New Telecom Services that Capitalize on Broadband Connectivity – Part 3

Background and Recap

The theme of this three part series is to examine potentially new and different telecom services that enable telcos to particpate in the value chain created by broadband Internet access. Pressure is on telcos to build out their fiber based and/or mobile broadband networks for greater coverage and higher traffic carrying capacity. Yet it is other companies (and not the telcos) that are making money from the value added services and apps they’ve created which take advantage of the telcos broadband network. So are telcos nothing more than purveyors of a fat, dumb pipe? Or can they find new services that will generate revenues and profits? That is, can telcos transform a “dumb pipe” into a “smart pipe” which they can make money from?

Discussion

So far we’ve looked at different versions of the “connected home” as well as emerging devices pairing up with M2M Communications platforms to create new telco opportunities and business models. Of course, many telcos have entered the entertainment video market (via IPTV and/or RF video) and offer triple or quad play service bundles. There is also the often touted Location Based Services (LBS), which is to be coupled with mobile advertisements and directory services. Premium mobile video has also been tried (e.g. Qualcomm’s MediaFlow, Sprint TV), but hasn’t produced much revenue or profits.

Another potential telco opportunity is smart grid communications networks. Many alternatives are possible. It could be a private network for the electic utility, a shared public/private network or utility use of a public broadband wireless network. However, utilities seems to lack trust in telcos and prefer to operate their own communications network (sometimes outsourced to a 3rd party). For more on this topic, please see:

Integrated Critical Communications Infrastructure for Smart Grid at Connectivity Week

We think mobile broadband may finally give rise to wireless health care applications. Telemedicine is a great example of a wireless connected health solution, especially in developing countries, unserved or underserved rural areas. IEEE ComSocSCV will be featuring a very illuminating Telemedicine panel session at our Sept 14, 2011 meeting in Santa Clara, CA.

For quite some time, femtocells have been touted as a great way for telcos to get traffic off of their mobile data networks and onto a broadband wireline network. AT&T is offering free femtocells for iPhone subscribers that live in rural areas which lack 3G/4G coverage (my neighbor in Arnold, CA has one and it works very well- as long as you’re iPhone is within 10 meters of the femtocell). Andy Germano, Vice Chairman of the Femto Forum identified several possible femtocell services at the Connections 2011 conference, which include:

  • Secure home access
  • Virtual home phone
  • Virtual fridge notes,
  • Picture synchronization and
  • remote control.

Recently, a raft of telco provided cloud computing based services have been proposed. These include: private/public cloud, personal cloud, virtual private cloud, etc. We don’t think any of these will succeed unless the telco has lots of experience with IT hosting, managing data centers, service and support of IT enterprises. Very few U.S. telcos have such experience- probably only AT&T and Century Link (with the Savvis acquisition). Hence, we don’t see Cloud Computing as ripe for telco exploitation, at least not at this time.

Perhaps, the only Cloud related attribute that telcos might capitalize on is subscription based billing. Ironically, such pay as you go billing has always been used for long distance circuit switched voice calls, but is not used for broadband (other than for various data plans based). The basic concept is to manage billing in terms of a customer’s data traffic activity and therefore manage revenue dynamically.

Chris Couch, COO of billing vendor Transverse, cited an example of subscription based billing, “If a major tennis tournament is in town then you might want to subscribe to results or clips etc, for the period of the tournament, but you normally would not subscribe to a tennis subscription. This level of sophistication increases the flexibility of the offering and the understanding of the customer. It gives the customer choice.”

When asked how the cloud fit into this billing model, Mr. Couch replied, “It is a virtuous circle. The flexibility and resources of providing this as a cloud service means a lower cost base and the ability for service providers to climb the maturity ladder quicker. It is also the most effective option, in terms of investment in normal circumstances this kind of infrastructure would have a $5-10 million price tag.”

For more information on subscription based billing, please refer to:

Can subscription billing enable the new business models telcos require?

Analyst Opinions

We checked in with Harry Wang – a very astute Telecom Analyst at Parks Associates – for his thoughts on this provocative topic. Harry thinks that telcos do have several opportunities to diversify into new markets. Here are a few he ticked off:

1. Telco App Stores

These would enable telcos to distribute content across mutliple end user platforms. Ericsson is currently providing a “white labelled” app store for Sprint (and managing their network, too). Telcos are partnering with Get Jar– a third party aggregator of mobile apps. Harry also mentions Wholesale Application Community (WAC) – a global mobile carriers’ initiative to offer app purchases no matter what device platform or mobile carrier that a consumer uses.

FiOS Mobile Remote User Interface, Courtesy Verizon

2. Home based Services (part of the “Connected Home” scenario)

Home entertainment (video, audio, game playing, etc), home security monitoring, energy controls, personal emergency response (e.g. elderly person falling down or getting hurt) were cited as some possibities. Verizon’s FlexView is a specific example of a home entertainment service for FiOS customers. It is a Video on Demand (VoD) type of service that lets the customer purchase or rent videos, which can then be played on a number of end user platforms, including:

  • Personal Computers/Netbooks
  • Compatible wireless handsets (see image for example of FiOS Mobile Remote User Interface)
  • Compatible portable devices that support Microsoft® PlayReady® content access technology.

3. On line TV packages that complement telco broadcast video (IPTV or RF) and VoD

The telco would procure the content from a 3rd party and make it available over their triple play delivery network (e.g. FiOS, U-Verse, etc). The STB would play the OTT videos along with broadcast and VoD on TVs and other user devices/platforms. Note that this OTT video package can be offered outside of telco’s network-covered territory and serves to be a competitive response to OTT video service providers like HULU, Netflix or Amazon.

4. Becoming 4G- MVNOs

Telcos (and MSOs) that don’t have their own 4G network could buy pieces of it wholesale from a third party provider like Clearwire or LightSquared. This would help telcos like Century Link and XO Communications, that currently don’t have any wireless offerings for consumers or the mobile workforce.

5. Personal Cloud for consumers

Assuming the telcos can learn and understand what makes a good cloud experience for consumers, they could provide individual “personal clouds” that store the customers data, electronic documents, music collections, downloaded videos, photo albums, etc. User concerns include: security, privacy controls, reachability and cross platform access. Harry cited Newbay Software as an interesting company in the personal cloud space.

Interview with Harry Wang

6. Commercial Services for SMBs

These would encompass service bundles that include both fixed and mobile offerings. One example is SIP Trunking, offered by XO Communications and others. Provided by an Internet Telephony Service Provider, a SIP trunk connects an IP-PBX to the traditional PSTN. Other voice, data and video conferencing services are possible. SMB customer needs will determine the precise ones which are deployed.

Here is a ViodiTV interview with Harry Wang

Parks Associates VP & Principal Analyst Kurt Scherf is very optimistic about premium technical support services to be offered by skilled telcos. Kurt wrote in an email,

“This is a broadband-provided service that I think will help to generate positive cashflow for the broadband service provider by:

  1. Creating new revenue streams; and
  2. Helping to reduce incoming customer support phone calls when people have something typically considered “out-of-scope” such as a virus infection on their home computer.

Revenues from premium technical support services are projected to grow from $1.5 billion in 2011 to $4.8 billion in 2011.”

Closing Comment

We’ve identified many new and interesting services that telcos might provide. Their success or failure will depend on skill, agility and committment of the telcos. Customer service and support will play a huge role here.

It’s imperative that telcos continue to upgrade their broadband wireless and wireline networks to keep up with the exponential increase in data traffic. We wonder whether they will have the resources and commitment to also pursue new services, such as the many we have described in this three part article.

© 2011, Alan Weissberger

0 thoughts on “New Telecom Services that Capitalize on Broadband Connectivity – Part 3

  1. Thanks Alan for completing the third part of this 3 part article that synthesizes many of the good panels and presentations from Parks Associates Connections event, together with research you did on the topic. It is a definite challenge of not being spread too thin, as the telcos have to keep up with infrastructure demands, while at the same time, picking which services to offer and how to offer them (e.g. partner or build it themselves).

    1. Thanks Ken. I spent a very significant amount of time researching the potential new telco services identified. I wonder if telcos have evaluated each of those and possibly others, especially support requirements?

      As their technical support and customer service is horrendous (at least, my experience), I am skeptical telcos can succeed in most of the new services that were described in the three part article series! Do they plan to outsource 1st level customer care to India, as AT&T does now? Outsource services to a 3rd party? And NOT tell you when there is going to be a planned outage? Or give the WRONG information when there is an unexpected outage (e.g. AT&T-Yahoo email authentication server failed and users were instructed to reset their password, which didn’t work after that process was successfuly completed)?

      1. There is also the challenge of being good at a lot of things. As you point out, the skill-set required to run a network is entirely different than the skill-set required to deliver high-touch service in the home or to the person. Sometimes it is easier for a new organization to provide this service as the organization grows up in a way that meets the needs of the customer. That’s good and bad. If the needs of the customer change or the organization tries to serve a different market, then its probably much more difficult to change the culture of the organization than it is to perfect the technology.

        Culture has been a been a common topic of my conversations with independent telcos over the years. They have been innovators in terms of providing some of the services that your wrote about. Here is an interview with Alan Hoopes of Silver Star Communications.

        http://www.viodi.tv/2007/02/26/hoopes/

        I can’t imagine how one goes about changing a culture as entrenched as what is in a 100 year old company.

  2. Excellent 3 part series with many points to ponder.

    The main one is this: What experience or credentials do telco employees have to succeed at new services that are foreign to them? For long time telcos had problems with anything that wasn’t tip and ring/POTS oriented.

    Without any internal expertise, will they have to outsource customer support to a 3rd party, like they outsource their operations and network management, i.e. Ericsson, NSN, etc? If they have to pay a 3rd party for each new service, that will be difficult for telcos to co-ordinate & cut into any profits generated! Have the telcos considered this vital point?

    Another issue is trust. Will the customers trust a telco to provide a new service that they don’t have any experience with? VZ may be a test case for this with their Home security/monitoring system described in part 1 article.

    1. Ken Pyle’s comment above may partially answer your question. He wrote:
      Culture has been a been a common topic of my conversations with independent telcos over the years. They have been innovators in terms of providing some of the services that your wrote about. Here is an interview with Alan Hoopes of Silver Star Communications.

      http://www.viodi.tv/2007/02/26/hoopes/

      I can’t imagine how one goes about changing a culture as entrenched as what is in a 100 year old company

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