With the boom of over-the-top Internet and mobile data traffic and the gradual move of services to Internet players, Service Providers are struggling to find space in this fragmented competitive market. Why not just simply transport the traffic and continue with the traditional business model? Well, it worked during the ‘land grab’ periods, where a large number of new users were subscribing to new services and the model could justify large investments in new infrastructure. We’re now in front of a completely different situation, a very competitive and saturated market, where Service Providers can’t grow their subscriber base and find it difficult to differentiate their services, so competing on price is the only available option. The subscriber has been educated in a ‘quasi commodity’ model where the Service Provider is providing a faster service for a lower price year after year. Providing connectivity can still be a lucrative market for business services or monopolistic environments.
However, the need to evolve the business model is real. Service Providers around the world have been extending basic services with IPTV or online gaming offers (with mixed results) in order to increase the ARPU or at least to create loyal customers and reduce churn. In the new model the subscriber becomes the audience and the Service Provider becomes a competitor of the Over-the-Top players such as Google, Yahoo!, Bing, YouTube or Netflix (landing in Europe soon)
After a few years operating in this extended environment, Service Providers found that the most valued service by their customers is still connectivity (competing with the traditional players) and content is a completely different game. Internet players are offering their services over-the-top of the original Service Provider network in a best-effort mode and are still far more interesting than the Service Provider offering. At the end of the day the end user only cares about connectivity when they can’t view or receive the over-the-top service. Meeting end user demand for faster connectivity can’t be sustainable on the current model and new revenue models must be sought.
So, the business evolution went half way through… Service Providers are now able to sell not just connectivity, but also content and other services, potentially taking a larger share of the subscriber’s purse. However, the competition is fierce, with pure players operating in that space.
Is there a better way to truly evolve the business model, extending the customer base to new markets? Meeting customers in the last couple of years I found signs of a change: Telco CDN Services, Service Provider bundles with Over-the-Top services, Cloud federation and more recently Network Programmability blog…
In upcoming blog entries I will cover some of the above topics. Stay tuned...
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