NB A PDF version of this briefing can be downloaded here.

This special Executive Briefing report summarises the brainstorming output from the Retail Services 2.0 section of the 6th Telco 2.0 Executive Brainstorm, held on 6-7 May in Nice, France, with over 200 senior participants from across the Telecoms, Media and Technology sectors. See: www.telco2.net/event/may2009.

It forms part of our effort to stimulate a structured, ongoing debate within the context of our ‘Telco 2.0’ business model framework (see www.telco2research.com).

Each section of the Executive Brainstorm involved short stimulus presentations from leading figures in the industry, group brainstorming using our ‘Mindshare’ interactive technology and method, a panel discussion, and a vote on the best industry strategy for moving forward.

There are 5 other reports in this post-event series, covering the other sections of the event: Devices 2.0, Content Distribution 2.0, Enterprise Services 2.0, Piloting 2.0, Technical Architecture 2.0, and APIs 2.0. In addition there is an overall ‘Executive Summary’ report highlighting the overall messages from the event.

Each report contains:

• Our independent summary of some of the key points from the stimulus presentations
• ·An analysis of the brainstorming output, including a large selection of verbatim comments
• The ‘next steps’ vote by the participants
• Our conclusions of the key lessons learnt and our suggestions for industry next steps.

The brainstorm method generated many questions in real-time. Some were covered at the event itself and others we have responded to in each report. In addition we have asked the presenters and other experts to respond to some more specific points. Over the next few weeks we will produce additional ‘Analyst Notes’ with some of these more detailed responses.

NOTE: The presentations referred to in this and other reports, some videos of the presentations themselves, and whole series of post-event reports are available at the event download site.

Access is for event participants only or for subscribers to our Executive Briefing service. If you would like more details on the latter please contact: andrew.collinson@stlpartners.com.

Background to this report

New research shows that customer behaviours and expectations from ICT products and services are changing globally. Customers are not simply using the internet and mobile passively for information and entertainment; there is increasingly a culture of participation and involvement. Customers want to contribute: to wikis, to blogs, to mash-ups, to product and service reviews, to product development. These changes are not confined to the “Digital Kids” but are happening at a pace that challenges traditional telco innovation processes and timelines. This session focuses on what operators can do to better address these new needs and behaviours.

Brainstorm Topics

• Preview of new Telco 2.0? research report: “Serving the Digital Generation: Innovation for a new breed of customers”
• How are customer behaviours and expectations changing?
• Which service providers are best addressing these changes?
• What are the challenges and opportunities for operators seeking to develop services and support 3rd party service providers?
• What changes are required to Telco product/service design and innovation processes?

Stimulus Presenters 

• Scott Adler, VP, Amdocs Interactive
• Mo Firouzabadian, Global Business Line Director, Buongiorno
• Norman Lewis, Associate, Telco 2.0? Initiative
• Richard D. Titus, Controller Future Media, BBC
• Marc Davis, Chief Scientist, Yahoo! Mobile

Panelists

• Richard D. Titus, Controller Future Media, BBC
• Marc Davis, Chief Scientist, Yahoo! Mobile

Facilitator

• Simon Torrance, CEO, Telco 2.0 Initiative

Analysts

• Chris Barraclough, Managing Director, Telco 2.0 Initiative
• Dean Bubley, Senior Associate, Telco 2.0 Initiative
• Alex Harrowell, Analyst, Telco 2.0 Initiative

Stimulus presentation summaries

Delivering a Personalised Experience to the ‘Tera-Sumer’

Scott Adler, VP, Amdocs Interactive said that there would soon be one trillion permanently connected customers. Device proliferation would continue, with an ever increasing proportion permanently connected. You could call it the ‘tera-sumer’ – not thousands, but a trillion segments. Each individual is a valid segment.

What’s the impact? Call centres would be at risk; the off-portal trend accelerates even further. Cash will be squeezed out of more and more sectors, but customers will pay for personalised and integrated experiences. As Rory Sutherland, vice-chairman of Ogilvy, pointed out, they will pay for applications but not for Web pages.

We need to sell, provision and bill bundles of apps, goods, and services together; we need to extend the ”portal experience” outside operator or vendor portals into other services and across many different devices. It’s the ”universal storefront”, by analogy with Amazon. We should consider services as ”network goods”; people will use reviews etc, so we ought to provide them and get ready for them rather than try to stop it. A smart network should know what I do on the Internet and act accordingly, he said. Formats used to be unique; they are now spread across many devices. This should include the cloud.

We need to start innovating now and see what works and what doesn’t. There is no one answer, and each operator is trying to find their own way. But the important thing is to start today. It is vital to recognise there are not thousands of segments, but a trillion segments of one – much better to provide things the user wants, than to provide everything and let them click through. The historical silos for selling all goods must be broken up.

The Customer Participation Framework

Norman Lewis, Associate, Telco 2.0 Initiative presented findings from the latest Telco 2.0 Strategy Report. If we can understand user behaviour, we can deliver on the two-sided business model that the Telco 2.0 Initiative has been popularising. At Orange, when I talked about changing user behaviour they would always say I was talking about the long term; it’s actually a short term thing. This is not about unexpected outcomes, a battle that might be lost or won. It’s going to happen; the question is whether we cope or not.

I-Mode gained 20 million subscribers in 2 years. This was instant user behaviour. So we’re trying to look at the digital generation, to understand what drives this behaviour – now, and in 20 years’ time. I’ve talked about risk culture, the rise of the bedroom and the decline of the street; this technology enables them to create autonomous space. It’s not the technology – it’s the culture.

The fastest-growing group of Facebook users are between 26-40; so we are all part of the digital generation now. This is the mass market. People are forming relationships and interacting with popular culture through this technology, now. We’re going to see this behaviour in the mass market. For example, the users no longer make a distinction between online and offline.

So we created the Customer Participation Framework (CPF) – how you represent yourself to your peer group and how this filters back to you. We’ve created this framework to understand the kind of services needed in the future. There are eight axes – ”it’s all about me”, ”my peers and me”, ”the world and me”, ”my money”, ”my space”, ”the creative me”, ”me and others”, and ”me to the power of us”. All of these match a different mix of telco capabilities. He gave as examples, respectively, Firefox extensions, Facebook groups, QQ, Ebay, Linkedin, YouTube, Twitter, and Amazon.com.

Blyk is an example of the economics of participation; roughly 29% of subscribers respond to the ads. Subsequent ads go to the responders only, and so on. There’s a radical boost in revenue per campaign due to this social filtering. It’s a flywheel – participation creates information, which creates opportunities. Upstreamers get better targeting, more join; more products; more customers, and so on. This recruits more and more innovation into the operator platform…

How could we redesign a core service? For example, what would ‘SMS 2.0’ be, based on the CPF? It would function as a social authentication mechanism. It would provide group messaging, both individual to group and group to individual; it would use the billing engine to collect credits that can be spent in the real world. We came up with the service in 15 minutes.

The Customer Participation Framework is also a mechanism through which you can check your innovation product cycle. Is this idea still relevant? Check it. This is a ruleset for understanding the future; rather than trying to guess the essentially unpredictable.

Retailing to Pre-Paid Customers

Mo Firouzabadian, Global Business Line Director, Buongiorno reminded us that prepaid customers represent 65% of the world total mobile users. How can we do more with them?

We need to leverage your existing data assets. An example – ‘O2 Extras’, a service from 2003, which educated prepay customers as to things they could do with mobile phones. As a by-product of that, we started the customer life cycle management process – how can we make customers move up the slope of value?

‘Orange Wednesdays’ is a 2 for 1 cinema ticket giveaway promoted to Orange customers. It’s a two-sided business model – cinemas benefit from more footfall, and opening Wednesday night. For the operator, it provides differentiation and helps retain customers.

‘Win Every Time’ – a scheme that offers prizes at top-up time – is another good example. All user contact with the network provides an opportunity, so we’re doing event-driven marketing based on analysis of past contacts. The analysis is done in real-time – this is an especially valuable feature and causes a drastic boost to effectiveness. More convenient top-up – and more physical feedback of the airtime sale. Checks customer records, causes logging in the company core.

We got the time-to-market down to two months. The operator sets up advertising rules based on 9 parameters. The approach creates engagement; it cuts churn; it went ROI-positive in 1 week. Brands can now pay telcos to reach their users effectively…

 

[Mo’s full presentation is available at the event download site. He will be writing a more detailed case study on this topic in the next few weeks. This will be available at www.telco2research.com].

Feedback: General (verbatim comments)

• Good to have concrete examples. But… most two-sided market theory suggests that you can only really make a profit from one side. thus we need to understand which side of the market will generate the largest profit and choose to focus effort there [#8]
• Buongiorno and Telco 2.0 presentations were very good – practical and relevant for two-sided business models. [#11]
• [I liked] the practical examples implementing the theory [#10]
• Business transactions work best when there is value shown to both sides, need to show value to upstream and downstream to make this concept viable, not just a single direction monetary transaction. [#28]
• Operators are often too slow and protective to open up to the 2-sided model. Will probably take brands and enterprise to force the model as customers of operators rather than operators push the model from their side [#92]
• The 2 sided models looks fine but what is the best case? [#114]
• There are barriers to achieving the 2 sided business model which are not being discussed [#75]
• Not sure the 2-sided model works at all levels of the value chain leading to margin pressure for some parties [#83]
• Would like to hear more about the ‘how to’ [#7]
• How do you ensure the upstream and downstream get value, currently seems biased to the SP [#25]
• How are you going to resolve the issue of wholesale and retail competition? two-sided business models have to deal with both sides [#53]
• o    re 53: many operators have already done this, ask the European operators that have successfully launched MVNO’s [#120]
• Two sided bus model might be a side track. Most social communications is in social networks regardless of which Telco the user prefer. This is really about layers of communications services where a social communications needs to work across operators. thus either needs a Telco monopolist or implementation of open standards that is used by all operators [#48]
• Are there better details on which models are best 2-sided and which may remain 1-sided? [#64]
• How is it possible to avoid resistance from internal retail division that can foreseen a possible cannibalization of retail market related to third part offering based on open APIs? [#87]
• How to share revenues between Telco and upstream? [#78]
• There is no two-sided Telco model. As a media company we have a great customer relationship. Once the customer has bought access to unlimited internet use then we have everything [we need from telcos], thank you. Can you explain what network annotation needs to be built in to the infrastructure so that we can get differentiated services from the Telcos? [#90]
• Is there a risk that Telco 2.0 has overestimated the $250bn revenue from distribution platform? A lot of this is access, backhaul etc but isn’t this already a significant part of Telco revenue? [#106]
• Do we really think slow incumbent operators will open up with any reasonable speed to the 2-sided model or will it take brands and enterprise to push the model as customers of the operators? [#108]
• Is there any best case of 2-sided model other than MVNO? [#123]
• How do you build intimacy and relevance with digital consumers to leverage the 2 sided business model opportunity? [#124]
• How do we convince the retail department in the Telcos that adopting a platform or NaaS [Network-as-a-Service] business model will not cannibalise their existing business? [#127]
• Can you name examples of operators opening up data and helping service providers defining new value added products? Who are the leaders in this field? [#22]

[[[Ed. – The Telco 2.0 team will respond to these questions in future Analyst Notes at www.telco2research.com]

Feedback: Better Retailing to Pre-Paid Customers

An example of a “proto-2.0” service was demonstrated bv Buongiorno. Although its immediate focus is on helping extend a 1.0 model (O2’s prepay mobile) via enhanced customer interaction, it actually represents a roadmap towards more 2-sided models. In addition, the interactivity is itself a good example of using the innate capabilities of the network (SMS and top-ups, in this case, linked to the web) as a mechanism for adding value beyond basic person-to-person communications. The presentation stimulated a number of positive comments, as well as queries about the details of the service.

• On the Buongiorno example, I wonder if the “O2 treats” programme would reveal any interesting insights if the data is compared across territories (e.g. UK vs. Italian vs. Czech Republic) prepaid consumer.
• Does it run the risk of being perceived as “unfair” – it is less of a random lottery and more targeted according to behaviour [#27]
• Not normally convinced that ‘real-time’ is as important as many think – but the Buongiorno example of immediate reaction to top up events is really good [#36]
• Do Buongiourno do any O2 promo or VAS with the O2 arena in London? [#51]
• In the Buongiorno example, I would be worried to make post-paid to unattractive compared to to prepaid. Has this been considered? [#77]
• How far does the bribery go before it become unsustainable as consumers demand bigger and bigger prizes [#121]
• Expanding the Win Every Time concept to advertisers paying for the rewards: more interesting maybe for brands who are not confident with how to approach mobile advertising [#33]
• Will top up prizes go the same way as free gifts at petrol stations – i.e. we now only want cheaper petrol. [#44]
• Which carriers, if any, are adopting WET?

[Mo from Buongiorno will respond to these and other questions in a follow up case study article. Watch www.telco2research.com for details]

 

Feedback: Customer Participation Framework and ‘SMS 2.0’

Norman Lewis’ presentation on consumer behaviour and requirements generated a very large amount of feedback, mostly concerning his concepts of the Customer Participation Framework and SMS2.0. While some comments were very positive, there was also debate as to whether SMS2.0 was simply a recast form of Mobile IM. In Telco 2.0’s view, there is actually clear water here – SMS2.0 is about extending the life and usefulness of an existing service and technology, with little impact on the device. Conversely, many variants of mobile IM have attempted to compete with Internet IM – often with a business model that does not fit with consumer expectations of the service (eg cost).

• A good framework, but needs to be tested, consumers seeking value, not all about me, needs to consider charity as well [#16]
• I found the participation framework to be very interesting. It certainly stimulated my thinking for a project I am involved in right now. [#35
• Involving the customer is from my perspective the only way how services can run in future [#
• Recognised the need to serve customers, did not account for how to develop personalised customer services. [#65
• Participation Framework is right – ME first. [#70]
• Focus first on what end-user wants, and offering end-to-end offering, not on technologies… [#74]
• I liked Telco 2.0’s framework for evaluating products, however I feel there is more work to be done and feeding these parameters into economic business case for a product. [#9]
• Love to hear Norman talk – always very insightful. [#15]
• Excellent approach regarding reformulation of the actual services (ex SMS2.0), and leverage their usage / experience. Nice to go and do that exercise for other services. [#31]
• Liked the participation framework and using it to enhance an existing service e.g. SMS2.0, but can operators charge more for these new features [#37]
• Hybrid models of services that create missing links from SMS to mobile internet: the SMS 2.0 concept is very powerful, universal yet simple enough for mass adoption [#17]
• Disagree with point 17, SMS 2.0 is just mobile IM, which already failed [#45]
• Agree with 17 that linking SMS to web & social networks has a lot of possibilities. Vodafone’s Connect to Friends app on Facebook is an interesting mash up of this [#60]
• Regarding Norman’s SMS innovation: DiGi in Malaysia launched a mobile and web community called Kakiis in Feb 2008 with group SMS function, and rewards and perks to purchase digital goods. [#42]
• SMS plus Norman’s model = twitter [#111]
• Twitter – totally overrated and in many cases value-negative. Unlike Facebook, it’s a flash in the pan – a quick burst of hype and then a slow slide to oblivion [#115]
• Isn’t Google’s Grand Junction a subset of what could be done by a Telco for Voice enhancement, far beyond SMS2.0? [#67]
• Isn’t SMS 2.0 idea just mobile instant messaging which already failed to take off? [#21]
• Adopt enhanced Norman model to upstream parties. What are the driving elements for the upstream? Apply an integrated model for the eco system. [#63]
• Participation is well spotted, but it requires localisation/identity/depth… otherwise true interactions is lost [#103]
• Why does Norman think all the social innovation is taking place outside of Telco’s, when they should be the experts in communication not start-ups. [#98]

 

Feedback: Industry cooperation and structural issues

The session highlighted numerous challenges around industry structure and partnership – the general theme from participants seemed to be that operators could struggle to collaborate with the types of organisation that are gatekeepers, such as content owners or Internet players. There is both a timing and attitude issue here – Telcos need to move fast to keep up, while at the same time dropping their perceived “arrogance” in dealing with organisations that they hope to keep as peers or customers.

• Mobile advertising failed shot due to lack of sizeable and qualified audience. How would customer participation based programs tackle this fundamental issue? Is interconnection of customer knowledge across Telcos a must have to create a sustainable 2.0 model? [#93]
• I don’t see the operators solving the Telco 2.0 opportunity alone, it needs innovative third parties who think outside the box and can collaborate as intermediaries with many operators [#125]
• How do Telco’s form win-win partnerships with companies who are successful with digital consumers? [#86]
• Will Telcos get benefits from relationships with big Internet players? i.e. Google is increasing the relationship with mobile customers without Telco [#89]
• The new world of services is really made by software, which is not a core Telco capability. How should Telcos have the software developed? Outsource – too expensive? Or in new revenue sharing partnerships with software companies? How would such a business model look like [#82]
• Which is the better choice for operators between collaboration with ISP and develop SDP themselves? [#109]
• How do we show the value to ensure all stakeholders work together, too many still act as single entities [#54]
• How do we bring it all together, users will want mobility and portability, this needs partnerships, scalability and equal value sharing propositions, this has not happened over the past 15 years in the Telco sector, only the ICT sector seems able to work across platforms, how to get the Telco’s to embrace and move forward [#91]
• Are we as carriers being able to provide IT services connected to twitter/Facebook in timely fashion? [#34]

Feedback: scepticism

It must be noted that there was a significant undercurrent of pessimism in some contributions, perhaps reflecting the economic situation, and also the increasing realisation that new business models are not a “quick fix”. In particular, we sensed frustration with the slow pace of internal Telco organisational change, and also a lack of awareness of response to “real world” concerns of consumers.

• No thought of tying the presentations to the real world issues, too Western and focused on the past, needs to think in the future, feel no real innovation. [#41]
• Services must add value, and address the issues of the day, this did not come through [#20]
• ·         3 presentations about retail, however retail companies on the web for entertainment, purchase product (not network minutes) has not been addressed. [#43]
• Our concerns relate to the saleability of some of the examples and also to the contextual scenarios that lack a twitter viral effect. [#55]
• Not sure about moving completely off-portal. Most handsets do not have the screen and power to behave like a pc. [#57]
• Need more focus on the participation aspects, still driven as a how do we impose services, rather than how do we identify demand. [#73]
• Lack of analytics and underpinning data. All claims are good … [#84]
• No thought of sustainability, there is lots of possibility here, but only old world thinking, how to ensure greener concerns are addressed [#32]
• There are not a success example of Telco winning money in a digital market [#113]
• The accountants who run most phone companies and the fear of creative destruction is the biggest barriers to new business model adoption [#116]
• Has the current financial/economic crisis changed anything in the Telco 2.0 outlook with regards the retail customer? Hard to imagine it hasn’t….. [#66]
• Re: Amdocs point about multi-screen apps, e.g. across mobile/PC/car etc. Is there hard evidence users actually want this, or just wishful thinking by vendors and operators [#5]
• Can we find a way to make mobile operators go bankrupt? 50% EBITDA margin in an oligopolistic business is just a robbery. Wished Skype kills them [#61]
• Many good ideas are presented, but fundamental different organizational capabilities and competences are needed to succeed. Should companies make a bet and focus according to which capabilities they are likely to succeed developing? [#112
• Don’t you think that ‘convergence’ is sometimes much more violent than what is described, i.e. each player want the golden share more than cooperating to grow a market. for example in media delivery, CEs v. Telcos [#81]

Feedback: do telco people know anything here?

One specific sub-theme that emerged was whether Telco executives can really read the minds of youth & other groups.

• How come the people discussing teenage digital behaviours have been so far male over 50? [#38]
• o    Note 38: people who run phone companies are generally old white guys. That’s why. [#52]
• o    Do 50 year old males really understand teen/youth behaviour? Yes, because we have teen children to observe and pay for their digital habits! [#62]
• Suggestion: invite digital natives to the next Telco2.0 to spice the whole thing up! [#96]

Feedback: privacy, security, and customer data

Another issue, which also cropped up in the session on subscriber data management, was that of privacy

• Amdocs view of the world sounded rather big brotherish. Wouldn’t the regulator have a field day? What about the issue of customer privacy – how would this be managed in practice? [#19]
• o    Re 19 and big brother – what confidence should consumers have that operators can control their vendors so that BSS companies can’t abuse access to customer data? [#131]
• We must be careful with the use of customer’s information. Regulatory commissions are over. But Google or Facebook get a lot information of customer without problems [#102]

Feedback: Technology

Although later sections of the event went into more depth on technology, the retail section of the day also elicited some early feedback on some potential technical issues and problems

• Sounds to me like the magic is in the application layer – not smart networks but rather smart applications. Think Internet hourglass – thin in the middle, just forward the packets. Keep a record CDR style but this again is an application layer thing… [#118]
• What are the fundamental reasons why operators don’t roll out new business models> i would argue that it is a function of the cost of risk. the risk/cost is largely based on legacy BSS/OSS [#47]
• Is there some sort of ‘middleware’ required to tie in the elements of the Telco infrastructure, corresponding to the eight axis in Norman’s talks? [#30]
• About AMDOCS presentation: Looked very theoretical to me. How do you put yourself in the middle of trillions of real-time connections? [#59]
• We see that customer segmentation is quite complex to manage therefore requires smart solutions in software, architecture, man power [#29]
• Telcos are still very far away on having that dynamic. Today’s heavy architectures are not aligned with 2 simple things: innovation and cost reduction. How to achieve both? [#88]

Feedback: iPhone

Inevitably, some of the comments invoked the iPhone’s impressive success in developing a new end-to-end business model in mobile. What’s Apple got that everyone else hasn’t?

• Any idea why Apple is winning the loyalty of the i-phone user rather than the operator who provided it and operates it? [#23]
• Because the device is the differentiator. [#58]
• Over 40% of new i-Phone subs are coming from other service providers. The ease of use, apps store and feature set are compelling people to move. [#80]
• i-Phone loyalty reflects the fact that people think of the device as a standalone product (like iPod or PC), not as ‘part of a service from the operator’. You don’t have loyalty to the electricity provider you use to charge your phone, do you? [#132]

Feedback: Others, Questions

• Sorry, for the Telco there is no money in exposing the API for location and presence? It makes yahoo good. [#126]
• Risk of a new service, lower the risk easier to test out a service before high volume deployment. Traditional Telco (wire line) very risk averse due to cost of new service deployment [#50]
• There are two sides of the debate on rolling out new business models 1) limitations in the back office 2) business policies and procedures [#100]
• Some interesting ideas around the consumer market but what about the significant enterprise market? What approach should be taken to this? [#94]
• Are Telco brands important in the new world? [#130]
• Currently the digital natives see little or no value in Telco brands; they only see value in content brands. How should the Telco’s address that challenge? [#128]
•  Re 21 instant messaging by Telco failed to take off but Skype does not. Many services provided by Telco I [#99]
• Will Blyk ever be profitable? [#107]
• Do we think the Chinese SN [social networks] will work in Western Europe? [#95]
• Most of ideas are focused on Smartphones. Is their penetration and usage (majority of Smartphone users only use it for calls), enough to justify a quick change? [#104] [Telco 2.0 – not necessarily, it should be possible to run many of these new services on featurephones, especially the next generation which will have quite good web browsers]
• Why don’t you use Twitter to show a real case of social participation now? [#117]
• What about KPI’s regarding new services that are going to be created? [#68]
• Pre-paid will be used as a part of applications, because more and more consumers know the model of prepaid will be reusable by SP. May be it is not a good idea for common usage. [#76]

Participants ‘Next Steps’ vote

Participants were asked which of the following statements best described their views on the role operators should try to play in serving digital natives?

• Be a really good dumb pipe. Provide connectivity and voice messaging only and let the ‘over the top’ players get on with innovating services
• Retail supermarket. Sell Telco or third-party services via online platform.
• Enabler. Allow third-party innovators to do a better job by giving them access to Telco capabilities and assets (identity, billing etc).
• Retail – enabler. Sell own and third-party products AND ensure they are improved through access to Telco enabling capabilities.

Lessons learnt & next steps

Taken together, the presentations, feedback and final vote highlight an industry in transition – but still very uncertain of the precise direction or roadmap. Early examples and case studies of new retail telecom business models are like gold dust – scrutinised and dissected to yield any generic insights. Irrespective of the aim to develop two-sided business models and open platforms, it is also clear that strategists are still focused on extracting the maximum value from today’s existing services.          

Looking at the results of this section’s vote, it is unsurprising that few people in the industry see the dumb pipe as an attractive future strategy. But more interestingly, the concept of a retail supermarket, which had been widely seen as an attractive option in the past, seems to have fallen away, reflecting a desire by Telcos to ensure that they can still differentiate and add value through their infrastructure. This shift may also reflect the awareness that this type of retail operation would put them head-to-head in competition with Apple’s AppStore and various other service portals. It also highlights the dilemma of Telcos’ desire for exclusivity, set against application providers’ hope for the widest possible distribution.

The Telco 2.0 team agrees with the outputs of the vote – the most attractive options involve turning the operator’s network (and possibly devices – see below) into a platform of “enablers” for third party services and applications. These assets and capabilities may not be easy to deliver – either organisationally or technically – but once in place, should provide a much more defensible source of value.

There is a fairly even split between those suggesting that “enabled” services can be sold in retail by Telcos, versus those who believe that the exposed capabilities alone represent a more viable standalone basis for growth. In many ways, the reality will depend on a variety of factors – existing customer relationships, portfolio of existing inhouse services, ease of developing retail partnerships and so on. A tier-3 mobile operator with <1m subscribers and few smartphone users is going to find it hard to partner with the coolest web brands. A former fixed-line incumbent, in its home market, with enviable billing relationships to a sizeable % of the country, is in a much better position.

It is worth noting that various of these applications simply cannot be “sold” through an operator’s retail store, as they will be small but integral parts of much larger services. In the same way, Amazon is able to enable the development and sale of a huge variety of other products and services, but would be the wrong company to try and retail all of them to its customer base. (Sellers of fresh food or fuels, for example, would not fit with Amazon’s logistics business, but might still exploit its various online commerce enablers).

In the short term, the following needs to occur:

• Continued emphasis on getting C-level buy-in and commitment
• Identification by Telcos of areas for quick pilot deployments of new business approaches
• A focus on deploying services like Buongiorno’s, which are “enhanced 1.0” models, with a relatively straightforward roadmap towards 2.0 options as they mature.
• Willingness to publish details of successes and failures – despite the competitive aspects of the marketplace, we are still at a stage where the industry as a whole needs validation.
• Awareness of tactical acquisition opportunities, given the contraints of the recession
• Pragmatism about retail services that can use “lowest common denominator” service components like SMS and the existing installed base of legacy phones or home gateways, even if they lack the “sexiness” of those that can exploit the latest smartphones or intelligent end-points.

 

Longer term, the emphasis clearly has to be on developing full-fledged platforms open to developers, as well as exploiting new distribution channels.

• Structure and incentivise the retail operations in a fashion that enables them to compete on a level playing field with future wholesale customers. This does not necessarily mean structural separation, but it will need some “chinese walls” and changing attitudes from protectionist to competitive.

• Go back to the drawing board and develop a full strategy for voice and messaging services. Despite the move towards cheap/free minutes, there are ways to extract value through other business models.
• Pragmatism about relationships with leading Internet players. Trying to compete head-on with FaceBook or Google is unlikely to succeed. There is more mileage in looking to enable peripheral service or capabilities, or partnering directly if the Telco has sufficient scale.
• There is no reason that Telcos should not retail each others’ services if they are particularly good. At the moment, there are extremely few instances of Operator X selling an application developed (and maybe branded) by Operator Y. Would you really rather deal with Google than your peers?
• Invest in behavioural research, but in ways that directly translate to new relationships rather than putative services with a multi-year development timeline. Think “R&P” (research & partner) rather than R&D.