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‘Two-Sided’ Telecoms Business Models - Hunger for Adoption Now

We are currently analysing the huge amount of material generated by the participants at the 5th Telco 2.0 Executive Brainstorm last week - both qualitative and quantitative and captured by our ‘Mindshare’ method. We will share all of this with the participants next week, and highlights of it with readers of this blog over the next few weeks.

But in the meantime, below are the results of two important votes with the 250 senior execs at the event which demonstrate the growth in the perceived relative importance of the ‘two-sided’ telecoms business model versus the existing telecoms business model. It’s useful to compare this with some of the output from the 4th Telco 2.0 event in April 2008 (described here) and then to reflect on the changes in attitude by forward thinking people in the industry in the last six months alone. One of our associates Dean Bubley, a seasoned industry analyst who runs Disruptive Analysis, summed this up very well in a note he sent us this morning, which we’ve published in full below. Here’s the first chart:

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Strategies, left to right: M&A in existing geographies, expand into Internet markets, expand into IT, expand into adjacent telephony markets, expand into entertainment, expand into emerging markets, enhance retail, enhance new wholesale distribution, offer more retail ICT, new VAS platform

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What are these charts telling us? Dean Bubley’s thoughts:

I’ve been to several of the Telco 2.0 Brainstorm events over the past two years. Last week’s was a bit different - the mood had changed from curiosity to hunger, perhaps overlaid with the slightest hint of fear. The survey responses from the event tell the story: especially with the current economic situation, telecoms operators are aware that the prospects of future growth are dim, especially if they continue to push today’s strategies towards their inevitable commoditisation.

One thing I find particularly striking is the apparent desire to “leapfrog” existing retail/wholesale business models (even new, Telco 2.0-enhanced ones) and jump straight to the much more complex and less-defined B2B2C VAS propositions.

This ties in with a huge industry obsession with opening up APIs, and finding value in the nooks and crannies of “network capabilities” and repositories of customer data. By comparison, simply extending the “retail” model to third party services, or selling wholesale (and unbranded) capacity to be embedded other voice/data/video/mobile players seems a little bland.

I agree that the really advanced VAS services have huge long-term appeal, but I fear that it will take a while to get the specifications, standards, business models and management philosophies in place - particularly given the likely conservatism of management teams over the next 18 months. In the shorter term, I think there is a lot more that can be done with improved retailing and wholesaling.

It is notable, for example, that Hutchison 3’s INQ handset division has announced its “FaceBook phone” this morning. Using the handset as an advanced retail storefront is not a new concept - but previous heavy-handed approaches have been more about forcing users to confront never-ending exhortations to download paid content.

The 3/INQ approach is different - it’s about getting average users to sign up for data plans, and potentially getting a stream of dedicated users who might generate even more revenue in future. The iPhone AppStore is another prime example of improved retailing in telecoms.

The wholesale side is trickier. Most mobile operators still guard their brands religiously. But third-party pays, or “sponsored” data is a must, on both handsets and other devices [Ed. - this concept was presented at the event by Andrew Bud - more to come]. Not everyone will want to sign up for a 24 month HSDPA modem subscription for laptops, while most prepaid handset subscribers still lack data access as they don’t understand the costs.

There need to be options for other people to pick up the tab - governments could sponsor free mobile data for people to check social services websites, conference organisers and cafĂ© owners could offer “free 3G” the same way they currently offer “free WiFi”. Broadcasters could send users “free” mobile TV shows, supported by adverts in the same fashion as terrestrial TV broadcasts.

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