Thursday, January 8, 2009

Telco Garden or Telco Jail

The choices available to companies offering mobile products and services (Value Added Service [VAS] Providers) have increased in 2008, thanks to iPhone, G-1...

The VAS provider's relationship with the telco and VAS business model are some of the strategic levers available to manipulate. Placement of the VAS service with the telco is another option available. Factors affecting this decision / potential value added by the telco include:

A) On-deck placement: Activation/Trial of a service is 10-times higher for on-deck products/services than those that need to be downloaded
  1. Awareness of product/service: Initial awareness can occur on the web
  2. Seal-of-Quality implicit when the telco offers a product/service on their deck
  3. Customer ownership is a critical element affecting this decision. Needless to say, the one bringing the customer to the service owns the customer
B) [Co-] Branding: Branded / Co-branded / White-label: Some of the factors affecting the VAS provider's decision on how to brand their offering:
  1. Consumer's awareness of the service, thru possibly other channels (e.g., internet)
  2. Marketing dollars to create awareness
  3. Is the value-added service (VAS), or part thereof, another company's branded product (e.g., Hollywood content)
C) Service Activation: Role played and incentives provided by the telco, service provider and partners
  1. Who is best positioned during the user experience to proposition the user
  2. Information available to craft and introduce service activation request message
  3. Role played by the entity to increase success rate
D) Call-to-action: Whom does the consumer interact with to use the service? More to do with branding and customer control?

E) Optimization of performance [of app/service] vis-a-vis network
  1. Telco is best positioned to do this
  2. There are third-parties who have deployed their infrastructure at telcos who can help do this as well
F) Optimization of user experience
  1. Knowledge of device capabilities, network choice/performance. As in the above (E), the telco can offer this more easily. However, there are other service providers with their equipment at the telco, who could offer this service to you as well. Going with a third-party might help you have a more consistent interface across the many the telcos that you need to support.
G) Credit management
  1. Credit rating a user and extending credit to them, especially in a Web 2.0 world can be an art, which affects the health of the business. More so, in the given economic environment
H) Billing & Collection
  1. Efficient itemized billing, especially for micro-payments, is critical
  2. Effective collections of micro-payments can be tricky in a mobile/telco world
I) Information about the user's usage, preferences...: Who has the more comprehensive view of the user
  1. A telco might have a better view of the user across the various products/services that they consume, and across the telco's user base
  2. The VAS provider might have a better view of the product/service across multiple telcos, as well as, other communication channels / media
J) Add-on services/revenues: Ability to sell, up-sell, cross-sell
  1. Does the telco or the service provider have the ability to better sell related products and services

The telcos charge anywhere from 50% to nearly 70% of the revenues for providing some of the above value. The price charged by the telco to provide is value is the height of the wall that determines whether the you, the VAS provider, is in a garden or a jail.

Alternatively, a VAS provider could look at this list to tweak the offering to reduce the height of the wall. I have seen quite a few companies doing this, especially in today's more open mobile environment. There are quite a few tools and technologies available for each of the above factors (possible topic of another blog).

What are you noticing in your neck-of-the-woods? Dumb-pipe, intelligent-pipe...? Are there any other levers folks are using in the tussle between the telco and the VAS provider? Which of the above value-adds by the telco that you care for / can't do without?

1 comment:

  1. Interesting digest of what must be thought through as one considers their role in the mCommerce jungle. The interesting side note is that economics, branding and control are the three key elements to determination of how one should proceed. Look at Mobile payments like PayPass and Visa Wave, in this case the advantages are not as clear to the telco. What is their revenue source? Clearly the banks might rent a bit of space but not if it is much more expensive than buying a contactless card say $1.50 over 3 to 5 years. For others the key issue is generating volume that entices the Mobile Network Operator to play. A few hundred bits per day does not drive incremental revenue. Millions is what they are interested in. Then why not employ a simple browser and not worry about engaging with Telco. More and more phones have such capabilities and if the VAS has thought through the various configurations and capabilities of the mobile device then it can simply be a URL in someones favorites list.

    Next step in adding value begs the question of security and Authenticity of Identity. Now when these become factors in the equation, the mobile phone suddenly takes on a new role and the telco must be involved to assure that the elements that secure the authenticity and integrity of the solution are integral to the SIM.