Friday, November 22, 2013

Exploring the possibilities of a two-sided telco business model

Why should only the user pay for communication?

The answer to this question might seem obvious:  of course they shouldn’t.  But in many ways, this reflects the historical one-sided business model of the telecom industry, in which only subscribers or enterprises paid service providers for communication.  This model has served telcos well through decades of growth and high profits, but now operators are seeing their communication ARPU decline as communication gets bundled with connectivity. 

This is forcing to look for new revenue opportunities as communication gets bundled with connectivity. So it’s time to look to the other side, so to speak.

Two-sided business models are common in other industries.  Newspapers are perhaps the most obvious case, with a model built on both advertising and subscriptions.  This model is famously under pressure, with ad revenues falling drastically and some publications leaning more heavily on revenue from subscriptions.  But, even with all this, advertising remains a key factor in the media industry, specifically through the development of native advertising and sponsored content.

Or take NutraSweet, the brand name of the artificial sweetener aspartame. It was initially marketed directly to consumers but is also now “invisible” as an ingredient in more than 5,000 products, such as Diet Coke.  Google also makes use of a two-sided model, in which the company attracts users with free services on one side, while advertisers pay for information and exposure on the other.
And there are existing examples within the telecom industry, from toll-free numbers – where the business pays – to emergency service calls – when the cost is often picked up by government. 

Within telco, there has been a discussion of the two-sided business model for telcos for several years, and it has become clear that telcos have a great opportunity to sell services to “upstream customers” such as developers, governments and retailers, while continuing to focus on their traditional “downstream” customers.

Much of the discussion on the topic, however, has centered on OTT players and how to involve third-parties into the business relationship between customer and service provider.  But we feel there is real opportunity in addressing a two-sided market more directly by expanding into new verticals.

And there are many verticals to explore. A good current example is a federal US program in which the government provides mobile phones for certain disadvantaged job seekers, in order to help them stay in contact with potential employers.

Remote education is another area in which governments could pay for linking teachers with students.  There are intriguing efforts in this area – such as the “cloud school” approach being tried in India and the UK, in which students are linked to teachers solely via video. , And with the explosion in more traditional distance learning, this sector has the potential to be big business – and not a business in which only the student pays for the link.

The Telefónica Group has created an entire company – Telefónica Learning Services – to focus on e-learning, including integrated virtual classrooms and multi-format offerings for desktop and mobile devices. Examples of their projects include working with rural farmers in Spain, schools in South Korea and creating a digital platform with the National University of Distance Education in Spain, including support from MIT in the US.     

Then there is health care.  Hospitals could pick up the cost of communicating with some patients, if the alternative of clinic visits or increased illness proves to be more expensive.  An early use case for this is AT&T’s Remote Patient Monitoring program in the US.   

Here is a description from an eWeek article around its launch:
[The] platform could enable better management of chronic diseases, such as congestive heart failure and diabetes, as well as reduce hospital re-admissions, AT&T reported.  In addition, the platform will provide reminders to patients about their medication routines and educate patients about their conditions.
With some imagination and by bringing communication into new contexts, the two-sided business model will allow operators to reach beyond the limits of their existing business.  And that is something worth taking risks for.

By Bodil Josefsson for The Voice on Telecom


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    еngaging, and let me tell you, you've hit the nail on the head.

  2. Thank you for the praise. I’m glad that you find it useful.

  3. Really a nice post for the business owners and companies who are looking for the two sided business model by having some useful techniques like toll free numbers and also some other manners as well where in low cost more customer interaction can be done.

  4. The whole idea of covering the Telco in Two-sided business models is really great. Currently this model is common in other industries. This business model helps companies to have an opportunity to sell services to “upstream customers”, while continuing to focus on their traditional “downstream” customers. Using such kind of business model helps companies in increasing the productivity and focus on their customer service. Go4Customer is a leading call center outsourcing company which uses effective and modern business models with advanced call center technology to provide the best in class services to its clients.