New Telecoms Business Model: some 'A-Ha' moments
We've been presenting the concept of the 'two-sided telecoms business model' to numerous parties over the last few weeks - boards and corporate strategy teams at large telcos in Europe and N.America, internet leaders in Silicon Valley, CEOs of mobile operators in emerging markets, CTO gatherings, equity researchers in investment banks, public policy lobby groups, and officers of large trade assocations. We've found that there are certain parts of the presentation that we might call 'A-Ha' moments. An 'A-Ha' moment has nothing to do with the 1980s Danish pop group, but refers to some key slides which grab the attention.
We've captured these below, then picked out some highlights of our the Telco 2.0 event in April to show how we're looking to expand on these concepts to help answer the number one question we get asked at the moment: "How do we move forward from here...?" Here's the first 'A-Ha' slide which wakes up those getting too excited about mobile broadband:
There's a real live example of this with the BBC iPlayer, which is hurting fixed ISPs in the UK since it launched two and half months ago. This slide helps to explain it:
Of course it's early days so far: on mobile, we're only just starting to sell 3G data as a mass market phenomenon, and those corporate laptops aren't all hammering on video and P2P yet; the BBC example is new, online video is still mostly low-res and therefore lowish bandwidth; and internet video is still generally lacking a path to the TV set, which is when the problem really gets bad.
Nevertheless we suggest a 'new business model' is needed to address the fundamental issue - technical fixes alone won't work. But what does that mean? Let's look at the current business model. It tends to reach its limits in competitive, saturated and/or price-sensitive markets:
So, why not expand our horizons and look at more sophisticated distribution services for digital goods: connecting end-users with 3rd party digital services...and getting paid by the 3rd party for doing so:
As described earlier this week, telcos have many valuable assets (that companies like Google envy), the most important being the data and information that flows through their networks. There are challenges to take advantage of this (described here), but if we classify them appropriately it will help us decide which would benefit from new industry wide standards to expose and exploit them and which can be done by individual operators locally:
So, we can now start to see more revenue sources, which tie in with telcos core capabilities:
And here's a (very high level) example of how it might work:
(Here's a more detailed example).
Crunching a lot of numbers and projecting forward, this could result in a very attractive growth opportunity:
But the first steps on the way to achieving this growth is to quantify the opportunities and benefits for the upstream partners, the 3rd parties, who increasingly rely on digital channels but who also experience significant friction in exploiting them. How can the telco insert itself effectively between 3rd parties and end users and add value in so doing?
That, essentially, is the in-depth research we've been running recently. We'll be presenting summaries of the key numbers at our event in April to stimulate the debate (event participants get a choice of one of these reports for free as part of their entry fee).
Also stimulating the debate will be senior execs representing large Wholesale operations (critical enabler of the 2-sided business model, and where lots of the growth will come from), Mobile Internet programmes, Quad play cable operators, social networking sites, large internet platforms, the advertising industry, the banking industry, handset manufacturers, developers specialising in 'mash-ups', the traditional vendor community, public policy and investor groups. (More here).
Finally we'll describe a framework for how these new business models work in practice, and how to answer the question 'What next...?':