 | Issue: | Asia-Pacific III 2012 |
| Article no.: | 6 | |
| Topic: | Direct operator billing – A strategy to mitigate the OTT threat | |
| Author: | Nic Stirk | |
| Title: | CEO | |
| Organisation: | SLA Mobile | |
| PDF size: | 327KB |
About author
Nic Stirk is CEO of SLA Mobile. He is an entrepreneur, visionary and classic example of a transformational leader. He is responsible for transforming SLA Mobile from a professional services business to a solutions provider, which helps mobile operators across the globe monetise their network assets.
Having gained a wealth of knowledge working with large Telcos in the past, Nic has led SLA Mobile to growth as a global Professional Services business and expand into APAC. Nic is a Chartered Director, graduate of the Stanford Business School and was awarded Member of the British Empire (MBE) status in 1995.
Article abstract
There is no denying that OTT players have shifted the centre of gravity of the mobile industry. Mobile operators can respond by adopting the two-sided model, facilitating merchants business on one side and driving it to the mass of consumers on the other. To do that, mobile operators need a Direct Operator Billing (DOB) system that exploits their biggest assets – subscriber knowledge and operator’s trusted brand. They are best placed to deploy permission-based mobile marketing to gain consumers’ consent. DOB will build an ecosystem of downstream and upstream customers that can be further monetised when more consumer intelligence is utilized.
Full Article
The mobile industry is seeing significant shifts in power and influence away from traditional Mobile Network Operators (MNO) such as SingTel, Axiata and Vodafone to Over the Top (OTT) players such as Apple, Facebook and Google, who have applied disruptive business and technology models that span a number of industries and sectors, not just mobile and telecoms.
As technology has developed from first generation voice and text services to mobile data, mobile internet and Rich Communication Services power has shifted from the MNO who owns the network to businesses that have developed frameworks, technologies and services that give the consumer the ability to develop their own content, media and entertainment. In effect, Facebook is a framework and a set of tools that allows users to input and build their own communication network.
The challenge for MNOs is how to mitigate the growing threat from OTT players and how to stop themselves from becoming a ‘dumb pipe’, whereby their revenue is generated from declining voice, text and data transactions whilst real value is created from social media platforms and web companies that leverage the growing smart phone market. With an ‘asset rich’ infrastructure, historical and real-time consumer personal data, it is argued that the MNO is ideally placed to mitigate the growing threat from OTT organisations by executing a strategy of ‘monetising network and personal data assets’.
Figure 1: The OTT Threat
A word on Personal Data: The World Economic Forum (WEF) in their January 2011 publication, Personal Data: The Emergence of a New Asset Class , have said that we are moving towards a ‘web of the world’ in which mobile communications, social technologies and sensors are connecting people, the internet and the physical world into one interconnected network. In the same publication, the WEF believe that: “personal data will be the new oil, and will emerge as a new asset class touching all aspects of society”.
Having worked with a number of leading mobile operators in the APAC region, this article suggests that the MNO should develop a ‘two-sided business model’ for the monetisation of network assets, and that a ‘quick win’ could be achieved by monetising the MNO’s billing assets and introducing Direct Operator Billing (DOB) for upstream industry verticals, merchants and enterprises. It is also recommended that the MNO collaborate, and not compete head-on with the OTT players.
Figure 2: Two-Sided Business Model
The needs of the stakeholders in a ‘two-sided business model’ that is focussed on DOB require the following:
– The downstream customer and consumer of DOB require a service that is underpinned by trust in the relationship with their MNO, simplicity with how the transaction is made with both the Merchant and MNO, and a transaction that is financially secure.
– The upstream customers, merchants and enterprises require a low cost implementation route to DOB and one that can form part of an overall m-commerce strategy – a business model that can compete with other payment options and ensures margins are maintained or increased, and finally a product and solution roadmap that can bring value-added propositions which can complement DOB.
So assuming the MNO has recognised the sustained value in a two-sided business model, and decided to implement a strategy to monetise network and personal data assets, they need to start by asking themselves three questions:
• Do I recognise the threat from OTT players?
• Do I want to adopt a Smart Pipe strategy?
• Do I recognise the strategic value of DOB?
Assuming the MNO answers ‘yes’, they now need to execute. The MNO may have their own DOB delivery capability, however if they do not they should explore a partnering approach that ensures their brand remains central to the DOB proposition that is presented to the merchant and enterprise. After all, the MNO brand is the biggest asset they have. Yes, the merchant’s brand owns the consumer, however it is recommended that the MNO – and not an aggregator – owns the merchant. The consumer also needs to continue to recognise that the MNO brings ‘trust, simplicity, and security’ – not a branded mediator such as an aggregator as currently exists within the Premium SMS market.
The MNO wants a partner that can be an ‘extension of their own business’, not a branded third party that owns the merchant relationship. They will want a partner that sees DOB as one of a multitude of assets that can be used to increase consumer value, retention and sustainability. They also want a partner that can share the risk and reward through an innovative business model.
Within their DOB launch plan, the MNO needs to develop a ‘merchant engagement strategy’ that does not start with direct MNO-merchant engagement, but rather begins with an awareness campaign to the upstream customers. This will highlight the value that DOB can bring to their businesses as a trusted payment method, which can sit equally alongside more traditional methods such as cash and credit cards. Once engaged with the MNO, the merchant needs a seamless and easy way to access the platform. The MNO’s DOB infrastructure needs to adopt a 2.0 / Amazon approach to merchant engagement – after all most merchants are not technologists and they need to ‘focus on their day jobs’.
Monetising the MNO billing platform assets through a DOB proposition should be a significant stepping stone to further monetisation of network and personal data assets. Executed successfully, DOB will build an ecosystem of downstream and upstream customers that can now be further monetised. With a scalable platform and a team that can culturally bridge the divide between the MNO and industry verticals, the MNO will be in a position to work with those verticals to identify propositions that bring sustainable new revenue streams to both sides of the ecosystem, whilst enhancing the customer experience.
A leading operator in Indonesia who needs to collaborate with a global insurance provider is one such case. The case study centres on the operator’s objective of reducing churn in a predominantly pre-paid market, focusing on the low-income segment, where insurance – such as life cover – is virtually non-existent. Using the Right Time, Right Place Marketing proposition the operator can detect in real-time when subscribers with the correct profile require a top-up and can incentivise them to top-up with a reward of free life insurance for a period of time. This use case satisfies the conditions of ‘win-win-win’ of the two-sided business model, whilst at the same time enabling the operator to fulfil their corporate social responsibility role. As the MNO builds upon their DOB successes, leverages the ecosystem they have built that is monetising their network and personal data assets, they will need to consider the challenging area of permissions.
Figure 4: The Five Areas to Unlock Consumer Data, (Source: Forrester Research, Inc)
Before an MNO can build upon their success from DOB and extend their strategy to further monetisation of their assets, they need to rebuild subscriber trust on how they use Personal Data. To do that they will need to develop and implement Permissions Technology that is trusted and transparent for the user. The Mobile Marketing Association (MMA) defines permissions-based mobile marketing as: “The practice of gaining consent from consumers in advance of a continuing marketing dialogue that is taking place on mobile devices and in return for some kind of value exchange” . The MMA also goes on to say that MNOs have the opportunity to gain on two broad counts through permission-based mobile marketing: They can increase customer satisfaction and also open up new revenue streams by partnering with content creators and advertisers. Forrester believes that “Marketers need to focus on five areas to unlock consumer data – Privacy, Security, Transparency, Portability, Economy and Privacy”, as outlined in figure 4.
The MNO is facing significant challenges from the young, nimble, disruptive business models from OTT players such as Facebook, Apple and Google. However, they have a number of very significant assets, that if exploited via a well thought out and executed strategy can deliver a significant competitive advantage that the OTT players do not have.
The future for charging and billing is in the exposure of appropriate billing MNO assets to trusted merchants and industry verticals, and in using DOB as the catalyst for further monetisation of other network and personal data assets. MNOs hold large volumes of consumer personal data relating to call records, location, spend and key relationships derived from calling patterns, as well as personal data related to search habits and social media usage. MNOs need to reflect hard on their ability to execute a strategy of monetising network assets, making best use of the technology and more importantly bridging over to the culture that the OTT players have. If not cannot do that, they need to find a partner – quick.
