The Telco 2.0 'Business Model Map': Part Four, Action stations
In this final instalment on our Telco 2.0 Business Model Map we'll look into some of the consequences for network operators. You'll want to read our introduction, explanation and map timeline before reading this article. We're going to stick with the ten-year-out map just for sake of typographical clarity, but the points apply to the industry evolution at any stage on the way.
The opportunity isn't where you think it is
The received wisdom in telcoland is that bundling a triple/quad/n-play is the route to a profitable future. We're less convinced. A few media owners control the blockbuster content (and the rest is on YouTube); telephony -- even with feature add-ons -- is coming under margin pressure on both fixed and mobile; and the broadband offering just sucks up capital without giving a good return (unless you've got a weak regulator and great lawyers).
We think the biggest opportunity lies in a different quadrant, where the apps are less tied into the network ("idiot savant pipe", rather than "dumb pipe") -- but the billing and value-based pricing remain in place.
What operators need to do is to break up the broadband business model, horizontally and vertically:
- Horizontally break it into tiers: free (ad-funded), subload (e.g. backups), standard best-effort, priority and full "QoS assured".
- Vertically slice it so it can be packaged with devices or services as "postage and packing included".
This service-funded connectivity is crucial. Today's broadband model is a user experience disaster for customers, particularly wireless ones. Users have no idea what speeds they need, how much it's costing them in metered usage, and suffer bill shock when they sometimes find out. They need a single price, all-inclusive. This is not going to displace Internet access, but complement it.
The line passes through the IMS/QoS bubble; we'd see IMS being used here as a capacity reservation system of otherwise dump-pipe point-to-point links, but not as a session routing and management service (as with telephone calls).
Keep some of the pie rather than lose all the pie
The various additional strategies in the bottom right help stretch the options for a "pipe++" play that takes the basic broadband offering and packages it in different ways. The "platform" strategy opens up the closed voice, messaging and entertainment platforms to outside innovation. "Protection" is about cost elimination and optimising the segmentation and pricing of the low-innovation legacy products.
What do you know about your customers?
The ability to perpetuate value-based pricing is going to keep telcos in the loop. Being able to slice up the offering and precision-price and package it will be crucial to bringing all kinds of internal and external innovation to market.
Telcos with a 360° view of the customer and their full spectrum of behaviour are going to be in a strong position.
Left-field is on the left
Finally, some of the more creative business models lie to the left.
BT are already busy getting attachment rights on government buildings in the UK in return for promising to build pubic-service networks. Wireless spectrum auctions in the US are seeing similar trends with hybrid public safety and private use networks. Community-centric networking is coming of age.
The absence of cell towers, call detail records and obvious billing points is likely to scare many operators off from the Personal Area Networking ('PAN') space. The lockdown of Bluetooth and Wi-Fi -- mostly by US wireless operators -- suggests a deep lack of ideas on how to approach this space. Most human interaction is face-to-face, not on the phone. Billions of new interactive, smart devices are going to be deployed in homes, cars and offices, and not every radio needs to be connected to the Internet. Until our personal devices can interact more fully over personal scales, we'll be stuck with autistic technology. Someone's going to get really rich here, and it probably isn't you or me.
Finally we end with 'Bottom-Up' networking initiatives. FON and Iliad are the current poster-children for this, but you can bet there will be more entrants -- such as BT. New models will emerge that don't require fresh hardware, but open up what's already installed. Femtocells will be deployed with new business models that reward those who create the network and have paying users roam onto your privately supplied connectivity. It's an inevitable trend of de-centralisation of management control and network planning -- one long-ago started with affiliate partners for build-out of US networks and growing with every Wi-Fi enabled home and office.
Over to you...
We've had a lot of fun putting together the Telco 2.0 Business Model Map. We'd love to hear your feedback: does it make sense, has it changed your outlook, what do you like and dislike, where are the gaps, and how can we improve it? And if you're feeling really lost without a map, you can always get in touch.
Editors Note: We will be presenting these concepts and discussing them in detail at the Telco 2.0 Industry Brainstorm, 27-29 March, London. Details here.