The inversion of the telephony business model

We are currently doing consulting work on the future of telephony and what future business models might look like. A recurring theme is understanding what the underlying sources of value are in the voice and SMS products that we take for granted. The excerpt below from our report on the future of consumer voice and messaging highlights some of our core ideas and themes.

As telephony becomes a feature of other applications, rather than a service in its own unnecessary right, we expect to see a corresponding inversion in the business model. The graph below compares average per minute wages in the US to average per minute fixed and mobile telephony prices, all rebased to 2006 prices. Ten years ago, it would have made sense to employ a college graduate for an hour if that saved you the cost of a one hour wireless phone call.

vom-wages-chart.png

The graph tells us that the cost of a telephone call is increasingly accounted for in the time of the caller and callee, not in the cost of using the telephone network. Therefore, the opportunity cost of a call that does not end up meeting the objectives of the participants is rising. This suggests there is growing value in preventing unwanted calls, eliminating unnecessary calls that could be automated - perhaps through better presence, improving the comprehension of the caller and callee to avoid strain or repetition, and shortening calls where the goal is to communicate information.

In traditional telephony, access and long distance telephony were scarce resources. AT&T's choice to retain its long distance network, rather than the local loop, when it was broken up, shows how easy it is to become attached to old modes of scarcity and be unable to adapt to new economic models.

As a consequence of people's scarcity of time and attention, we think the business model for telephony will invert over the long term. Rather than money being given to the telephone company at a constant rate during a call, we will see a completely different pattern. This pattern will require an understanding of the objectives of the caller and callee, and the ability to deliver a successful outcome from the user's perspective. Today, a telephone company is rewarded for failure - the call that goes through to voicemail that you immediately terminate. No industry with such misalignments in value can prosper in the long term.

Instead, we expect to see new sources of revenue: First, there will be revenue in managing the rendezvous and conversation process. Communications companies will be rewarded for getting the right people together, at the right time, on the right device.

Second, there will be revenue for assisting transactions during a call. Today, the user experience of interacting with interactive voice recognition systems and call centres is fundamentally broken. It is inefficient, insecure and inconvenient.

Third, there will be revenue from managing the metadata from a call. Just as Google recovers the latent value of hyperlinks as digital social gestures between web pages, a telco will use its social data to drive business processes as well as relationship and community forming activities. Users have invested their most valuable assets, time and money, in making those calls.

There is no guarantee that the telephony companies will be the beneficiaries of these revenue streams. To date, telcos have been lucky that companies such as Skype have also clung to the old model of access as the up-sell from their free voice products. For example, it is not possible to tell if another Skype user is in a call before you initiate a call. Ultimately, the rise of social networking sites will prove a far stiffer challenge as the sites are centred entirely around providing a presence experience, in the widest sense of the word.

This was an excerpt from our research report into new forms of voice & messaging, and how telcos can improve their traditional core product. Click here to find out more.