the Top

Brands

Spectrum

Cloud

M2M

Billing

Payments

Analytics

Verticals

Wholesale

Picture: Flickr/roger.karlsson

Customers


Non-telcosare collectingdigital assets

World leader

digital search

(in 1982)World leader

telecom equipment

World’s largest

private company

Picture: Flickr/dsearls

Let’s compare ‘incumbents’ past – and present


1982

Bell Labs(now Alcatel-Lucent)

Inventions includeUNIX, C++

World’s 5th largestsoftware company;owns AT&T spinoff

Telcordia

Ericsson Labs and acquisitions

via Motorola Mobilityalone

20,000 30,000 24,500

Examples: Google search, Android, BigQuery, Chrome,

Google+, GoogleApps,Google Talk

Western Electricequipment division

World’s largestmobile network equipment

vendor

World’s 4th largest server manufacturer

Innovationarsenals

Owned

asset

Related

asset

No

asset

Patents

Softwareand services

Hardware


Spectrum

Technicolor Broadcast servicesdivision

O3b satellite system (launching 2013)

Metro Wi-Fi networks in U.S. and Nairobi, Kenya

Fiber

Wi-Fi

Satellite

Metro, long-distance, sub-sea fiber assets

Builds, operatesfiber networks

World’s 1st commssatellite, Telstar 1

Bought Wi-Fi vendor BelAir

U.S white space

spectrum database

administrators(approval pending)

Networkinfrastructure

Owned

asset

Related

asset

No

asset

Developedoptical laser

1982

Satellite backhaulservices

Builds, operatesmobile networks


Devices

Google Wallet

AdWords, AdSense

Content

Advertising

Payment

Examples : YouTube, Google TV, Google Earth, Google Play, StreetView

Content distributionservices with Akamai

Admarket platform

Consumptionenablers

Owned

asset

Related

asset

No

asset

IPX multimedia brokering & Ericsson

Wallet payment system

Western Electric, American Bell

LG-Ericsson, ST-Ericsson, M2MDevice Connection

Platform

Motorola Mobility

$

1982


Less is nowmore

$1,167,339$156,538* $278,210

Employees

Revenueper employee

*adjusted for inflation

1,040,000

32,467104,525

1982


1982*

$131billion

$162.8billion

$27.5billion

$30.2billion

$192billion

$37.9billion

10% 9.8% 18.8%

Who’s most successful?

*adjusted for inflation

Revenue

Market cap

ROIC


World populationtouched

1 billion900 millionsubscribers via managed networks unique visitors per month

(also 4 million enterprises on GoogleApps)

108 million

* in 1982

14.3%12.8%

2.6%*


In 1982, AT&Twon a sweetenerto break up The Personal Computer

‘Man’ of Year for 1982

A move into computers*

A new age of Personal Communicationwas dawning

* It failed.


Now, personalcommunicationis the anti-trustissue

European Union

United States

Argentina

UK

South Korea

India

Search, advertising

Online advertising

Search, StreetView

Wi-Fi ‘slurping’

Search, advertising

Search,Android

StreetViewWi-Fi ‘slurping’


Vertical integrationisn’t evil

What matters is how

it’s managed

Picture: Flickr/Leo Reynolds

The world’s most valuable

companyhas a

controlledecosystem

It’s also fighting an anti-trust lawsuitalleging price fixing

of e-books


The digital economyis expanding

New privacy

challenges

As machines join the ‘conversation’

in a post-PC world


Differenttastesare evident

Bonappétit!

Network

infrastructure

Digital

content

Personal

devices

Telcos becomemore virtual

Internet firms become

more physical

Picture: Flickr/free range jace

Device makersoffer virtual goods


Can regulatorskeep up?

Today’s anti-trust

challenges

1. Need for velocity33 years to settle the AT&T-DoJ suit; 11 years for Microsoft-EU suit

2. Wider scopeDiversity of virtual assets (eg: new gTLDs)

3. Defining abuseUnaligned policies (eg: EU vs US)

4. Who to protectConsumers and/or competitive firms

2012 will be as important for anti-trust as 1982

Picture: Flickr/dgray_xplane


Marketobservations

• Value creationConcentrated in social, mobile & virtual assets

• Value enablersPhysical assets remain critical

• Regulatory bias?Virtual asset focus for Internet firmsPhysical asset focus for telcos & hardware firms

• Stakeholder rolesBlurring in a multi channel, multi platform world

www.informatandm.com The New Incumbents: June 2012 @cmendler © All rights reserved 22

Contact

Camille Mendler

Principal Analyst, Informa Telecoms & Media

[email protected]

+44 7766 13 15 28

Twitter: @cmendler

mailto:[email protected]

http://www.twitter.com/cmendler

Technology

The New Incumbents: Anti-trust in the Digital Economy