What a busy industry
we work in. The range of hot topics keep surfacing like cloud services,
smart phones, net neutrality, mobile app stores and over-the-top
services as well as continued buzz from LTE and WiMax keeps on coming.
Of course, these are increasingly facets of the same thing, which has
to do with emerging mobile broadband and how the technology is
unlocking whole new markets.
Probably the biggest single thing
that the iPhone has done over the past couple of years is to give us a
tangible glimpse of what the future might hold. Not so long ago, people
debated “so if we provide all of this bandwidth, what are we ever going
to do with it?” Not any more; the iPhone and other emerging smart
phones give you an insight into the huge range of things you could do
with mobile broadband. And we’re beginning to see the problem as not so
much filling empty pipes but getting enough bandwidth out there fast
enough to satisfy demand.
It’s not just the creativity of the
85,000 plus apps that are available; it’s the level of integration
between them (and hopefully the underlying networks too). For example,
take Shazam, the application that lets you discover what that song on
the radio is, order it through iTunes and then play it on your phone:
it’s so much cooler than trying to hum it to some geek in a record
store! Mobile broadband creates an almost unlimited set of
opportunities for people to deliver goods and services – which are not
necessarily new – in an entirely different way.
The rock in the
pond with mobile broadband is that it drives a totally different set of
thinking, business models, relationships and ultimately money from the
mobile voice and messaging world. The fixed Internet has pioneered a
rethink on different business models where services are generally free
at the point of use. So Google, Facebook and many other useful services
cost nothing for us to join and use for as long as we want. But in
reality, there’s no such thing as a free lunch; it’s of course the
sponsor or advertiser who is footing the bill.
These new
business models evolved in parallel with the growth of fixed broadband
Internet connections and for a while at least, everyone, including the
communications providers, seemed happy with plenty of new revenues and
relatively little new cost as Internet services piggybacked on existing
voice infrastructure. At least until the tipping point where copper/
DSL has to give way to fiber and the cost of infrastructure is way out
of line with potential returns. Cue government handouts, net neutrality
debates et al.
So mobile broadband providers can see what’s
coming. And for them, their networks are so tightly engineered that
there’s no piggyback play here – just more billions to spend on new
spectrum, 4G base stations and massively fatter backhaul networks. So
there’s no wonder that there is intensive interest in new business
models, new services and how the money will flow around.
Over the Top
There continues to be a lot of talk about so-called “over-the-top”
services, where companies use existing networks to get to their
customers. If you’re riding on top of someone else’s infrastructure,
the cost of playing with new business models and ideas is very low -
you don’t have to invest millions of dollars and hope it works.
That
feeling of being somehow robbed is fairly prevalent in the telecom
industry, but actually the feeling exists across the service value
chain – many players, especially the content folks, feel that it’s
their assets that are leveraging new markets for other people, and
somehow it’s not fair. So everyone feels they are under threat from
the next guy in the value chain, and everyone is fearful and suspicious
of everyone else and their motives.
Of course the key here is
collaboration as well as innovation. And you have to admit that while
the communications industry remains very innovative at the technology
level, it’s not exactly flush with great new ideas at the service
level, especially compared to the likes of Apple, Google and Amazon.
Michael
Porter once penned a seminal business book on core competencies that
basically says that you need to know what you’re good at and what
you’re not – leverage the one and minimize dependency on the other. So
while I’m not saying that it’s impossible for the communications sector
to outgun Apple, Google, Facebook, et al, I’m saying it’s unlikely. But
that doesn’t mean that communications companies can’t play to their
strengths. They have enormous financial muscle, huge customer bases,
unparalleled ability to run five 9s services across hugely complex
infrastructure and are chock full of really smart people. But in
reality, they’ve spent 100 years enabling people to communicate with
each other but leaving it up to their customers as to what to actually
say on a call. So what they’re not good at is getting inside the skin
of a customer and working out the kind of services they might want to
use.
One of their core competencies is enabling and
adding value to services that other people can figure out the actual
user purpose. And that’s the way I think they should engage in the
brave new world of app stores and smart new mobile broadband services.
Social Networking: The Next Generation
One idea that seems to be a great opportunity is to leverage mobile
social networking. But how can communications companies make money out
of it – isn’t Facebook just another over-the-top application? Well, the
interesting thing about Facebook – and why it’s winning the social
networking war over MySpace and other rivals – is not necessarily
because it’s cooler or better than everyone else; it’s because social
networking seems to resolve down to being a natural monopoly.
Basically, if all your buddies are on Facebook, why would you consider
another site? People tend to flock to the most popular site, and then
it’s near impossible to peel them away even if your service is 10 times
better.
And
that’s how the communications industry can leverage new revenues: by
tapping into the concept that if everybody wants to be on the same
social network, why not be on the same communications network? Not much
appeal to people to do that if every mobile or fixed network just
gives them vanilla connectivity, but if the service provider enables a
richer user experience by adding interesting new capabilities that help
bind the group of friends together tighter than Facebook alone can,
then the communications player can start to reap some benefits.
These
capabilities might simply be a sort of “Facebook Friends & Family”
arrangement, where a group of people could get a better rate as part of
a named group. But it could go a lot further than that. Unlocking
features like location services into Facebook applications so that
friends who are physically near each other can meet up; providing
enhanced click-to-talk and messaging services over and above that
provided by Facebook itself; conference calling, enhanced voice,
click-to-talk facilities that actually work and so on. The idea would
be to grow affinity groups that are as loyal to the communications
provider as they are to their social networking provider.
Why would this be good? Because customer loyalty drops straight to the bottom line. As TM Forum reported in its latest Insights Research Report
on Customer Experience Management, small shifts in customer loyalty can
have big impacts on profitability. Loyal customers don’t need tempting
with expensive offers to win them back, and they are your best
salesperson, recommending your service. And what better to have ever
expanding groups of friends telling each other that if they switched to
using Facebook on your network, they would get a great rate and extra
goodies thrown in.
To make this work properly, mobile
providers and social networking market leaders would need to go beyond
arm’s length partners and really team up. The service provider gets
‘sticky’ revenues and improved profitability, and the social networking
partner would instantly broaden and diversify their user base.
Seizing Opportunities
There’s an old theory that everyone on the planet is connected by only
6 degrees of separation among them; that’s to say you are only 6
friends away from every one of the 6.75 billion (and rising) people in
the world. That’s some social network to play for! Not all of these
people are using smart phones, but within 2-3 years that number will be
5.5 billion, and the price point for phones with decent browsing
capabilities will be very common.
If
service providers aren’t quick to grab onto new business models and
start monetizing them, they may get overrun by the over-the-top guys
who find ways of circumventing them and leaving them to pick up the
pieces.
There are lots of other areas where service providers
can be enablers. They’re very good at billing and settlements; very
good at things like security and authentication and so on. Not every
over-the-top application provider is, so by providing application
players with more than just bit transport and sharing the revenue
(whether or not it’s the end customer who’s paying), there’s a good
role for the service provider once they stop thinking of the content
and application guys as freeloaders and the enemy. By thinking of them
as partners and providing things that they have real competencies in,
they can all start to make money – and really capitalize on the mobile
broadband revolution!