By Joseph Waring, Telecom Asia
That's the "old" school. A roundtable of telco and media executives moderated by group editor Joseph Waring recently discussed how operators have to open up, give up some control and accept they are now the servant of the user.
The days of pushing ahead alone in segments that aren't their core competencies, such as music and entertainment, are over. The new model is partnerships, in various forms, and increasingly dealerships.
Softbank senior executive VP Ted Matsumoto said that in the past business executives were motivated by egos - they wanted to control the market by having others use their technology or products. "But today no one can do everything so it's a mixture of many people putting together components. In this new world, once you accept that the customer is the top priority, your life becomes easier. To be successful we have to get user support - no one will argue with that."
But he notes there is always the tendency for a company to want to "be the guy who sells to the users, but actually it has to be a mixture," citing the example of the winning package of iPhone hardware, Apple App Store and the operator's network and services.
When you realize you are the servant of the user, Matsumoto said it breaks down any reluctance to tie up with others. He said Softbank's exclusivity for the iPhone has given it differentiation and is the secret to its success.
Blyk co-founder Antti Ohrling pointed out the distinction between partnerships and dealerships, which need to be exclusive to have value. He said he's sure there are big players out there that will never give exclusivity because they don't need to.
"But on the other hand, operators sit on that gold dust of knowing their customers better than anybody else. By combining that intelligence from the network with Blyk's intelligence about what people say they like and don't like, it's a staggering picture you start to develop."
He said that is a level of intelligence that is not available from the over-the-top players, noting it gives operators a chance in a specific geographical area.
But having access to customer data and using it are two very different things. Nucleus Connect CEO David Storrie expressed surprise at how little some telcos know about what their users want.
"As a wholesaler, our whole business is based on partnering with the service providers. When we sit down with potential service providers, the first thing I do is ask them what they are trying to deliver to end-users, and you'd be amazed at how many blank faces there are on the other side of the table," he said.
Loo Yew Ming, Universal Music's VP for digital & business development, noted that the issue is that telcos try to work in a space that's not their core competencies. "Take music for example - a lot of operators try to sell music when the guys running those divisions know nothing about music. That's where they can definitely benefit from a partnership. Music marketing is our core competency and you guys run the network and know the customers best."
Dialogic CEO Nick Jensen said, “You’re spot on. A traditional telco is a technologist's playground - the marketers are the minority. With an MVNO the marketers are the majority because they don't care about the network infrastructure."
But partnerships come in many forms and benefit telcos differently. Ohrling explained that operators need social networks like Facebook more than they need operators. "If that is the case, they aren't paying you, you are paying them - because if you don't have them you're not as good in the marketplace as your competitor. The consumer wants that more and they don't care where they get it.
"There's this dynamic happening as well, it's not just a matter of being a partner or a dealer, but someone paying a 'market tax' which is eating up the playing field, like in the cable TV industry."
CSL CMO Mark Liversidge said it's a question of helping the end-user use Android and Apple devices for all the things they want and have a good experience on the social networks of their choice. "Our focus is how do we provide this in a packaged way that makes it easy for them to access."
CSL recently launched a social media program called Tribes, which builds social comment on Apple and Android.
The market reality, Jensen said, is that "if you have Apple, the other guy has Apple. If you have over-the-top play, the other guy has it. Everyone has Facebook and everyone will have LTE."
He said carriers are saying they don't just want to be the pass-through guy or the middleman who doesn't add value on the content side. "They want to own content because they have to compete with the guy around the corner that has the same devices, the same spectrum and the same network equipment. I can't differentiate there, so I have to differentiate on being hip and providing content the others can't."
He asks operators: "What do you want to do? Because you can't all do the same thing. If you all do the same thing, there is no differentiation and it becomes a commodity."
Jensen, explaining the benefits of blasting an announcement of say a Lady Gaga concert that is available to your video subscribers, said such a promotion drives sales of high-end handsets and generates transaction-based revenue from users who watch the concert on their handsets.
"Over time you build profiles and then you can add advertisements. That's how you make money so you don't have give it to Apple or give it to Google because you control it. You become hip because it happens on your network."
Ohrling said, from Blyk's experience, any information you gather is negative unless the subject knows you're doing it. "It's about transparency. People are willing to share an incredible amount of information if you tell them why. When you become a master of your subscribers' information, then the question of partnership or dealership becomes less important because you are the best channel to any individual in that market."
He said he found the Universal Music approach of working with mobile operators on a revenue sharing basis refreshing. "With the type of exclusive partnerships you can get much more intimate. You can build IPR that your partners can have and use."
Loo from Universal Music said that is the key driver of its partnership with SingTel. "The only way to go to a promoted concert for free is to sign up with SingTel and buy a device."
Nucleus Connect's Storrie pointed out that some offers to customers, such as LBS in-store promotions, are powerful only when they reach the majority of the market.
He gave an example of a retail chain in Singapore sending special offers to customers by SMS. "It didn't take off because they really needed to have all the operators working together so everybody in the store got the message, not just the StarHub customers."
Jensen said the challenges of the carriers are very different from market to market because of huge variations in monthly spend, the amount of fiber available and the bandwidth available.
Carriers have a choice – they can be an enabler of bandwidth and let people pass through and collect payment. "It's a great business model and will work for some markets if you're good at taking the costs down. But operators in developing markets like India and Bangladesh with low ARPU don't have that luxury - they don't even have customers that can afford to by an iPhone. Activity is transaction based."
He said the users still want a smartphone, so the operators have to think differently. Because content is king, he encourages them to have exclusive access to content, like Airtel, which owns the rights to Premier League Cricket and Manchester United content.
The operator's model is for users to make per-game or per-minute downloads and time shift to make a purchase of say a ManU jersey on the Airtel site and go back to the game.
Softbank's Matsumoto raised the point that many times business people are too impatient and try to make money very quick. "I think it's a mistake. If you sell devices capable of supporting certain services, users shouldn't have to always calculate how much they'll have to pay in total. But if they buy an expensive device and all the services are free, they will make a decision. To start with it should be free."
CSL's Liversidge said the industry needs to throw out the old model of looking at the number of connections. “It's the out old-fashioned way of looking at things. We need to shift our thinking to the context of 'we have a network, it's a sunken cost, how do I fill it?' I have to think like an airline now. If that jumbo flies half full, I can't take seats off and put them on the next one; it's wasted inventory."
He said CSL is shifting its focus to the end-user and moving away from the standard operator model of a single user, with a single device on a single plan. "This is why we've got into position where we're obsessed with the big device vendors that have been in control."
Because more consumers are carrying multiple devices, CSL has to cater to that change. "It's more important for us to build service support and delivery of content and apps to devices, which is were we see our value and where we'll take our profitability from."
He said CSL is getting out of the game of giving away devices with massive subsidies.
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