Telefonica recently restructured its business units and now has a separate business unit called Telefonica Digital that is ran from the UK and has several offices around the world: Sillicon Valley, Madrid, etc.
Telefonica Digital is a clear sign that the traditional telecommunication business is no longer going to be the growth engine for Telefonica. So what should Telefonica Digital focus on. Here are five ideas. Some are already partially in progress but ease-of-use, consistency and completeness often can be improved.
1) Become the European Netflix
Google and others are likely to enter into the European market for all-you-can-eat video-on-demand, a.k.a. pay a monthly fee and see all movies, music, series, documentaries, etc. you want. Netflix is the American success story however there is still a window of opportunity to become the European one. Having great content is key in this market. However the most important competitor is not a company but a protocol: P2P. Some European countries have high piracy rates. People are getting accustomed to downloading movies and music for free. The longer Hollywood holds on to high prices in the digital age, the more chances there are that people will not want to pay any more for content. Even when all-you-can-eat service becomes available. Sometimes it is better to have every family pay €15/month then to have almost nobody pay €20/DVD.
2) Long-Tail Partner Eco-System
Open system for partners, big and small, to easily integrate into Telefonica’s back-office systems. Partners should be able to:
- charge customers and handle recurring subscriptions
- have single sign-on solutions and access to user profiles
- update Telefonica’s inventory and CRM systems without magic
- provision Telefonica’s base services (e.g. numbering plans, VLANs, etc.) in one-two-three
- long-tail monitoring and alarming
- long-tail settlement engine
- long-tail support systems
- Escrow and standardized contracts
- Standard revenue sharing arrangements in which partners get the lion share.
Having a long list of long-tail partners will boost innovation at a relatively small cost. A regular operator takes 12-24 months from idea to production launch. In the digital era, new services should be launched daily. Without partners this is impossible. Telefonica should focus on lowering the entry level so two people in their garage can benefit as well.
3) Telco & Mobile PaaS
Offer easy to use telecom APIs to key assets like billing, network quality of service, user profiles, micropayment subscriptions, etc. Allow developers to integrate these telecom APIs into SaaS and mobile apps/SaaS. Have tools to easily create mobile SaaS and native apps. A cloud-based environment to host SaaS. Have a marketplace where customers can easily buy and provision the combined solutions. Solutions to support customers that need help for solutions they have purchased.
4) M2M PaaS
Similar to Telco PaaS but for machine-to-machine and the Internet of Things. Specific hardware plug-and-play functionality, backoffice plugins for monitoring/alarming/management interfaces, etc.
5) The Paypal of Mobile Payment
Operators have a limited time left before alternative systems will disrupt the micro-payment “oligopoly”. NFC solutions, micro-payment subscriptions, mobile payment, etc. are still not standard. Mostly not because of technical limitations but because the whole eco-system wants to see a high margin business. High-volume low-margin would however change the potential of short-term success. What if a micro-subscription (€0,10/month) would leave a merchant with €0,09 instead of €0,05 or less? The window of opportunity is closing fast however…
The European telecom market has been a fragmented market with many languages and local laws. Small successful US dotcoms often completely avoid Europe. This makes the European operators feel relatively safe and not aware of the disruptive technology that awaits them.
How could Google disturb the current European telecom market?
1) Become a Pan-European MVNO and offer cheap no-roaming data plans.
Tablets are reaching the Tipping Point. If Google would offer one SIM to cheaply access the Internet everywhere in Europe, then operators would loose out enormous roaming revenue and their most lucrative market segment: travelling businessmen.
Google could also allow the usage of this data plan in mobiles and offer Google Voice and Talk on the mobile via VoIP.
2) Micropayments together with Energy providers
Telecom operators have been reluctant to set-up a long tail eco-system of partners that can sell services, content and apps and charge them directly onto your phone bill. Each operator has its own interfaces, if any. The operator’s revenue share is extremely high, making most business models unprofitable.
What if Google would partner with giants in other industries? Would consumers mind if their online game purchases would be billed on their electricity bill instead of on their telephone bill when the amount is below €2? They would probably not. The energy giant has to send you a monthly bill anyway, so getting some extra profit would be nice for them.
3) Top-up NFC with no merchant commissions
In your Android mobile you would use your NFC (near field communication) device to pay small amounts. From time to time you would recharge your mobile via Google’s Checkout or enable an auto-recharge. Merchants would receive the combined money transfer at the end of each month but would not pay commission. How would Google make money? A top-up and late payment to merchant means that Google can hold large amounts of money for easily 30 days. The interests should go far in paying daily operations costs. Additionally you would share with Google all your purchases, so they can target you with virtual coupons and other long tail advertisements.
4) Youtube + Google TV can become the European Netflix
For those not familiar with Netflix, and similar services, it is a “cheap” all-you-can-eat video-on-demand service in the US. It streams the latest movies and series from the Amazon Cloud right towards your SmartTV, Set-up Box, Tablet or PC. Prices have recently gone up but are still relatively cheap.
Using Youtube’s streaming platform and Google TV’s content, operators could be seeing their data network costs skyrock without any major revenue gain.
5) Combine all of the above
Google could be launching all of the above in a very short time period, leaving operators no time to react. Roaming/calls/SMS would drop enormously, third-party revenue from premium SMS would drop, lots of new innovative services sold over-the-top and an unseen bandwidth usage explosion.
Sometimes you wish you would be working for the other side…
If you take a look at the type of SaaS solutions that are currently in the market then you see a lot of generic solutions: hosted email, backup in the cloud, CRMs, ERPs, etc. Although these solution will continue to exist, the future of SaaS is more likely to be in specialized solutions that either focus on a specific customer segment or a specific type of solution.
These specialized SaaS will help a doctor to manage patients, a professor to teach better, a grocery to sell more, a software architect to design better software, etc. The specialized SaaS will be a mix of web as well as mobile SaaS and ideally should be integrated with operator’s telecom assets, e.g. subscription based billing on your telecom invoice.
Telecom operators should start enabling dotcoms instead of ignoring this potentially highly profitable innovations. Operators have many assets to offer that small companies will appreciate, at least if they come at the right price. This is the time to start enabling this new ecosystem.
Although the video seems to be ahead of the software, the vision of mobicents for the cloud is disruptive. The economics of setting up a global communication infrastructure in the cloud and integrate it with Web 2.0, Smartphones, Internet of Things, etc. will drastically change when first-class open source solutions will be available: