Forget Google and Apple. Is the real money for operators in expanding local communication?

Maybe we need to forget about Facebook, Google, Amazon and Apple.  Maybe the real money is not in the epic fight for platform dominance.

Maybe the real money, at least for operators, is in the next tier of internet sites – local banks, media outlets, online communities and local shopping sites. Today most of these sites offer only one-way communication – they communicate with and sell to their readers through a blog or articles or banner ads or the occasional video.

What if these sites could expand and then monetize their communications? What if they could include voice and texts and video calls, all through their own site?

photo by photostock

Let’s take an imaginary site aimed at parents.  There are lots of these in reality, and they do quite well. Parents are an engaged and constant audience. However, the audience is also not large enough to make serious money off advertising alone.

But what if active commenters on this imaginary parenting forum could call each other? What if a resident expert was available for voice or video consultations … at a price?  Would people outside major cities pay USD 5 to talk to a specialist for a couple minutes?  I bet they would.

Voice is also a boon to advertising.  It is hard to convince people to buy complex products with a text-based ad. And parents often need to make complex changes – new house, new car, new insurance, new appliances.

This is already happening. Google is seeing this now with its click to call ads – more than 10 million last month, mostly for companies already dependent on calls, like florists and insurance companies. Cable provider Comcast has seen 270 percent greater click through on mobile than desktop click to call ads.

But don’t be fooled by Google’s success with national players. Operators are perfectly situated to take advantage of smaller, more local markets. They have the local sales forces that Apple and Facebook do not. They have the billing capacity (and trust) for micropayments or easy on-site billing, especially outside the US.

They have the customer support organizations necessary when you offer complex communications.

There is a window here for operators, but it will not stay open forever. Eventually, someone else will buy minutes in bulk to sell to local site. Or another local player will develop a local sales force, or another company will start consulting with sites on how to expand their communication business.

The time is now for operators to transform the internet from an ad-based ecosystem to a communication-based one.

Don't trust your instincts: putting users at the center of the telco business model

Once upon a time, mobile operators competed on network quality and tariff plans. The race was to trumpet 99.999 percent availability and then focus the entire organization on the next technical achievement.

Can we still say that today?  Not really.  Today, it is about price and the coolest smartphones.  Do you have the iPhone?  No?  Well, do you have the best Android phone then?

So how do operators compete then?  Some have started the long shift towards a user experience focus, trying to create their own sticky services.

This is crucial as operators take on new over-the-top (OTT) voice and texting players. By their very nature, OTT players are a few steps higher on the user experience ladder.  These OTT players are going to offer innovative, user-focused services for free, or based on a freemium model. They will be innovative about integrating voice in a whole array of services, from traditional phone calls to a whole range of HTML5-based web solutions.

This does not mean that operator networks do not matter.  They do.  But they have to be built and then optimized to ensure the specific types of service quality that end users demand.

There are immediate payoffs to a user experience focus, as clear goals help system architects come together to optimize systems, focusing on the points where users actually interact with a network . It can cut time to market, and it does not have to go against traditional telecom values like standardization. In fact, user experience and standards go hand in hand – it just depends what you base your standards on.

In our connected world, people are getting impatient with services that do not work exactly as they need them. You can see this already in the “Bring Your Own Device” trend in enterprise communication, as employees reject what they see as inefficient solutions.

Sony sees this big picture now, even as a company traditionally focussed on technology and hardware.  According to its new CEO, user experience is the only way forward.

It can be hard not to go with your gut feeling and not to trust a new technology for its own sake. But, after all, can you really put yourself in the shoes of a 75-year-old Japanese woman on the Tokyo subway?  Do you know her communication needs? You need to observe and get real feedback.

It can’t just be about launching the latest thing anymore.

AT&T making strategic - and smart - bets on HTML5 and the cloud

You want to know who gets the convergence of mobile, social, the internet and voice?

It’s AT&T.

In recent days, the American giant, the heir to the Ma Bell monopoly, came out with two distinct yet strategically related moves into both HTML5 and the cloud.

With HTML5, AT&T has created a new API platform that will allow developers of web-based apps to include SMS and MMS in the app, take in-app payments charged directly to an AT&T bill, as well as integrate with AT&T’s U-Verse TV. The company is also opening an AppCenter app store on Android phones, so users will have a way to discover HTML5 web apps, says GigaOm.

HTML5 is important for operators, both in their consumer and enterprise offerings, and AT&T has long been frustrated by platform fragmentation. A standards-based web technology would solve that problem and put operators in a better competitive position against companies like Apple, Google, RIM and Facebook that look to own the customers on their respective platform.

HTML5 has been the best alternative to native apps for a good while, but its performance still frustrates developers, and it still lacks that breakout hit to trigger “boom time.” Oh yeah, and everyone thinks HTML5 is hard to monetize.

AT&T can help change both that perception and reality.

At the same time, AT&T made two “ambitious” moves into the cloud by launching CloudArchitect, a cloud infrastructure as a service model aimed at developers and small business, and by being the first US telco to sign on to the OpenStack initiative, an open-source cloud project started by NASA, among others, in 2010.

Providers have been courting developers for years. And here we see an operator trying to grow into the internet, and not locked into one strategy. Where the company thinks it can make money more or less itself – in the cloud – it aims to own it. But in web development, it is opening up to others.

Of course AT&T has its own ambitions on the web.  But instead of limiting itself by only pushing its own things, the company is embracing the creative forces of the Internet to maybe help it discover the next big thing.

It is not either or.  It is about doing both. And this multi-pronged strategy ensures AT&T multiple revenue streams from developers, enterprise clients and end users.  It is good business, and it is necessary business, because the market is moving too fast for anyone to stand still.

This is why VoLTE is so important for operators ...

This is a video of Gabriel Brown, of Heavy Reading, giving an excellent five-minute primer on Voice over LTE (VoLTE), both on its short-term rollout and its long-term potential as the core of future connectivity networks.

One quote that sums up why VoLTE is so important:

Voice is a critical application, with a lot of revenue. People pick up the phone and want to make calls and want it to work. That's why then need it.

Will the revolution in France be "Free"? And will it be about business model or technology?

Frenzied crowds.  Wild gimmicks.  Fans with their own nickname.  Outside of an Apple store, you don’t see this kind of flash and glam often in the telecom world.

But that’s what we’ve seen with the launch of Free Mobile, France’s country’s fourth mobile operator.  Led by tough-talking iconoclastic tech entrepreneur (and convicted felon and part-owner of France’s most prestigious newspaper) Xavier Niel, Free Mobile burst onto the market earlier this month with an offer of “unlimited” calls and texts to 40 countries for just EUR 19.99 a month, plus no contract required.

So, yeah, it’s fun (though maybe not for France Telecom, SFR and Bouygues Telecom) to read the articles because of the crowds, the fan nickname (Freenauts) and Niel’s history of successfully disrupting the French broadband world.  But is this really a long-term threat to the established operators?  Or is it all smoke and mirrors.

The consensus in the telecom press seems to be:  smoke and mirrors.

Morningstar has the most concise analysis (though there were good takes from Ovum, Fitch Ratings and Stanimir Minov in Austria, among others).  And here are the reasons why Morningstar says Free Mobile will not shake up the French telecom market: Free’s prices are below cost; high data usage could overwhelm Free’s network; the established operators will fight back; French consumers like to shop in stores, which Free does not have; and France has a high rate of contract customers, meaning people cannot switch operators easily.

That all makes sense. If you focus on the business model, it seems clear that Free can sign up only a certain – and very low – percentage of the market, and its prices will not be sustainable.

But what about technically, with what Free says is an innovative mix of Wi-Fi, HSPA+ 3G, femtocells and its all-fiber backbone?

This is debatable.  Like with Republic Wireless in the US (see our post on that here), a patchwork service can never match a true mobile network in coverage and quality. But I am intrigued by their focus on Wi-Fi, as is GigaOm.  If you put together Free, Republic Wireless, AT&T with its “hotspots,” plus operator True in Thailand investing in USD 48 million in Wi-Fi networks, well, it’s some kind of Wi-Fi trend.

Is it one we need to be paying closer attention to, even in terms of voice and SMS?