Investment criteria to fight Internet players

The Associated Press reports:

Online Age Verification May Prove Complex

At MySpace.com and many other popular online hangouts, a 30-something woman can celebrate her Sweet 16 over and over with just a click of the mouse. A 12-year-old can quickly mature to meet the sites' minimum age requirements, generally 14, while an adult looking to chat with teens can virtually shed several years.

It's no secret that many of the Internet companies struggle to contain fraud and misuse of services. This story highlights three things important to developing a Telco 2.0 business.

Firstly, user identity is a critical component. There is a wealth of literature on the subject of self-issued and conferred identifiers. Readers interested in the details should make themselves familiar with the Laws of Identity created by Microsoft identity guru Kim Cameron. What matters in terms of dollars and cents is:

  • What do we know about this customer that they might find difficult to express themselves? An example might be the nature of their social network, culled from call detail records.
  • What data has the customer given us that, even if it turns out to be false, is at least valid in the sense of being entered correctly and makes sense (no "30th February" birth dates)?
  • What do we know about this customer that can be proven to be true to some degree? Think: credit checks, copper cables into their premises validating their address, email addresses that have been clicked on.

Services which employ stronger forms of identity are harder for Internet players to replicate. When a customer engages in an operator-provided service, they are effectively putting some identity collateral at risk: get your device or service terminated, or even in the worst case go to court or jail.

Just ask eBay or Verisign if you want to know how profitable building a strong identity business can be. "This person is a child" or "this person is an adult" are simple to state, but expensive to verify.

Today, operators have trouble husbanding these assets. Internal revenue protection needs ensure a reasonably high degree of data quality, but active management is often weak.

Secondly, operators have suites of assets for collecting and managing these identity assets. Call centres, ATMs outlets, retail stores, partners, and so on. A father can come into a store to provision a service for his children and proffer identity of his and their age. For MySpace.com, that's a serious competitive challenge if you can make your environment safer and more trustworthy. Nothing will be entirely safe -- adults will use phones provisioned to children -- but there's clearly a comparative advantage.

Finally, the criteria needed for product and project go-ahead need to reflect the new reality. Voice and messaging revenues are still fat and happy, but the amount of attention and traffic given to Internet-based alternatives grows all the time. Every project and product needs to be scored against its "Internet sustainability", using criteria such as "Does this product leverage our advantage in valid and verifiable customer identity assets?".

Where products are lacking, they need to be reinforced. For example, accumulating data about customer behaviour that in turn improves service helps to reduce churn. If you throw the data away, you can't go back and get it. When someone dials for directory assistance, don't just send them an SMS; offer to add the address to their network address book. Allow them to easily keep, browse and search their full message and call history. And so on.

Rather than asking "how much cash can we subtract from the user by identifying the value of the bits flowing through the pipe", the real question is "how much value can we add to the traffic on our network from our non-network assets?"