|Dan Baker Blog|
Pumping Gold Through Dumb Pipes: Creating Value Streams for Over-The-Top Partners
In case you missed the dotcom revolution, “disintermediate" is what was supposed to happen to all those “brick and mortar" companies who would become “irrelevant" thanks to online stores like eBay and Amazon. Actually many businesses did fall victim to the Irrelevancy knife, though most of the larger, more established firms have done just fine in the Internet era. Flash forward to 2011 and the threat of telecoms being “disintermediated" or “made irrelevant" is a much talked about issue in the mobile market.
As the over-the-top app players fill up the wireless broadband pipe and extract greater and greater revenues from users, the fear is that telco margins could be squeezed to the point where it’s longer profitable for CSPs to upgrade their networks. If that happens, our fate could be like the electric power industry in California where overzealous regulators forced utilities to “disinvest" in their California power plants, which ultimately led to widespread blackouts.
Well, amidst all the doomsday talk over dwindling ARPUs, death by flat rate and being relegated to “dumb pipes." Steve Cotton is one guy who is quite bullish about telecom’s chances in the next twenty years.
“Service providers are in an excellent position right now as long as they focus on the places where they can bring value to the value chain, " he says.
If you’ve been in the BSS/OSS industry for some time, you’ve no doubt run into Steve Cotton because he’s been very visible as a champion and pioneer of billing and mediation technology. At Metapath and Telesciences he was instrumental to the launch of the AMA Teleprocessing System (AMATPS) which was installed at all the RBOCs.
Today Steve is head of Revenue Management at the TM Forum. He runs the customer experience side of TM Forum’s collaboration program, which includes the charging and billing group as well as various spinoff groups in everything from fraud and cost management to revenue assurance and enterprise risk management.
Dan Baker: Steve, it occurs to me that your work at the TM Forum is a natural evolution in your career. In just about every position you’ve held in 39 years in telecom you’ve been collaborating with people to push new industry standards.
Steve Cotton: I was certainly fortunate to be on the ground floor of some technologies that took off. My AMA work was gratifying because I’d seen the days when people would record usage by taking Polaroid snapshots of meters. At Metapath, one of the accomplishments I was proud of was when we won the Sprint-PCS contract in 1991. In six months we deployed their mediation into 185 markets and we tested its viability in the NOC by demonstrating a 15-second lag between the hang-up of a phone call and the customer care rep seeing the usage show up on the screen.
Later on I was the first (and for the first year, only) staff member of the IPDR.org standards organization that led to CableLabs baking in that standard on a system-wide basis in the MSO community where many billions of IPDRs are collected each day.
Now these successes in standards adoption don’t happen overnight. For instance, IPDR was “technology of the future" in 1999 when it was conceived, but it wasn’t till 2007 that the cable industry perfected and widely rolled out the standard. Today it’s a mature and globally applicable technology.
And my work at IPDR is highly relevant to what’s happening at the TM Forum as we roll out our Frameworx suite of standards including the Business Process (eTOM), Information (SID) and Application (TAM) components. We are working closely with major service providers to build conformance checks in to their procurement processes, and we’re seeing major vendors being certified as Frameworx- compliant. I enjoy helping move that process along.
DB: Steve, a lot of people look at the rise of over-the-top players in wireless and figure it’s only a matter of time before telecoms get commoditized. But you see things differently, so I’m wondering: Why are you’re so optimistic?
SC: Dan, if you worry too much about the obstacles, you’ll never see the direction forward. The flip side of any problem is an opportunity. So it’s worth examining the problem closely to figure out where the opportunities lie.
One of the first issues we face today is that we’re losing sight of who the customer is. We’re losing that precious intelligence about customer behaviors that has always been the hallmark of the telecom-to-customer relationship.
Ironically, back in the late 1970s when I got into the business, the customer was the public utility commission which basically “granted" a telecom a certain level of profit. So at the executive lunches we used to stand and give a “toast to the rate payer." We’ve come a long way.
There’s a book, Real Time, authored in 1999 by the technology marketing guru, Regis McKenna. And the book’s subtitle captures the today’s challenge really well: “Preparing for the Age of the Never-Satisfied Customer."
Now this doesn't mean that customers are never satisfied now, it’s just that they never stay satisfied. They are always saying: “What have you done for me lately?" You may be able to dissatisfy them once, but if you do it a second time, you may never even hear from them again.
DB: Clearly that’s true. Subscriptions are much harder to win these days and generally the more users choose prepaid plans, the less intelligence you have of the customer. So what can be done?
SC: The answer is to do more analytics, which is really the grown-up stepchild to billing mediation.
We had a fantastic Catalyst project at our Management World Americas conference in Orlando last year, where deep packet inspection was combined with a service pattern recognition library. When you open up and identify those packets you can pinpoint exactly what service the subscriber is using across thousands of service types.
Then, when you scrub the privacy issues out of the data, you can extract stuff like how many of the 35 to 50 million usage records from 7 p.m. to 9 p.m. were accessing Amazon's book section in the area of fly fishing, for males age 30-40. You could get that specific.
The subject of analytics is getting great attention within our Collaboration Community at TM Forum. In fact, the report on leveraging data analytics with customer experience visibility was the second most downloaded Insight Research Report last year.
Now analytics is critical. Take the flat rate billing versus real-time charging debate. In my experience over the last decade, the marketing departments doesn’t really know what the cost of flat rate actually is. There’s a disconnect between the actual cost of service delivery and the value of what’s being delivered in the mind of the customer.
If you could match up the value delivered to the value equation of the subscriber, they will pay for what they are getting on a case-by-case basis and flat rate doesn’t have to be a catch-all. Think of it. Today 10 percent of the heavy users are abusing the network while the light users are sharing in the cost of their load. That’s how the flat rate is actually distorting the value chain.
With better analytics, however, we can become more precise in the prices we charge and our control of the network.
DB: Which brings us smack into the issue of network policy.
SC: People talk about network policy as if it’s something new, but look at the prepaid market. In prepaid, policy has been hardcoded into the switch for decades.
In the Chinese mobile market, providers are supporting 100 million subscribers of which 50 million are prepaid and they are getting billions of detailed records a day. So one of the simplest policies they enforce is whether the user can make the call or not. If you have a balance, you can make a call. If your balance is zero, you get blocked.
But today we can get more sophisticated because we can tie policies to a database which allows you to set up all sorts of rules to allow or disallow a user action.
CSPs need to be careful here: If that greater network policy sophistication is going to work, the logic of what you’re doing needs to be transparent to the customer so they understand how policy is interacting with your service offering. And to achieve that takes a lot of work. It begins by integrating systems from the switch to the mediation layer, then up into real-time charging engines and over to the customer care and finally into the financials. All of that has to be intricately interwoven. The whole system needs to react as an organic whole or the customer will lose confidence in what you’re doing.
DB: OK, so let me see if I’ve followed your logic, Steve. Customers are getting harder to gather intelligence on, so we need to make wider use of analytics tools. Analytics, in turn, gives us the intelligence to do better pricing and policy over who, when, and where users have access to the network. So the question remains: How does this give us a leg up on competing with the over-the-top players?
SC: We don’t necessarily want to compete with the over-the-top players as much as deliver that extra layer of value that only telecoms can provide.
In the manufacturing industries they talk about something called “Value-Stream Management," a lean manufacturing technique that is all about lowering costs without sacrificing value in the customer’s eyes. The idea is to leverage your own and your partner’s competencies.
And what telecoms can leverage is having access to the full market, similar to what broadcast networks like ABC/CBS/NBC and Fox enjoy in television. Within the constraints of privacy laws, you can pull together a great deal of knowledge about what over-the-top customers are doing. And what’s unique to telecom service providers is that view is across all the over-the-top providers. So this tremendous market reach is something service providers can take to the bank.
There are several segments of commercial world that would give a firstborn child to get the visibility on their customer base that CSPs have. Even Apple – you know, the company with the marketing halo over its head – actually has limited visibility into the market at large. It only has knowledge of the people who buy services from its music and app stores, but it doesn’t see the full view of customer activity like telecoms can.
There are huge opportunities here. For example, the cable providers with their intelligent set-top boxes can provide narrowcasting to the one-to-one contact point for targeted advertising or bundled offerings.
Companies like Netflix that offer a streaming service want to guarantee a certain QoS for their customers. So here’s where the new network policy capabilities mobile operators have can be leveraged to delivered telco-enhanced video streaming for partners such as a Netflix.
Look at how much value the iPhone and iPod have created as a pure OTP service. Imagine what can be done when CSPs work closely with Apple and other leading content firms to deliver premium services. It’s all about becoming full-fledged partner in the OTP’s value stream through effective network policy and advertising.
The sky’s the limit, really.