The Convergence of Telco & the Subscription Economy

Agenda

• Wake everyone up!

• The Own-Lease-Rent-Subscribe Continuum

• Understanding the Subscription & Sharing

Economy

• Why Telcos are Best Positioned to be Significant

Players

• Key Challenges

• Take Outs

Own-Lease-Rent-Subscribe Continuum• Owning

• The “great Australian dream” – owning a home

• The traditional/historical way to access an asset

• Finance often plays an important role

• Leasing

• Gives the lessor almost all of the benefits of

ownership but without tying up capital

• Finance is an essential part

• Sometimes indistinguishable from owning with

finance (e.g. car lease vs hire-purchase)

Own-Lease-Rent-Subscribe Continuum

• Renting

• An agreement where a payment is made

for the temporary use of a good, service

or property owned by another

• Further down the continuum from leasing

• Subscribing

• Getting access to a resource, or regular

supply of a product on a regular basis

Own-Lease-Rent Subscribe ContinuumProperty

Own

Lease

Rent

Subscribe

Own-Lease-Rent Subscribe ContinuumCars

Own

Lease

Rent

Subscribe

What is the ‘Subscription Economy’?

• A new way of looking at how people ‘buy’ ‘things’.

• Utility trumps ownership.

• Shift in consumers spending habits.

• Goods are repackaged as services.

• It can be anything: cloud-based software & services,

media/content, groceries, consumables.

• Just another XaaS?

Economics of the Subscription Economy

• Infrastructure is expensive and ties up capital.

• Companies want to shift fixed costs to variable

costs.

• Consumers want capital to be used for assets,

not liabilities (cf. Rich Dad, Poor Dad)

• Ownership shifts up the supply chain and is

replaced with subscription.

• For a telco, does this sound familiar?

Traditional vs Subscription Business Model

• Tradition Business Model:

• Value of the sale is the value of items sold.

• Each sale is a one-off transaction

• Customer is only your customer for one single

transaction

• Customers might be anonymous, so CRM is a

big challenge

• Loyalty is a bolt-on system

Traditional vs Subscription Business Model

• Subscription Economy Business Model:

• Value of the sale is the ‘Customer Lifetime

Value’

• A sale results in multiple transactions and a

revenue stream over time

• Customers cannot be anonymous

• You can/must communicate with them

regularly

• Loyalty is a key part of the business model

Subscription Economy Business Model

• Revenue = Customers x ARPU

• Customers (month N)

= Customers (N – 1)

+ New Customers

– Churn

• Key metrics of performance are customer

acquisition cost, acquisition rate, cost to serve,

churn rate

Marketing in the Subscription Economy

• Instead of repeat purchase, you subscribe

once and continue until you cancel.

• Inertia works for the vendor rather than

against it

• Dramatic impact on the marketing process –

consider Dollar Shave

What’s in it for the Customer?

What motivates customers to participate:

• Value – cheaper access to a resource

• Sharing – better use of resources

• Trust – will you be there next month?

• Simplifying the purchase decision/cycle

• Tapping into the power of communities

Why Telcos are Significant Players• The original sellers of subscription services

• Experience in pricing services, cross-

subsidisation, ‘freemium’

• Already have billing relationships with

customers

• Telco ‘hard’ services converging to cloud

services, e.g. Virtual PBX

Key Challenges• Billing – much more complex with multiple

products and bundles

• Pricing – understanding margins, true cost,

value of marginal increase in ARPU

• Selling & supporting multiple products

• Mixed regulatory environment

• TCP Code impact

• Lack of control of the supply chain

Take Outs• The ‘Subscription Economy’ is here

• It has been here for a long time, just known

by other names

• Telcos are in the best position to take

advantage of it

• Position now for the next (NBN?) wave

Shameless Plug• Billing Bureau have been doing this for

nearly 20 years; started in telco and now

expanded to subscription and services.

• We live and breathe it.

• Experts in convergent billing and automation

and scalability of billing & related processes.

• Cloud billing will only become more

complex; we have already done it all.

Thank You!• Any questions?? All clear as mud?

• For more information, contact

• Lesley Kelly; Sales and Marketing

03 8611 1111; lesley@billing.com.au

• David Werdiger; Chairman

0412 389 389; david@billing.com.au