Telco 2.0™ Research

The Future Of Telecoms And How To Get There

Can Telcos Unlock the Value of their Consumer Data?

Summary: telcos have a significant market opportunity to act as custodians of 'digital personas', giving consumers the power to exploit their own data. This is an extract from a special 100 page report containing expert contributions and detailed analysis on privacy issues, legal and regulatory frameworks, technological solutions, adjacent competition, and including ‘best and next practice’ and scenario analysis, from the 1st Telco 2.0 International Summit on Consumer Data and Privacy. (Special Report, April 2010, Executive Briefing Service)

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The richness of the consumer data that flows through telco networks is far greater than anything Google has. The potential social and economic benefits from mining this 'analytic super-food' are enormous. What is the role of telcos in enabling this and what do they need to get right to realise the opportunity?

Telco Consumer Data is core to many new business model opportunities

Telco 2.0 has analysed a number of opportunities for telcos to develop new 'two-sided' or 'platform' business models that support B2B and B2C processes, and has set out the general theory and strategic approach in the Two-Sided Telecoms Market Opportunity Strategy Report. The use of consumer data to improve operational performance and create the 'Personal Information Economy' is an ongoing theme in the 'User Data and Privacy' research stream and will be a major theme at the 2011 Telco 2.0 Executive Brainstorms in Americas, EMEA, and APAC, and online at Best Practice Live! on 2-3 Feb.

Many of these opportunities reuse telco consumer data in some way, whether directly, e.g. to identify the consumer for the purposes of authenticating a transaction, or indirectly, using individual consumer data to build up anonymised sets of analytical infomation. Yet the diversity and complexity of the information, the consumers' privacy needs, and patchy regulation present potential hurdles to the potential use of the data.

The Challenges of the 'Consumer Data Explosion'

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Source: Telco 2.0

This new 100 page Special Report analyses the provision of consumer data from telcos to other processes and parties, and assesses the key challenges of empowering change in the industry, maintaining appropriate privacy, gaining consumer trust and acceptance, and establishing viable legal and regulatory frameworks, as well as previewing potential technology solutions. It contains expert contributions and detailed analysis on the key issues, including ‘best and next practice’ and scenario analysis, from the 1st Privacy 2.0 International Summit in Boston, February 2010.

The rest of this article comprises an extract of the key findings, a Telco 2.0 analytical framework for consumer data, the detailed contents of the report, how to get it, and a special offer on this plus related analysis. You can also see a further extract of a chapter of this report in the recently published Consumer Data and Privacy 2.0: Give Customers the Power. [Ed. We will also feature more on the potential value and uses of telco consumer data at the 9th Telco 2.0 Brainsrorm in London, April 28-29, 2010.]

- Start of Report Extract -

Report Objectives

  • To identify and clarify the commercial opportunities and risks related to proactively managing consumer data, identity and privacy.
  • To understand how best to align the interests of the key stakeholder groups: consumers, merchants, legislators, tech companies, and telcos.
  • To define the parameters and next steps for the creation of a common international policy and strategy for the telecommunications industry in relation to consumer data governance.

Top Level Findings

There is shared recognition of the potential value of customers' data, and also of the potential risks involved in attempting to monetise it inappropriately:

  • Telcos are in a great position to be the custodians of customer data in the developing ‘Digital Economy'
  • The subject is of significant interest among the world's leading telcos with recognition that the existing ‘one-sided' business model is reaching maturity and that ‘2-sided' business models represents the single biggest opportunity.
  • There is also recognition (cited from recent World Economic Forum) that Telco CEOs fear a ‘3 Mile Island' scenario, where a poor strategy or operation to tackle privacy risks openly, could destroy or retard this nascent information services opportunity for Telcos.  However, to address this, the industry should be much bolder and pro-active in advocating and trialling solutions rather than waiting for others to act.
  • The area is also being targeted by other adjacent industry players such as Google and Facebook, so there is a finite window of opportunity for Telcos. There is also a significant risk of unnecessarily restrictive regulatory intervention driven by concentrated fears of privacy abuse, if not balanced by the understanding of possible benefits to individuals, organisations and the wider economy of functional, fair and legitimate digital business.
  • Overall, while the Telecoms Industry is ‘waking up late' to this opportunity, there is a significant imperative and growing interest, to make up for lost time - and the opportunity needs to be taken now.

(NB. The above is an extract from Report's Executive Summary, and the following is an extract from the opening section of the report, describing an analytical framework for telco consumer data.)

The Commercial and Social Challenges of exploiting Consumer Data in the ‘Digital Economy’

Phil Laidler, Director, Telco 2.0 Initiative, presented an overall perspective on Privacy including a new descriptive and analytical Framework.

Introduction -Telecoms and customer data

Communications service providers have traditionally been very cautious about exploiting their data assets. This is partly because they have not had much need to, partly because of the technical challenges in doing so and partly down to concerns around privacy and security.

In Western Europe and to a lesser extent North America and some advanced Asia-Pac economies, telcos have reached a saturation point in core services: voice and messing revenues are stable or shrinking and set to decline further.

Although broadband services are providing new sources of revenues, these require significant capital investment and challenging returns. Furthermore, broadband access opens the door to new forms of service competition, often from players with broader commercial objectives than taking a slice of telco revenues. This only exacerbates the feared drift into becoming utility providers of “commodity bit pipe”.

Need for a new business model

New value lies in addressing the friction that exists in everyday interactions between businesses and consumers, and between governments and citizens. Typical examples include: authenticating users; market research; targeting promotions; distributing goods and content; collecting payments; and providing customer care. Today, these processes are often slow, inefficient and ineffective. They waste money and affect customer satisfaction.

Collectively, telcos have assets that can address this situation: real-time user data; secure distribution networks; sophisticated payment processing capabilities; trusted brands; a near universal subscriber base; and core voice and messaging products.

To realise a new business model opportunity based on Telco 2.0, these assets must be reorganised. A ‘two-sided’ telecoms market structure is required in which telcos facilitate improved interactions and transactions between people (‘downstream customers’) and organisations (‘upstream customers’). Telcos must continue to attract retail consumers and satisfy their needs, but in addition, they should extend the capabilities of their traditional consumer products to explicitly support enterprise business processes.

The 'Two-Sided' Telecoms Business Model

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Source: Telco 2.0 Customer Data and Privacy Report

To do this, telcos will need to create open and standardised platforms that third-party organisations can plug their enterprise IT and communications systems into, just as they plug into the telephone and internet networks today.

The Telco 2.0 Initiative estimates this opportunity could be worth $375bn of new revenue to telcos in 10 years' time, equivalent to around 20% of total telecoms revenues at that time in mature markets alone. The value to the wider digital economy – industry and consumers – will be many times greater.

There is a sense of urgency. This revenue is not guaranteed and large-scale ‘over the top’ players are also interested in capturing value by re-engineering the value chains of other industries – witness what Google has done with the advertising industry. Operators cannot afford to sit and wait. They must act soon if this opportunity is not to pass them by and this means co-ordinated, cross-industry collaboration to develop the market opportunity. Failure to do this will lead to inevitable decline.

The situation – Personal data explosion

The advent of the digital economy has led to massive growth in the volume of data generated, captured and stored. This is partly because – in more advanced economies at least – we conduct so much more of our life through digital media: work, play, buy, sell, learn, opine, meet, bank, watch, vote, give, protect. It is also because there are many more connected devices to generate and retrieve data, much of it automatically. Finally, the cost of transmitting, storing and then extracting meaning from all this data has fallen dramatically and is set to continue falling according to Nielsen's, Kryder’s and Moore’s Laws respectively.

Consumers and authorities struggle to keep up with the pace of change. Much regulation is an uneven patchwork of sector and geographic rules and policy. Consumers scroll down to click on “I agree” with routine abandon. For most, the practical reality of “notice and consent” is that it achieves neither. This represents a new potential role for telcos.

Telco data: Buried gold

Telecoms operators process vast quantities of data related to their users

Critically, telcos are in a relatively good position to authenticate user identities. Furthermore, they can draw on multiple & rich levels of data to provide increasingly rigorous levels of authentication process. This is key as it provides so much of a secure basis for undertaking other processes.

Very few elements of data held by telcos are unique and most of these are losing their uniqueness (e.g. location). Furthermore, telco data sets are not as complete or accurate as they could be. However, taken together, telcos have an exceptional broad base of data which can be added-to and refined to support a plethora of third-party services.

Telcos have a unique relationship with the consumer and hold the key to helping consumers, organizations and enterprises in all sectors take advantage of the ‘analytic super-food’ flowing across their networks. There is a significant commercial opportunity for telcos to act as trusted guardians of this data, but also significant risks.

Other potential future custodians of our digital personae are retail financial institutions, internet players (Google, Facebook), device manufacturers (Apple, Nokia) and Government. There may be some surprises from unexpected quarters (e.g. credit rating agencies). To succeed they will need to build trust, and deliver value and convenience to customers.

Telco Consumer Data Map

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Source: Telco 2.0 Customer Data and Privacy Report

Making sense of personal data

In seeking to drive the debate for the 1st Privacy 2.0 International Summit in Boston, we have attempted to map out potential consumer data activities along two dimensions: how the data was obtained; and how it was used.

Telco 2.0's Consumer Data Analysis Framework

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Source: Telco 2.0 Customer Data and Privacy Report

Based on categorisation presented at the Telco 2.0 brainstorm in Orlando last year, by Marc Davis of Invention Arts, we have split the sources of personal data into 3 groups: declared by customers, observed, and inferred. This last group includes many lifestyle characteristics, interests, tastes, communication and relationship preferences, attitudes, beliefs and behavioural patterns.

We then consider how the data is used and have split this into four groups: internally by the entity collecting the data; externally for services that do not actually share the data, but make use of it for supporting third party organizations (Google search is an example of this); externally as aggregate, anonymised data that cannot be attributed to an individual; and sharing PII data externally with third parties.

Any given organization looking to exploit customer data will operate across this map at different points in the customer lifecycle, for different business processes and in different ways. They will also operate with varying degrees of customer awareness and varying degrees of implicit or explicit accord. Building consensus across telcos on where and how the industry should operate will be key to meeting the industry’s aspirations.

By using this framework, we hope to bring clarity and understanding to the debate and help to answer the key questions that the conference is looking to address:

  • How can the industry profitably enable upstream players to benefit from consumers’ data that we hold, while still effectively empowering consumers to share/trade their data in an informed, “safe” and “fair” manner?
  • What do we do in each area of the data map, how do we need to do it, both individually and collectively.
- End of Report Extract -

Report Contents

  • The Commercial and Social Challenges of exploiting Consumer Data in the ‘Digital Economy’
  • The framework for Analysing Consumer Data and its uses
  • Stakeholder Problem Statements
  • Understanding the ‘Consumer’ - highlights of global consumer research and eTrust Framework
  • Examples of current ‘Best Practice’ in key areas: Online Identity Management, Regulation and Behavioural Advertising, Google and Disruption, Mobile Data Analytics
  • Examples of ‘Next Practice’: Supporting the ‘Currency’ of the Information Economy, Enabling Multiple IDs, Personal ID Management, Privacy By Design
  • Participant Survey – Challenges and Barriers
  • Moving Forward – Future Scenarios
  • Moving forwards – towards an International Policy and Commercial Strategy
  • Brainstorm responses for scenario 1 - Telco Trustmark
  • Brainstorm responses for scenario 2 - Let the Market Decide
  • Brainstorm responses Scenario X - Telcos do not participate
  • Panel Review of Proposals
  • Next Steps for the telco industry, organizations & individuals
  • Appendix 1 - Group Brainstorm Outputs
  • Appendix 2 – Summit Agenda

To Get the Report

Members of the Telco 2.0 Executive Briefing Subscription Service and the Telco 2.0 Transformation Stream can download the full 100 page report in PDF format here. Non-Members, please see here for how to subscribe, here to buy a single user license for for £995, and here to buy a license for up to 5 people for £1,450. Corporate-wide licenses are also available - please email contact@telco2.net or call +44 (0) 207 247 5003.

[NB There will be more on the value and uses of consumer data at the 9th Telco 2.0 Brainsrorm in London, April 28-29, 2010.]

Special Offer

We reommend that non-member readers looking for a comprehensive overview of new Telco Business Models enabling advertising and marketing also consider the Telco 2.0 Briefing report Mobile Advertising and Marketing: Text-based Local Search Use Case and the special report  Mobile Advertising and Marketing: Operator and Market Growth Strategies 2010. Each report is available individually for single, group and corporate users, and a also in a package of all three reports at a 33% discount - £1,900 for a single user and £2,900 for all three reports for 5 users. Please email contact@telco2.net or call +44 (0) 207 247 5003 for more on these packages and interest in corporate-wide licenses.