Enabling Services: New Revenue Potentials for Telecommunications Wholesale (Detecon Executive...

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 www.detecon.com Dr. Markus Steingröver Jürgen Richter Markus.Steingrö[email protected] [email protected] Enabling Services New Revenue Potentials for Telecommunications Wholesale The traditional telco model is under threat. Even the wholesale success story of the last years is mitigating due to declining interconnection revenues and falling margins for DSL resale. Innovative services are needed to replace diminishing wholesale revenues. In order to sustain wholesale revenue growth rates leading network operators actively focus on existing capabilities in their value chain instead of passively waiting for the next technology wave. These capabilities are currently reduced to supporting elements in the production process of retail services. Exploiting these capabilities can however unleash a substantial revenue potential by offering them as separate or bundled enabling services to wholesale clients. The wholesale customer will benefit from tailor-made solutions based on a modular system that enable him to create new sophisticated and targeted products. The wholesale operator will profit from reduced churn and attracted new customers. > Executive Briefing

Transcript of Enabling Services: New Revenue Potentials for Telecommunications Wholesale (Detecon Executive...

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www.detecon.com

Dr. Markus Steingröver Jürgen Richter

Markus.Steingrö[email protected] [email protected]

Enabling Services

New Revenue Potentials

for TelecommunicationsWholesale

The traditional telco model is under threat. Even the wholesale

success story of the last years is mitigating due to declining

interconnection revenues and falling margins for DSL resale.

Innovative services are needed to replace diminishing wholesale

revenues. In order to sustain wholesale revenue growth rates leading

network operators actively focus on existing capabilities in their value

chain instead of passively waiting for the next technology wave.

These capabilities are currently reduced to supporting elements in the

production process of retail services. Exploiting these capabilities can

however unleash a substantial revenue potential by offering them as

separate or bundled enabling services to wholesale clients. The

wholesale customer will benefit from tailor-made solutions based on a

modular system that enable him to create new sophisticated and

targeted products. The wholesale operator will profit from reduced

churn and attracted new customers.

> Executive Briefing

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Enabling Services – New Revenue Potentials for Telecommunications Wholesale

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Status quo and challenges for the wholesale business 

After comfortable years for European incumbents’ wholesale units in which revenue growth

rates and EBITDAs were higher than those of the corresponding retail branches the national

wholesale story is losing momentum.

The interconnection business is declining due to increasing direct network

interconnection between competitors, price reductions for interconnection and loss of call-by-

call and preselection minutes. Price cuts for subscriber lines and DSL resale products are

also having negative impacts.

In addition the NGN ante portas bears a high level of uncertainty for the further

development of the wholesale business.

It becomes obvious that telcos have to transform their current business model if they

want to survive. The following options exist:

  The telcos reinvent themselves as retail driven infotainment supermarkets acting as

distributor for the majority of consumer and business communications, information and

entertainment needs.

  The telco acts as a communications wholesaler, providing infrastructure and

commodity services to service providers who in turn deliver information and

entertainment to consumers and retailers. This infrastructure could include enablingservices, such as authentication, authorization and billing and a service delivery

infrastructure that insulates the applications and services from the specifics of the

network.

Today most telcos still follow the rule “Wholesale follows Retail” and show a tendency to

migrate to the first of the above sketched models. A success is however not guaranteed.

Telefonica’s dream to become an infotainment supermarket started with the acquisition

of the entertainment production company Endemol in the year 2000. After gaining the

perception that the mere diversification into the entertainment production industry does not

compulsorily lead to synergies and would finally enhance the USP of a telco, Telefonica

found it more promising to become an aggregator and a bit pipe carrier and sold Endemol in

2007.

An aggregator does not have to be involved in the creation of content but he rather has to

focus on the sourcing and packaging of the content, i.e. content location, rendering, billing,

advertisement placement and customer care.

An example for a telco defining itself in the direction of a communications wholesaler is

British Telecom. After undergoing the regulatory-driven ‘structural separation’ and having

the ‘21C NGN’ near to completion BT Openreach is at the forefront of the innovative

wholesale service providers. BT’s wholesale enabling services cover such diverse areas as

platform and hotspots, authentification and security, billing and related functions as well as

customer premises equipment. Moreover, BT even offers ‘Personal Services’ such as IT

support manager and HR within their enabling services portfolio.

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More general view on enabling services

The examination of the value chain beyond platform-centric services reveals several

approaches to establish wholesale business. The following figure shows the different

elements of a telecommunications value chain including the corresponding enabling

services.

Voice and videotelephony

Personalization

Digital RightsManagement

(Proxy) RADIUS

Support foremergencyservices

QoS-functions

VPN

SLA imple-mentation

IP multicastsupport by IProuters (for IPTV)

Switching ofmulti-mediasessions insteadof voice-onlysessions

Session control

Typical INservices

MM Mail Box

Identity

Locationinformation

Service creationplatforms

IN platforms

Policy control

Single sign on

Directory functions

Interconnection,ENUM

Mobile / fixednumber portabilitiy

Firewall / Viruswall

Ready-to-useplatforms,e.g. order mana-gement systems,contract server

Flexible pricingand billing models

Prepaid

   E  n   d

   d  e  v   i  c  e  s

   A

  c  c  e  s  s

   T  r  a  n  s  p  o  r   t

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   i   t  c   h   i  n  g

   I  n   t  e   l   l   i  g  e  n   t

   C

  o  n   t  r  o   l

   V  a   l  u  e

   A

   d   d  e   d

   S  e

  r  v   i  c  e  s

   S

  e  r  v   i  c  e

   P  r  o  v   i   d  e  r

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  c  c  e  s  s

   S

  e  r  v   i  c  e

   M  a  n

  a  g  e  m  e  n   t

   B

   i   l   l   i  n  g

   M  a

  r   k  e   t   i  n  g

   &

   S  a   l  e  s

Examples for Enabling Services along the Value Chain

1 2 3 4 5 6 7 8 9

1 2 3 4 5

6 7 8 9

 

Fig. 1: Enabling services along the value chain

Within the variety of enabling services ‘location information’ is worth looking at in greater

detail, since it is one of the enabling services with the most promising revenue potential.

  In the case that the network owner possesses a ‘Loc Info Brokerage’ platform the

enabling service ‘location information’ can be used to address the market for

‘Location Based Services’.

  The ‘location information’ regarding mobile devices or fixed DSL CPEs can be forwarded

to an application provider or an advertiser transforming the ‘location information’ e.g

into a ‘traffic measurement’ application or a ‘buddy-finder’.

  By offering additional enabling services like data protection service or micro payment

service a client can tailor an enabling service bundle to his preference.

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In the following examples of enabling services offered by telco wholesale innovation

leaders are presented.

“URU” (You are you):

Automated online identity verification serviceembedded in client's existing online registrationsystems providing identity authentication

Authentication (British Telecom)

Web21C SDK:

Set of libraries allowing application developersto use Web Services such as

send SMS messages, place phone calls andcontrol conf. calls from their applications

develop voice-enabled applications &services

Web Services (British Telecom)

Internet data center:

hosting the computing systems of contentproviders and enterprise customers for Web-based data delivery. In addition, supply of avariety of other services such as messagingand call center

Hosting (Korea Telecom)

Web portal site:

Information portal site providing a broad rangeof content via the Internet based on a highspeed content platform

Portal (NTT)

 

Fig. 2: Enabling services of wholesale innovation leaders

Modular system based Wholesale Model 

Enabling services will take off at the latest when the transformation to NGN is completed. In

an NGN the platform owner will provide a portfolio of service elements based on a ‘Service

Oriented Architecture’.

Service elements could for example be voice signaling, QoS-transport or network information

like presence or identity. These service elements will then be offered against payment via a

web-based partner portal to the own retail unit or external ISPs or vISP. These customers

can now combine service elements with their own services in order to generate newofferings. This will result in an ecosystem of innovative companies building their own

services around the incumbent’s platform features. With the opening up of platform

functionalities the incumbent can thus benefit from the innovation power and

flexibilities of third parties and finally participate in the service revenues of these

innovative companies.

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oEnabling Services – New Revenue Potentials for Telecommunications Wholesale

> Executive Briefing

Conclusion & Recommendation

Wholesale operators need to do two things in order to successfully cope with the

transformation in the wholesale markets and associated declining wholesale revenues:

1. Explore enabling services as a new and innovative source of wholesale

revenues as they promise to exploit the existing value chain more comprehensively

and effectively! Wholesale operators should analyze the entire set of enabling

services which could be offered and concentrate on those with promising revenue

potentials. The assessment should include the possible impact of the migration to

NGN.

2. Enabling services should be offered in a lean and modular system. In

accordance with the general Web 2.0 trend, enabling services should be offered as

modular systems. This enables wholesale customers to choose from a variety of

wholesale platform functions in order to build their own new and innovative retail

services.