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September 27, 2007

How Practical is your SDP?

Members of the Telco 2.0 team went on a trip to the Italian Lakes this week, where we were stimulating and facilitating an impressively organised conference for Service Delivery Platform experts jNetX and a gaggle of telco people from most parts of Europe. We used a basic version of our interactive Mindshare approach to elicit audience feedback on the issues raised.

Some people there had a funny reaction to our use of the word “platform”, central as it is to the Telco 2.0 vision - isn’t a platform really an operating system? Or something used when drilling for oil? They’re right, of course; a Telco 2.0 platform is a sort of operating system, just as Salesforce.com or Amazon’s IT infrastructure can be seen as a sort of single huge computer. But it became increasingly clear that this cuts both ways; you need the right platform in the second sense to do a platform in the first sense right.

Where did it all go wrong, Telco 2.0?

jNetX’s actual product illustrates this - it’s nothing if not complex, being a mighty stack of JavaEE elements that deal with SS7, IMS, and pure Internet access networks at one end and generic IT (and Web 2.0) interfaces at the other. What is noticeable about it, though, is that it is made up exclusively of stuff that already has Java Specification Request (JSR) status (especially JSRs289 and 240); it’s all open-standard if not open-source.

And the examples of its use in practice bear this out. At BT, head of tech strategy Mark Kent described its deployment for new IN services at BT Global, with the assistance of a tiny startup, NetDev. Crucially, the role of systems integrator remained with BT’s chosen partner, and the standard interfaces meant that BT remained free to choose whatever hardware, software, and other partners it liked; standards compliance is the death blow for vendor lock-in.

Hence BT’s spanking new apps platform, Project Firebird; running in a JAIN SLEE environment, it acts as a “resource adaptor”, speaking assorted Java APIs to IT systems in one direction, SIP to switches and routers in another, and the Linux API to the carrier-grade Linux machine it runs on. As Kent says, “you need to look out for platforms.” In every sense; Telco 2.0 is well aware of the dangers of the oil-drilling kind.

At Mobilkom Austria (with operations in lots of emerging markets), Alexander Kuchar described the process of developing their group-wide “mobile service network”, a term which describes everything between the RAN and the IT system. Kuchar decided to go for a full-blown IMS, lock, stock, and ten wriggling tentacles, and use jNetX’s Telecom Application System as the IMS applications layer. The upshot? The second time around, launching a VPN service cost just 10% what it had the first time. Interestingly, he said that the most important factors in successful deployment had been the standard nature of the system and the fact that Mobilkom retained full control of intellectual property throughout, rather than the specific IMS architecture.

Telco 2.0’s scepticism about IMS is well-known; but what is most Telco 2.0 about all this is jNetX’s DNA, not just a rather strained biological metaphor but a Developer Network Area, which brings together its community of third-party Java developers. JNetX markets their applications to its telco customers, making itself probably the only vendor to have a catalogue of 100 mobile apps. As they point out, there is no killer app; but that’s a good thing. All the better to develop as many small and good ideas as possible.

If we had a criticism, it would be that perhaps some denial persists about the “special nature of telco hardware” - quite a few people claimed that such-and-such a service would never scale on IT gear, even though we heard a nice anecdote about an unnamed telco boss who demanded to know what platform (that again) a new apps server runs on. “Linux, on an IBM Bladecenter,” our man responded. “So you’re just buying a computer?,” the boss said.

“Well what do you think our network runs on?” Indeed.

Further, Telco 2.0 didn’t think there was quite enough interest in external innovation - getting out of the operator’s development shop. Fortunately, there was jNetX boss Gary Miles on hand (“Operators don’t do mashups!”), and there was this thought from Huawei Europe CTO David Fowler.
“We can either throw money at our own development, or partner with others so as to start running today..”

Fowler also believes there is no consumer demand for mashups, and therefore vendors should concentrate on supporting operators’ cost saving efforts, for the next three years at least; the obvious answer to this is “if there is no demand, why do so many people on the Internet spend their time making them?” It’s central to the Telco 2.0 vision that cost-cutting is not enough; an industry whose primary problem is that its basic product is getting progressively cheaper needs new sources of revenue.

We finished the event by asking the eminent panelists what they thought were the “big things that need doing to stimulate growth for the mobile industry”; below were the responses. We think they bear this point out.

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September 24, 2007

Ring! Ring! Monday News Analysis, 23rd September

“Ignore it - just like we do with the squid” - it could almost be a telecoms industry motto, if you took out “squid” and replaced it with “Internet”. Here’s some news you can’t ignore, though…

Technology Disruptions

IMS equipment sales to reach a not very massive $8bn by 2012? So say Informa Telecoms & Media.

Telco 2.0 Comment: What, IMS a failure? Never…

More mobile Linux: MontaVista joins the LiMo foundation.

Telco 2.0 Comment: Note that the LiPS mobile-Linux standards group is cooperating with the Open Mobile Terminals Partnership - handset software people getting involved with the interface between the device and the network. The industry has to become more software-driven in order to evolve.

Speaking of which, Nokia has a new application that lets you organise your SMS inbox thematically.

Telco 2.0 Comment: That’s more like it - nobody thinks of their friends alphabetically, and neither do they sort them in chronological order. It’s a pity, however, that the installation is made up of two separate apps!

Fortunately, some people in the business have a clue about usability. Six vendors agree to standardise on Micro USB for charging and data ports.

Telco 2.0 Comment: Can this be an end to the takeover of the globe by rogue chargers? And £30 vendor-branded data cables?

Broadband Connectivity

Intel still banging the drum for WiMAX.

Telco 2.0 Comment: More importantly, they’re now fabbing the chips at 45nm - Moore’s law in action for RF components. Interestingly, they also showed off a mobile variant of Ubuntu Linux at the same developer conference.

BT: perhaps fibre after all?

Telco 2.0 Comment: Go on, you know you want it. It’s always been a little odd that a carrier as advanced as BT hasn’t been sound on fibre deployment.

Google: Is a Telco.

Telco 2.0 Comment: Google already has a platform, a big IT infrastructure, and a ton of partners. It’s bidding for access-network radio spectrum. Now, it’s getting into the submarine cable business. Is it, in fact, the first Telco 2.0?

Digital Product Innovation

MVNOs are cheap - right? Unless you’re SK Telecom, which just sank another $270 million in Helio.

Telco 2.0 Comment: MVNOs struggle to differentiate themselves, unless they are part of a broader platform strategy. Like Cubic, who we’ll come to later.

After Nokia, Google is next to go into mobile ads.

Telco 2.0 Comment: Fear the mighty Google, even if the product is apparently just tweaked AdWords - our sources say Google is trying hard to hire Symbian OS engineers.

Portals, Partners, and Platforms

A “global mobile phone”? Aren’t they all?

Telco 2.0 Comment: This one is special, though - it comes with a SIM card issued by Cubic’s MVNO, which offers low-cost roaming worldwide. This is a rare example of connectivity being paid for with the device - Cubic also offers VoIP via WLAN, so it can be described as a sort of platform.

Orange apparently trying to put the squeeze on Nokia; won’t carry their new phones.

Telco 2.0 Comment: We’ll see who has the customers’ attention, eh? Supposedly Orange isn’t happy about Nokia’s portal, Ovi, competing with their roaring content business.

Speaking of roaring content businesses, Virgin Media darks its music download shop.

Telco 2.0 Comment: And announces that everyone who spent money there will have their record collection confiscated - they’re revoking the DRM. No wonder it was such a success - customer care’s the key!

NBC, meanwhile, wants to put ad-funded TV on the Web.

Telco 2.0 Comment: Not just on the Web, but on a peer-to-peer download network - how long before the DRM gets cracked?

Digital Youth

Blyk finally on the launchpad, after months of “studying the mobile advertising market”.

Telco 2.0 Comment: A cynic might say that time was mostly spent desperately searching for anyone who wanted to advertise with them; see our previous analysis.. Note that the service is invitation-only, making for better targeting and also reducing the risk of “catastrophic success”. Also note that data overage is charged at 99p a megabyte; so 1GB =£1000!!

Digital Politics and Regulation

Ofcom: we’ll have that 900MHz back!

Telco 2.0 Comment: Spectrum refarming - it’s bound to happen. The barriers will be lowered.

David Isenberg deploys extreme snark regarding Net Neutrality.

Telco 2.0 Comment: What, me worry? Check out that IMS story.
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September 19, 2007

Voice ‘Mash-Ups’ - Futuristic Buzzword or Critical To Prepare for Today?

To help with the debate on the role of ‘Mash-Ups’ in securing telcos’ future in core voice and messaging at the Digital Product Innovation summit on 16 Oct, we’re delighted to have Thomas Howe as a stimulus speaker.

Thomas is a ‘VOIP’ veteran (2 decades at Versatel, Picturetel, Comverse etc). He’s just set up a new company focused on ‘real time communications mashups for the enterprise’. One of the reasons we asked Thomas to speak is that he won the O’Reilly Emerging Telephony Mashup Contest earlier in the year: he designed and commerically launched (repeat: commercially launched) a unique call manager service for Doctors…in 45 minutes (in the room, there and then!).

The term ‘mash-up’ is just as abused as ‘web 2.0’. Thomas defines it as an application that uses 1) modern Web integration technologies, 2) to take content or services from two independent sources, 3) to solve a unique or niche problem. “In general, you’d have to have all three to qualify in my book,” he says in an excellent article here. Prime yourself with two presentations from him here.

So, we might now have a better understanding of what a mash-up is, but why is it important to the future of telcos? The context for the October Summit, and for what Thomas will be talking about is as follows:

We’ve had a flurry of email discussions with various people about the ideas in last week’s article about what SDPs should really be enabling, what a ‘platform’ business really looks like, why it probably offers the brightest future for operators, and why enabling a vast plethora of mash-ups for niche markets will be critical.

But we’re encountering so many people working in the so-called ‘here and now’ - managing product pipelines within telcos or selling enabling technology to them - don’t feel this future is relevant to them: ‘it’s too far away’, ‘not our problem’, ‘doesn’t affect our business right now’

Our view, based on some recent analysis, is simply this:

  • Operators are not great product innovators (our survey earlier in the year reconfirmed this: 75% of telco practitioners felt they didn’t understand the future needs of their end-users in their core business of voice and messaging)
  • Margins are under severe pressure in this area which makes up typically 70-80% of telcos’ revenue.
  • There are many new entrants bypassing the traditional operators (our forthcoming report has a directory of these), including including not just small start-ups, but also industry giants such as Nokia, Apple, Google, and the social networking sites (VC’s are pouring money into this area right now).
  • Our current survey respondents are saying that 40% of total mobile voice minutes (in mature markets) will flow through alternative forms of (non-incumbent) voice services in 5 year’s time. Half of these will come from competing ‘horizontal’ voice services like Skype; however, the other half will be embedded into ‘vertical’ applications like games, dating applications, etc. - i.e. mashup territory. (that’s the industry talking, not us!)
  • In this environment, mass-market telco services will not be as compelling as enabling ‘long-tail’ applications (see research here).
  • Telcos (fixed and mobile) have great assets that could help others innovate.

So, business model innovation, as we all now, is key. But business models cannot be changed by a small series of tactical measures, like putting in some app servers and creating some APIs. If the world is changing in the next 5 years in the way that the industry is itself saying it is, then we need to align these tactical measures with the emerging business models now. 5 years is, after all, not that long in terms of capital depreciation cycles!

At the moment, we’re seeing too little action by the operators. Particularly, most worryingly, by the mobile operators. Lots of rhetoric, but not enough dynamism. Given how over-the-top services like MXit in South Africa have displaced operator offerings, this complacency could be punished severely.

So, the question is not about ‘mash-ups’ vs mass market services. The answer is ‘both’. The bigger questions for today, right now, are: what innovation to insource via partners vs perform in-house; how to support those partners commercially and technically; and how to remain a value-added supplier in the value chain for voice and messaging services rather than being bypassed entirely by “over the top” players.

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The Joy of ‘Functional Separation’ - Panel on Telecom TV

Following our Q&A last week with Steve Robertson, CEO of Openreach (“proud guardians of the UK’s local access network”), we organised a panel on Telecom TV to discuss the impact on business model innovation of the ‘functional separation’ of this unit from the BT Group (see vid below). Anne Heal, (MD, Openreach) and Kip Meek (Chairman, BSG) were there too. They were on opposite sides of the Ofcom-BT negotiations that led to this groundbreaking separation two year’s ago. Beware: The European Commission is very interested in how this model could be spread elsewhere…

We met the Openreach team yesterday to discuss Steve’s stimulus presentation for the Telco 2.0 Executive Brainstorm Plenary on the 17th Oct. Building on the Q&A and the panel, Steve is working up something new for the event: his analysis of the technical, commerical and cultural/organisational changes that could have the biggest impact on business model innovation for ‘communication providers’ in the next 3-5 years. Also, his rating and criteria for judging how easy/difficult these might be to implement. The audience will then feedback their views via the ‘Mindshare’ interactive process. This should stimulate a great panel discussion with Gord Graylish from Intel (who’ll have spoken about innovation opportunities around new device categories) and Ross Fowler from Cisco (who’ll unveil latest thinking on how to deal with OTT players). A big thank to all these guys for putting real effort into contributing something new - not the toothless corporate presentations we see so often at events… Here’s the Telecom TV panel:

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September 18, 2007

Broadband Still Sold Like Phone Lines - Time to Change?

We’ve been ploughing through the first 300-odd responses to our survey on the Future of Broadband and there are some very interesting results. (If you’ve not done it yet, just click here — we’ve extended the end date to 30th September as a number of organisations are circulating it internally to stimulate thinking about business models).

I’ve picked on one question that’s given me a bit of a surprise. When a consumer purchases “broadband”, what is it they are actually buying?

Today, on both fixed and mobile networks, the standard means of provisioning is to sell the user an access line. You then get a broadband connection where you can attach any device and use any application. The “line” is identified by a SIM card for mobile networks (at least on GSM-derived networks) or some kind of physical port and/or login credentials on fixed networks.

The chart below shows three possible alternatives to the current status quo, where the act of provisioning is centred on an individual person, device or application.

Summary of combined fixed and mobile respondents for 2012, % of responses.

Taking these alternatives in turn:

  1. Personal access — you authenticate to any device on any network and get access to your services and are responsible for usage. The connectivity follows the user. When at Sprint PCS, this was on the cards for the 1xRTT PCS Vision launch in 2002-3. You would be able to pick up any Sprint 3G phone, log in, and have your usage billed to your standard account — without having to call up customer care to provision additional devices. This proved too complex in the back office, and too difficult a user experience, so never happened. With this kind of provisioning system, the number of devices you can use at once may be limited, and you might be billed accordingly.
  2. Device access — anyone who has the provisioned device in their possession can use it on any network. The ability to use your service with other devices may be limited. You could imagine a future iPhone being like this, once they’re done with exclusivity with individual operators. We’ve got wholesale access bought from all the carriers, so you don’t need to worry about their brands. Just pay us the monthly fee. In some ways, CDMA networks already do this (as there is no separate SIM card — it’s the device that’s provisioned), just CDMA roaming is a minority sport.
  3. Application access — each application (voice client, browser, games) separately authenticates to the network and you pay per activated application. The ability to use other applications is limited. Today an operator might offer an “all you can eat” data plan for mobiles in the knowledge that use of data-hungry applications is low (or outlawed by the terms and conditions). There is a very predictable usage profile for Web and email access, so they price for that. This third form of provisioning would formalise that, making the application itself (not the device) authenticate to the network. This would require some suitable security (like that supplied by most modern processors with a trusted computing module) to prevent fraud, with one application acting as an impostor for another.

The surprise to me was that I thought that application access was rather promising. It enables operators to offer price plans that more closely align to perceived user needs, without carrying so much of the risk of the asterisk after “unlimited*”. After all, there’s only so many web pages or instant messages your thumbs can withstand in a day.

What you are keen on is user-centric connectivity. Sell the user a connected lifestyle, not individual lines. This potentially challenges how data services are priced. Why can’t I use the broadband at my parents’ house at top speed, even if they’ve opted for a low-user slow and capped plan? Why do T-Mobile try to charge me for WIFi access when I’m already a 3G data plan subscriber?

These questions are important because there are whole new classes of device coming on stream, such as small mobile Internet tablets. The industry seems to assume that you’ll just keep on buying more and more line-based data plans as your device arsenal proliferates. Our survey shows considerable enthusiasm for re-thinking how the product is packaged and sold.

You can hear Intel’s VP for Europe present on new business models for new devices at the next Telco 2.0 event next month. And if you still haven’t done the survey, here’s the link again.

Ed - An analysis of the whole survey will be presented during the plenary on 17th October at the Telco 2.0 event.

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Vodafone: A “Total Communications” Company?

The Times recently interviewed Arun Sarin, CEO of Vodafone. The Newbury empire once held ambitions of global hegemony as the biggest, baddest vertically integrated telco of them all. In a more pragmatic era, they’ve been working on getting the basics of business right, with their own glasnost and perestroika programmes to re-invigorate the mobile operator model.

Sarin’s remarks are consistent with the strategic move Vodafone is making into a new phase of its business. In the last year or so they have moved away from being simply a really big mobile network operator. He says he wants Vodafone to become a “total communications company”. In pursuit of this, they’ve been investing in fixed-line DSL and PSTN activities, either as a reseller (as in the UK) or by buying up assets (as with the acquisition of Tele2), or just by integrating more closely with their once forgotten fixed assets (as with Arcor in Germany), .

There’s a clear Telco 2.0 angle here; a key point in Telco 2.0 analysis is that the connectivity is no longer special. Rather, it is becoming a commodity — something easily purchased on the open market by any entrant for a predictable price. Further, its tight coupling with other parts of the value chain is melting away. Therefore, the distinctions between mobile and fixed operators, between networks and virtual network operators, and between telcos or ISPs, content providers, IT service providers, and consumer electronics firms are increasingly irrelevant. What now matters is the assembly of elements from the horizontalised soup into attractive propositions to customers. As we said about France Telecom, this may mean that integrated fixed-mobile telcos have more life in them than you might think. (Our current Survey will help to clarify that point anyway).

Sarin spoke of “mobile plus”, and pointedly mentioned that the company is getting into mobile advertising but would not become a content producer. Could this perhaps signal that Vodafone — traditionally the most telcoish of mobile operators — is thinking of a platform strategy?

It’s also worth noting that Sarin was so keen to show off an HSDPA USB modem as the interview’s shiny gadget; connectivity may no longer be special, but networks that don’t keep up with the bandwidth race will certainly lose competitiveness. (Unlike 3UK, whose own HSDPA modem offer modestly claims 2.8Mbits/s, Vodafone is claiming the full Class 5 3.6Mbits/s.)

Note that Sarin said Vodafone was not pushing its DSL reseller activities in the UK very hard because being an ISP in Britain is unprofitable. Bandwidth will be abundant and cheap; therefore its provision will not be especially profitable, and something else must be done to make the telco a viable business — such as new ways of positioning the product to users.

Given we’ve covered platform and pipe, what about the product? This could be the severest test. With their policy of supporting three mobile operating systems (Linux, Symbian S60/UIQ, and Windows Mobile) they should be able to find plenty of compelling gadgets to hawk. He rejects the iPhone because, even if 1m handsets flew off AT&T’s shelves in 9 weeks this summer in the US, it is only 2G. It is probably right to reject Apple’s shiny gemstone (especially as Apple always offers partners the poisoned red side of the fruit).

However, a better response might be “we’ve got a far better plan to deliver a great communications experience to our users”. Without the service side innovation, device and application makers will simply bypass the operator. If in twelve months from now Vodafone are still only selling voicemail products with the 1980s GSM user interface, ‘total communications’ could become total disaster. (We’ll be discussing this and other core voice and messaging issues for operators at our Digital Product Innovation Summit.)

Is it too soon to welcome Arun Sarin aboard the Telco 2.0 train?

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September 17, 2007

Ring! Ring! Monday News Analysis, 17th September

Technology Disruptions

Motorola to tout WiMAX, again; Sprint boasts of 2.5GHz quality; it’s been a week of WiMAX. So we’re interested to see that having made it far more difficult to communicate with customers by calling their product “Xohm”, Sprint’s now gone and got itself a blog dedicated to their coming WiMAX network, in order to communicate with their customers better.

Says the blogger: As I’m discovering, RF is perhaps just as much an art as a science (yes, I’m from the Internet world not the wireless telecom domain)…

Telco 2.0 Comment: Everyone has to learn, you know. Just be glad you didn’t join Earthlink.

EDGE connections are being observed on O2’s UK network, which counts as the only hard evidence for any of the speculation about who gets the iPhone. Of course, Orange already has an EDGE network. Oh well.

Telco 2.0 Comment: Just a reminder that GSM is likely to last longer than we expect, what with there already being further evolutions of EDGE towards data rates of 400Kbits to 1Mbit/s.

New entrant to the mobile OS space: QNX’s Neutrino real-time operating system is (kindasorta) open source.

Telco 2.0 Comment: Sounds interesting - don’t imagine S60 is the last word!

New details on the Great Skype Crash; looks like it was the client software and the Microsoft patchday whatdunnit. See also Brough Turner’s blog.

Telco 2.0 Comment: Spot the bonus STL content in the first link! Worth remembering that large p2p networks are essentially experimenting on their customers; also well worth rereading this post in the light of this.

Portals, Partners, and Platforms

Aricent joins the IMS Forum.

Telco 2.0 Comment: Convergence means competition; it broadens the possible base of competitors. Commoditisation follows shortly!

Salesforce.com introduces a web-based API.

Telco 2.0 Comment: Platforms are coming.

T-Mob UK and 3 meditate network-sharing.

Telco 2.0 Comment: Note that the two flat-rate data carriers in the UK are also the first to consider net-sharing…and how long before we see either a wireless version of Openreach, or else a really big network outsourcer?

Digital Product Innovation

Sprint Nextel intros… a femtocell product! No, it’s not a dual-mode box, although the obvious comparison is T-Mobile USA’s product. It’s a true CDMA femto product, which may be a first.

Telco 2.0 Comment: Mmm, Sprint, still the US’s most advanced carrier. SAWS, big IP backbones, affiliates, WiMAX, femtocells.. You might almost think they read this!

The UK goes 100% plus penetration. Britons now have on average 1.6 phones; where do the carriers go from here? <

Telco 2.0 Comment: Telco 2.0, of course! Ask Dean Bubley.

T-Mobile USA acquires SunCom: a battle looms for Leap.

Telco 2.0 Comment: More C’s - commoditisation, created by competition and convergence, causes consolidation, conflict, and complexity. Amusingly, the Financial Times reported that xG shares rose due to the initial offer for Leap; now that makes us laugh.

Digital Politics and Regulation

Meanwhile, a ferocious competition bill enters the US Congress, promising to ban essentially all the annoying ways telcos try to cling to their customers.

Telco 2.0 Comment: The chances of this getting through the telco lobby must be small, but it could happen. Barriers to entry and exit are still falling. And here’s Viviane Reding, piling into wholesale interconnection fees this time.

Verizon appeals the “Google amendment”.

Telco 2.0 Comment: Cheekily, they claim the open-access clause violates their free speech rights (to violate others’ free speech, presumably). Well, they’ve got to try…
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September 14, 2007

Putting the “service” into Service Delivery Platforms

One of the things keeping us busy right now in preparing the stimulus for the Telco 2.0 brainstorm in October is the practicalities of how operators can turn themselves into platform businesses. A platform business is one that:

  • Makes money without having to define the whole end-user value proposition: that is left to third parties.
  • Is integral and value-adding to those third party products and services, beyond just product distribution or retail.

Operators already have several successful platforms, such as i-mode and premium SMS, where third parties create the content and applications. They need to develop more. The challenge going forwards is threefold:

  • What to open up to 3rd parties, beyond billing functions?
  • How to technically integrate the core real-time functions of telephony and messaging?
  • How to make money?

A key enabling technology of a platform is the Service Delivery Platform (SDP). This is a piece of software that telephony and other real-time applications can run inside. An SDP deals with the nuts and bolts stuff of failover, scalability, and monitoring. It also provides a standardised interface to that application software to the heterogeneous network and IT world beyond. They are complex and expensive to buy and deploy, so it matters if you buy one and how you use it.

However, SDPs are positioned by vendors as a technology sale, and the business model often remains fuzzy. The sales message tends to breathlessly begin “Now you can deploy hundreds of new services in weeks, not years!” Just nobody knows what they are, or how they’ll be sold or supported. (Just go tell customer care you’re launching thirty new services next week, and see what happens. I advise wearing body armour.)

So in this post we review the core ‘Telco 2.0’ business strategies and explore some of the context for SDPs and a platform business strategy.

Examples of platform businesses

Microsoft Windows is one archetypal platform business. You buy Windows, but only because you want to run the applications it supports. Apple’s iTunes is another. They don’t have to do A&R work, or understand anything about the vagaries of musical tastes. The VISA network is a platform for merchant commerce.

I was told the story this week of another example that really drives home the difference between a platform and a product business: Home Depot in the USA. They retail home, car and garden equipment. Yet they don’t carry the inventory risk of the goods on the shelves, or even have to think about how much weedkiller is needed in Minnesota in May. They rent shelf space to the product businesses that make those products, and charge a transaction fee on both sales and returns.

This also happens to align their interests with those of the end user. Don’t think that lawn trimmer does the job? Return it! Home Depot will be delighted to capture the re-stocking fee off the mower maker. They won’t resist making the customer happy. This is a fundamentally different way of making money.

For most operators, it’s time to trim down the product development group (if there’s anyone left), and build a new business division around platform and partner services.

Why share the customer relationship with a third party?

Traditionally operators are expected and encouraged to create end-user services like MMS or video telephony. They recognise, however, that for many reasons this vertically integrated model is dissolving away. So-called “over the top” Internet applications reach the price and performance levels needed without special help from the network.

If telcos really understood user needs, this wouldn’t be a problem. They would be product innovation businesses, like Apple or Microsoft, and would have highly differentiated products. Clearly, this is not the case. It took Apple to come along and remedy the glaring usability failures of voicemail. You get your telephony service from the folk who operate the cell towers and radio network because you have to, not because you want to.

The business model therefore needs to evolve, but most network operators are clinging onto the triple/quadplay offering (fixed voice, video, Internet, mobile). This leaves them with a lot of capex and debt (to build out fibre to support me-too IPTV and high-speed Internet). You then hope your way of offering video and voice service (in a one-size-fits-all package) is exactly the right way. (Are you really, really sure that the users want the TV to pause when the phone rings?) And that same Internet connection ensures they eternally suffer low margins in their voice and video services. No wonder confidence is low in the industry’s future.

Get out of jail cheap?

The answer is to horizontalise. Do fewer things, but better. That leaves five (and a half) core Telco 2.0 business strategies.

  • Product innovation. Where possible and advantageous, operators should indeed opportunistically invest in end-users products and services. This can be via internal or insourced means (e.g. Cyworld at SK Telecom). However, much of the current product development creates considerable cost without compensating revenue: the top footballers are the biggest winners from IPTV.
  • Protection of existing voice and messaging products, aligned to some product innovation to extend the franchise’s lifespan. Business as usual.
  • Platform business, based on partnerships and supply chain.
  • Pipe business, based on scale and price. These may start to merge into other utility and infrastructure businesses over time.
  • Packaging business, based on customer intimacy, that assembles offerings from a variety of sources, is agnostic to technology and suppliers, and works without the network or technology capital asset base of a platform business.

The extra “half” are the various other forms of diversification into adjacent industries, such as into payments and banking, healthcare, home security, etc.

If you can’t stand the heat, then sweat

When you focus, you also sweat your assets far harder. The companies to look to for inspiration are folk like Costco and Ryanair. Their revenue per square foot or per aircraft leave competitors in the dust. Ryanair in particular recognised early on that the plane seat was a loss leader for rebooking fees, baggage overage charges, food, hotels, rental cars, ground transfers, and lotto tickets. IBM mastered the “smorgasbord” approach to business in the 1990s, blending services, hardware and software.

Operators have a wide variety of under-exploited assets, for which the network is just the bait:

  • A mass of user identity, user context and usage data.
  • IT assets like expensive data-mining suites.
  • Tangibles like retail stores, which are woefully short of customer-centric innovation. How come you don’t go to a network operator to buy your home network gear? How come operators are the only retailers who can track goods at the individual items level, with both forwards and reverse logistics, but can’t exploit this?
  • Intangibles, like brands, and established partners and supply chains.

The network can also be worked harder: it often sits idle waiting for an unfortunate roaming mobile customer to start a data session at some outrageous price.

Every one of these is an opportunity for a partner or platform interface. That may be an API, but it could equally be other formats, such as a web site for partners to do business intelligence functions based on service usage, or a weekly spreadsheet emailed out, or a co-marketing arrangement.

Product vs. platform

The Home Depot example we gave earlier shows how product and platform businesses can look confusingly similar. That means operators need to develop a finer sense of when and why to offer product vs. partnering (via a platform approach) vs. pipe. Just because you can develop the product doesn’t mean you should.

Those products that are developed should clearly

  1. extend existing successful product lines (e.g. SMS auto forwarding or reply, premium SMS), or
  2. utilise an asset or capability that only operators can technically or economically offer, when compared to over-the-top players, or
  3. diversify the business outside ( e.g. adverts, mobile payments, etc.).

Aligning investment to assets means reworking the tools and processes that gatekeep the investment and product pipeline. Projected return-on-investment alone is not a strategic criterion, as you end up with dozens of “chase the buck” activities with no synergy. In particular, operators need to understand and model the weaknesses in the Internet and “over the top” business model, and thus the opportunities to partner. Sometimes these are quite subtle.

Building a services platform, not just a portal

Most of the innovation in applications and content will come from 3rd parties. This is well known. Therefore operators need to organise around these platforms that enable outsiders to reach operators’ customers. To date these initiatives (e.g. Vodafone Live!) have tended to fail to meet expectations because of being simultaneously too narrow, too ambitious, and too closed:

  • too narrow in that just a portal and a billable event don’t go nearly far enough to solving the user’s problems, and a far richer platform is needed;
  • too ambitious in trying to fill every possible entertainment and information need rather than focusing on a few ( e.g. navigation, messaging, music) and perfecting them;
  • and too closed in that operators, with few exceptions like DoCoMo’s i-mode, have put up large bizdev and technical barriers that only the biggest partners can overcome.

The glaring omission remains the integration of core voice and messaging into the platform suite. So an SDP is a piece of technology in search of a business model; and the business model can be one of internally driven product innovation, or as an external platform approach to support third party services as well as own-brand ones.

What is a service?

To the end-user, a service is a combination of ALL of the application, content, connectivity, and device; as well as support, sales, payment, etc. Therefore a service delivery platform has to be far more than just a bunch of APIs into network elements and IT systems. It has to support the full lifecycle of the application (retail to replacement), as well as payments and remittances. It’s just as important to offer a usage data mining service that matches the users to market segements as it is to offer purely technical capabilities like location dips.

In short, a business platform, not just a technology platform.

Evolving the service platform offering

The most important part of the platform is delivering the right connectivity and application together. Only a telco can do this. But the ISP access model of selling expensive unlimited Internet access plans isn’t working long-term. This is because:

  • the broadband incentive problem (it’s more profitable to throttle the heavy users than build new capacity),
  • a proliferation of devices means it’s too expensive to users to buy the same Internet access plan over and over, and
  • user confusion at being sold an intermediate factor of production, not something of direct tangible value. (You don’t need to guess the voltage, phase and usage profile of your electricity supply in advance, so why ask the same of users of broadband?)

Thus we need new business models. Indeed, taking a quick peek at our online survey results (you have done it, haven’t you?), I see that over 50% of commercial respondents from fixed networks believe a new business model is needed (i.e. not an ISP model or n-play).

There will be a fragmentation of the broadband product (“slice and dice”) into tiers of quality and various degrees of quantity, as we’ve previously documented here. We already see precedents for this (Sprint Vision, X-Series, Blackberry, Sony Mylo, etc.) The ability to route money will remain critical; putting smart boxes into networks to control sessions and applications, less so.

From gatekeeper to supplier

The operator is in the best place to do this job of managing this services layer. This is because of technology (you get better performance processing the data near the user in the network) and payments (you already have billed them for access, so why not generalise that to any billable event). Furthermore, the average service developer has zero interest in learning about complex technologies like IMS. Operators will have to expose simple, easy to use web services that hide most of the complexity. Application developers can then focus on developing applications, not nuts and bolts enabling technology. Operators need to engage partners like Microsoft, with their Connected Services Framework — and several million developers — to become suppliers to those developers.

The future will be one of thousands of mashup applications, with far fewer mass market horizontal applications. These are going to have to be easy to create. Even simple scenarios like the TV pausing when the phone rings are fraught with complexity: what happens if the TV is turned off after the ringing starts, or what if the phone is participating in a find-me/follow-me service? An application develop will be content to let someone else deal with that part.

Hence there is an opportunity for the “phone company” to act as a supplier to application developers and hide this complexity. The developer may use far simpler web services protocols to configure the desired behaviors, and never touches any of the session control directly. Indeed, we’re already seeing this being taken to its logical conclusion, where business people can create applications, just as data mining and analytics went from requiring specialist programming and database skills to graphically-driven user interfaces.

Part of the business transformation is to create all the support infrastructure to enable this: partner education, recruitment, 24×7 support for your APIs, etc.

What’s the revenue model?

The operator will make the money from charging for access to these APIs, or via the APIs driving the core business metrics of the existing product set (via lower churn, lower cost of acquisition because of a more differentiated product that sells itself, etc.) This is very operator-specific, and varies with local business conditions.

In summary

SDPs can be used to support two different business models: a product business (legacy voice and messaging aligned to new internally-driven product innovation), or a platform approach. A few operators like BT and TeliaSonera are taking the platform approach very seriously and are re-structuring to support it as a business. The critical word is “service”. A true service delivery platform differentiates itself from a mere application server running a bunch of telco APIs. It does this by supporting the full life cycle of the user service — most notably the provisioning and payment for connectivity or content delivery as part of the user proposition.

Brian Levy, the CTO of HP’s CME business, gave it a better name during a panel we moderated this week - “Service Integration Platform”.

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21C Global Summit: A Weird Consensus…

Telco 2.0 was supporting the 21C Global Summit at Blenheim Palace this week. And what did we find?

Well, it’s increasingly clear that our ideas have traction. Everyone who so much as touched on telco business models, or the infrastructure that underlies them, agreed on key points; points that could have been taken from the last few months of this blog or the main texts of Telco 2.0. The challenge now is to fully internalise what these mean within telco organisations and create some action plans to do something about it. This requires stronger leadership - a recurring theme of the event.

For example, Andy Zimmermann of Accenture’s Technology Strategy practice opened the conference pipes on Wednesday morning by explaining the importance of some Ps; portals, partners, and platforms were all there. Another was “plexes”, which rather than being another word for your navel was used to refer to big IT infrastructure. Again, that’s certainly a theme you’d meet in your daily Telco 2.0. Further, Zimmermann cited content-delivery networking, secure control of sensitive data, and payments as crucial functions telcos need to develop.

Not just that, but the means he recommended had a notable Telco 2.0 feel; specifically, telcos needed to work on their service-delivery platforms, which don’t need to be IMS. (See Martin’s post for more on this…)

He wasn’t the only one, either; Ross Fowler, Cisco’s VP in Europe, drew everyone’s attention to the curious way the functions of content providers are converging with those the GSM/UMTS standards world think are the core functions of a telco. For example, they require high-level applications such as video editing and collaboration, policy/authentication functions to control how their output is released - and the indispensable networking infrastructure to haul bits. Ross, by the way, will be going into more detail about this at the Telco 2.0 Executive Brainstorm on the 17th of October.

We’ve often enough pointed out the importance of really good infrastructure to anything online; and the transformation from systems based on huge, dedicated softswitches to Googlised applications spread over herds of commodity servers. Peter Cochrane, one of the biggest brains in the room, got to the nub of the issue when we asked him where telcos’ comparative advantage lies in this evolving marketplace. “Engineering and maintaining life-critical networks”, he said.

Well, Scott McNealy woz ‘ere too, and he said that telcos are Sun’s number 1 market, that he wants to “help the telcos win”, and that Sun promised not to compete on what he calls the essential core of subscriber management. The menace, though, was that “if telcos don’t become destination sites, the destination sites will become telcos.”

The message is coming from a lot of people; telconess itself is becoming much less concentrated, infrastructure is changing, and transactional functions are vital. The killer detail, though, is that literally everyone at the conference said something along these lines….except for the telco executives themselves. If you wanted to know about the problems of activating lots of iPhones, indeed anything about sexy gadgets, shiny video content, or wishing you could just bill Google again - there were plenty of telcos to tel you. But no sign they even noticed there was a problem with their fundamental business model.

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September 10, 2007

Ring! Ring! Monday News Analysis, 10th September 2007

Technology Disruptions

When billing attacks: Vodafone suffers.

Telco 2.0 Comment: They say billing is for people who find operational support subsystems too exciting, but there’s a reason for that; it’s got to work every time, especially if you’re charging for every bit. Because that means every bit has to be kicked and counted through the billing system before you can do anything else with it.

More seriously, Vodafone has been very keen on setting up big, partly outsourced shared-service centres recently. Here’s an example of this going badly wrong. Imagine if they had been charging “by event”…

Digital Product Innovation

Another m-payments attempt.

Telco 2.0 Comment: From the people who brought you triumphs like Simpay - European network operators! Where’s my M-PESA?

Can’t think of anything to do with phones? There’s always surveillance; in this case, it’s intended to improve the quality of TV ratings data.

Telco 2.0 Comment: Having spent all this time and money inventing a new medium, it’s ironic that one of its uses is to improve TV advertising…

Mobile TV comes to South Africa: Vodacom’s MobileTVPlaya.

Telco 2.0 Comment: Mobile TV? In Africa? Surely not…in fact, they’ve taken the very sensible and T2-compliant decision not to have any mobile TV technology and just fill their underutilised GPRS network.

Motorola’s strategy: be boring, consistent, and competent.

Telco 2.0 Comment: Well, yes. It’s the kind of statement that tells you more about how bad things have got than anything else. Apparently they’ve also discovered WiFi.

Vodafone buys into Tele2; wants DSL lines in Italy and Spain.

Telco 2.0 Comment: Who thought the very first alt.telco would end up being part of a really big integrated carrier - but one that started off as a pure mobile operator? Good example that there’s still a long way to go in the cycle of disintermediation, horizontalisation, and reintegration.

Regulation and Digital Politics

Dept. of Justice doesn’t like net neutrality, on free-market grounds.

Telco 2.0 Comment: Indeed. After all, US subscribers mostly have a choice between AT&T, AT&T, and AT&T, or Verizon, Verizon, and Verizon. Or Sprint, Sprint, and Sprint…

Broadband Connectivity

Telefonica: fibre is coming.

Telco 2.0 Comment: As everywhere else, bandwidth is cheap, demand growing, costs shifting from opex to capex. See also here and here: it’s the same under the sea. And they don’t know how to pay for it either.

European voice ARPU down but data ARPU will save the day; sez Analysys.

Telco 2.0 Comment: It’s finally happening…special notice is in order for the fact that they think femtocells might save the voice business too.

Leap and MetroPCS getting together; Leap CFO leaps.

Telco 2.0 Comment: Low margins; higher volume. Especially if you’re stuck with 1800/1900MHz GSM spectrum and therefore almost twice as many cellsites to rent as your competitors.

….and happy 20th birthday, GSM!

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September 6, 2007

Rave Wireless at the Digital Youth Summit

This year’s Telco 2.0 Executive Brainstorm is rushing up at us with telco-shattering force again, and that means it’s also soon going to be time for a ‘Summit’ session focused on the ‘Digital Youth’ market. Pushing on the debate from the last session in March, we’ve invited some interesting people to tackle in more detail the paradox of a market segment that’s neophilic and increasingly rich (in mature markets at least), but is also dramatically turned off by obvious efforts to appeal to it. For example, there’s Raju Rishi, COO and co-founder of US-based company Rave Wireless.

Rave gets around the paradox by primarily doing business with universities and schools, not with the youths themselves; essentially it’s a MVNE (Mobile Virtual Network Enabler) that creates micro-MVNOs for these institutions, buying bulk capacity from whichever carrier suits. The carrier gets a targeted marketing effort to shift bits, and the institution doesn’t just make a turn on the deal, but also gets to chuck out its desk phones without needing to buy a ton of SIP or UMA devices and a huge LAN upgrade. You can do that when you are your own telco.

There are also some interesting new applications that the institution gets to do, which tend to keep students from churning away; as Rishi points out in an interesting article here, SMS alerts are ideally suited to communicating with the students because everyone uses SMS and everyone pays attention to SMS. Campus security, something of a current preoccupation, is a key Rave application.

But there’s a clear risk here; if you either are the “official mobile network”, or just look like it, you could become very unfashionable indeed. Especially if your USP is that you deliver lots of text alerts from The Authorities. Marketers to students regularly underestimate their market; putting a lava lamp and pizza vouchers next to your product will not overcome its failings. Having taken this warning to heart, what can we do more positively?

Another speaker at the event, BT Global Services CIO J.P. Rangaswami, thinks he knows. He argues that we’ve gone from a “garage generation”, when it took months to years to develop software in the proverbial garage, to a “pyjama generation” for whom Web-based tools and powerful scripting languages make it possible to rustle something up in hours. Yet again, it looks like telcos are just going to have to embrace the hackers; we still need an API for telecoms.

In the context of creating new business models for this critical market, the
Digital Youth Summit will also be looking at: social networking (particularly the phenomenon of Facebook), Mobile Internet, Mobile Music, creative access
methods (opportunities from femtocells), and trends in device form factors. The final agenda will be up on the site next week, once we’ve finished briefing the stimulus presenters…

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September 5, 2007

Making Structural Separation Work: Interview with Steve Robertson, CEO, Openreach

Readers of Telco 2.0 are probably well aware that we like the British model of structural separation, where the local loop is controlled by a specially-created company with a duty to provide nondiscriminatory access to all-comers, a lot. This approach helps to mitigate risk across the BT Group and, theoretically at least, liberates the individual units (Retail, Wholesale, Access) to be more innovative and responsive to customer needs (levelling the playing field a little with internet players like Google). (More on the benefits of this here).

Naturally, we jumped at the chance to interview the good people at Openreach, the BT access division. Especially in the light of rumours that BT might be considering a KPN-like deployment of fibre to the street cabinets; which would make the Local Loop Unbundling model Openreach was formed to defend partly obsolete.

Our interview with Steve Robertson, CEO of Openreach, (who will also be a stimulus speaker at the Telco 2.0 Executive Brainstorm in October) is below the fold…

Steve - Sir Christopher Bland, the BT Group Chairman, has recently been reported as suggesting that there might be a deployment of fibre to the street cabinets in the UK. This might be a big change in the firm’s strategy. We’d like to explore more about how Openreach’s product line and business model might evolve in the long run and its impact on the communications market structure.

1. You have described the Openreach model as intended to stimulate investment in infrastructure. Profit margins are tiny and falling across the ISP industry. Yet your balance sheet and cash flow remain strong. How might Openreach help to resolve this apparent contradiction in the health of the different parts of the value chain?

It is Openreach’s responsibility to keep the access network infrastructure healthy and to make sure that it is made available fairly and equally to all Communications Providers - leaving industry free to compete on equal terms. Like any well managed business we monitor our working capital closely to ensure that we use our cash wisely and have good cash flow performance. Openreach is closely regulated and our Return on Capital Employed (ROCE) is monitored by OFCOM to ensure that our financial returns are in line with expectations. So far, I am really encouraged by the results of Openreach’s focus on giving the market every chance of prosperity. Openreach is open to the possibility of fibre to the cabinet, but only where it makes economic sense for the company. Fibre to the cabinet is definitely an option for us, but a decision has not yet been taken.

2. Given the context of falling industry margins, and the shift in ISPs’ cost base from OPEX to CAPEX (as local-loop unbundling, electronics upgrades, and peering replace IPStream and transit), how do you expect Openreach’s business model to evolve?

I don’t agree that industry margins are falling. Following the landmark changes to its structure in 2006, the industry is still redefining itself. How can such a market be easily defined when new, unexpected things are happening every day; for example, players like Sky are taking the bold move of bundling their entire product set? Underpinning the Openreach business model is our fundamental responsibility to look after what was identified as an economic bottleneck and make access to it fair and equal for everyone - this is not going to change, regardless of the environment around us. However, it is clear that there are lots of questions to be resolved over the coming year or so with regards to the future shape of the access network.

3.In five or ten years’ time, how likely do you see these different scenarios: Openreach as a BT division; an independent business, a publicly-owned enterprise (whether classical or Network Rail-type); or something else, for example a company jointly owned by all ISPs?

The priority for Openreach is to deliver a great service and to continue to fulfil our promises made to Ofcom and the industry as part of the Undertakings. Anything, including speculation of this type, which distracts us from this, can only be detrimental to the health of our business and the industry we support.

4. Can you envisage a scenario where BT Group and Openreach might become competitors? Could pressures possibly develop within BT to get its own, competing access network?

Openreach was established to run the access network - it was thought not viable to replicate it and so I can’t envisage a situation where anyone would try to build a second one in the UK - including BT.

5. How do you expect Openreach to fit into BT’s 21CN plans? At what level of the network architecture are Openreach customers who are non-BT likely to get access to it? (DSLAM/MSAN/iNode/router?)
Others within the BT Group are better placed than me to comment on the 21CN plans, but Openreach is a big supplier to the 21CN programme - every customer will be switched from the existing platforms to the 21CN that involves manual jumpering in every case. The 21CN programme has a lot of detailed engagement with customers and I know that there has been some high quality dialogue both through 21Consult and NGNUK ( a href=”http://www.ngnuk.org.uk/”>NGN UK) about the right place for network interconnection and access.

6. [A question on unbundling at layer zero (below the physical layer; the right-of-way and trunking infrastructure).] Openreach’s mission is to preserve access for all-comers to the existing national local loop. What about operators who wish to move on to fibre? Should the concept of open access extend to the dig as well as the installed wire?
I think that this would be unwise. The existing infrastructure recognises where the real economic bottleneck lies, and therefore the boundary is in the right place, in my view. Not to mention the issues that duct unbundling would undoubtedly throw up, for example, space limitations, the risk of first mover advantage, and should that mean that ducts other than Openreach’s would be considered too?

7. As we understand it, the 21CN plans foresee three access methods: xDSL, WiMAX and WLAN. Will these new BT radio access networks be part of Openreach, or parallel to it? If parallel to it, what does this say about BT and the scope of the open-access model?

We see radio access networks as part of the competitive access infrastructure - there are many players, in these markets, most of whom are Openreach customers, including parts of BT which are downstream from Openreach. We see our role as offering fixed access and backhaul propositions. We provide open access under equivalence of input terms to all of our products, access and backhaul. But the real point is that end users want the access methodology they need, depending on what service they want to access, where they are accessing it from and when they’re doing it. This means the availability of a portfolio of access technologies being available to give the customer choice and flexibility. That’s part of the promise of 21CN, although no firm decision has been taken on the overall mix of access technologies.

8. What would be the pros and cons of expanding Openreach’s activities in terms of network reach? For instance, upwards, into the long lines or downwards, into home networking?

To an extent, Openreach already has long lines if you consider our backhaul product set. Home networking is not something we are considering in the short term while we maintain our focus on making the existing infrastructure work as hard as it can for UK plc.

9. Does the open-access model mean that boxes in the home - for example, routers, media centres, external hard drives, and VoIP appliances - are purely a field of competition? Or would the UK be better off with Openreach providing a common home hub platform?

I don’t see Openreach’s role being as a provider of such ubiquitous equipment. The CPE will continue in my view to be an area where differentiation and innovation helps to keep the market healthy and vibrant. Therefore it wouldn’t be appropriate to impose a standardised equipment set in that arena. However, early work on the evaluation of VDSL2 suggests that there will probably be a need to manage the DSLAM and the Modem as a matched pair in an NGA environment with an Ethernet port. That will have implications on network boundaries.

10. Can you envisage your business model including open-access to other network functions, for example content-delivery networking? If so, how might this work?

I can’t envisage this happening in the near future, no.

Thank you very much, and see you in October!

Ed - Next week we’ll publish a televised debate on this topic and talk more about how we think BT Group can take better advantage of its functional separation.

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September 4, 2007

Are you “easy to do business with”?

You know those “life events” that cause your arteries to fur up, and make your hair go thin, grey and limp? I had one the week before last. I moved house. Buyers not signing contracts until the 11th hour, sellers wanting to change moving date at the stroke of midnight as their new home hadn’t quite been built yet (your problem mate, not mine). My stress level was off the scale:

Nigel Tufnel: The numbers all go to eleven. Look, right across the board, eleven, eleven, eleven and…
Marty DiBergi: Oh, I see. And most amps go up to ten?
Nigel Tufnel: Exactly.
Marty DiBergi: Does that mean it’s louder? Is it any louder?
Nigel Tufnel: Well, it’s one louder, isn’t it? It’s not ten. You see, most blokes, you know, will be playing at ten. You’re on ten here, all the way up, all the way up, all the way up, you’re on ten on your guitar. Where can you go from there? Where?
Marty DiBergi: I don’t know.
Nigel Tufnel: Nowhere. Exactly. What we do is, if we need that extra push over the cliff, you know what we do?
Marty DiBergi: Put it up to eleven.
Nigel Tufnel: Eleven. Exactly. One louder.
Marty DiBergi: Why don’t you just make ten louder and make ten be the top number and make that a little louder?
Nigel Tufnel: [pause] These go to eleven.
— Spoof rock documentary Spinal Tap

I’ll leave you to turn 11/10 into a blood pressure reading, but it’s not a healthy one. Anyhow, in the midst of all this, there’s one essential utility you need to seamlessly transfer as you switch properties. Forget stuff like gas and water. I can buy bottled water to drink, skip a shower, eat cold food, and wear an extra pullover. An Internet addict needs broadband.

A while back I experienced a non-functioning sign-up form on a BT website. In the comments and some subsequent email exchanges, BT’s CIO left me with the challenge of how companies like BT can be “easy to do business with”, and I agreed to post my thoughts some day.

I think you can guess where my inspiration might now come from to complete the quest. I’m going to use a little vignette from my own experience to make the point about how a customer-centric organisation thinks and acts.

Moving home, the BT way

Now, if you’re expecting some comical customer service disaster from BT, you’re going to be disappointed. OK, my initial attempt at a change of address on the self-service website met with an internal error, but the real story is that they’re trying really hard but still haven’t really got under the skin of a customer in the midst of moving home.

The telephone process was slick and easy. An IVR option for moving home, no queue, give your account number, new address and moving date, and done. Here’s your new phone number (will they still make you change once 21CN comes onstream?), is there anything else I can help you with, Sir? Oh, and by the way, can we have your mobile number in case we need to get in touch.

A follow-up call to my ISP, and both services are scheduled to move over together. The retail and wholesale sides of BT march in sync.

The big day arrives, we get the key to our new home, and go in. The old occupants are just picking up the last of their belongings on the way out, shedding a few tearful goodbyes. Once we have the place to ourselves, I plug in my landline phone, and call my mobile to check it works.

But that wasn’t on our business process flowchart!

Whoops! That’s not my number. I’m guessing it’s the number of those departing, so I decide to call up BT customer service to see if and when the swap is scheduled to happen.

First problem. Four burly men are hefting all our worldly belongings up from a huge truck to our new apartment. Including, somewhere among the many boxes, some box files with my folder labelled “Phone stuff”. What number do I dial?

I have a vague idea the 150 was the number for customer services. So I dial away, and get a rather strange announcement saying that they’re open from noon til 6pm (I can’t remember the exact details) on Sunday afternoon, and that would be a great time to call. Without listening on, I press the red button. Must have got through to the wrong department. This is Friday afternoon, by Sunday I’ll be in need of anti-anxiety drugs without getting Internet access up and running.

No matter, I do a quick google on my phone for “BT customer service” and after a few dead ends manage to find the “doing business” equivalent of the front door. (Most businesses seem to follow a Brutalist architectural approach and decline to make their entrance obvious.)

Hmmm. Same message, but this time I hold on — “Welcome to BT!”. So they’re busy trying to deflect calls. Onwards we go into the IVR.

Doing business does not equal “buying”

Now, the next bit is so painfully close to being an amazing customer experience, it’s sad to see the gap between ambition and reality.

“We note that this line is scheduled for a house move today. If you would like to speak to someone about this, press press one.”

Wow! Blown away. A few more keypresses, and…

I’m through to BT Retail’s broadband sales unit. Not the people who deal with phone line sales and activations. I explain my situation, get an apology, and am transferred to a queue for a different support department. I’ve already got an ISP, don’t need another one.


What’s that noise? Oops. My cordless phone’s battery is dying. It’s been packed away for a couple of days. I’m in the queue, waiting, waiting, dead.

But they do love me, really

So I give up, as there are too many other things to deal with. Yet just a short while later, my phone vibrates with an incoming SMS:

BT update on [my new number]. Service has now been provided. Please ring 0800 028 1317 between 07.30-22.00 Mon-Sat or 09.00-18.00 Sun if your line is not working.

That mobile number I gave them way back? Seems like they’ve made good use of it. (OK, we won’t laugh at the irony of the message content.) I pick up my (now charged) phone, call my mobile, and get the right caller ID. Plug in DSL modem, and all the right lights come on. I’m in business!

So, what could have been the experience?

From BT’s point of view, the above was a perfectly executed change of address process, with one spurious time-wasting customer call call that probably got allocated to the “other” bucket of reason codes.

From my point of view, it was a worry and frustration I could have done without, simply because of a mis-timed SMS and a dead phone battery.

Now, we’re only looking here at part of the customer experience — the “doing business with BT” part, not “using the service”. And within that, we’re only dissecting one business process — “staying a customer whilst moving house”. So we can’t possibly say how to fix the thousands of business processes a company like BT must maintain.

To fix the customer experience of moving home, they should:

  • Text me early on the day of the move, assuring me it’s all in hand, give me the scheduled switchover time, and here’s their customer service number in case of problems.
  • Also text me with my new number, both in the caller ID and message, making it really easy to add to my mobile address book.
  • Make their IVR understand that there are two parties involved. That means one menu for the person moving in, and another for the person moving out.
  • Ensure zero queue time for callers moving house.
  • Assume callers will use a mobile to call for help, and treat a pre-registered mobile number as equally authentic as one from the landline in question.
  • Work with Google or whoever to make sure search results on PC and mobile Web lead customers to the “way in”.
  • (In my dreams) Replace the dialtone on move day with goodbye and welcome messages, and the former would offer a menu option to either place a call or terminate service so the new occupant can’t call Timbuktu on your account.

The bigger picture: service-oriented organisation, not service-oriented architecture

We’ve written before on how telecom management often insulate themselves from real customers via quantitative surveys and operations metrics. The real way of seeing if an operator like BT is easy to do business with, is to view it from the customer’s perspective. Shockingly, this means contact with real customers, which appears to be a terrible distraction from important emails and meetings.

In over three years at a telco, I spent zero minutes listening in at the call centre, zero minutes working in a retail store, and zero minutes partaking in focus group and usability studies. This is probably typical — indeed, so common it’s the theme of a TV series on how out of touch those are at the top from the shop floor. You only become “easy to do business with” when most middle and upper management have to be exposed to the harmful radiation of the real world outside of the shielded corporate contol capsule. Shouldn’t everybody be out there for a week a year listening to the pain of the customer?

I was really impressed last year when an office-based contact at Tesco said she couldn’t have a meeting in the run-up to Christmas, because they were all busy helping out in stores during the peak period. It’s that kind of top-to-bottom culture of customer contact that’s led them to capture 1/7 of all UK retail sales. You aren’t going to discover that cordless phone battery life is a problem for customers moving house by sitting in a brainstorming session. You have to live their experience, over and over to find out. (And that freephone number? Won’t be part of the user’s standard mobile minute bucket, either.)

There are also organisational and structural changes needed. In this case, a first tier of support for people moving house, whose sole function is optimisation of that process. No internal structural boundaries should be exposed to a customer. Having a dedicated IVR to take you to exactly the wrong person is a nice thought, but I’d have been better off pretending I wasn’t interested in “moving house” (which meant to BT Retail “broadband ISP sales opportunity”.)

Finally, you have to aim high. Not merely to complete the business process, but to provide a truly exceptional experience, and one that tends as much to the customer’s emotional needs as practical business process execution.

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September 3, 2007

Ring! Ring! Monday News Analysis - 3rd September, 2007

This week we look at important stories concerning Product Innovation, Broadband Connectivity, Technology Disruption, Regulation, Partners.

Digital Product Innovation

Nokia is reconceptualising itself; it wants to be an “Internet-driven experience company,” not just a crummy old vendor. To that end, its web presence is being shuffled into a new portal called “Ovi” (it’s Finnish for “door”), which will integrate its new music shop, its Web 2.0 activities (eg Lifeblog), and a rebooted mobile games division. Even N-Gage looks like it might get a new lease of life..

Telco 2.0 Comment: Horizontalisation isn’t just for travel agents and bloggers, y’know. Nokia is probably the keenest of the vendors on trying to shunt the carriers out of the way and get a direct relationship with users; this was only to be expected.

100 million prepaid subs in the Middle East.

Telco 2.0 Comment: Note the surging growth at Iran’s two heavily prepaid networks, Taliya and Irancell (MTN Investcom); contrast the sluggish incumbent MCI. The recipe for emerging markets is still low prices, prepay, credit transfer, SMS, and autonomous distribution. These strategies also work pretty well in Germany too…

China Telecom’s business is hammered by mobile.

Telco 2.0 Comment: It’s not just in the 100% mobile penetration world that the fixed-line business model is sinking fast - it’s also in rural China.

More of a lack of digital product innovation here: Motorola: it’s not getting any better. Market share slides 7.3 per cent in three months

Telco 2.0 Comment: How long before the idea of selling off the handsets division gets refloated? It’s not particularly clear, after all, what Motorola’s strategy is other than hoping for another RAZR-splurge.

Broadband Connectivity

Vodafone UK flips on HSUPA and HSDPA Class 8; pushing data rates towards 1.4Mbits/s uplink and 7.2Mbits/s downlink in selected cells.

Telco 2.0 Comment: It’s a pity their pricing model is designed to discourage you from using it…

BT signs up DSL customers at 2,000 a day.

Telco 2.0 Comment: We told them it would work…

Municipal Wi-Fi: Earthlink zaps 900 employees.

Telco 2.0 Comment: Two huge muni-WLAN projects are left to rot. No clear business model (“It costs too much and there are too few people who will use it”, says a Chicago official), and geek idealism rather than radio-planning; no wonder it doesn’t work.

Samsung gets the contract to build Sprint WiMAX in New York

Telco 2.0 Comment: Can we say it’s a reality yet?

Technology Disruptions

Clap your listening gear on this: Java techies on how their database works on a smartphone.

Telco 2.0 Comment: Is the window of opportunity for telcos to make themselves indispensable for mobile applications development closing? With the rapid growth of storage on mobile devices, they are getting more independent of data stored in the network; peer-to-peer technologies, as well as simpler stuff like RSS, XML, SyncML and Co, can handle synchronisation. If you’ve got multiple gigabytes of storage, and a real database engine like this (or SQLite on the S60 platform), you don’t need to rely on the network operator to store data.

SignalMap is great, says Brough Turner, but why doesn’t it gather objective data?

Telco 2.0 Comment: Good point, Brough, but how many young webdevs really want to replicate telco network optimisation tools? Snark aside, this is an important point; so far, network measurement has been entirely a function that caters to operators, not users. And only T-Mobile has grasped this so far; but they are hardly likely to recommend you go to the competition…

Qualcomm MediaFLO gets a trial in Malaysia. Maxis Comms and Astro TV check out the broadcast possibilities.

Telco 2.0 Comment: It’s been a bad few weeks for Qualcomm, but this is a timely reminder that they still may have a big hit in the mobile TV world, especially among the uncommitted to either the GSM or CDMA camps. That’s if anyone actually watches mobile TV…

Regulation and Digital Politics

Singapore has stronger legal protections for Internet users than… most places, it turns out.

Telco 2.0 Comment: Google says don’t be evil; the reason is that a good reputation is an asset, and only a good reputation with the people who pay counts. After all, there’s no reason to think they won’t just cut you off.

The future of provisioning? More like its medieval past. Comcast declares a fair-use policy and cuts off people who breach it; it’s a pity they don’t say what the policy is..

Telco 2.0 Comment: The customer is evil and must be eliminated, right?

Man fired over GPS-tracking mobile: NYC carpenter accused of sneaking off early.

Telco 2.0 Comment: One thing proponents of the “digital worker” with mobile devices tend to softpedal is that one of its primary uses is to extend managerial monitoring, surveillance, and control. This guy’s case is likely to set a very important legal precedent; he claims he wasn’t told that the free gadgets offered to staff by City Hall were logging his every move.

Partners and Platforms

Ericsson grabs two more managed service contracts…parts supply in Mexico and Deutsche Telekom’s microwave network.

Telco 2.0 Comment: In the future, there’ll be one huge telco for the whole planet and 600 million service/application providers on top of it; and the telco will be Ericsson. Fear of our Swedish future…

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