The Dollars And Sense Of Connectivity

THE DOLLARS ND A SENSE OF CONNECTIVITY MARCH 2016 OGILVYRED THINK SERIES VOLUME 2 1

FORBABY BOOMERS THE WORD “TELECOMMUNICATIONS” MAY CONJURE LANDLINES, ANALOG DESK SETS, AND POSSIBLY EVEN A SHOE PHONE. Meanwhile, Gens X, Y, and Z probably don’t give much thought to the word, if any at all. The difference in perspective exists for many reasons, but the primary one is the fundamental shift in the definition, scope, and impact of telecommunications. This report will explore the brand and marketing opportunities presented by that shift and cite potential scenarios for leveraging it. 2

MOBILE CONNECTIVITY’S EXPLOSIVE GROWTH IN THE PAST 15 YEARS HAS MADE IT AKIN TO A UTILITY, LIKE or WATER ENERGY. Telecommunications corporations have essentially become utility companies, providing something that people need rather than something they simply want for entertainment, or to connect with family and friends, perform transactions, and do their jobs on the go. With this in mind, it’s interesting to note that access to mobile devices worldwide is growing much faster than access to many of life’s bare essentials. 3

DIGITAL TRANSFORMATION IN ACTION Improved water Mobile phone Electricity Internet Secondary school Mobile broadband Improved sanitation 100 ON THE ONE HAND, that’s a sobering trend, dictated by the local 80 availability and quality of internet service, not to mention the would- 60 be customer’s financial wherewithal (what devices and service can they afford?). At the same time, access 40 to baseline necessities (clean water, % of the population sanitation, energy) tends to rise with the tide of increased mobile 20 connectivity. This is illustrated well in places such as India, China, 0 Russia, and sub-Saharan Africa, where mobile service and access is growing rapidly, but not as well in 1990 1995 2000 2005 2010 2015 poorer developing nations. Source: World Development Report 2016: Digital Dividends, The World Bank. 4

UNIQUE SUBSCRIBERS BY REGION THERE’S LITTLE DOUBT (Millions) THAT MOBILE TECHNOLOGY CAN BE A FORCE Asia Pacific FOR GOOD — AND NO DOUBT WHATSOEVER Commonwealth of Independent States Europe THAT IT IS AN ECONOMIC FORCE. Latin America Middle East & North Africa By 2020, mobile technology will reach an North America Sub-Saharan Africa 4,596 estimated value of $4 trillion worldwide, 4,336 4,470 which represents more than 4 percent of the 4,191 4,020 global Gross Domestic Product. Two factors 3,838 3,636 are driving the expected growth, in a simple 3,463 supply-and-demand equation: increased 3,210 3,013 mobile access among people who have 2,798 never been connected will produce more 2,569 2,346 (paying) subscribers to existing services, and the drive to create more services to meet the rising demand. “Access to the Internet is a fundamental challenge of our time.” - Mark Zuckerberg, Founder of Facebook 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 5 Source: GSMA: The Mobile Economy, 2015

IN SHORT, mobile connectivity can This produces yet another provide the means to fulfill fundamental needs, like potential economic driver: The healthcare, education, and social interaction, as well network of connection points is as to utilize advanced services such as financial growing exponentially, and with support, business information, real-time navigation, it the demand for more data and banking and commercial transactions. But giving bandwidth and IP addresses, as more people the ability to live more efficiently and well as lower latency. increase their personal wealth is just part of mobile connectivity’s promise. The growth of machine-to- machine (M2M) communication has created billions of new connection points among the internet of things (IoT), from smart-home devices (thermostats, fridges, televisions, etc.), to connected cars and agricultural machinery. More connection points means more interactions, which in turn creates more brand and marketing opportunities. 6

GLOBAL MOBILE DATA TRAFFIC (Per month, PB) 24,314 16,140 10,666 6,765 4,175 2,523 1,480 2013 2014 2015 2016 2017 2018 2019 Source: Cisco VNI Global Mobile Data Traffic Forecase Update, 2015-2020. 7

While continuing to be growth. This is especially profitable businesses, carriers true because many of the face an increasing challenge new users (that is, the people to financially support (e.g. and businesses creating the through investments) the demand) that carriers would increasing demand for data and like to bring online are low- voice services. Infrastructure income. Carriers rely on a costs in developing markets certain average revenue per are dropping, thanks to the user (ARPU) not only to make development of more efficient a profit but also to invest in hardware. But that’s just one infrastructure to ensure growth. part of the economic equation, and carriers now face a conundrum. The increase in demand creates more Things start to unravel if connection points and data, users are ultimately unable or which in turn require more unwilling pay for the increase infrastructure. The fundamental in connections and data problem is that the increase in bandwidth at the carriers’ demand doesn’t guarantee the required rate. returns necessary to justify the investment in infrastructure 8

While the benefits of connectivity are well documented, actual access, together with the desired bandwidth and data for mobile devices, is restricted by a diverse set of factors. They range in scale from personal (an individual’s ability to pay for service) to infrastructure (insufficient reach and bandwidth, and regulatory constrictions). A complex network of industry players has built the infrastructure to enable wide- spread access as well as the required bandwidth. At the core of this network sit mobile carriers, or Mobile Network Operators (MNOs), that typically own the end-consumer relationship for businesses and individuals. 9

For non-telco brands and marketers, everything noted to this point provides important context for their ultimate goal: And so, marketers should not to engage with customers on their mobile simply apply legacy advertising devices. However, the marketing industry mechanics to a fundamentally still struggles with finding the right value new engagement ecosystem. New offer to a customer, value which would make strategies are required to leverage consumers engage with a brand. Marketers mobile connections in a more have struggled with developing the right meaningful and effective way. engagement mechanisms for existing users (mobile display ads only take you so far and don’t yet leverage the creative potential that mobile broadband offers). The emergence of a new audience presents an additional challenge, one whose solution is highly unlikely to be found by traditional means. 10

This paper, the second in the REDThink series by OgilvyRED, acts as springboard for companies, vertical markets, and brands, which will directly or indirectly benefit from enhanced connectivity around the world. It will draw a high-level picture of the current ecosystem and its constraints. It will also highlight innovative concepts currently being used to meet the challenge of providing internet accessibility through mobile broadband. We hope to provide thought starters for carriers as well as for marketers on how to think about new ways to create winning propositions that benefit customers, carriers, and other members of the connectivity ecosystem. 11

WHO’S CONNECTED, WHO ISN’T, AT WHAT COST? 1 12

7 BILLION Regardless of which source you believe — the United Nations or the U.S. Census Bureau — the world population stands at about 7 billion. Mobile broadband has emerged as a standard utility in technologically developed markets, but elsewhere it is scarce to nonexistent. 1 13

The latest available research indicates that the number of internet users worldwide grew from 1.6 billion in 2008 to 2.9 billion by the end of 2014. This means that more than 4 billion people — or about 60 percent of the world population — THIS MEANS THAT THE UNIVERSE OF are unconnected. About 10 percent THE INTERNET BREAKS DOWN INTO ROUGHLY to 15 percent of the latter group live in remote and/or badly impoverished places, where internet service simply THREE GROUPS doesn’t exist. O1 People who are connected to Current estimates put 3G coverage at the internet and use its services 5.2 billion people worldwide. However, only 2.5 billion people are connecting O2 People for whom internet service is to the internet. This means that while available but unaffordable (due to another 2.7 billion people may have prohibitive data costs for instance) access, they are not using it. O3 Those who are unconnected 14

THE BITE HOURS WORKED TO PAY India 39.25 A MOBILE PHONE BILL Brazil 15.2 OF MEGABYTES China 13.2 U.S. 12.83 Mobile costs hit poor Turkey 8.79 nations the hardest. As a result, people decline HOURS WORKED TO India 1,240 data plans, and carriers PURCHASE A SMARTPHONE Brazil 355 lack profits to improve China 200 networks. U.S. 76 Turkey 286 % OF SMARTPHONE USERS India 57 Based on Minimum Wage WITH A DATA PLAN Sources: McKinsey, ITU, Nielsen, Brazil 43 Forbes August 2015 China 77 U.S. 96 Turkey 49 15

In developing nations, AFFORDABILITY AND DISCRETIONARY INCOME ARE FUNDAMENTAL DETERMINING FACTORS FOR BEING CONNECTED. Consider the statistics: But even in developed markets, Among the smartphone-dependent the ability to pay for connectivity population of the United States, 51 is neither a given nor factored into percent of users report exceeding household budgets. Consumers their mobile plan’s data allowance; are very conscious of their data among those people, 15 percent say allowances and turn to wifi as they “frequently” tap out of data. often as possible. It’s safe to conclude that restrictive allowances are a significant bottleneck for people who rely heavily on mobile-data usage. About 20 percent of smartphone users say they considered it a financial burden. 16

In many cases the costs are “invisible.” If a user has a contract that charges $60 a month for up to 6GB of data, a 360MB game app costs $3.60 for the download alone. Streaming Netflix for an hour under the same plan, at a medium download rate, costs about $7. The people who complain about the high cost of using a smartphone very self-conscious as to when they are not simply whining. With the use their data plan vs. tapping into widening income gap and major the increasing amount of free wifi carriers increasingly targeting high- options. This situation is projected income customers with plans that to worsen, as more devices per cost $60-plus a month for a single household become connected at the device, a significant portion of the same time that the per-household population in developing markets is cost of connectivity increases. 17

THE BOTTOM LINE IS that the cost of being connected is a significant line item in the household budget -- one that proves prominent on consumers’ minds to the extent that it can potentially be prohibitive to certain segments of the population. 18

WINNERS LOSERS IN THE MOBILE-CONNECTIVITY ECOSYSTEM 2 19

WHILE MOBILE CONNECTIVITY is in some respects a social equalizer, in many ways it benefits some more than others. To understand this apparent contradiction, it’s helpful to know the three basic components of, or players in, the mobile-connectivity ecosystem: 2 20

O1 Carriers — also called telcos or providers — play the most pivotal INFRASTRUCTURE PROVIDERS, role in the ecosystem. They include AND IN PARTICULAR, such companies as Vodafone, Verizon, Airtel, Claro, Singtel, and CARRIERS. SK Telecom. The carriers’ power (and thus their value) derives from acquiring or licensing access to the infrastructure that connects consumers with providers of services and content. The providers’ primary function is the very thing that enables mobile connectivity. They operate the network and provide the access point for devices and consumers. 21

O2 This diverse group includes services such as entertainment companies PROVIDERS OF (Netflix), finance and payment SERVICES AND services (PayPal), information providers (news outlets, directories, CONTENT. maps, traffic), educational products, ecommerce outlets, OTT messaging or social media platforms. While the majority of interactions of services and content involve actual consumers, there will be a dramatic increase in machine-to-machine (M2M) protocols as more “objects” beyond mobile devices go online (see IoT). To date, content and service providers have not played a key role in providing access; rather, they have simply relied on the connectivity supplied by carriers, to serve consumers. 22

O3 “Consumers” is a bit of a misnomer in this context. For the most part, in CONSUMERS OF the mobile-connectivity ecosystem, SERVICES AND the term applies to individuals, businesses, or government entities CONTENT. that benefit from the services provided. Consumers have paid carriers for baseline connectivity, and occasionally for access to select services, based on the providers’ service model. With the advent and growth of the IoT — essentially, machines connecting to the infrastructure — we expect a dramatic increase in the exchange of data between machines in the IoT to either individuals (this is called an M2P interface) or machines (as mentioned above, this is an M2M connection). 23

CONSUMERS OF SERVICES & CONTENT Carriers, Infrastructure Providers INFRASTRUCTURE CONSUMPTION SERVICES & CONTENT Individual, Business, IoT Education, Health Care, Navigation, Entertainment, Cities, Financial Services, Messaging & Social 24

“Around 400 million people in the last year got a smartphone. If you think that’s a big deal, imagine the impact on that person in the developing world.” THE BENEFITS OF - Eric Schmidt, Executive Chairman, Google MOBILE CONNECTIVITY are multidimensional and things such as the size and well documented on several health of a nation’s economy geographical scales: local, city, (often, as measured by the GDP regional (often, rural versus and per-capita income); literacy, urban), and national. poverty, and employment rates; technological progress; and a The extent of a nation’s mobile variety of socioeconomic and connectivity, and the benefits cultural factors, such as racial arising from that connectivity, and gender equality and access depends on many factors. to healthcare. Figuring into the equation are 25

In developing nations with low connectivity, programs to increase connectivity can show dramatic results. For instance, access to information and transparency about political instability, nutrition, the environment, and living conditions can help predict the outbreak of an infectious disease. A nation’s agricultural production and economy can improve quickly when mobile connectivity gives farmers access to information about such basic things as weather forecasts and commodity prices. Villages and communities that emerge from isolation thanks to mobile connectivity are often able to introduce better health and education programs. 26

In developed nations, the benefits of higher bandwidth may seem more trivial, providing such luxuries as access to video streaming or graphics-and-data–intensive mobile games. Higher bandwidth can also instantly improve productivity in businesses that rely on data-heavy formats. Research by companies such as Google and Huawei estimates that “increasing the internet connectivity by 10 percent in a country increases the GDP by up to 1.4 percent.” 27

Smart cities constitute another focal point of development, with the promise of faster predictive emergency response, more efficient energy management, better traffic control and more effective municipal servicing. 28

HIERARCHY OF CONNECTIVITY NEEDS developed markets high speed, low latenc AUTOMATED LIVING & BUSINESS y BUSINESS INFRASTRUCTURE ENTERTAINMENT EXTENDED INFORMATION ACCESS EDUCATION HEALTHCARE developing markets BASIC PROVISIONS (UTILITIES) basic access 29

At the company or business level, Verizon The many potentially profit-generating benefits predicts that some of the world’s top to a company also include access to a larger corporations could become 10 percent more group of consumers/customers outside of profitable by 2025, if they use IoT products their direct physical reach as larger groups of and solutions intensively. the population connect more frequently. 30

What is the GREATEST CHALLENGE TO THE ECOSYSTEM? 2 31

GLOBAL MOBILE BROADBAND POPULATION COVERAGE If the benefits of greater mobile connectivity and bandwidth are all but 3G 4G guaranteed, it’s fair to ask why the services aren’t universally available. 84% 86% 86% 86% 81% 76% The answer is complicated. To achieve 73% greater coverage and meet increased 66% 63% demand, carriers must invest significantly 60% in infrastructure. They must do so in a 56% 56% highly competitive environment, with new 50% 50% carriers entering the market, questions 43% 44% about consumers’ ability or willingness to 34% 35% pay for the voice and data services, not to mention government regulation and 26% taxation. Despite all of the variables, one 22% 19% thing is for sure: demand is and will continue 11% to increase rapidly, so not investing in the 5% delivery system (spectrum acquisition, 2% 0% 0% hardware and cell sites, 5G infrastructure) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 is simply not an option. Source: The Mobile Economy 2015, GSMA 32

CARRIERS ARE RESPONDING — in some cases, with significant investments. In the U.S., T-Mobile’s recent network upgrades reportedly cost $4 billion. That’s just part of category-wide capital expenditures (CapEx) expected to reach $1.4 trillion globally by 2020. Not surprisingly, there is risk associated with this kind of capital outlay. An analysis of 45 carriers by the telecommunications research firm Ovum published in 2014 found a CapEx increase of 3 percent year-over-year but revenue growth of The low return on investment puts just 0.6 percent. According to Ovum and GSMA, pressure on carriers to find new ways the largest association of mobile carriers in the to increase revenue, which is tricky world, the industry’s compound annual growth in a market that is still developing, rate (CAGR) between 2014 and 2019 will improve highly competitive, and that faces to as much as 2.5 percent. In past years, that increasing costs to comply with new number reached as high as 4 percent. government regulations. 33

TOTAL GLOBAL REVENUES GLOBAL MOBILE OPERATOR CAPEX (US$ BN) (US$ BN) 1,353 1,382 244 250 1,284 1,321 233 236 1,244 233 1,148 1,200 216 229 1,085 1,124 183 198 1,029 161 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: GSMA: The Mobile Economy, 2015 34

In developed markets, carriers are struggling to justify consumer-service pricing. Criticisms include a lack of transparency and a bias toward wealthy users, which invites scrutiny by consumer-advocacy groups. The core financial issue, which we alluded to earlier, is whether investing in new infrastructure will provide sufficient cost savings and revenue enhancement to offset the decline in consumer pricing. For now, the answer appears to be “no.” 35

GLOBAL PROFITABILITY FOR CARRIERS EBITDA Margin According to one report, providers’ total 36.9% cost of operations (TCO) for mobile 36.6% broadband networking is projected 36.4% to fall by a factor of three through the year 2018, while selling prices per GB of data are projected to fall by a factor 34.9% of 10. Increased competition in the marketplace contributes to the falling revenue. The unbundling of long-term 33.5% 33.3% 33.5% service contracts and phone subsidies is driving an increase in churn rates in developed markets. Hence, carriers are increasingly seeking new revenue sources beyond simple data-plan charges. 2008 2009 2010 2011 2012 2013 2014 Q1-Q3 Source: GSMA: The Mobile Economy, 2015 36

The SUPPLY DEMAND EQUATION 2 37

SO, HOW CAN CARRIERS ADDRESS THE MARKET CHALLENGES? Let’s look at sticking points and solutions on both the supply and demand sides. 38

O1 SUPPLY In the mobile market, supply consists primarily of the carriers and their services, as well as the adjacent supplier infrastructure. With lower data rates in developing markets and higher churn rates in developed markets, ARPU is decreasing. 39

CARRIERS IN DEVELOPED MARKETS ARE SEEING AN INCREASE IN DATA CONSUMPTION, which they are seeking to capitalize on companies offer wifi solutions. At the by replacing unlimited data plans with same time, infrastructure sourcing tiered plans. Interestingly, carriers are is becoming more complex and now adding service contingents (e.g. competitive, also due to the entrance free usage of messenger platforms) of new companies to the market. They for additional fees on top of their tiered are offering higher bandwidth with plans to capture incremental revenue. lower latency, and also more readily employing new technologies — satellites In urban areas, however, larger carriers and drones, for example — to introduce are facing competition and a decreased connectivity in developing areas. demand for data services, as new 40

Traditional carriers are also facing competition from significant players, such as Google, that are providing direct-to-consumer data solutions as mobile virtual network operators, or MVNOs. Currently MVNOs are addressing certain segments in the population with specific needs (e.g., low-cost, specific long-distance destination calling etc.). They do not necessarily provide the largest network or best bandwidth. However, more players besides Google with significant market access might be testing their way into this market soon. 41

Regulation and taxation can also be an issue; generally speaking, they vary greatly depending on market and do not support a highly innovative business environment. Faced with slowing revenue growth from voice and text services, carriers are seeking new sources of income through value-added services, or VAS. Over-the-top (OTT) providers, such as Skype, WhatsApp, and Line currently own this competitive environment. Carriers are responding now with a GSMA supported platform called RCS OTT messenger platforms (Rich Communications Services). This platform allows carriers to offer similar services as OTT messaging providers (e.g., image or file sharing and VoIP), but without having to tap into the data allowance of the consumer. The success of this platform is likely going to succeed or fail with the quality of the user experience. 42

O2 DEMAND O1 A significant increase in consumers being connected to voice or voice/ Demand for basic connectivity data services. and increased data is driven by three factors: O2 A significant increase in the number of connected devices in the IoT. O3 New services requiring higher data bandwidth (video and games, for instance) and lower latency (connected cars, for example). 43

VIDEO FUELING STRONG MOBILE DATA GROWTH (PB per month) 24,314 Web/data File sharing Video Audio streaming 16,140 Ericsson predicts mobile data usage will grow more than tenfold by 2021, 10,666 with video streaming accounting for almost 70 percent of traffic. The vast majority of the so-called next billion 6,765 — that is, masses of new users — will go online via mobile devices. GSMA 4,175 estimates 1 billion new mobile users 2,523 over the course of the next five years until 2020, which represents an increase of 27 percent from today’s 2014 2015 2016 2017 2018 2019 3.6 billion users. 44 Source: Cisco VNI Global Mobile Data Traffic Forecase Update, 2015-2020

DATA DEMANDS WILL INCREASE not only because of the increase in new data exchanges. According to Cisco, users, but also because data-intensive by the year 2019 more than 10 billion services grow as connection speeds devices will exchange an estimated increase, and people become more 35 quintillion bytes of information per comfortable with smaller screens (which month. (We don’t have room for all of the is definitely the case). From a consumer zeros here, but for the record, a quintillion perspective, video is by far the No. 1 is a million raised to the power of 5.) You driver for exponential growth in data heard about the traffic jams in New York demand. when the Pope visited? That’s going to be a picnic compared to the radio-wave At the same time, the growth of the IoT congestion caused by the increase in will produce more connection points and connected devices in the IoT. 45

So, consumers need more bandwidth, and 5G is part of the answer. In fact, 5G is even more important to industries such as healthcare and driverless cars. 5G promises to reduce latency and increase data speeds to the extent that autonomous cars will be able to make driving decisions in milliseconds based on real-time information from a variety of sources around them. 46

HOW ARE INNOVATORS TACKLINGthe CONNECTIVITY CHALLENGE 3 47

The connectivity market place is complex, and challenged. But it is equally obvious, that the benefits of enhanced connectivity and increased access to the internet are tremendous and desirable. The logical conclusion is a market that sees a great amount of O1 ACCESS SPONSORHIPS innovation both from incumbents as well as new entrants. 1.1 CARRIER SPONSORED ACCESS AND DATA 1.2 BRAND/PROVIDER SPONSORED MODELS 1.3 DIRECT-TO-CONSUMER INFRASTRUCTURE O2 LOCAL EMPOWERMENT O3 IOT O4 FINANCIAL SERVICES 3 48

O1 ACCESS SPONSORSHIPS ACCESS SPONSORSHIPS CAN COME IN A VARIETY OF FASHIONS. Typical access sponsorship is In any case, zero-rating certain making use of a practice called data packages provides a “zero-rating,” which means fundamental pillar for later providing access to certain business opportunities. Since content or services at no charge consumers, by definition, don’t to the consumer. Zero-rating, bear the cost of zero-rating if misused, draws scrutiny and service, it is covered by either sometimes harsh criticism, as carriers, brands or content evidenced by the controversy services. Let’s look at various that surrounded Facebook’s sponsorship scenarios. recent attempt to introduce its Free Basics service in India. 49

O1 ACCESS SPONSORSHIPS 1.1 The majority of access sponsorships are underwritten by A the carriers, which provide limited data and bandwidth for free. T A In some cases, this free data Either way, carriers have is used to gain a competitive an incentive to zero-rate product advantage, as T-Mobile in order to enhance their did with Binge On. In other cases, product, engage users fronting partners provide content who will eventually pay for for free but have agreements with services, and upsell existing the carriers not to charge for the subscribers more expensive ARRIER-SPONSOREDCCESS AND Dengagement, as is the case with data plans. C A Facebook’s Free Basics. 50

O1 ACCESS SPONSORSHIPS O1 FREE BASICS/ INTERNET.ORG Launched in developing markets to provide free low-bandwidth connectivity. Content developers are welcome to provide their products via Free Basics at no cost. As a business tool, it works: about 50 percent of Free Basics users upgrade to paid data plans after their initial free trial expires, providing carriers with a base for subscriber acquisition. 51

O1 ACCESS SPONSORSHIPS O2 WIKIPEDIA ZERO Launched in 2012 and reportedly now reaching 600 million people in 60 countries, Wikipedia Zero provides free access to its content. Data is positioned as educational, and access is being paid for by about 80 carriers who believe there is a halo effect on their brands by being associated with an ostensibly educational effort. 52

O1 ACCESS SPONSORSHIPS O3 T-MOBILE U.S. BINGE ON Following the success of its Music Freedom initiative, which lets users stream music services like Spotify at no cost, T-Mobile launched Binge On. It enables subscribers to watch low-bandwidth (480p) versions of certain video services over their network. Services include Netflix, Hulu, and HBO Go. T-Mobile hopes to pick up more subscribers, but there’s a hitch: the current service is under scrutiny as a violation of net- neutrality, because only select video services are offered. 53

O1 ACCESS SPONSORSHIPS O4 APP-BUNDLED DATA PLANS Strictly speaking, this is not a zero-rating practice, since consumers do have to pay for them. Providers, however, such as Singtel in Singapore, are offering prepaid data plans that include free (up to a daily limit) use of prechosen social or messenger apps, such as Facebook, Line or WhatsApp. The consumer essentially pays a flat fee for all data used by the specifically chosen app. Interestingly but not surprisingly, the free use of WhatsApp does not include the use of its VoIP solution for voice calls. Cell C and other African carriers are pursuing similar offer packages. 54

O1 ACCESS SPONSORSHIPS 1.2 In some cases, content companies will pay carriers to compensate for the increase in data usage. VIDER O BRAND/PRSPONSORED MODELS 55

O1 ACCESS SPONSORSHIPS O1 O2 App developers can be to a limited set of Google India’s largest carrier, which incentivized to co-sponsor services (search and Gmail), also has significant presence content access through but are prompted to pay in Africa, recently confirmed “free data,” and Google is if they surf “too far away” that it is launching Airtel Zero, charting the technological from the original property, which will allow companies waters for certain Android but executing multiple click- to buy data in order to offer apps to provide “free access.” throughs from a single their apps to consumers at A recent report noted that search. Google reimburses no cost. Google’s version of zero- carriers for Free Zone access. rating goes beyond a one- off deal, allowing developers to create apps that live on. Google also offers sponsored access via Google Free Zone, where users have access 56

O1 ACCESS SPONSORSHIPS O3 & Amazon Prime members are program (non-Prime members now able to stream Amazon can still access the entire Prime video content for content catalogue for a free over JetBlue’s inflight rental fee per movie/show), network. It is a win-win deal and Amazon has found a for the companies. JetBlue new outlet to acquire new is offering an extremely Prime members on the fly, competitive entertainment so to speak. 57

O1 ACCESS SPONSORSHIPS O3 Used almost exclusively in on its head, by rewarding unengaged audience. Jana developing nations, this is consumers with free data for has integrated the system essentially an advertising clicking on ads. The mCent into the billing systems of platform for marketers app provides over 30 million 311 carriers in 93 countries. and brands to engage consumers access to free with consumers via their apps. For each app trial that mobile devices. The model consumers undertake they works around a well-known are granted free data, paid impediment to the success for by the app advertiser. This of mobile advertising, namely model enables advertisers, that consumers know that which include app developers clicking on ads will count Zynga, Hulu, Saavn, and Kakao against their data plan. Jana to create a trial with a well- has turned this principle documented but previously 58

O1 ACCESS SPONSORSHIPS O5 Through a feature called passing along the cost to App Pass, carriers provide the advertising app/brand. subsidized data access to Opera has also introduced applications. Carriers can a sponsored web pass, present app offers through which enables consumers the browser, allowing cost- (especially, first-time mobile free use of the apps, albeit users) such things as a for a limited time. Carriers free day of mobile-internet decide whether they want usage, or a free hour to provide this access for on Twitter. Advertisers free, and capitalize on it sponsor these offerings. with their own brand or by generating revenue by 59

O1 ACCESS SPONSORSHIPS 1.3 Another way to provide access is based on an TURE ad model where the advertising revenues pay O-CONSUMER for access through wifi. T TRUC - S T DIREC INFRA 60

O1 ACCESS SPONSORSHIPS O1 LINKNYC This ambitious project will provide New York City with free, super-high-speed wifi in all five boroughs. LinkNYC is being built by a newly founded company called Intersection. The company builds digital billboards that double as wifi towers. The project is funded by the advertising revenue from these digital billboards (OOH). Intersection and the City of New York will share this revenue. This project allows users to dramatically reduce their data usage while in the city (and thus potentially the revenue for carriers) and it allows tourists from outside of the country to omit roaming fees for data services. The first “links” have already been fired up, and the group expects to have over 2,000 installed throughout the city within a year. 61

O2 LOCAL EMPOWERMENT Especially in developing markets we are observing a variety of projects to provide basic accessibility by empowering local groups to establish self- sufficient access points. 62

O2 LOCAL EMPOWERMENT O1 Tone is a OTT service which the value of having access educate the fishermen on provides a platform to locally to services such as GPS, the usage of the phones. The empower communities. local weather, fish maps and kit also comes with a solar It provides connectivity chat functionality. The idea power-based charger for and service in previously is that the service will pay for the phone to overcome any underserved regions. One itself, and thus be “free,” by electricity shortages. Local such empowerment program enabling fishermen to realize NGO employees also have the is mFish, in Indonesia. Tone cost savings by running their opportunity through Tone’s is providing a kit to local business more efficiently. software to directly chat with fishermen that includes a Just as importantly, mFish the fishermen and support phone, an educational set, overcomes the challenge them with any queries. and a SIM card for a local of digital literacy with an carrier. The data is not free, educational introductory but it comes at a lower rate for kit. This allows local NGOs a promotional period to allow that work with Tone and 63 the fishermen to understand the carrier on the ground to

Tone reinvests 20 percent of profits in social and environmental initiatives. Carriers are paying Tone a portion of the data revenue for this acquisition effort. The government subsidizes the original infrastructure – for instance, the cost of installing cell towers – through a fund to which local carriers contribute. 64

O2 LOCAL EMPOWERMENT O2 VILLAGE ISLAND This Gilat Satcom offering provides internet infrastructure via a private satellite network to what the company calls a nano-ISP. Examples of nano- ISPs include schools, shops, and churches, where the carrier installs hardware to receive the satellite signals. The carrier resells the signal to nano-ISPs for a very low cost. Prices are expected to be as low as $1 a month, and the network is designed to scale up. It thus enables local entities (nano- ISPs) to become small businesses. 65

O2 LOCAL EMPOWERMENT O3 EKOCENTER At Mobile World Congress 2015 (MWC), allowing locals internet access and real-time Ericsson and Coca-Cola revealed the upstream and downstream data sharing “EKOCENTER” project, which is intended to to optimize the supply chain to the local bring safe drinking water, solar energy and kiosks and measure the efficiency of power mobile connectivity to communities in the generation. In addition, this connectivity allows developing world. EKOCENTER is a modular for a range of other services to be considered, community market (kiosk) that is run by a such as real-time medical information sharing local entrepreneur and supplies basic goods or access to market prices for agricultural and services to underserved communities. products. EKOCENTER is run as a social Functionality that can be added beyond safe enterprise, meaning it combines philanthropic water, electricity and connectivity to jump- and commercial interests of Coca-Cola and start community development includes social its partners. For Coca-Cola, there are not facilities and entertainment; power generation only clear, tangible benefits (increased sales for charging phones; cooling/refrigeration inpreviously undersupplied regions), but also of vaccines; education opportunities; and intangible benefits to generate positive brand much more. Connectivity is fully integrated, impact with stakeholders and consumers. 66

O2 LOCAL EMPOWERMENT 04 This company addresses the lack of energy availability in certain parts of some developing nations, which ironically are within reach of service but unable to use it for lack of a power source. Intelligent Energy thus addresses two essential elements of connectivity: network availability and power. Intelligent Energy develops portable fuel cell systems that can remotely power phones without access to “the grid,” thus overcoming another large barrier in developing countries that are struggling with energy more than with connectivity provisioning. 67

O3 IOT INITIATIVES 68

O3 IOT INITIATIVES O1 CONNECTED CARS When it comes to connecting the internet of things, the most prominent efforts from a consumer-facing perspective seem to be made in the area of connected cars. AT&T just announced a major deal with Ford to bring more than 10 million connected cars to the street within 5 years. AT&T also now allows users to add their car as another device in a data plan. While adding a car still comes at the cost of a monthly fee, Tesla is offering 3 years of free connectivity to AT&T’s 3G network within its innovative EVs. Carriers including Vodafone and Deutsche Telekom are creating models similar to AT&T’s. 69

O3 IOT INITIATIVES O2 IOT INTEGRATION AT SCALE Many major carriers have announced and piloted IoT connectivity platforms aimed at specific verticals. Telefonica, AT&T, Verizon, Deutsche Telekom, Orange, Telstra and others are tackling topics such as smart cities, connected homes, health tracking, manufacturing and even cattle tracking. In some instances, these platforms have been built for a certain vertical or challenge, while in other examples they are a direct collaboration with a specific brand, such as Coca-Cola or Nestle. At the moment, neither of these platforms seems to drive significant revenue compared to the core business, and remains an innovation opportunity rather 70 than a scalable business play.

O4 FINANCIAL SERVICES 71

O4 FINANCIAL SERVICES O1 WITH FINANCIAL SERVICES CARRIER INTEGRATION Arguably, the industry that has embraced mobile accessibility the most and made huge strides is the financial services industry – specifically providers of payment solutions, credit/lending services and insurance, particularly in developing nations. In this space, start-ups, established banking players and carriers are working together to provide these services. Vodafone’s m-pesa service in Africa, India, and Eastern Europe is one of the more prominent and successful examples of this. In 2015 in South Africa, the local bank FNB other carriers as well. The service is a natural offered its customers pre- and post-paid cell extension of the bank’s financial services coverage. It currently uses a specific carrier’s business, which includes a rewards program cell towers, but says it is open to expanding to and mobile bill-pay capability. 72

As of December 2014, there NUMBER OF LIVE MOBILE MONEY SERVICES BY REGION were 255 live mobile money (2001-2014; year-end) services in 89 markets. Sub-Saharan Africa South Asia 255 Source: GSMA: The Mobile Latin America 232 Economy, 2015 East Asia & Pacific Middle East & North Africa Europe & Central Asia 1 74 116 66 38 16 4 5 6 10 1 1 1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 73

MOBILE CONSULTING FOR GLOBAL CPG DELIVERING THE BUSINESS CASE AND ROADMAP TO BUILD A MOBILE COMMERCE PLATFORM IN EAST AFRICA Through in-depth market these carriers in a market, where research, OgilvyRED was able to consumers would typically carry convince local carriers in Africa multiple SIM cards. that their mobile payments system should be evolved Furthermore, mobile payments from a peer-to-peer system were introduced for payments to a system that allows for along the supply chain from payments at retailers. Costs for distributor to retailer. The the SMS, that were required to risk of fraud and simple cash make payments, were absorbed theft was mitigated and all by the carriers. This in return transactions could electronically created brand preference for be accounted for. 74

the WHAT IS OPPORTUNITY? 4 75

As carriers are trying to identify new tactic given the relatively negative sources of revenue and potential investors sentiment towards advertisements in the ecosystem, there is an opportunity among consumers. for companies and brands to step in to collaborate for success. Beneficiaries differ based on the region and their state of technology maturity. Some (few) companies might be looking towards becoming connectivity providers with direct contact to the end consumers of such services. Meanwhile, verticals that will benefit But the majority should probably be from a more connected ecosystem looking at opportunities to create value through IoT are starting to form alliances for the company through sponsorship or with automotive and manufacturing subsidizing deals. Third-party platforms, companies. While Verizon and AT&T are such as Jana and Opera Max, have already currently focusing much of their attention shown success by tapping into this on connecting mobile devices to their space to garner advertising dollars. The networks, both appear to be placing challenge with this model will be whether greater emphasis on IoT connections and pure sponsoring can be a sustainable management. 76

MOBILE-ENABLED PRODUCTS AND SERVICES IN THE DEVELOPING WORLD Health Learning Money Others 1400 1200 1000 800 600 400 200 0 PRE 2009 2009 2010 2011 2012 2013 2014 Source: GSMA: The Mobile Economy, 2015 Note that others include disaster response, energy access, green networks, midentity, NFC and smart cities 77

WHY BRANDS SHOULD CARE 4 78

BRANDS ARE STILL STRUGGLING with how to engage with consumers on mobile devices beyond buying media to gain click-throughs. This model is quickly becoming outdated in a new era of consumer behavior. Simply put, mobile users dislike the current mobile-advertising model, and are rejecting it by not clicking through. Companies planning to enter the connectivity space for branding and marketing purposes have to re- evaluate how they can produce value for their enterprises beyond ad clicks. 79

In its paper “BRANDS THAT DO: BUILDING BEHAVIOR BRANDS,” OgilvyRED explains how modern brands take action to create value instead of just asserting the brand’s message and raison d’étre. The basic tenet is that marketing is a service that delivers real consumer benefits, such as mobile connectivity. This new way of thinking and acting as can also provide intangible (emotional, a marketer does not obviate the need to psychological) benefits. It also may establish and move toward a commercial not be limited to individual companies goal, albeit with greater transparency making investments in providing access to consumers. Brand benefits do not and connectivity, as it is likely more necessarily have to be directly tied to economical to form consortiums or revenue or margin (tangible benefits). They industry associations. 80

TANGIBLE BENEFITS 4 81

TANGIBLE BENEFITS THROUGH LONG-TERM BUSINESS MODEL INNOVATION For example: O1 O2 New pricing, new revenue Fundamental cost-structure sources, new product pipelines. enhancements. In healthcare, Bringing the next billion online for example, better data may will create a huge market for be voluntarily provided by direct-to-consumer offerings. patients (mobile users) to help Increased levels of income will healthcare providers with risk improve consumer ability to pay assessment, to reduce the cost for incremental goods. of insurance products. 82

TANGIBLE BENEFITS DIRECT REVENUE INCREASE THROUGH INCREASED SALES For example: O3 O4 O5 By increasing sales outlets, Through mobile commerce and Product bundling and co- as the Coke EKOCENTER direct-to-consumer sales. For marketing, as shown in example illustrates. example, fast-food restaurants the collaboration between could own car connectivity, and JetBlue and Amazon Prime. the in-car screen for preordering when driving near restaurants. 83

TANGIBLE BENEFITS BY INDIRECT BOTTOM-LINE CONTRIBUTION For example: O6 O7 O8 By capturing government Through efficiency gains achieved With more efficient customer subsidies or tax breaks. with better value-chain visibility, servicing rerouting calls to decreased cost of acquisition, and messaging services using decreased cost of advertising. Facebook Messenger as a In the example of mFish, in customer service outlet. Indonesia, brands get direct and highly targeted access to specific groups, directing acquisition investments to the precise audience for a brand. 84

TANGIBLE BENEFITS BY INDIRECT BOTTOM-LINE CONTRIBUTION (CONTINUED) For example: 09 10 11 Through an increase in By providing mobile connectivity By enhancing business decision- customer base and brand to previously unconnected users. making capabilities, such as exposure, using physical Direct marketing through OTT demand-based pricing on the fly, or digital trials, such as services such as WhatsApp or using real-time data analysis. Jana has. are especially relevant in this Insurance companies, for case. Messenger platforms are example, could tailor premium increasingly being used not just pricing in real time according to for communication but also as data they can collect if they “own” transaction touchpoints (e.g., the consumer’s connectivity. WeChat). 85

INTANGIBLE BENEFITS 4 86

INTANGIBLE BENEFITS CAPITALIZE ON BRAND DIFFERENTIATION For example: 01 02 Increase perception of brand as a digital and Using mobile connectivity to enhance contemporary leader. Brands that have previously consumers’ perceptions of brands not been perceived as technology leaders can as innovative and service oriented. gain advantages. In agriculture, for instance, For example, Tesla is now updating technology is making vast strides to enable better its cars’ operating systems through decision-making, with such simple products as a 3G connection, which frees owners mobile weather forecasting, and data-gathering from having to schedule a service and data-analysis tools. appointment. 03 04 Improved positioning vis-a-vis indirect stakeholders, Allow consumers to see brands as such as governmental bodies, NGOs, and supply beneficial to communities, as Coke has chain partners (see Coke Ekocenter). done with the Coke Ekocenter. 87

INTANGIBLE BENEFITS INCREASE COMPANY FUTURE PROOFING For example: 05 06 07 By driving an innovation Through talent acquisition By building a company’s agenda and introducing and retention. capabilities, exposing it to new opportunities for first-time technologies, and introducing it mobile users to test and to new partners. learn about a product. 88

BARRIERS KEY ISSUES to SOLVE 4 89

Net Neutrality 90

O1 NET NEUTRALITY According to Wikipedia, “Net neutrality… kicks in. The aforementioned example is the principle that internet service of Facebook’s attempted introduction providers and governments should of Free Basics in India illustrates treat all data on the internet the this point precisely. The message same, not discriminating or charging to marketers is that any potential differentially by user, content, opportunity or proposition must site, platform, application, type of be vetted to ensure that it does not attached equipment, or mode of discriminate by limiting access to a communication.” single provider, or by allowing access to a single competitor’s product. The moment that companies (whether Services like Jana have solved this they are brands, social platforms, or equation, since it can be used to carriers) provide access to content access any content or service. for free or for a lower price than other services, the issue of net neutrality 91

Transparency of Business Models to the Customers 92

O2 TRANSPARENCY OF BUSINESS MODELS TO CUSTOMERS The mobile connectivity ecosystem the mFish solution. This is tolerated is not considered by consumers to and even appreciated by consumers be transparent. Companies that because they perceive mFish as want to enter the ecosystem should beneficial to the community due make transparency a priority, to to the (transparent) way it has avoid alienating consumers or structured deals with the carrier and attracting the scrutiny of regulators. government. In the United States, Consumers are not easily fooled Google Fi is showing carriers what and understand the popular phrase, it means to communicate with “If you are not paying for it, you are their customers in a simple manner the product.” Examples of success about pricing, avoiding jargon or through transparency include hidden fees. Tone, which makes it clear that the company is making money from 93

Digital Literacy and Relevancy of Offers 94

03 DIGITAL LITERACY AND RELEVANCY OF OFFERS A key obstacle for many developing the pitfalls (e.g. spam, data markets is digital literacy. People security). The simpler the offer and are often not aware of the benefits value proposition, the better. Last of the internet, if provided through but not least, many services have mobile devices, which are not not been fully adapted into local affordable to large parts of the context (language, data speeds). world’s population. Educational Especially in developing markets it campaigns need to start here, and cannot be assumed that English is should not assume that everyone the spoken language. Any service would be online if they just had which adapts to local language access to a connection. The second and available bandwidth will have a obstacle is that it takes training to clear advantage. become familiar with navigating the offers and services including 95

THOUGHT STARTERS 5WHY SHOULDN’T WE... 96

01 TAKE ADVANTAGE of the RETURN ON INSIGHTS (DATA) THAT MOBILE CONNECTIVITY PROVIDES By sponsoring access in highly the car’s telematics data. Healthcare frequented areas, companies could be providers could sponsor connectivity granted exclusive access to data that for underserved communities in is being collected within these areas, exchange for using the data to move allowing for dynamic pricing or product from reactive to proactive prevention adjustment concepts. Think about an mechanisms. insurance company sponsoring all mobile access along highways, and “One of the myths about the Internet of Things is that thus being able to monitor real-time companies have all the data they need, but their real traffic behavior and adjust premium challenge is making sense of it. In reality, the cost of pricing accordingly. An insurance collecting some kinds of data remains too high, the company could also simply pay for the quality of the data isn’t always good enough, and it car’s data contract, taking that burden remains difficult to integrate multiple data sources.” — Chris Murphy, Editor, Information Week 97 off of the consumer in exchange for

02 USE MOBILE CONNECTIVITY to monitor compliance of INTAKE OF MEDICATION If the healthcare industry could monitor compliance of medication intake in a real-time manner, it would be able to save billions in post-symptomatic treatment costs by preemptively improving positive outcome rates. Connected pillboxes are making a slow entry to the marketplace, but there are currently no scaled concepts in place to provide them free of data cost or to sponsor the data it takes to communicate with healthcare providers or caretakers. 98

03 Use the SOCIAL ENTERPRISE CONCEPT TO INCREASE BRAND IMPACT CPG/FMCG companies in particular as resellers of data plans, or simply struggle for differentiation because providing them with access to of the broad exposure of their brands information to build new communal and products. Becoming a sponsor marketplaces. Or, consumer brands of connectivity or empowering local might sponsor the local adaptation communities through, for example, of non-native content and services helping to overcome digital literacy into the local language and data barriers, could significantly boost ecosystem. their value proposition beyond the product, and create a more favorable selling environment. Think about a CPG company helping local women to become small business owners 99

04 CONSIDER CARRIERS as RETAILERS As carriers are connecting more and more devices, is there a chance to become a retailer for more than just phones and tablets? What if household appliance manufacturers or home electronics companies sold their goods through the ecommerce sites of carriers? 100

05 CONSIDER CARRIERS as FINANCIAL SERVICE COMPANIES Carriers already bill for data plans to opportunities for subscription-based their customers, and some (though models (especially if these services few) other regular billing activities are based on data usage). can be processed through these carrier bills. Are there efficiency and convenience gains to be conceived by integrating other regular billing activities (e.g. utilities, media subscriptions) through a carrier’s system? This would potentially allow for a more comprehensive data view of individuals’ financial transactions and would also provide acquisition 101

06 CREATE NEW MVNOs As we are connecting more and more devices, including our cars, will these brands be selling us connectivity and data plans as well connecting into a multitude of carriers in the background through soft SIM cards? What if major marketplaces or financial service providers become MVNOs? This would let them take ownership of consumer/customer data, contact, and reward activity, directly, through sponsored data. 102

07 SPONSOR ACCESS ACCESS CONTENT With the advertising industry struggling to find meaningful ways to engage consumers on their phones, could content and the sponsorship of access to content become positive value components in the lives of the consumer and the brands? Consider, for instance, the WhatsApp video channel from Coca-Cola bringing consumers exclusive World Cup video coverage, free of data charges. 103

08 ENABLEmore E-COMMERCE Any company that already has or more convenient and potentially more is looking into opportunities to sell cost-effective ways for consumers directly to consumers might have to shop on their phones or tablets? an interest in expanding its potential This model could become especially customer base by providing them interesting if carriers were paid for with free access to their mcommerce data-based on revenue share instead sites. Could marketplaces like OLX, of fixed per-MB pricing. eBay or Amazon or a consortia of brands look into creating unique, “free- of-charge” DTC offerings, providing 104

09 USE MESSENGER SYSTEMSto provide CUSTOMER SERVICE Messenger apps (Whatsapp, FB (access or confirmation codes, etc.). Messenger, Line, Kik, KaKao Talk) Given that messaging is moving have seen a massive surge in person- towards more video-based platforms, to-person traffic. Some of these brands might innovate their customer platforms (e.g. FB Messenger) have service experience through video chat already openly started to use their functionality, with the chat traffic paid platform for business-to-person for by the brands themselves. communication, opening the system up for customer service channels or even machine-initiated messaging 105

10 PROVIDE RE-COMPENSATION SCENARIOS through GOVERNMENTAL INCENTIVES If brands engage in larger-scale provisioning or sponsorship of accessibility, should governments not provide them with tax breaks as the brands are actually creating a community service? 106

11 PROVIDE BETTER INTEGRATION for LOYALTY PROGRAMS Loyalty programs are struggling with in New York with American Express creating proper value exchange to Membership Rewards points, why promote for repeat engagements with can’t the same customer have an their underlying brands. In developing American express phone that is paid markets, loyalty programs have long for via American Express purchases embraced “airtime” as one of the most made with the mobile payment option? coveted currencies to their consumers. Why could frequent flyer programs not Can data plans for connected devices cover roaming charges with mileage? not simply be paid off with loyalty points? If a customer can pay for taxis 107

12 INTEGRATE BRANDSwith FREE ACCESS PROGRAMS in cities With communities or public/private are there relevant offers they could partnerships providing cities with provide in context, e.g. transportation “free” wifi services that still need subsidies by knowing when and where individual authentication (e.g., their customers are traveling (“Ikea LinkNYC), can companies with just sponsored your subway ride to our preexisting accounts (Amazon Prime, store”)? Facebook, carrier accounts) not automatically pre-authorize access? And if these companies tracked movements through these networks, 108

13 ENGAGE IN GLOBAL TALENT DEVELOPMENT through INCREASED ACCESSIBILITY Certain industries (e.g., software, tech sectors) are struggling to grow and identify the right talent going forward. If increased connectivity means more access to education, can there be a long-term investment goal to bring this connectivity to regions where talent will most likely be sourced in the next 10 to 20 years? 109

14 POSITION BRANDS to serve an AGING, CONNECTED POPULATION Parts of the world are or will soon be capability? Ogilvy & Mather Singapore struggling with ways to better serve an worked with Singtel to redesign the aging population. If accessibility and functionality of a smartphone that connectivity mean better education, was then distributed to Singapore’s improved medical care, and potentially aging population. The restructuring higher mobility, should a consortia dramatically simplified the phone’s from the public and private sectors interface and functions, allowing less not invest in overcoming certain levels digitally savvy customers to take of digital illiteracy and provide people advantage of basic functions such as with generation-specific services games, camera and emergency calls. independent of a person’s financial 110

CLOSING THOUGHTS 111

Not really. Certain institutions have demanded “the internet” be considered equal to basic Will we ever have life requirements like air and water. But this does not mean that the internet is equally as accessible and abundant (after all, clean water is certainly not INTERNET ubiquitous or always free). It still requires an enormous amount of investment to keep the internet infrastructure operating, and the cost for this is not as easily FOR redistributed throughout the complex ecosystem that has sprung up. The benefits the internet brings are in some cases hard to measure or attribute to the “FREE” providers within the ecosystem. ? These market forces are not trivial, as they relate to trillions of dollars in investment and trillions in potential revenue. 112

Currently governments are generating a significant income from auctioning off spectrum to carriers. Carriers, in turn, are forced into high-stakes auctions for Do we have this spectrum to remain competitive. The lease investment required, however, is directly subtracted from the carrier’s ability to invest further in infrastructure A HOMEMADE extension. The lack of this investment slows down growth in the economy, at the country level, from enhanced connectivity. Is it worth re-doing the math to see if the INNOVATION benefits of an extended infrastructure investment would not overcompensate for the short term gains from these DILEMMA? auctions at the federal level? “ To me the biggest question for the future is will we really continue in the future to license spectrum – do governments license oxygen? No. The Internet is oxygen, it’s water.” – Vittorio Colao, CEO of Vodafone Group 113

Google Fi and Apple are already providing services that are carrier-independent. In many developing countries people carry two SIM cards and phones because the individual carriers services are either cheaper or better based on whether WILL WE, IN 5 YEARS, someone is in a rural or metro area, or whether people are making short or long distance calls. Carriers will obviously do REALLY CARE everything to keep their brands relevant who provides us with access? through a combination of direct (network strength) and indirect (value-added services) value propositions. The simple answer is “maybe.” In a best-case scenario, consumers do not have to worry about connectivity at all, because their devices will be automatically switching to the strongest signals, and their services will be provided by a third party that is invested in the content and service platform rather than the sheer connectivity. 114

WILL CARRIERS BECOME B2B PLAYERS? and if so If the scenario just described prevails, then carriers could find themselves becoming B2B players at scale and target WHO ARE resell partners (such as banks as MVNOs). This might dramatically decrease their individual cost of acquisition, as they might be selling in bulk. The effect on THE competition and innovation potential will BUYERS have to be evaluated in this scenario. ? 115

THE OPPORTUNITY When asked what lessons she translate that into business FOR ALL would provide the audience terms to help drive growth.” about marketing in the digital This applies to all companies age, Linda Boff, the CMO at GE, and brands, whether they said: “Be sherpas for what is provide infrastructure and new and what is next. I think access, services and content, there is a real role today for or are looking to profit from an marketers to identify what’s increasingly connected global around the corner and then to population. 116

But the MOBILE ECOSYSTEM PLAYERS,whether new or incumbent, WILL NEED TO COLLABORATE & COEXIST and then, together, they might just be able to create a brighter, more connected world while also doing good business. 117

CREDITS AUTHOR: EXPERTS & SOUNDING BOARDS: OGILVY CONTRIBUTORS: Martin Lange Colin O’Donnell Carla Hendra Global Consulting Partner, OgilvyRED Chief Innovation Officer, Intersection Caylin Lo Derk Hendriksen Chelsea Jones VP Business Integration & GM EKOCENTER, Devon Cottle The Coca-Cola Company Elizabeth Stroud Harald Neidhart Emily Arnold Founder & Curator at MLOVE Jay Kurahashi Sofue Mark Kaplan Jeremy Katz CEO and Founder, Tone Jess Kimball Nathan Eagle Joe Bargmann CEO & Co-Founder, Jana Mary McFarland Peter Fasano DESIGN: Priyank Mathur Lori Argyle Sarah Tran Seth Greenberg Spencer Schrage Sydney Sadler 118

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