If telcos don’t issue bills, where does new revenue come from?

Many of you here are working on digitalisation projects but I would urge you to think bigger. You need to think about business model change – with existing customers or into whole new sectors. It isn’t just about product innovation. It’s about company innovation.”
Deborah Sherry
at TM Forum Live!

I really like the way Deborah is thinking (she’s General Manager and Chief Commercial Officer of GE Digital Europe BTW).

On a different, but ultimately similar line of challenger-thinking, Eric Hoving also addressed TM Forum Live! with this statement, “We’ve spent zillions of dollars on BSS but who is in need of a bill? No over-the-top (OTT) company sends a bill and nobody ever uses the data of the billing system. Why do we have a billing system at all?

So, I decided to follow those trains of thought by asking, “If telcos can’t issue bills, from where can they source new revenues? And in turn, will new revenue models drive entirely new telco business models?” Certainly BSS models would change because the revenue sources would change drastically.

Whenever considering different revenue models, I refer back to this great image from Ross Dawson:
Revenue Models

Now let’s break these down into ways OSS might contribute to alternative telco revenues:

  1. Advertising – mass-market advertising is shrinking, in part because mass-markets are becoming more fragmented due to increased choice (eg pay-TV, subscription content services like Netflix, etc). Due to the barrier-to-entry of building layer 1/2/3 physical networks, telcos still control a large subscriber base even if the OTT play has taken control of application (layer 4-7) connectivity. This provides advertisers with a potentially large audience to promote to. Similarly, OSS / BSS hold enough information about subscribers and their usage patterns to provide advertisers with highly targeted promotional material to specific segments
  2. Content – Telcos have long been aware that attractive content drives consumption of communications services to access it. Partnerships with content providers such as sport or movies prevail but OTT has taken significant market share by providing content platforms like YouTube, Netflix, etc. However, that’s only considering consumer content. OSS potentially provide telcos with a machine-to-machine (M2M) content platform, controlling data streams that machines consume. This could be IoT platforms leveraging data feeds to improve their machine learning algorithms and much, much more.
  3. Distribution – Digitalisation has eaten the world largely because of the efficiencies it has brought to distribution of all kinds. The telco world has barely touched the API or NaaS (network as a service) opportunities yet, nor the value fabric or smart contract implications that API / NaaS offer. OSS have a huge part to play in streamlining distribution in unfathomable ways.
  4. Community – Closely linked to point 1, community research data (ie depersonalised versions of the data collected by our OSS) hasn’t been monetised by telcos to anywhere near the extent that OTT players have. Take it a step further and it becomes Data Analytics as a Service (DAaaS)
  5. Events – For a telco, this is probably best leveraged by content and/or platform plays
  6. Partnerships – Digitalisation of the value-chain / supply-chain have introduced huge opportunities for partnerships where third-parties provide the innovation, telcos make it accessible to their subscriber-base and both parties share in the revenues generated. APIs and NaaS again extend on these opportunities to partner
  7. Brand – Closely related to point 1 again
  8. Platform – Telcos own the layer 1-3 platforms but they’ve been usurped by OTT in the L4-7 (application) platforms. Telcos and our / their OSS still have a huge opportunity to apply platform / marketplace thinking to bring value to subscribers. Consider this – almost everyone who buys or sells something subscribes to an L1-3 service from a telco. If the telco can deliver the platforms that bring their subscribers together (ie buyers with sellers), then they have a new revenue vehicle
  9. Merchandising (ie retail) – Selling of products / services / subscriptions is the standard revenue model for traditional telcos. Linked to item 6 above, perhaps more could be made of sell-with or sell-through merchandising with an array of partners. If the merchandising (or their distribution) is digital then OSS and their APIs have a part to play. Could this represent telco’s equivalent of the highly profitable frequent flyer programs that prop up many airlines around the world?
  10. Affiliate – This represents the progression beyond item 1, from the advertising / marketing, to assisting with the closure of a sale by the advertisers. OSS have the potential to monitor click-throughs and conversions from the advertised offers into booked sales. In doing so, they earn the right to affiliate revenues
  11. Classifieds – If telcos can leverage their OSS / BSS into the creation of platforms / marketplaces (item 8), then classified revenues are the logical progression
  12. Leads – In the time of telephony-predominant services, telcos used to dominate revenues of communications services because it was a fantastic mechanism to generate and close leads remotely. Those services connected buyer and seller together but the telcos only received revenues from service usage. They never received any share of a “finders fee” for helping to make a sale. The OTT has become more adept at delivering value from connecting buyers and sellers, from offer creation to marketing to lead generation to customer grooming to selling, delivering to and billing buyers. That’s why I feel the OSS-driven platform play mentioned in point 8 is the “think bigger” opportunity that Deborah Sherry exhorts service providers to chase.

Just one strong caveat on the thinking above and it was again brilliantly articulated by Eric Hoving at TM Forum Live!, “For 20 years we tried to make sense out of data and failed, but Google did it. Stuff is not an asset if you don’t get something out of it. If you aren’t going to do something with it then stop doing it.”

I’d love to hear your alternatives, your most innovative revenue / business model ideas!

PS. Check out this link from Sarah Wray that elaborates brilliantly on Deborah Sherry’s “Think Bigger” speech.

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