This article originally appeared in the Dec. 2011 issue of INTERNET TELEPHONY.
Change is frightening and disruptive. Most organizations resist it – both out of uncertainty and out of fear. Worse, many organizations (e.g.: established vendors, embedded organizations) have a vested interest in the status quo.
Sixty years ago Joseph Shumpeter described the process of “creative destruction” in which change only comes when new creative organizations eclipse, and destroy, old change-resistant organizations. Our goal is to ensure that we adapt to new opportunities, rather than be swept away in the economic forces of change.
For 100 years, our industry has worked on the paradigm of the monthly bill, with metered and itemized usage. Most often, a month’s worth of credit was extended to subscribers who had one telephone company and were expected to remain on subscription until they moved. Most did. Consequently it had to be an after-the-fact, aggregated process.
None of this is technologically required today. In fact, none of this happens in other online industries. For 20 years, in fact, prepaid has been a steadily growing force, with real-time rating and account handling. In most online transactions, advice of charge occurs before a transaction executes – think of Amazon, eBay (News - Alert), hulu, Google, or any other online service provider.
Similarly, most online service providers use real-time processing to personalize content, ads, subscription handling, display rendering (appearance), etc. Our competition has already ditched the monthly subscription billing model and moved to a real-time, interactive, transactional paradigm.
This shift is driven by two forces. First, new services demand – or at least are enhanced by – real-time controls. Second, today’s technology renders it both technically and economically feasible. In fact, if done properly, real-time transactional billing and customer service may be significantly less costly due to reductions in customer service, revenue leakage, bill printing, mailing, processing, etc.
First, let’s look at the drivers for real-time handling. Prepaid began the movement, allowing service to those without established credit, and allowing individuals to have more control over their spending. In some regions this is implemented via post-paid plans that execute real-time controls to avoid bill shock. Credit control is a powerful driver beyond the traditional credit-challenged demographics – when we think about minors, transient users, and occasional users.
But more and more the real driver is a different class of services. Growth is coming not from voice and “dumb” data, but from content, information and commerce services.Video, news, social information and online commerce are more analogous to retail shopping than to long-term subscriptions arrangements. Impulse of convenience buying is the norm – and that cannot be predicated on a multi-month or year relationship. Moreover, content, information and commerce all require other real-time processing. They demand advice of charge (before delivery). They benefit greatly from personalization (such as My Yahoo, Facebook (News - Alert), or even the real-time results of search listings). They often require parental controls (which must be enforced before delivery), subscriptions checks, account balance checks, and device suitability (e.g.: only display content that can be played on your device). In the commerce space, the very nature of the transaction is interactive. Finally, the content market is one built around advertising as an important component of the revenue picture – content is highly indicative of interests, and content is generally unaffordable if not subsidized by advertising. Witness nearly all forms of mass media.
These shifts represent trillions of dollars of gross revenue worldwide – larger, in fact, than the sum-total of all existing voice plus data subscriptions. So the opportunity is large, as is the implicit threat. This threat mostly exists because our industry is accustomed to “bill” and “the subscription”. Certainly we want to maintain long-term, stable consumer relationships, but at the same time, we must recognize that the web has changed consumer actions forever. Real-time credit control and rating is quite cost effective today – in even the lowest value transactions. An example (of many) includes some Asian operators that bill per character SMS on a prepaid, real- time basis.
In summary, we have a perfect storm brewing. It offers opportunity as new services offer new revenues and profit opportunities. It also threatens us with bypass. One of the greatest shifts is one of technology – to real-time, personalized, interactive transactions, with very low levels of labor support. Our history holds us back, as our future beckons. Heed the future.
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Edited by Stefania Viscusi