Telco 2.0 - Exploring Multisided Models

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Telco 2.0 – Exploring 2 Sided Markets Why Telco’s are up in arms against Google, Skype, Apple

Presenter: Vishal

Agenda

Telco Markets, 1 Sided Market

Telco 1.0 Characteristics and Operational View

Define 2 Sided Market, Example – Google, ???

Define 2-Sided Telco, Telco2.0

Telco 2.0 Platform Offerings – Distribution, B2B B2C VAS

Telco’s Latent Data Exploits

Why Google Envies Operators, Matured Telco’s Status

Emergence of Web 2.0, The Long Tail Phenomenon

Telco Markets

Wholesale

Retail

Traditional Market

Value moves from Left to Right

Growth beyond some point usually leads to diminishing returns. Profit contribution is maximum when Marginal Cost = Marginal Revenue

Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR

Suppliers

(wholesale) Create

Price

(Retail)

Advertise or Promote

Move Distribute Service Customers

Value Chain Upstream Downstream

Cost Revenue

Source: STL Partners, Telco2.0

Upstream Downstream

Suppliers = Cost End User = Revenue

Products (Partners)

Products (Own)

Telco

Content, Apps, Devices

Network & Termination

Interconnect & Storage

Consumers

SMEs

Enterprises

Multi-Nationals

Traditional Telco

Telco 1.0 Characteristics

Mass Market

Regular Business Model - Per minute, Flat rate

Applications - Voice, SMS

Technologies - Intelligent Networks, SS7

Telco 1.5

Late 90’s to earlier in decade

Applications - Content, VAS

Technologies - JAIN - Java API for Networks

Revenue - Via Walled Gardens, Closed Systems

Telco 1.0 Operational View

Millions in CAPEX and OPEX Silo'd services delivery, Technology stack built ground-up Many integration touch-points, High maintenance

Limited flexibility Oriented towards single services, Resource-intensive Limited new deployments per year

Long development cycles Time-to-market, and profit, for delivering new services

Emergence of Web 2.0

Architecture of Participation - engaged users, 3C’s - Community, Collaboration, Conversations

Continuous Improvement - fail fast, Be in Beta..

Data transformability- Remixabilty of data (RSS) Data is the King

Web as a Platform - Services not packaged Software

Cost effective scalability

Users in control of UI -Rich UI (AJAX)

Over 100 million users access Facebook from a mobile device

More than the combined population of Spain and Argentina - Facebook.com

Telephony Interactions

Calls

Conversations

Relationships

Communities

Tel

eph

on

y S

oci

al

Net

wo

rks

Rendezvous


Vo

lum

e

Telco 1.0 vs Web 2.0

Services

Platform

Core Network

Access Network

Licenses

Revenue Share

Market Growth

Telco Web 2.0

Low Rapid

Web2.0 - Inverse Revenue Model, higher profits, higher growth

Telco’s provide customer access and who owns them -???

Revenues: The First 9 Years

$-

$2

$4

$6

$8

$10

$12

$14

$16

$18

1 2 3 4 5 6 7 8 9

Google, $17b

Vodafone, $3b

Bill

ion

s

Years After Inception Source: STL Partners, Telco2.0

Six Times larger in 9 yrs in comparison to largest mobile operator

Telco1.0 Service Delivery

Equipment Vendor

Telco

Consumer Service

Provider

Source: DSP IP , Telco2.0

Future Service Delivery

Service Provider

Consumer

Telco Equipment

Vendor


Future Service Delivery

Consumer


Telco

Dumb pipe for service providers -???

The Long Tail

Abundance

Tail

Head

Source: The Long Tail, Chris Anderson

Po

pu

lari

ty

Services/Products

Where is the opportunity -???

New Market Place

The Long Tail

Tel

co 1

.0

Telco 2.0 Tail

Head


Po

pu

lari

ty

Services/Products

Telco 1.5

Telco Markets

Wholesale

Retail

2 - Sided

2 Sided Market

Value moves in both directions, Left to Right and Right to Left

Marginal Revenue and Profit contribution is always increasing as user base grows Network effect leads to economies of scale

Customers Customers

Value Chain

Upstream Downstream

Revenue

Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR

Revenue

PLATFORM

Example 2 Sided Market

Low Cost Per Transaction

Google Platform

Free Product for End Users

(subsidised)

Cheap Adverting for Brands

Massive Investment in Google Platform


Google Indexes 20B+ pages

Other 2 Sided Markets


Company Industry Type Platform Type

Google Web Search/Advertising Audience Builder

Amazon (ebay, Trading Post)

E-Retailer Matchmaker

Monster (Seek) Recruitment Matchmaker

iTunes Music Matchmaker

Betfair Gambling (betting) Matchmaker

AP Moller-Maersk Logistics Cost Sharing


Upstream Customers Downstream Customers

Telco Platform

Developers, Content Owners

Retailers, Utilities

Government

Millions of Customers

Thousand of Segments (SME’s

Enterprises, Public Sector)

Brand Advertisers

Media, Finance

Telco - Retail


2 Sided Telco

B2B2C, VAS

Distribution

The Long Tail

Expanded Offerings


Rev

enu

e

Subscribers

Managed Services, Unified Comm, Cloud (SAAS, IAAS)

New Services

Voice Hosting Broad- band

Service Bundles

Telco1.0 - carriers controlled the network as well as the user experiences

Telco2.0 - carriers open up the network as well as the innovation

Telco 2.0

Market - many niche markets

Services - Personalised

Technologies - Telco web services, (open API - SOA), meshups, blended

Revenue - Open Gardens, Connect to 3rd parties (mesh up)

Telco2.0 Platform Offerings

Distribution

B2BB2C, VAS

Distribution

Data – iPad, Kindle

B2B B2C, VAS

Advertising via upstream customers, if downside customer clicks, operators wont participate in it, but will report it

Telco's have many Valuable but Latent Data Assets

MY PERSONAL DATA

MY STUFF MY IDENTIFIERS

MY INTERACTIONS

MY RELATIONSHIPS

MY CONTEXT

MY DEVICES

Name

Address Gender

Profile Preferences

SIM SoftSIM

Serial Number Device details

Location Presence

On/Off Roaming

Pictures Videos

Calendar Address Book

Bank School

Friends Workplace

Browsing History

.mobi domains QR Codes

MY CREDIT

Bad debt Demographics

Average balance

Number SIP address

IP Address Email


B2B B2C, VAS Offerings

Order Fulfilment - Offline

Order Fulfilment - Online (Electronic

content) Billing & Payments

Identity, Authentication &

Security

Advertising, Marketing Services

& Business Intelligence

e-Commerce Sales

Customer Support



Downstream Customers

Millions of Customers

Thousand of Segments

(SME’s Enterprises,

Public Sector)


Identity, Auth & Security

Ch

ann

el Partners C

han

nel

Par

tner

s

Mktg, Adv & BI

e-Comm Sales

Order Fulfill Offline

Order Fulfill Online

Billing & Payments

Customer Care

APIs

Device

New Commercial Models

Network

IT

Voice & Mesgng

Data

Broad Band

Access

Personal

Devices

Identifiers

Context

Content

Interactions

Relationships

Financials

B2B Platform Services

Enablers Capabilities

or Process

Customer &

Network Data

Core Products (for Distribution

Platform)

Upstream Customers

Telco 2.0 Platform

The needs of and interfaces

with other industries has

been on neglect side.

Some activity

has been done with developers

by individual operators (by MMA, GSMA and individual operators) and with Media (by

MEF and others)

PayPal - Billing & Payments


0.68

1.00

1.40

1.84

2004 2005 2006 2007

Paypal Rev($ Billions)

Customer and Merchant data never leaves Paypal

Merchant Consumer

Google Envies Operators

Scale around communications and billing


Scale around retail sales and customer care

Data - lots & lots of data, Limited Knowledge of customer

MY PERSONAL DATA

MY STUFF MY IDENTIFIERS

MY INTERACTIONS

MY RELATIONSHIPS

MY CONTEXT

MY DEVICES

MY CREDIT

Weak!!

Matured Telco's

Source: 2005 MIT Sloan Center For Information Systems Research

Business

SilosStandardised

TechnologyOptimised

Core

Business

Modularity

Glo

ba

l Fle

xib

ility

Architecture Maturity

Lo

ca

l Fle

xib

ility

Hig

h F

lex

ibil

ity

Lo

w F

lex

ibil

ity

Summary

Telco’s traditional business model is under threat

Innovation by digital companies like Skype driving Telco’s to re-invent

Multi sided model on a Digital platforms has a lot of promise

Telcos’ are well positioned to leverage Multi sided model but time is running out

Questions