Telco 2.0 Event: Digital Home
Below is a summary of the output from the Digital Home brainstorm at March's Telco 2.0 event. We'll be pushing forward the debate over the next few months, in preparation for the follow-on brainstorm on 18th October in London.
- What customers want from the "Digital Home"
- Key Issues and Technologies
- Case Studies / New Concepts
- Sources of value for Telcos
- Conclusions and Next Steps
2.1 What do customers want from the Digital Home? Do we/they really know?
Jacques Recourdon, VP of Marketing Vision at France Telecom, Matteo Gatta, VP of Strategic Planning & Projects at Belgacom and Pierre Yves Le Berre, VP at Comverse spoke. Some of the most interesting take-aways were:
Jacques Recourdon - When asked how well telcos (including France Telecom/Orange) really understood their customers needs today in the Digital Home market, he gave a rating of 5/10. He is leading a programme to undertake much more sophisticated consumer research, building on his experience from the Consumer Packaged Goods industry. We'll ask him to come back and tell us about it in October...
Matteo Gatta showed that the Digital Home is more than just broadband, broadcast and broad backsides on couches - security, privacy, other media management (eg photos), health, frailcare, education, teleworking etc are all part of the Digital Home "space". He revealed results of recent Belgacom market research showing which were most interesting to householders. BelgacomTV is seen as the key 'foot in the door' of the digital home (see below for more discussion on TV).
Pierre-Yves Le Berre talked about the move to the networked, visual home and new modes of communications, entertainment and social interaction. He also talked about the "Digital Home on the Go" - the extension of the home while you are out and about, and the shift in consumer purchase, from "logical" to "intuitive" buying and investing in tools for self expression (being an 'active player' in something they want to be part of) rather than being a mere user. He made two very important points we need to bear in mind: 1.) Users need more control over the threat of intrusion to really trust these services, 2.) Users by and large like to own their services, not rent them.
Responding to this stimulus, delegates gave a good mix of feeback using the event's collaborative technology. Here's some of the most pertinent:
Do you honestly believe that Telcos can stretch their brand to the content space to be perceived by the consumer as a credible content competitor (outside of communications content)?
Can telcos really control the experience in a world where users already go online to experience offerings from WWW players? Why shouldn't Orange just be an access-only company?
We need to get away from specific solutions like home energy management, and move towards creating an environment which facilitates the customer's journey to discovering value.
2.2 Key issues and technologies - Collaboration and Open Source are key?
Fernando Calvo, who investigates Digital Home Services for Telefonica R&D, gave a super paper on the trends in technology maturity over the whole Digital Home space - hhis reference technical architecture stimulated much debate (we'll be coming back to it in a future blog post). His main message was that a significant number of key technologies will be fully mature by 2008/9 - we must start working out how to use them now! A big thank you to Fernando for making a special effort to produce some unique material for us.
Gabriele Elia, Head of Broadcast Innovation at Telecom Italia, showed the problems and lessons learned from existing IPTV implementations, and the threat/opportunity from Web TV and P2P based approaches. He said the business model for IPTV, as it currently exists today, at least in Italy, was broken for a combination of end user, internal telco and technical reasons. He outlined some new business models for IPTV - among them the creation of a shared network platform for multiple IPTV service providers to deliver multiple services to multiple customer groups across multiple geographies.
Marty Algire, VP of Platform and Products at Radialpoint gave the first "disruptor" talk, discussing the opportunity for telcos to 'neutralise' the threat from the web portals and search companies (Google/Yahoo/MSN). He noted that the two pillars of the Telco 2.0 world, viz (i) Partnerships and 3rd party open plays, and (ii) Customer-centric multi-service provisioning, are in some ways mutually incompatible unless services are truly open systems. Otherwise, plugging in is hard to do. As he pointed out, there is no real "developer network" for Telco services, and it won't appear without an open culture and, perhaps, open source at the application layer. Since the event, Marty's done a great 'guest post' on this blog, here.
Some comments from delegates:
How long does it typically take to go from Proof of Concept to general available product in Telefonica? In my experience it takes 3 years minimum
The Telecom Italia IPTV shared Platform model seems similar to BT Wholesale vision, and rather different to BT Vision. Is this the future for telcos - work with competitors as well as compete with them?
Isn't it easier for the content player to give the content to Joost, Babelgum for worldwide distribution.
In human history, advances in thinking are typically driven by reaction to challenge/threat (war for example) - should the telco industry rally round the 'perception' of threat (from Google, MS et al) in an effort to put aside internal industry differences to get our collective act together (before its too late) ?
2.3 Case Studies/New Concepts - Just get out and try!
Pearce Connolly, with perhaps the best job title in telco is "VP of Football" at Telenor. He talked about their use of the good old 'Football TV Rights Gambit', and the direct - and indirect benefits. A real "aha!" is that in an interactive world, the chatter about football is more important than the football itself in terms of customer loyalty. He also made a good point that Telcos shouldn't analyse their way into new media, at some point they just have to go with their belief.
His belief was: "You change your car, you change your mobile, you might even change your wife, but you never change your football team!" Football allows Telenor to test, for the first time, this content across all channels - MobileTV, WebTV, PayTV, Online, Mobile. And in so doing, it enhances the telco's brand image as something more 'cool 'n' fun'.
Edward Roberts, a Director at Asset House talked about the importance of the metadata and the service data as part of the customer's "digital product management". We'd agree....it's a subtle point, too often lost, but the data about the services is often more important than the service. You can ready more about what Edward's doing to support BT Vision here.
Andy Tiller, VP of Marketing at ip.access, talked about Femtocells and the use of these very localised mobile cells as an alternative to WiFi. Interesting points are that about 30% of mobile calls are made from home, and about 35% of mobile TV is consumed in the home - mainly in the bedroom and lounge apparently! Andy explains more about the opportunities for mobile operators to encroach into the home market on our blog here.
A comments from delegates:
Great that Telenor have shown how to brand build and create community and communication with football. The Telco 2.0 question is how do you enable this for someone else - Coca Cola sponsoring music and creating a community around this, say?
2.4 Sources of Value for telcos in the 'Digital Home' - Business Models before Technology
Stuart Collingwood, VP Europe for SlingMedia showed how Slingbox, as a disruptive play, created value by "productising" a customer need to watch the TV they wanted, where they wanted it - elsewhere in the house, in another house, even another country. Should the telcos bother to innovate in the consumer electronics side of this market when entrepreneurs with plenty of VC money will beat them to it every time? SlingMedia is releasing a slew of other products that help make 3G more relevant (SlingProjector, SlingPlayer, SlingCatcher - look them up!), but their speed of service innovation is a marked contrast to that of the telcos. Is it even worth competing?
Sadly, Gerry O'Sullivan, Director of Products at BSkyB couldn't make the event at the last minute. He was going to discuss how BSkyB sees the Digital Home from the point of view of satellite media and as an ISP broadband service, and how they are thinking of integrating these services. It would be have been interesting as Satellite is often forgotten as a key player in the Digital Home. Next time...
Our Analyst-in-Residence, Alan Patrick, an independent consultant with Broadsight and an associate of the Telco 2.0 team, stepped in to describe where value can be found, and who is looking for it.
He pointed out that it's a fairly standard and predictable - and thus highly priced - strategic play to try and creep up and down the 'Digital Home' value chain and try to own more of it. However, the last 10 years has shown that playing in a small but useful emerging vertical segment - and doing it really well - can bring substantial value as well.
Relevant 'emerging vertical segments' could be found at the intersection of a.) different sectors - like 'Security', 'Health', 'Home Automation' - with b.) different functions - like Identity / Intimacy management, Security, Metadata/Search (eg Directories, EPG, stats), Social Networks, Interactivity, as well as Billing, OSS, and Provisioning - and c.) different service types - eg. Integration, tidying up some of the "digital mess".
Tied to this is Alan's other main point that the "Convergence" people talk about is not just technology, it's also about business models. Media advertising-based models and dotcom "grow at all costs" are as valid in the Convergence as traditional Telco subscription based models. The key is, like SlingMedia, to be quick off the blocks. An opportunity (cf. Jacques Recourdon and Pearce Connolly) and, of course, a threat to telcos...
Considering all of the above and all the superb input and feedback from participants during the brainstorming (I'm afraid the full verbatim transcript of the brainstorming is availabe to participants only), there seemed to be 3 big narratives bubbling up:
1. The Digital Home is far, far bigger than just phones, IPTV and Home Entertainment, and connecting it all up creates far greater added value than just delivering TV and Telephony over new pipes. (A sub-trend is that part of the Digital Home is extensible and mobile).
2. The overall "system" has to be easy for the customer to use - easy to adopt, adapt and adjust. The current "digital mess" is a barrier, though the emerging maturity of a large number of core technologies presents a huge potential opportunity for Telcos, especially in their ability to provide platforms for themselves and others.
3. The Convergence is about business models as much as (if not more than) about technology and services - and this will be a challenge for Telcos that they must address. (Watch this space for more on this topic, but see here in meantime).
In addition, in the comments and discussions during the brainstorm another interesting narrative emerged: in this early stage of a new market, Innovation is key, and that means a.) the ability to solve point problems not entire systemic solutions, b.) to try small new services, c.) to move quickly, and d.) to have enough belief to be unafraid of playing in others' turf - just as they are playing in Telco turf. As delegates said in the interactive debate:
"The telco industry needs to become MUCH less resistant to change - this is an industry that takes years to adopt new ideas. In the digital home environment (which is by definition a consumer environment) this will mean that telcos (and industry that supports it) will always be behind the curve. Sling is a classic example - this will mean telcos will miss the market more often than not."
"Start looking at opportunities on extending our core capabilities (what can we bring to the content provider and other partners, rather than what they can bring to us)."
"Start letting exploratory projects run themselves rather than letting the voice business 'elephant' judge the new projects as 'not moving the needle'. Perhaps we need 10 small projects rather than 1 big one."
"Start realizing the value of customer data. It's not all about vertically integrated VAS!"
"We should do more intelligent market research!!!! (intelligent = qualitative, non-traditional e.g. lead user workshop, empathic design, user clinics, information acceleration)."
The Telco 2.0 team will be exploring these issues more over the coming months, and will be running another industry brainstorm on this topic on 18th October in London at the next Telco 2.0 event.