3/1/2010

Open Telco

T-109.4300 Network Services Business Models

18.02.2010

Data Communications Software

Researcher

Yrjö Raivio

Email: yrjo.raivio@tkk.fi

Tel: +358 50 568 9672

Open Telco enables new innovation

3/1/2010

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2

• Introduction• Service domain• Technology domain• Organization domain• Finance domain• Conclusions

Contents

3/1/20103

From Closed to Hybrid Model

3/1/2010

Closed Model

Walled Garden

Hybrid Model

Smart Bit PipeOpen Model

Bit Pipe

IMS

Open TelcoBit Pipe

Flat Rate

Degree of

openness

MP2P

Push PullSMS IM

Mobile

Web 2.0DRM

Creative Commons

WAP

Wireless Village

QoS

Security

Jabber

DynamicFlat Rate

iMode

Broker

RESTIN

Super distributionN-sided

model

Area

Long Tail

B-partypays

Web Services

P2P

Web 2.0

MSS

PoC

PremiumSMS

0700 &0800

VoIP

PTT monopoly

• Pressure from the Internet

• ARPU is declining

• Volume of mobile data is growing exponentially but revenues just linearly

• Service innovation difficult

– Lack of global markets

– Lack of standard APIs

– Lack of business case

• Open Telco a good opportunity for the Finnish ICT industry

• Principles can be applied to other industries also (ref. EVA report)

• Operators moving from Walled Garden towards openness: a hybrid model

Operators still make good profits but..

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Internet players have strengths

3/1/20106

APIs and Mashups in the Internet

3/1/20107

Source: www.ProgrammableWeb.com

Lessons from the Internet

3/1/20108

Network Effect

Context

Metcalfe´s and Reed´s Laws

Speed and quantity turns into quality

Every customer can be monetized (Privacy?)

Flickr: “Don´t build applications. Build context for interactions.”

Social networking - Viral marketing

Open Innovation – The Long Tail

Developers

Open and simple APIs & SDKs, automated support systems

Global access

Fair revenue sharing

The Long Tail of Mobile Services

3/1/20109

III Open Innovation

II Content Provider

Services

Serv

ice R

even

ue

s

Mobile Music

I Operator Services

Number of

ServicesCall & Share

Mobile Email

BusinessServices

InfoVoice SMS/MMS

PoC

Mobile TVHome Entertainment

Community

Location WEB2.0

Revenue

Ring

tonesGames

100 M€ ? M€2 B€Finnish

Market:

Mobile World Congress, 15.02.2010

3/1/201010

http://www.mobilebusinessbriefing.com/content/showdaily/2010/monday/pageflip.html Source:

Open Mobile Terminal Platform

Supported by large operators,

Nokia and Ericsson

BONDI: standard for W3C widgets

and web applications on mobile

Standard within12 months

15 largest operators

incl. TeliaSonera

3 billion subs

”..open international

applications platform”

30% commission?

What Open Telco can offer for

mashups?

3/1/201011

da

ta c

on

ne

ctiv

ity

billin

g

pre

se

nce

ide

ntity

loca

tionnetwork

internet (IP)

Operator

horisontalization

end user

Many passwords to remember, security issues, spam

Limitation to ad-based business models and tedious credit card use

Context to be provided manually by the user

Telco identity management

Telco charging and billing capability

Telco location and presence information

Limitation of targeting possibilities for advertisers

Telco demographics and profile information

Bad real-time quality, long response times, connection break-offs

Telco quality of service

High cost of voice related application integration

Integrated voice & messaging in Internet applications

vo

ice

me

ssa

gin

g

• A holistic business model framework

described in "Mobile Service Innovation

and Business Models", Bouwman et al.

(2008)

• Includes four domains: Service,

Technology, Organization, Finance

• Service Domain: end-user perspective,

customer value of the service

• Technology Domain: technical design of the

service

• Organization Domain: the value network

needed to realize the service

• Finance Domain: revenue models,

investments, financial arrangements of the

service

STOF model

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Service

domain

Finance

domain

Organization

domain

Technology

domain

Business

model

Value

for

customers

Value for

service

providers

Technology

domain

Organization

domain

Technology

domain

Finance

domain

Organization

domain

Technology

domain

Service

domain

Finance

domain

Organization

domain

Technology

domain

3/1/2010

Service domain

Complements other open APIs

3/1/201014

Social media

Hobbies

Context

Ecommerce

& advertizing

Emergency

Public

sector

Travelling

Message Payment

Location

OPEN

TELCO

APIsContext

SLA

Profile

Voice Identity

Public

transportation

B2B

• Idea: Profile based automated travelling information about local hotels, restaurants, public transportation and tourist attractions combined with tickets

• Targeted advertizing• Both business and private customers• Open Telco APIs: messaging, payment, location,

profile

Travel guide

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• Idea: Mobile ticket owner can impact on the event content, give feedback before, during and after the event

• Services tailored to concert ticket: live recordings, T-shirts, exclusive offers

• Open Telco APIs: messaging, payment, location, profile

Access ticket + voting & blogging

3/1/201016

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Technology domain

Mobile network

3/1/201018

DOCUMENTTYPE 1 (1)

TypeUnitOrDepartmentHere TypeYourNameHere TypeDateHere

RNC

MSC/

VLR

BSC Other networks (GSM, PSTN, ISDN, etc)

Air

MS

MAP

BS

RAN

RNC

UE NB SGSN

MS BS

UE NB

GGSN IP-networks

MS/UE= 2G/3G Mobile Station BS/NB = 2G/3G Base Station

RNC = Radio Network Controller RAN = Radio Access Network

MSC = Mobile Switching Center

SGSN = Serving GPRS Support Node

SCP = Service Control Point HLR = Home Location Register

Backbone Backbone

Gr

CAP

Gn

GMSC GMSC

SCP SCP HLR HLR

GMSC = Gateway MSC GGSN = Gateway GPRS Support Node

CAP = CAMEL Application Part

Iub

Iur

IuCs

A

Gb

IuPs

Gs

Abis

VLR = Visitor Location Register

BSC = Base Station Controller

MAP = Mobile Application Protocol SMSCOSS/

BSS

OSS/BSS = Operations/Business Support System

SMSC = Short Message Service Centre

Call,

Presence

MessagingPayment,

Profile,

Statistics

QoS,

Browsing

Identity,

Location

Service

logic

WAP

Gateway

Architecture

3/1/201019

Support Functions

Adaptation Layer

MSS SMSC HLR …

Secure APIs

Developers & Services

Networks

ServiceMiddleware

ServiceCloud

LCS… IMS SMSC HLR LCS…

End Users End Users

• Privacy has a top priority, a show stopper

• Input into regulation, privacy rules are changing

• Novel ideas, do not invent a wheel again

• Avoid any new registers if possible

• EU directives vs. national law, APIs vs. Mashups

• Subscriber identity vs. Openness

• Differences between B2B and B2C, and passive (static) and active (dynamic) APIs

• Privacy management (User/Operator), levels and defaults

• Payment (telco and other purchases, remittances)

Security, Privacy and Trust

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Payment has still challenges ahead

3/1/201021

Source: Aamulehti, 18.02.2010

3/1/2010

Organization domain

Broker models

3/1/201023

Internet (IP)

Operator

Internet player

Broker

Network assets(authentication, billing,

location, presence, quality of service, etc.)

Types: Digital marketplace, audience builders, cost minimizers

Broker market requires critical mass for both sides (ref. SMS, roaming)

Broker must be neutral entity

Internet player

Internet player

Internet player

Internet player

Internet player

Internet player

Internet player

Internet player

Operator Operator Operator Operator Operator Operator Operator Operator

Value Chain

End

User

Content

Owner/

Originator

Content

Provider

Content

Aggregat

or

Marketing BillingApplication

Developer

Content fee

Op

era

to

r

Tra

ffic

fee

Te

rmin

al fe

e

Te

rmin

al

ve

nd

or

Reta

iler

•Analyze how open APIs impact on

each player of the value chain

•What new is required

•What new is achieved

Source: Haantie, 2006

Terminal

Content

Network

Infr

a

ve

nd

or

243/1/2010

Value Network

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Broker

End User

Broker

host

AdvertiserDeveloper

Operator

API

provider

Service

Network

3/1/2010

Finance domain

Two-sided business model (1/2)

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Operator accessible brokerage content market:

$100 B by year 2012

$350 B by year 2017

Source: STL Partners

Two-sided business model (2/2)

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A B C

End User Developer, SME

Advertiser…

Broker,

Operator

Subscription

Subsidization

Commission

Service fee

• Describes financial agreements between actors in value network

• Most important variables: capital, costs, revenues and risks; Target: win-win

• Open Telco equals Amazon type bazaar

• Subscription, advertising, transaction, volume, licensing, sponsorship, freemium = free & premium (1/10/90 rule)

• Fully automated processes for business transactions

• B-party pays (ref. lack of Facebook or Hobby club SMS notifications)

Finance factors

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• Mobile operators must react on ARPU decline

• Openness has clear advantages, but privacy challenges must be solved, a hybrid model

• Open Telco enables innovative business models (win-win)

• STOF model for business model analysis; STOF method for business model design

• This study provides Step 1 for STOF method followed by

– Step 2: Critical Success Factors (CSF)

– Step 3: Critical Design Issues (CDI)

– Step 4: Internal and external robustness check

• A lot of uncertainties, lack of end user feedback

• Multi-organizational trial required, Tekes/Tivit Cloud SW program prepared

Conclusions

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