Tomorrow’s Revenues: The New Rules

By Grant Lenahan

This year’s edition of Futurecom (LatAm’s largest telco show, held in São Paulo, Brazil) provided yet again a good perspective on how that dynamic marketplace is evolving as it transitions to the NGN. One of the hot topics discussed at the show was NP (Number Portability), or the mechanism that allows fixed and mobile subscribers to preserve their telephone numbers when changing service providers, physical locations or types of service.

In Brazil, the first stage of NP (as mandated by the local regulator Anatel) went into effect at the end of August 2008. Brazil represents the second largest implementation after the US, benefitting more than 170 million Brazilian fixed and mobile In this column I’ll focus on how to make money.

Good, I knew you’d all like the topic ‹grin›.

But it’s true. In this column I plan to kick off a seven-part series that looks at how we, as an industry, will make money on IMS and other “Next Generation” Networks (NGN). Oh, and on today’s networks too. Remember my favorite economist — Willie Sutton. Today’s networks are where the subscribers are, and, therefore, where the money is. While today’s networks may be where the money is, tomorrow’s services are where the money will come from, and tomorrow’s IMS and NGN networks will be vastly better at delivering them.

In the meantime, I’m concerned that we — as an industry — can’t see the forest for all the trees that are being hyped. Charging, Online Charging, Advertising, Content, Commerce and myriad supporting technologies are being talked about as if they were independent opportunities. They aren’t. Advertising, for example, is closely linked to both content and to Charging — after all, it is just one of several sources of revenues.

So let’s back up, sweep aside the hype, and see the big picture. Then we can figure out, together, how to get there. I’d like to start with a very few, rough-order-of-magnitude facts, courtesy of PriceWaterhouseCooper, the Organization for Economic Co-operation and Development (OECD), Gartner and Morgan Stanley. The global mobile market is roughly $750B. The Media and Entertainment market, which includes content, gaming and advertising, is $2.2 trillion — three times larger. The e/m-commerce opportunity is hard to measure exactly, but is larger still — and growing rapidly. I won’t go into detail here, but much of this data is available in presentation format in my recent presentation at the TM Forum’s Management World Americas, at www.telcordia.com. The bottom line is that there is more money, available yet untapped, to our industry than we make today. The questions are, “What percentage of those markets can be captured by Service Providers?” and “How?” (See the three illustrations accompanying this column.)

Many of the above-mentioned opportunities are hyped, without caveat. Yet the caveats are many. Communication Service Providers (CSPs) have no God-given right to any of these revenues. They must earn market share by providing a value proposition that is superior to existing channels for music, games, video, goods, and advertising. Similarly, in any two-sided value proposition, CSPs must also attract (and retain) consumers to their channels, and encourage them to participate in non-traditional plans. This requires that the consumers’ buying experiences be superior — via some combination of better quality, convenience, value, security, and user experience.

Therein lies the essence of the change our industry must undergo: from a one-sided business case to a two-sided one. From a vertically integrated service offering to being part of a larger, multi-party value chain. Thinking this way changes the question from, “Can I succeed with advertising?” to “How does advertising fit into a content delivery value chain?” and “How can my network intelligence [sometimes via IMS and NGNs] make this experience better for both the consumer and the merchant?”

I won’t try to answer these questions here. Rather I will lay out an agenda to address several inter-related topics over the next 12 months. Wherever possible, I’ll also create pointers to additional information on each topic, with an eye toward a collaborative community experience.

To orchestrate our potentially confusing journey, I’ve stolen from Lewis Carol: “Start at the beginning. Continue to the end. Stop.” So I will begin with the money, proceed with the requisite steps to get at that money, and finish with discussions of how all this applies to content, advertising and various forms of “other people’s content”. My agenda, always subject to improvement, is as follows:

• Where’s the money?

• Mixed revenue models — how advertising is just another form of complex charging

• What steps must CSPs take to win market share?

• Privacy and Trust — your competitive weapon

• Content and Advertising — Perfect Together

• Eating someone else’ Pie — making money on m-commerce, off-deck and user-generated content

One column at a time, I hope we can show where the hype lies, what the real opportunities are, and what steps our industry must take to expand our revenue base and prepare ourselves for success in the coming decade(s).

Grant F. Lenahan is Vice President and Strategist, IMS Service Delivery Solutions at Telcordia Technologies, Inc. For more information, visit www.telcordia.com.

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