|Issue:||Europe II 2007|
|Topic:||Fixed-mobile convergence – who owns the customer?|
|Organisation:||Global Billing Association|
Stuart Madeley is Chairman of the GBA (Global Billing Association). The GBA is at the forefront of the theoretical discussions about bill for content when operating within a converged world. Mr Madeley is also the Head of Billing and Credit for Virgin Mobile in the UK. He previously held positions in Europe and the USA with NCR and Lucent Technologies. Mr Madeley has a Bachelors degree in Industrial Economics. He is also a member of the Chartered Institute of Management Accountants.
Fixed-mobile convergence brings subscribers a variety of advantages. Operators take advantage of the variety of services to offer discount-priced service bundles that appeal to users. Operators understand that with each new service they provide they earn more, learn more about the customer and make themselves increasingly indispensable in their usersí lives. On the other hand, the traditional business model for fixed telephony and that for mobile do not easily mix, and put mobile revenues – and customer control – under pressure.
Fixed-mobile convergence has been discussed for many years, but now it is actually happening. In the UK, leading players such as BT ëFusioní and Orange ëUnikí both offer mobile handsets that also work with Bluetooth or WiFi wireless networks. Carphone Warehouse lets users top up their mobile account through their home phone bill when both are supplied by their Talk Talk brand. In the content arena, 3ís X series enables customers to access their home TV and broadband services anywhere in the world from their mobile phone. The driver for these convergence-based applications is the desire to capture as large a share of the customerís revenue as possible. The new convergence-based services are opening up more complex questions as to who owns – and indeed who is – the customer. It is not simply that many communication companies now operate across several market sectors; after all, BT operated fixed and mobile divisions quite independently for over a decade without feeling the need to offer any converged products. It is rather that the saturated voice telephony market now means that the focus is on retaining existing customers while poaching new ones from competitors. A combined product helps absorb the cost of a discount – £10 off being easier to bear with a £100-a-month quad-play bundle than it is on a £25-a-month mobile-only package. Service bundles also hold customers through inertia; the prospect of untangling and moving four products to a new supplier is daunting if they are bundled together. So communications companies are expanding from their core product into new sectors: Orange from mobile into DSL; NTL (soon to be Virgin Media) from cable TV, fixed voice and broadband into mobile; BT into mobile (again) and video on demand; and Sky from satellite TV into DSL. To obtain the benefits of this convergence the products and the processes behind them must be truly merged. It is not enough for the Orange website to be a combined sales portal for mobile and DSL. Discounted bundles of products must be supported by common processes to achieve the necessary efficiencies and economies. Similarly, if the products are delivered independently then the customer can move them independently to whichever competitor offers a better deal for that product. To ensure customer retention the services need to be bundled together on one bill and supported as a package from one call centre. By and large people will tend to buy more from companies that they trust. In the UK, the supermarket Tesco is a good example of this. It has used the trust built up in the grocery sector to expand into the retailing of financial services, electronics and mobile phone services. Tesco has constructed a clear, comprehensive view of its customers and it knows how to make good use of this information. This kind of customer knowledge and ability to react is impressive. Convergence can help build a comprehensive view of the customer that if used correctly can strengthen the bond between supplier and customer. Fixed-mobile convergence, FMC, provides particular challenges when it comes to the relationship with the customer. Mobile phones are simply variants of their fixed-line cousins, but people use mobile phones quite differently than they do fixed. Mobile phones are extremely personal items. A recent UK newspaper article observed that a mobile phone is a personal style statement, just as a personís car is. Similarly, a study for Virgin Mobile found that single men show off their mobile phones in public to appear more attractive to women; in contrast, a home phone is simply a device for talking to people. Where mobile telecom is a highly personal service, fixed telecom is a shared or communal one. Consequently, mobile customers can be treated as individuals in a way that fixed line customers cannot. A fixed-line belongs to the household. This has implications for converged billing. What would a joint fixed and mobile bill actually show? It might list the householdís fixed line and all the mobile phones of the family members, but would all the family want their mobile call records seen by the bill payer? For teenagers, a mobile phone means private telephone conversations – without the interrogation as to how long they were on the phone, or with whom, that the household fixed-line bill brings. This applies as much to other forms of communications as it does to voice: an Austrian study of mobile TV viewing showed that peak viewing occurs in the early morning and early evening, on the way to and from work or school, at lunchtime and, surprisingly, throughout the evening peak viewing hours. It seems that teenagers will use their mobile to view TV away from the rest of the family. If FMC billing is to be accepted, it must deal with these complex relationships and deliver billing information only to the person it relates to. It ought to be possible to charge individuals separately for the services that they use, at rates that acknowledge the purchasing power of the household as a whole and still offer privacy and personalisation. Logically it would be the handset that would control and enable this, but this is not happening. However, there are a couple of mobile networks in the UK that are edging in this direction. BTís Fusion product offers a mobile phone that is charged at fixed line rates when used in the home. It does this by routing home calls via a Bluetooth network over DSL. Thus it provides fixed and mobile from a single dual function handset. Each family member can have their own handset and phone number. Orange has a similar product called Unik that uses a home WiFi network instead of Bluetooth. Neither is a completely standalone service; the household must have a fixed DSL line, and for the moment this will be billed separately. The key to success for both services is not so much the technology as the pricing and the customer relationship. Customers want to switch to DSL at home because fixed line is cheaper than mobile, but they could get the home calls even cheaper, free even, from a VoIP provider such as Skype. If they buy Fusion or Unik it is because BT or Orange make it easier than it would be to buy the services from separate suppliers. BT or Orange may keep hold of those customers who make this choice. Many will still choose to buy the services separately, but BT and Orange should have an advantage over those suppliers who donít have converged products, because they can build a unified view of their customers across the converged product range. Whether they can exploit this remains to be seen. A very different approach has been taken by 3 with its X series product. This uses convergent technology to unbundle content. Instead of, or as well as, offering customers 3ís own limited content, X series actively encourages customers to view third-party content on their 3G handsets. Using a gadget called a Sling Box and an X series mobile phone, customers can watch content from their home TV on their mobile handset anywhere in the world, but whose customers are they? They will pay Sky or NTL for their TV content and an ISP for their home broadband/DSL connection. This leaves 3 to charge for the mobile access as a simple monthly fee. All 3 will see of their customersí usage is the megabytes of data used – but they do not even bill this because of the monthly fee. 3 follows the traditional mobile model of discounting the hardware and trying to recover the cost through the monthly charge. Paradoxically, it may well be this model that has limited the practical implementation of FMC. Fixed communications in the UK is extremely open and customers will regularly acquire products and services from a variety of suppliers: BT; Tiscali; BBC; You Tube; Amazon; Ebay; Wikipedia, etc. Key to this is the fact that for most part customers pay for and install their own fixed line equipment and software. This is in marked contrast to the mobile market that, in the UK at least, has always given away free handsets or subsidised them. As a result mobile operators have to ensure that they retain their customers through the payback period and spend a lot of their time combating churn. The two business models do not come together easily. Opening up mobiles to access the full range of fixed services puts mobile revenues under pressure. If the mobile operator relies on network access charges to provide their revenue stream they are stepping back from their current position as primary or even sole owner of the customer. They will find themselves with the same relationship that currently exists for a fixed ISP. It is doubtful if this relationship would bear the comparatively higher acquisition cost of the mobile operator. While FMC ought to provide opportunities for better customer management, and therefore a closer customer relationship, it is unlikely to happen while the current business model exists for mobile.