Created by
Platinum Partners
Gold Partners
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Based on landmark research
Two-Sided Telecoms Markets -
The $375 billion growth opportunity
For a detailed description of this concept see the Telco 2.0™ blog: Two-sided markets: what are they? and Two-sided markets: why do they matter? The slideshow below gives a highlevel introduction.
Telco 2.0 - Frequently Asked Questions
Below, Simon Torrance, CEO of the Telco 2.0 initiative, answers some questions about what 'Telco 2.0' is and its role in the future of the communications industry.
1. What is Telco 2.0, and is there any connection to Web 2.0?
Telco 2.0 refers to the future telecom business model. Rather than endlessly trying to squeeze more revenue out of a telco’s end users directly, it focuses on growing revenues by building capabilities that support third parties that wish to interact with the telco user base. The potential market opportunity for telcos is significant: $375bn per annum revenue growth in 10 year’s time, in mature markets alone. A 20-30% growth on current market projections.
It requires changes to retail and wholesale and new B2B Value Added Services (VAS) such as advertising or payments. Wholesale becomes the new growth engine, as telcos enable third parties to package up minutes, messages and megabytes with their own products and services.
The VAS are new, and unlike the B2B wholesale part (which focused on selling network capacity), the core assets are the data you hold on the customer, and the ability to reach that customer and interact with them via many different channels (email, SMS, IPTV, web portal, etc.). The overall model resembles that of a logistics company. FedEx sells its service to the public (retail), but most of its money comes from moving stuff around as a B2B activity using multiple modes of transport (wholesale), and the margins come from offering VAS such as customs and tax management.
Telco 2.0 has only an informal connection to Web 2.0. Tim O'Reilly states that hard-to-replicate customer data is the new 'Intel inside', and telcos have large quantities of under-exploited data. It also reflects the Web 2.0 phenomenon of allowing third parties to 'mashup' the user interface.
By giving up control of some elements of call routing, voicemail, etc. telcos can generate more traffic, value and revenue. Both Web 2.0 and Telco 2.0 models require APIs to enable longer value chains to emerge. We are currently in the process of defining a commercial model for telco APIs - something that it lacking today.
2. Please briefly outline what the two-sided business model is in practice.
Two-sided (or multi-sided) business models provide platforms through which two sides can interact or transact. The purpose of the platform is to lower costs and build scale. A good example is a shopping center, which has to attract both shops and shoppers. By placing the right type of each together, it increases the number of buyers and sellers, and through shared resources lowers costs to both. eBay is a good online example.
3. What are the key challenges that an operator faces in adopting the two-sided business model?
The first is psychological - committing to change. The old model has been very successful for a very long time.
Then, there are many operational challenges. Existing BSS systems generally aren't set up for "white label" or wholesale operations. The data is often fragmented, and there may be no means of tracking metadata such as "the user has given permission for us to use this for purpose X". The platform can generate huge volumes of transactions. Consider how much more infrastructure an ISP needs to select the right ad to show each user on every web page based on their browsing history and demographics.
There is also an organizational challenge, both internal and external. Internally there is a poor alignment between current structures and rewards, and those needed to support a 'platform' type of business. Externally there is a need for greater collaboration both within the telecoms industry, as well as between industries.
4. What steps should an operator take to evolve to the two-sided business model? Are any operators actually doing this yet?
As a first step, we would encourage each operator to engage one friendly "upstream" customer (e.g. a retailer, bank, government agency) to trial one B2B VAS and demonstrate that market demand exists and the services are implementable.
As one of many examples, Turkcell has deployed many B2B VAS examples, from identity to payments to advertising. Indeed, their impressive "Chief VAS Officer", Cenk Serdar, is effectively the deputy CEO, which shows the importance they attach to this. Telus has some interesting experiments going on with point of sale terminals and wholesale data. And Verizon's ODI program has a very "Telco 2.0" feel to it. BT is making some very interesting moves around customer interaction and integration of web and telephony with their purchase of Ribbit.
5. What can operators learn from the retail industry?
Telcos have traditionally tried to find customers to fit their four core products: voice, messaging, video and data. Many of these customers that are being targeted with advertising and marketing money will have explicitly rejected the telco or churned away.
Retailers do the opposite, and hunt for propositions to fit to their customer base. Because telcos have adopted such rigorously closed networks and service architectures in the past, it became inevitable that those with good ideas want to go "over the top" and take no advantage of the assets of the telco: payments, distribution, provisioning, revenue protection, customer care, etc.
A few telcos are really getting to grips with the need for a large partner ecosystem, for example Telenor with its Content Provider Access (CPA) program, or even Verizon with its ODI platform. This provides a solid foundation for selling a wide range of digital lifestyle products and services, all of which will increasingly integrate well with the basic triple/quad play offer.
6. How does Telco 2.0 enrich the customer experience?
As with Web 2.0, it is vital for telcos to understand that they are not in the business of engineering end user experiences. There are just too many segments and varying customer needs in the world for one-size-fits-all communications and entertainment services.