If telecom service providers continue to believe that they own their customers because they have a billing or customer care relationship with them they are in for a really big shock. Those massive investments in billing, payments and customer relationship management systems in the past may soon be of little value unless there is a wholesale change of mindset within the operators themselves.
Customers needs and wants are changing rapidly, especially in emerging markets where a mobile handset is providing not only a means to communicate but a window to the world via internet access.
Telecommunications, once the domain of nationally owned PSTN monopolies, has burgeoned into a multimedia, multi-network, highly competitive grab-fest for the hearts and minds of the consumer, and the old roles simply do not apply any more. Billing, once the jewel in the crown, is threatened with becoming a mere commodity in the rapidly arriving next-generation world we keep hearing about.
The incredible success of prepaid mobile worldwide and the discovery that prepaid customers are easier and cheaper to manage has stimulated operators into encouraging their postpaid customers to convert. However, prepaid customers are less likely to hang about if a competitor comes up with a better deal. In some markets, it is cheaper to buy a pre-loaded, prepaid SIM than to top up an existing one -- guess how much loyalty that generates?
There was, for some time, an almost ridiculous theory among operators that if any "outsiders" wanted to sell digital content to "their" customers they had to work hand-in-hand with them because they not only owned the customer, they also had their money. In the early days of digital content downloads such as music and games the operators, with the notable exception of NTT DoCoMo, demanded between 50% and 70% of revenues from content developers and providers for the privilege of selling to their customers.
What ecosystem?
Needless to say, this did not go down well, and many content suppliers either went broke or were forced to look at other ways of selling the wares, either via consolidators or direct to users. In some markets they have attempted to compete with prepaid offerings of their own, by using advertising funded models and even given stuff away free to generate demand.
It appears that everyone, with the notable exception of Apple, had missed the point. There is only so much content one wants to download via a 2G or 3G network, especially if they have access to faster and cheaper access via a fixed-line internet connection. The remarkable success of the iPod was not replicated by mobile phones that had MP3 playback capability, despite the rosy projections from analysts.
Apple, however, went on to become the world's largest retailer of music via its iTunes store and nobody even saw what was coming next - the iPhone. Not that the iPhone itself was a remarkable advance, but the idea of having one standard operating system on every device it sold meant that Apple could provide applications that would work the same on every iPhone.
When it released its software developers kit, Apple unleashed a monster that nobody, even the analysts, had foreseen - a massive market for applications. The network operators are seeing none of this revenue. There may be some residual benefit from applications that promote utilization of the network, but it's little compared to the phenomenal growth of the applications markets, especially with all-you-can-eat data plans.
Not to be outdone, and some time later, almost every major mobile handset manufacturer announced its own version of the App Store, but most are finding it's not that easy. Whereas Apple has only one operating system and one device to contend with, the others have thousands of handset models with differing operating systems and screen size, as well as differing versions of software. The most recent news indicates that only RIM, with it's fairly consistent BlackBerry platform, is seeing substantial application sales.
Unlike Apple, a number of the new application stores (including RIM, Nokia's Ovi and Microsoft's MarketPlace) have announced their willingness to work with operators by using their unique micro-billing capabilities and, hopefully, benefiting from the vast prepaid user base not otherwise accessible. It's still early days to determine how successful this model will be, but one thing is certain, if the operators demand too much for "handling" the payments it will fail. The world's most successful content ecosystem, developed in Japan by NTT DoCoMo, was based on a 9% billing fee, and the operator has seen incredible date revenues as a direct result.With Apple's App Store alone reportedly bringing in revenues of over $200 million per month, even at 9% the new business could be extremely worthwhile to capture. Keep in mind that the App Store's own billing and payments system is kept dead simple. Every application has a single price and all payments are made by direct credit card debit. This may work in developed markets, but it stands no chance in the prepaid dominated markets where credit cards are not so common. This is still the domain of the mobile network operator.
The new applications players will also have little or no urge to set up highly capitalized and opex hungry call centers to cope with the guaranteed stream of enquiries. Isn't this a strength of the operators that could and should be farmed out for the new ecosystem partners? Here is the chance to not only destroy the "fat pipe" theory but to turn long-term cost centers into profit centers that could help fund the new billing requirements of NGN transformations.
Better hurry
However, there is potential competition emerging. It has been reported that in the UK a national micropayment network is set for a mid-2010 trial. UK content owners could have a working national micropayment network by next summer.
Again, it begs the question, why are operators not offering their expertise to this new market sector and at the same time keep their hand in the game. In the same vain, why haven't the content and application stores approached the micro-billing experts - the telco service providers and operators? This is no time for arrogance; this largely untapped market requires a joint approach.
If the telco industry turns its back on this opportunity it may be its last chance to avoid becoming the dreaded big fat pipe, and failure to capitalize on its BSS infrastructure cold well be billing's Little Big Horn.
Tony Poulos is head of the TM Forum's Revenue Management Sector and is based in Singapore