Business Model Innovation: Service Providers Reinvented!

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I’ve discussed in previous blogs about one of the top issues of the telecom industry today:  while traffic grows rapidly in SP networks, the ARPU decreases. And what makes it more interesting is that at the same time, Over-the-Top (OTT) providers are able to capture all the value running extremely profitable businesses.

What is the secret sauce of that success at the OTT side?

Well, there are many factors that contribute to the success of some OTT services, but in summary I would say it is a combination of them: Innovative, Simplicity, flexible business models, available through any network, service velocity, interactive, customizable…

What are the strategies Network Service Providers have taken?

BIP: Block, Imitate or Partner

The first instinct of some network service providers has been to block those OTT services that represent a threat to their core business. A good example could be Skype, but hasn’t always been very well received.

A second reaction has been trying to imitate OTT successful services. For example, ‘Tu Me’ is a service launched by Telefonica that imitates WhatsApp and Skype. Other examples can be found on services emulating NetFlix, Dropbox, etc… not always very successful.

And more recently, network service providers are looking for ways to partner with the OTT and offer a joint value proposition. A good example could be Microsoft Office 365 that is quite ready for MSP channels partners, but is not always the case and most OTTs don’t see value in partnering with network service providers.

To make it successful two questions have to be answered:

• Why would a customer pick an OTT service offered through its network operator and not directly?
• Why would an OTT provider partner with a network operator? And realistically, is it feasible for an OTT provider to partner with 100s of network operators worldwide?

Those questions are two sides of the same coin. In my opinion, the perceived value by the end user will not be just the billing integration. The real differential value of OTT services offered by network operators will be when it provides deeper integration: instant messaging integrated with SMS, Video on Demand linked to QoE…

It is time for network operators to reinvent themselves and become real innovators. Network operator monetizable assets go beyond traditional connectivity and it should expand further to include managed security, billing or quality of experience to mention just a few where network SDKs and SDN will provide the business interfaces for it. 

Picture by rahego

It is not an easy journey, but it creates a real platform for innovation.

I will leave you a video interview I had at GTB Innovation Summit about our views on service provider innovation.

References to previous blogs:

• Four Strategies Telecom Operators are following to compete in the OTT Video Arena
• The journey to profitable mobile services