In 2011 we’ve really been struck by the ‘can do’ attitude of companies in the Middle East and Asia Pacific regions towards Telco 2.0 strategies, and their desire to leapfrog legacy (Western) business models and technologies. This was highlighted at the New Digital Economics & CSG APAC Executive Brainstorm in Singapore, as were increasing similarities between APAC region business model challenges with those in Europe and America. (December 2011, Executive Briefing Service, Transformation Stream.)

Below is a preview of the first section of analysis from the Brainstorm covering core Telco 2.0 strategies. Further analysis (on Mobile Broadband, Mobile Money, Customer Experience, Digital Entertainment, Apps & HTML5, and 'Dealing with the Disruptors'), will be published in the coming weeks for members of the Telco 2.0 Executive Briefing service and for event participants. Non-members can subscribe here or for other enquiries, please email or call +44 (0) 207 247 5003.

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Introduction

The New Digital Economics Executive Brainstorm and CSG APAC Executive Forum, 30th November – 1st December 2011, was held at the Capella Resort, Singapore, and explored the nature of the fast changing ‘digital economy’ and telcos’ strategic options and tactical opportunities to respond to it.

The two day interactive event enabled 100 specially-invited senior executives from across the communications, media, payments, internet and technology sectors to focus on strategies that accelerate new growth opportunities and business model innovation.

It used STL Partners’ unique ‘Mindshare’ interactive format to help participants walk away with actionable ideas for new business growth. This involved cutting edge market analysis from STL Partners and the Telco 2.0 Initiative, case studies and use cases from CSGI, round table discussions, panel debates and interactive voting using on-site collaborative technology. It also included an Innovation Showcase to bring to life some of the concepts under discussion.

The aim was to facilitate the exchange of best practices, experiences, strategies, business approaches, challenges and visions within the theme of Accelerating New Growth Opportunities in Telecoms, Media & Technology. The Brainstorm was sponsored and co-hosted by CSG International.

Support for Telco 2.0 Strategies

84% of APAC participants believed that ‘Telco 2.0’ strategies – leveraging assets to create new B2B and B2B2C services and more sustainable business models (see Telco 2.0 Strategy: New Growth needs New Metrics) - were either already important or would soon be important to their organisation (see Figure 1 – Senior management attitudes to Telco 2.0 Strategies).

Figure 1 – Senior management attitudes to Telco 2.0 Strategies

Delegates also voted on the likely success of two key Telco 2.0 strategies (see Figure 2 – APAC and EMEA views on ‘Telco 2.0 Happy Pipe’ and ‘Telco 2.0 Full Services Strategies’):

1. Telco 2.0 ‘Happy Pipe’ Strategies – which create the most efficient bit-transport network, and make the characteristics of the network appropriate for the services that run on it, generating new revenues from 3rd parties in so doing (see Mobile, Fixed and Wholesale Broadband Business Models). 
2. Telco 2.0 ‘Full Service’ Strategies – which create more sophisticated platforms for ‘two-sided’ business models (see The Roadmap to New Telco 2.0 Business Models).

Figure 2 – APAC and EMEA views on ‘Telco 2.0 Happy Pipe’ and ‘Telco 2.0 Full Services Strategies’

The need for new business models

The challenges facing operators in the region are very similar to those faced in EMEA and the Americas, with a wide concern for flat-lining revenues in developed and emerging economies, which the majority of attendees represented.

Figure 3 – Pressures on the core business model

Investors still eye telco innovation with some suspicion

Telcos have become popular stocks for investors recently, with their considerable cash flows and good dividends, although investors are wary of telcos’ when they start to discuss innovation for fear that it will diminish returns.
Investors understandably want telcos to raise data prices, reduce costs, and re-organise for maximum agility and ability to enable others. Telco 2.0 agrees with these themes, but believes telcos can go further and do better making these changes in such a way that they enable new business models.

Evidence of progress

We believe that 2011 has been a watershed year for Telco 2.0 business model innovation, although the progress we’ve seen has not always been exactly how we envisaged back in 2006. Key differences are that many of the innovative ‘two-sided’ type business models we see in operation are:

• more complex and subtle than the archetypal merchant – consumer model exemplified by Google;
• have short life-cycles and evolve quickly into new iterations;
• and many are currently used to increase the relevance and appeal of telcos to their customers rather than generate large new revenue streams at this stage. It remains early days for operators seeking such new revenue sources players in developing markets, such as Safaricom with M-Pesa, have had most success. This situation looks set to continue.

Next steps

Telco 2.0 / STL Partners will:

• Develop a programme to work with investors and the broader industry ecosystem to raise the profile and perceived value of creating new business models, including an index to measure the relative performance of individual operators in developing new value sources and biz models;
• Continue to analyse, catalyse and quantify the value of Telco 2.0 innovations in the global market;
• Publish an updated Strategy Report in 2012 to articulate the key strategies needed to manage Messaging and Voice products to ‘end of life’ of PSTN, encompassing VOIP and VoLTE strategies;
• Continue to champion and develop the value of Personal Data and data analytics, both as a means to improve current performance, and as an enabler for the new Personal Information Economy;
• Expound and develop the key themes with operators:investing in, driving, and managing innovation in operators; developing the right strategic focus (Telco 2.0 Happy Pipe or full Telco 2.0 Services strategies); offering commercial terms that enable ecosystems of 3rd party innovators.

The rest of this report, to be published next week, summarises the findings and next steps resulting from the Brainstorm, covering:

• Mobile Broadband Strategies, including an overview of innovation in APAC and lessons from EMEA and the Americas;
• Mobile Payments – will Asia be the global HQ of Digital Money?
• Customer Experience – the growing importance of data analytics and personal data;
• Digital Entertainment – the pressures on the business model in the APAC region, and the viability of different potential solutions;
• Mobile Apps and HTML5 – an analysis of the potential impact of HTML5 as an app-like, cross-platform service;
• Google, Apple, Facebook – an analysis of the ‘Great Game’ - the battle for control of the digital economy between the main online players and the telcos.

Non-members can subscribe here or for other enquiries, please email / call +44 (0) 207 247 5003.