Charting a new business model for CSPs

Date: Sat, 06/18/2011 - 18:54 Source: Clarity press department

The evolving relationship between CSPs, content providers and customers is a mysterious area. Tony Kalcina, Chief Product Officer at Clarity, looks at what’s on the horizon

Charting a new business model for CSPs Tony Kalcina, Chief Product Officer at Clarity

A decade ago, Communication Service Providers (CSPs) could have been forgiven for thinking they had comprehensively mapped out their business models. Few foresaw that the rise of the digital age would arrive like a tsunami, sweeping away traditional revenues and disrupting the world of telecoms for many years to come.
The relationships between CSPs, content providers and customers have changed, forcing CSPs to accept that a kind of Bermuda Triangle now exists where business models have yet to be charted. They are also well aware that they must approach this area with an open mind if they are to survive.

The three sides of the triangle
In order to develop a business model where CSPs, content providers and customers work together for their mutual benefit, it is important to understand the needs of the different players involved.

CSPs in both developed and developing markets are being stretched to breaking point by wave after wave of industry transformations. Fierce competition from traditional rivals, combined with the arrival of disruptive new players like Skype, is eating into revenue streams. The skyrocketing popularity of streaming content, file-sharing and next-generation services is also putting immense pressure on CSPs to upgrade and expand their networks.
Operators are in the unenviable position of paying for network upgrades to support high-bandwidth traffic that they currently generate little premium revenue from, while content providers like YouTube and Apple reap the rewards. If a solution is not found, infrastructure development will continue to lag behind data demands, as operators have neither the cash flow nor incentive to proactively upgrade their networks. This problem will only be compounded in the future, as more and more online services like Cloud Computing emerge and the pressure on bandwidth and performance increases.
In the last decade there has been much talk of CSPs positioning themselves as a one-stop shop for their customers. Instead, their traditional revenue streams have been disrupted by the emergence of so many new intermediaries (such as content distribution systems or social networks) between them and their customers. By being forced to share the customer relationships that they once exclusively owned, CSPs may miss out on generating revenue from the data boom and become “dumb pipes”.

Content Providers
Meanwhile, content providers are bearing the brunt of the costs for developing online content and services. For this reason, they are desperately searching for new ways to monetise their content, since a steady revenue stream is critical for survival. This is a difficult task and only a lucky minority are finding ways to bring in a stable revenue stream. Some content and services, such as search and social media, have successfully deployed advertising-based revenue models, but as the market matures and becomes increasingly fragmented so will the revenue share from advertising.
With file-sharing and streaming content eating into expected revenues, content providers continue to face challenges around protecting their intellectual property. However, Digital Rights Management (DRM) and other forms of content protection always prove unpopular with consumers, as well as being hard to enforce. The abundance of free content available also means that content providers have very loose relationships with their customers, who can easily opt for another provider if they fail to supply the free or low cost content that is now expected. For this reason, content providers are investigating ways to encourage customers to value and pay for content, even if this is a nominal fee for access to huge amounts of data.

Customers are becoming increasingly frustrated by being locked into one provider of content for their devices. Such “walled garden” relationships are common because many hardware manufacturers are currently filling the gap as content providers for their own devices. Mobile applications are a good example of this, with vendors like Apple and Nokia only servicing their own handsets.
Consumers are inconvenienced by the costs and confusion of needing to open multiple accounts with different providers in order to access the content or services they want. Utilising services from multiple providers also leaves customers more exposed to fraud, as more accounts need to be opened. Similarly, the complexity of this system means that customers are frequently not securing the best value deals possible and cost-overruns are commonplace.  And in a future not too far away, as we enter the era of cloud computing and smart services, a plethora of lifestyle services for the home, car, education and health will need support. They will force the issues of both payments, as suppliers tailor customer specific deliverables which cannot easily be ‘pirated’ from one user to another, and also quality of delivery, as consumers become dependent on the service to fill a key lifestyle need.
These new services will be a catalyst for the adoption of a new, sustainable business model.  A simplified method of purchasing and bundling content and services is long overdue and device-agnostic access to content will soon be demanded.

Rewriting the map
So what will this brave new world of communication services look like? Certainly, all parties will benefit from a simplified and cooperative business model which is secure and based on shared value chains. CSPs are in a position to enter this chain as trusted suppliers, leveraging their existing customer relationships, subscriber knowledge and service quality assurance capability. However, they will also rely on partnerships with other players in the value chain to deliver both content and a stable revenue stream.  For this reason, a ‘broker’ service may emerge, which will be device and vendor neutral and act as an intermediary between all parties.
Any broker would need to have the financial strength and market credibility to support the needs and interests of all parties. In fact, the larger CSPs, or resellers, are perhaps best placed to provide this function, having already established financial relationships with customers, other service providers, handset manufactures and content providers. New standards for content development, delivery, security and revenue sharing will also need to be agreed, to ensure that content and revenue can truly be distributed in a device and network agnostic way.
In order to manage this complex integration, CSPs and other brokers will need to deploy automated processes to control every element of the customer experience - from ordering and provisioning to service assurance and billing. Flexible product catalogues will also be needed that can support any type of product or service and use repeatable processes to manage new services and bundles. Automated processes would enforce any financial agreements between CSPs and content providers, which will need the flexibility to be based on different charging models, such as data usage (for low value content) and revenue sharing (for premium content).
Migrating to this brave new world will be a challenge for all, as established ways of doing business are broken and rebuilt. But in the same way department stores can profitably provide a one-stop-shop for thousands of manufacturers, with shared payments and product guarantees, CSPs can do the same in the online world.  Now more than ever, CSPs need to map out how their business will operate in ten or twenty years’ time, so that the investment they make in processes and systems today will support the journey to tomorrow.

valorar este articulo:
Your rating: None

Post new comment

Datos Comentario
The content of this field is kept private and will not be shown publicly.
Datos Comentario
Datos Comentario