February 4, 2014 | Written by: Anthony Behan
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For many years now, we have been watching the relentless march of Internet and over the top services companies, as they have built brands and businesses, around content and advertising, and telecommunications companies have continued to provide the infrastructure upon which their success has been based. The telco industry can’t really complain, of course, as all of this activity has maintained consistent and growing demand for its core products – connectivity, and bandwidth. Despite margin pressures and commoditization, telecommunications remains a strong business, generating cash and retaining regulatory protection.
There are tremendous opportunities for growth in the Digital Services domain, and as over the top service providers become more comprehensive in their offerings, more and more value is shifting away from the telco. Take the MVNO proposition, for example. While historically we have seen MVNOs as either low-cost or brand plays, with varying degrees of success, we are beginning to see in China and Europe some MVNO plays that are actually more about other services than connectivity and bandwidth. Even in the US, the Amazon Kindle (effectively a global MVNO) represents a model where connectivity and bandwidth is almost entirely transparent.
What is happening, in effect, is that connectivity and bandwidth are becoming transparent, being pushed into the background. No one really wants Gigabits, cell towers and an absence of jitter; people want Facebook and movies and ebooks. The natural evolution of the industry is towards providing these kinds of services. And this makes telco more of a B2B provider, a wholesaler, than ever before, and if we think there’s pressure on margin now, that makes things a whole lot worse.
What Does a Digital Service Provider Look Like?
The question then becomes how do telcos become digital service providers? Many telcos who I speak to would say that they are already, in fact, Digital Service Providers, or DSPs. But if we think of the characteristics of DSPs, perhaps it’s not entirely true. DSPs are always digital first in terms of channel, and often exclusively digital. There may be a call center, but it’s buried, and tiny, and often only for business partners; consumers almost never call. They don’t have retail stores. They have active online forums, social channels, and user discussions that they sometimes facilitate. If I am a DSP consumer, I can fix my problem by Googling it.
DSPs have no great big billing monolith at the heart of their business; their business is, in effect, a distributed commerce platform. Charging and settlement, when it eventually happens, is just another customer engagement, and it’s done in a streamlined, simple way. Rate plans, and the product catalogue, are not massive, complex, and overburdened with historical models that three people in Kansas still insist on buying, forty years after it was sunset. DSPs often give services away for free. The cost of operations – per subscriber – is tiny.
DSPs operate open platforms. Third parties access their platform through open, secure APIs, either to buy stuff, or to sell stuff. Developers, and partners, are everything to them. DSPs have fail-fast development models, and their product time to market is measured in days. DSPs measure and automatically analyse everything – absolutely everything. It’s analytics by design.
So How Do We Get To There From Here?
Now, that’s all well and good for a start-up with three people in someone’s garage, but for a 10,000 person strong telco with decades of legacy and a revenue base to protect, that kind of turnaround doesn’t happen overnight. This is true. But there are principles of design and development that can be adopted to manage the establishment of DSP capability that can ultimately become the core platform. Here are three things to consider first:
- Real-time rating, charging and integrated policy management is a bunch of telco technology jargon, but it’s pivotal in the transformation. It forms the active intersection between the physical network and the business. Aspects such as scalability, flexibility and openness are important.
- Ensuring a world class digital front office capability will incrementally drive consumer interactions onto the digital channel. Allowing subscribers to customize and personalize their own experience on the web or mobile, including basic functions like ordering and billing enquiries, but also broadening the experience in terms of interactions, advertising and shopping, will make for a richer, more immersive customer experience.
- Deploying analytics everywhere, and not just in silos, to analyse, understand, and automate business processes across the enterprise will yield counter-intuitive insights, deep customer awareness, and opportunities that were not possible before.
Ultimately, there is a challenge in telecommunications to change the mind-set and culture from being a utility service provider to becoming a genuine digital competitor. The utility model for the most part remains a successful, cash-generating business, and that creates resistance to change. But the challengers are coming, and becoming a Digital Service Provider will offer new revenue sources, new competitiveness, and new businesses for the telecommunications industry to explore.
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