In this article, I’d like to continue with the theme about whether service providers should adopt the business model of becoming a platform play as opposed to being a network provider offering their own services. Of course this notion would not apply to all service providers, but I think it has merit to varying degrees. It is pretty much impossible to imagine a Tier 1 incumbent making a wholesale shift as the platform business model is unproven on a large scale and would be ceding far too much control over subscribers to development partners. On the other hand, if they fail to meet the evolving needs and wants of subscribers, they will have little choice but to go down this road.

 

Tier 2 and upstart service providers — for lack of a better term — are in a much better position to do this, as they have more agility to adapt, not just to protect their existing base, but to poach new subscribers from those Tier 1s who are lagging the market. This also lays the groundwork for what the service provider of the future will look like, and it may well be so different that we’ll need a term other than service provider to accurately describe it. Perhaps we will call them communications providers or community enablers. Food for thought.

 

For service providers of all stripes to remain relevant, this leads me back to a comment from my last column. The greatest asset of a carrier is not its network, but its subscribers. Revenues always trump expenses, and the network only has value by providing services that generate revenues. Notice how I said revenues, but did not specify where they come from. In the traditional model, they came exclusively from subscribers, but as we move to a Web 2.0 world, they could — and will — just as likely come from advertisers who are trying to reach these same subscribers. Today advertising revenues are a small fraction of subscriber charges, but this is quickly changing, not just as advertising-based models mature, but as the price of telephony services continues to decline. This last point alone should cause carriers to embrace some form of a platform model, but in most cases, this is easier said than done.

 

Let me now clarify things a bit further. In terms of dollars and cents, yes, subscribers are a carrier’s most valuable asset. They generate revenues, and they are tangible. Subscribers are real people who use your services, pay your subscriber fees, and tell you what they like or don’t like or want you to do in the future. There are many layers of value here, but subscribers are only an asset so long as they are buying your services. This is a pretty limited definition of an asset in that carriers do not ‘own’ subscribers in the conventional sense of being a hard asset. They cannot tell subscribers what to do (well, they can, but they risk losing them to friendlier competitors), their book value cannot be up or downgraded, and they cannot be traded like commodities for other assets with better growth potential.

 

I’m being very literal here, but for good reason. Based on the previous paragraph, I see the physical subscriber being an important asset, but not the most valuable part. I would argue that the underlying database carriers have on their collective universe of subscribers is more valuable in today’s market. Carriers actually own this data and can analyze it in myriad ways to run a better business. Not only can they do this with existing subscribers, but also for “ex” subscribers. So, even when the ‘asset’ of the paying subscriber is gone, the data stays behind, allowing the carrier to learn from their mistakes and move forward.

 

These metrics help them understand which services are most profitable, which ones are most used, which combinations are most popular, etc. The important thing here is that these datapoints can help service providers better segment their subscribers into audiences that will respond to distinct value propositions. This data has value not just for historical tracking and billing, but for being predictive indicators of future behavior.

 

Data mining techniques are routinely used now by large companies, and carriers can do more of the same to better understand their subscribers. Service providers with Triple Play offerings have the DNA at their fingertips to delve into the subtleties of how subscribers interact with voice, data and video services. There is an ever-expanding web of relationships here, not just for individual subscribers, but the communities they are increasingly attaching themselves to. This not the world of Ma Bell, not by a longshot.

 

As subscribers shift from being phone-centric to Web-centric, and from fixed to mobile, and even from voice to text in their communications habits, the standalone value proposition of being a voice provider is untenable. Vonage (News - Alert) has certainly learned the hard way, but incumbents are in the same boat. Even though telecom incumbents have been making these transitions, they are still very much built around traditional communications modes and the one-sided business model I referred to in my last article. Subscribers are conditioned to paying for voice services, but less so for Internet-based communications — VoIP, IM, e-mail, etc. The notion of providing free services that are subsidized by advertising is not native to carriers, but is increasingly becoming part of the overall value equation for subscribers.

 

There is a substantial amount of value to be discovered, unlocked and harnessed here by service providers. Those who get it don’t need to be reading this article. For everyone else, please stay with me. We have a lot more to explore here, and I’ll be continuing this thread in my next article.