If telecommunications service providers continue to believe that they own their customers because they have a ‘billing’ or ‘customer care’ relationship with them they are in for a really big shock. Those massive investments in billing, payments and customer relationship management systems in the past may soon be of little value unless there is a wholesale change of mindset in the operators themselves.
The incredible success of prepaid mobile takeup worldwide and the discovery that prepaid customers are easier and cheaper to manage has stimulated operators into encouraging their postpaid customers to convert. However, prepaid customers are less likely to hang about if a competitor comes up with a better deal. In some markets, it is cheaper to buy a pre-loaded prepaid SIM than to top up and existing one, guess how much loyalty that generates?
There was, for some time, an almost ridiculous theory amongst operators that if any ‘outsiders’ wanted to sell digital content to ‘their’ customers they had to work hand-in-hand with the operators because they not only owned the customer, they also had their money. In the early days of digital content downloads such as music and games the operators, with the notable exception of NTT DoCoMo, demanded between 50 to 70 per cent of revenues from content developers and providers for the privilege of selling to their customers.
Needless to say, this did not go down well, and many content suppliers either went broke or we forced to look at other ways of selling direct to users. They have attempted to compete with prepaid offerings of their own, utilizing advertising funded models and even given stuff away free. But it appears everyone, but Apple, may have missed the point. There is only so much content one wants to download via a 2G or 3G network when it’s a lot cheaper to do it via the internet. The remarkable success of the iPod was not replicated by mobile phones that had MP3 playback capability and content wasn’t cutting it, despite all the rosy projections the analysts were putting out.
Apple, however, went on to become the world’s largest retailer of music via its iTunes store and nobody even saw what was coming next – the iPhone. Not that the iPhone itself is so remarkable but the idea of having one standard operating system on every device it sold meant that Apple could provide single applications that would work the same on every iPhone. When it released its software developers kit, Apple unleashed a monster that nobody, even the analysts, had foreseen – a massive market for applications. And again, the operators are seeing none of the direct revenues, there is some benefit from applications that utilize the network, but it’s little compared to the phenomenal growth of the applications markets.
Not to be outdone, and some time later, almost every major mobile handset manufacturer announced its own version of the AppStore, but most are finding it’s not that easy. Whereas Apple had only one OS and one device to worry about others had many thousands of handset models with differing OS and screen size, let alone differing versions of software used to play music, videos and run applications. The most recent news indicates that only RIM, with it’s fairly consistent Blackberry platform, is seeing substantial application sales.
Unlike Apple, a number of the new application stores (including RIM, Nokia’s OVI and Microsoft) opted to work with operators utilizing their unique microbilling capabilities and, hopefully, benefiting from the vast prepaid user base not otherwise accessible. It’s still early days to determine how successful this model will be, but one thing is certain, if the operators demand too much for ‘handling’ the payments it will fail. The world’s most successful content ecosystem, developed in Japan by NTT DoCoMo is based on a 9 per cent billing fee, but the operator has seen incredible date revenues as a direct result.
The new applications players will also have little or no urge to set up highly capitalized and opex hungry call centres to cope with the guaranteed stream of enquiries. Isn’t this a strength of the operators that could and should be farmed out to the new ecosystem partners? Here is the chance to not only destroy the ‘fat pipe’ syndrome but to turn long-term cost centres into profit centres that could help find the new billing requirements of NGN transformations.
With Apple’s App Store alone reportedly bringing in revenues of over US$200 million per month even at 9 per cent the new business could be extremely worthwhile. If the industry turns its back on this opportunity it may be its last chance.
It has been reported that a national UK Micropayment Network is set for mid-2010 Trial. UK content owners could have a working national micropayment network by next summer. A testbed network is already being planned out, after Digital Britain allocated the government’s Technology Strategy Board (TSB) £30 million in June. PaidContentUK points out that companies like ITV, Fremantle Media and FT.com search are searching for a payment model.
It begs the question, why haven’t they approached the micro-billing experts – the telco service providers and operators?