Open Telco
T-109.4300 Network Services Business Models 18.02.2010
Data Communications Software Researcher
Yrjö Raivio
Email: yrjo.raivio@tkk.fi Tel: +358 50 568 9672
Open Telco enables new innovation
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• Introduction
• Service domain
• Technology domain
• Organization domain
• Finance domain
• Conclusions
Contents
From Closed to Hybrid Model
Closed Model Walled Garden
Hybrid Model Smart Bit Pipe
Open Model Bit Pipe
IMS
Open Telco
Bit Pipe Flat Rate
Degree of openness MP2P
Push SMS Pull IM
Mobile Web 2.0 DRM
Creative Commons
WAP
Wireless Village
QoS Security
Jabber Dynamic Flat Rate iMode
Broker
IN REST
Super distribution N-sided
model Area
Long Tail B-party
pays
ServicesWeb
P2P Web 2.0 MSS
PoC
Premium SMS 0700 &
0800
VoIP monopolyPTT
• Pressure from the Internet
• ARPU is declining
• Volume of mobile data is growing exponentially but revenues just linearly
• Service innovation difficult – Lack of global markets – Lack of standard APIs – Lack of business case
• Open Telco a good opportunity for the Finnish ICT industry
• Principles can be applied to other industries also (ref. EVA report)
• Operators moving from Walled Garden towards openness: a hybrid model
Operators still make good profits but..
Internet players have strengths
APIs and Mashups in the Internet
Source: www.ProgrammableWeb.com
Lessons from the Internet
Network Effect
Context
Metcalfe´s and Reed´s Laws
Speed and quantity turns into quality
Every customer can be monetized (Privacy?)
Flickr: “Don´t build applications. Build context for interactions.”
Social networking - Viral marketing
Open Innovation – The Long Tail
Developers
Open and simple APIs & SDKs, automated support systems
Global access
Fair revenue sharing
The Long Tail of Mobile Services
III
Open Innovation II
Content Provider Services
Service Revenues
Mobile Music
I
Operator Services
Number of Services
Call & Share Mobile Email
Business Services Voice SMS/MMS Info
PoC
Mobile TV Home
Entertainment
Community
Location WEB2.0
Revenue
Ring tones
Games
100 M€ ? M€
Finnish 2 B€
Market:
Mobile World Congress, 15.02.2010
http://www.mobilebusinessbriefing.com/content/showdaily/2010/monday/pageflip.html Source:
Open Mobile Terminal Platform Supported by large operators, Nokia and Ericsson
BONDI: standard for W3C widgets and web applications on mobile Standard within12 months 15 largest operators
incl. TeliaSonera
3 billion subs
”..open international applications platform”
30% commission?
What Open Telco can offer for mashups?
data connectivity billing presence identity location
network
internet (IP)
Operator horisontalization
end user
Many passwords to
remember, security issues, spam
Limitation to ad-based business models and tedious credit card use Context to be provided manually by the user
Telco identity management
Telco charging and billing capability Telco location and presence
information Limitation of targeting
possibilities for advertisers
Telco demographics and profile information Bad real-time quality, long
response times, connection break-offs
Telco quality of service
High cost of voice related application integration
Integrated voice &
messaging in
Internet applications
voice messaging
• A holistic business model framework described in "Mobile Service Innovation and Business Models", Bouwman et al.
(2008)
• Includes four domains: Service, Technology, Organization, Finance
• Service Domain: end-user perspective, customer value of the service
• Technology Domain: technical design of the service
• Organization Domain: the value network needed to realize the service
• Finance Domain: revenue models,
investments, financial arrangements of the service
STOF model
Service domain
Finance domain
Organization domain Technology
domain
Business model
Value for customers Value for
service providers Technology
domain
Organization domain Technology
domain
Finance domain
Organization domain Technology
domain
Service domain
Finance domain
Organization domain Technology
domain
Service domain
Complements other open APIs
Social media
Hobbies
Context
Ecommerce
& advertizing
Emergency
Public sector Travelling
Message Payment
Location
OPEN TELCO
APIs
Context
SLA
Profile
Voice Identity
Public transportation
B2B
• Idea: Profile based automated travelling
information about local hotels, restaurants, public transportation and tourist attractions combined with tickets
• Targeted advertizing
• Both business and private customers
• Open Telco APIs: messaging, payment, location, profile
Travel guide
• Idea: Mobile ticket owner can impact on the event content, give feedback before, during and after the event
• Services tailored to concert ticket: live recordings, T-shirts, exclusive offers
• Open Telco APIs: messaging, payment, location, profile
Access ticket + voting & blogging
Technology domain
Mobile network
DOCUMENTTYPE 1 (1)
TypeUnitOrDepartmentHere
TypeYourNameHere TypeDateHere
RNC
MSC/
VLR BSC
Other networks (GSM, PSTN, ISDN, etc)
Air
MS
MAP
BS
RAN
RNC
UE NB SGSN
MS BS
UE NB
GGSN IP-networks
MS/UE= 2G/3G Mobile Station BS/NB = 2G/3G Base Station
RNC = Radio Network Controller RAN = Radio Access Network
MSC = Mobile Switching Center
SGSN = Serving GPRS Support Node
SCP = Service Control Point HLR = Home Location Register
Backbone Backbone Gr
CAP
Gn GMSCGMSC
SCP SCP
HLRHLR
GMSC = Gateway MSC
GGSN = Gateway GPRS Support Node
CAP = CAMEL Application Part
Iub Iur
IuCs A Gb
IuPs Gs Abis
VLR = Visitor Location Register BSC = Base Station Controller
MAP = Mobile Application Protocol OSS/ SMSC
BSS
OSS/BSS = Operations/Business Support System SMSC = Short Message Service Centre
Call, Presence
Messaging Payment,
Profile, Statistics
QoS, Browsing Identity,
Location
Service logic
WAP Gateway
Architecture
Support Functions Adaptation Layer
MSS SMSC HLR
…
Secure APIs
Developers & Services
Networks Service Middleware
Service Cloud
… LCS IMS SMSC HLR … LCS
End Users End Users
• Privacy has a top priority, a show stopper
• Input into regulation, privacy rules are changing
• Novel ideas, do not invent a wheel again
• Avoid any new registers if possible
• EU directives vs. national law, APIs vs. Mashups
• Subscriber identity vs. Openness
• Differences between B2B and B2C, and passive (static) and active (dynamic) APIs
• Privacy management (User/Operator), levels and defaults
• Payment (telco and other purchases, remittances)
Security, Privacy and Trust
Payment has still challenges ahead
Source: Aamulehti, 18.02.2010
Organization domain
Broker models
Internet (IP)
Operator Internet
player
Broker Network assets
(authentication, billing, location, presence, quality of service, etc.)
Types: Digital marketplace, audience builders, cost minimizers
Broker market requires critical mass for both sides (ref. SMS, roaming)
Broker must be neutral entity
Internet player
Internet player
Internet player
Internet player
Internet player
Internet player
Internet player
Internet player
Operator Operator Operator Operator Operator Operator Operator Operator
Value Chain
End User
Content Owner/
Originator
Content Provider
Content Aggregat
or
Marketing Billing Application
Developer
Content fee
Operato r Traffic feeTerminal fee
Terminal vendor Retailer
•Analyze how open APIs impact on each player of the value chain
•What new is required
•What new is achieved
Source: Haantie, 2006
Terminal
Content
Network
Infra vendor
Value Network
Broker
End User Broker
host
Advertiser Developer
Operator
API provider Service
Network
Finance domain
Two-sided business model (1/2)
Operator accessible
brokerage content market:
$100 B by year 2012
$350 B by year 2017 Source: STL Partners
Two-sided business model (2/2)
A B C
End User Developer, SME
Advertiser…
Broker, Operator
Subscription
Subsidization
Commission
Service fee
• Describes financial agreements between actors in value network
• Most important variables: capital, costs, revenues and risks; Target: win-win
• Open Telco equals Amazon type bazaar
• Subscription, advertising, transaction, volume,
licensing, sponsorship, freemium = free & premium (1/10/90 rule)
• Fully automated processes for business transactions
• B-party pays (ref. lack of Facebook or Hobby club SMS notifications)
Finance factors
• Mobile operators must react on ARPU decline
• Openness has clear advantages, but privacy challenges must be solved, a hybrid model
• Open Telco enables innovative business models (win-win)
• STOF model for business model analysis; STOF method for business model design
• This study provides Step 1 for STOF method followed by – Step 2: Critical Success Factors (CSF)
– Step 3: Critical Design Issues (CDI)
– Step 4: Internal and external robustness check
• A lot of uncertainties, lack of end user feedback
• Multi-organizational trial required, Tekes/Tivit Cloud SW program prepared
