Telco 2.0™ Research

Summary: In the last 12 months the fundamental question related to the 'two-sided' telecoms market opportunity has changed from 'what is it' to 'how do we do it?'  A new Briefing report (summarised below) describes the key priority areas for implementation. (June 2009, Executive Briefing Service, Telco 2.0 Transformation Stream).

[Members of the Telco 2.0^TM Executive Briefing Subscription Service and the Telco 2.0 Transformation Stream, please see here for the full Briefing report. Non-Members, please see here for how to subscribe, here to buy the individual Briefing report, or email or call +44 (0) 207 247 5003.]

Introduction

The 2-Sided telecoms business model theory has been now been articulated thoroughly (see “The 2-Sided Telecoms Market Opportunity” report), and the theoretical growth opportunity largely accepted by senior strategists, as evidenced by the vote at the November 2008 Telco 2.0™ Executive Brainstorm and again at the May 2009 event in Nice, South of France.

Source: 6th Telco 2.0™ Brainstorm, Nice, May 2009

The key focus of debate is now on ‘how to move forward?’ Based on the output from the May brainstorm (a gathering of over 200 senior strategists from the telecoms, media and technology sectors) the Telco 2.0 Initiative has released a new Executive Briefing report that describes the key areas to focus on, the priorities within them and the key next steps required (short terms and longer term).

The following is an extract describing some of the key strategic issues.

Can telcos develop a successful platform strategy?

In Nice, almost half (48%) of the respondents agreed that it will be possible, but very challenging for telcos to develop a successful platform strategy, owing to the need for the industry to agree appropriate standards and develop new skills. However, one in five were more optimistic, agreeing that “operators have to do this and are in a unique position to seize the opportunity and add value to the wider digital economy.” While the remaining 32% felt that “the retail and wholesale businesses are fundamentally in conflict and service providers will be unwilling to move from a one-sided to two-sided market.”

The Telco 2.0 team’s view is that the way forward is to understand and specify an end-to-end commercial framework for telcos within the two-sided ecosystem. The diagram below summarises this at a high level.

2-Sided Telecoms Business Model: Schematic Architecture

The analysis and brainstorming sessions in Nice focused on 7 important aspects of building a two-sided platform strategy:

1. Open APIs –how to open telco networks to reduce access and/or transaction costs for other retailers.
2. Retail Services 2.0 – how telcos can provide both their own retail services and the B2B platform services that will enable other retailers to sell products and services successfully through their networks.
3. Devices 2.0 – how telcos need to access more of the intelligence in devices and exploit it for their own retail services and two-sided business model strategies.
4. Enterprise Services 2.0 – how telcos’ assets can be used to remove or reduce the barriers other service providers face in interacting with end users.
5. Content (esp. Video) Distribution 2.0 – how telcos are in a position to make money by helping to restore rational behaviour to the market
6. Technical Architecture 2.0– how telcos need to be able to easily access a key untapped asset - customer data
7. Piloting 2.0 – how to succeed and learn quickly.

The key issues and action points in each of these areas are described in the Executive Briefing Report, including an analysis of how current industry initiatives (e.g.s GSMA, TMF, NGMN, MMA, OMTP, OMA initiatives) map against the schematic architecture above.

Key priorities

In terms of strategic industry-wide issues to focus on, the delegates in Nice were asked to choose their top two priorities for the year ahead from a list of options. Below are the results of that vote:

Source: 6th Telco 2.0™ Brainstorm, Nice, May 2009

The top three priorities are collaboration between service providers, understanding the needs of upstream industries, and understanding end-users needs.

1. Collaboration is necessary to create new markets for upstream and downstream customers. This is because an application that addresses only a proportion of customers belonging to only one network is significantly less likely to be attractive and successful than one that can be used by or address anyone (e.g. the impact of SMS interoperability on usage).
2. Understanding the needs of “upstream” industries is critical – to understand their value chains and the pain points that new services can valuably address. This requires insight which is outside of the most traditional Telco’s expertise – deep into the processes of other business that are not necessarily obviously related to communications.
3. The needs of end-users are always important in service design, but in this instance there are two further twists. First, the needs again are not purely about communication and some are therefore outside of the traditional Telco world view. Second, some complex issues of security and privacy can be invoked by new uses of customer data, e.g.s Google Street View, Phorm. These issues can be addressed but not without clear understanding of the users’ needs and wishes and a product / service design that addresses these needs effectively.

The full 40 page report includes:

• An executive summary of key strategic actions
• A description of the overall strategy and key priority actions in each of the 7 focus areas
• Summarised analysis of the key points and debate in each focus area
• How this relates to 2-Sided Telecoms Business Model theory
• An analysis of current Industry initiatives against the schematic architecture

[Members of the Executive Briefing Service, Telco 2.0 Transformation Stream, please see here for the full Briefing report. Non-Members: please see here for how to subscribe, here to buy the individual briefing, or email or call +44 (0) 207 247 5003.]