Consumer Services 2.0 - The emergence of the social telco

Connected Planet is working with STL Partners to provide coverage of the first of the U.K.-based strategy consultant’s influential Telco 2.0 events to reach the U.S., to be held Dec. 9-10 in Orlando. As a lead-up to that event, STL CEO and founder Simon Torrance and his team shared with us — and we’re sharing with you — some analysis of the most recent Telco 2.0 event, held last month in London.

Up today: Insights into Consumer Services 2.0, a session that examined the ongoing Web vs. telco battle over delivering the killer communications and social apps of tomorrow. (Also in this series: Telco Data 2.0)

The presenters were Gil Rosen, VP, Amdocs Interactive; Bobby Rao, Director, Marketing & New Businesses; Vodafone Internet Services; Faisal Galeria, Global Head, Business Development, Spotify; and Mo Firouzabadian, Business Line Director, Carrier Solutions, Buongiorno. The panel also included Emma Lloyd, Director, Business Development, BskyB; and Nathan Richardsson, Executive Producer, CCP Games.

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1. Apple: Millions from Software, Billions from Devices

Gil Rosen of Amdocs Interactive began by reviewing the success of the Apple iPhone and the broader system around it (iTunes, the iPhone developer community, and the App Store). He pointed out that although Apple makes millions from iPhone software, it makes billions from selling hardware. Therefore it was necessary to tone down the industry’s fascination with app stores, and develop a more holistic understanding of these business models.

Apple, for example, uses the existing “cult of Mac” relationship it had with its customers and its historic speciality in industrial design to sell devices. The sizable installed base attracted developers and content providers, and permitted them to use applications and content as an upsell once the users had the devices.
Despite the increasing importance of the Web as an applications environment, he argued, there are still significant barriers, notably network quality and browser standardisation, to moving everything to JIL/BONDI/Web Runtime, so Java and native applications will remain relevant.

2. Ovi and Google

Nokia’s developing Ovi services offering represents the opposite approach. Rather than selling devices, and then extending into services, applications, and content, Nokia is trying to sell services that will encourage users to buy Nokia devices, and discourage the existing installed base from going elsewhere.

It’s telling that the bulk of the APIs available for Ovi are for cloud services; most of those for the iPhone are for device capabilities. Nokia is, essentially, trying to turn the device into a representation of the data you store in their cloud; Apple built a virtual community on the basis of the device.

Google’s strategy is to create as many touch points to the data they index as possible, thus giving themselves opportunities to sell advertising. The Android devices are an extension of this – hence what Rosen described as “the sad sight of T-Mobile staff looking for Google accounts for their Android devices”. The unique selling point is that it’s the device that has all your Google services and Google data.

Rosen argues that this is very similar to the Ovi strategy described above.

3. Customer retention remains vital

No matter what the shiny gadgets and whizzy apps may do, it remains critical for operators to retain customers. This implies that they need to employ such approaches with care – as they can result in the replacement of the customer relationship with the operator with one with the device or with a suite of cloud services. As a rule, operators should avoid being identified with any one vendor in the long run – which implies a Web-based strategy.

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4. Vodafone 360: Social Telco

Bobby Rao of Vodafone brought a product to Telco 2.0 – Vodafone 360, the carrier’s new platform for multiple social networks, widgets, music, and mapping. A vital point that emerged from the presentation was that Vodafone say “We’re not in the business of owning content”. Instead, the new strategy is based on the operators’ historical core business – communication, and specifically interpersonal communication.

To be useful, communication has to work irrespective of device, operating system, etc. So 360 is a Web-based product and the data lives in the cloud. It’s also unacceptable for your communication with others to be limited by which operators they use, so 360 will be available to users of any network or none (it has a generic Web front-end for PC use). And the APIs for widget developers are based on JIL and BONDI standards.

The biggest barrier to adoption of any social communications technology is the contacts problem, Rao suggested. He claimed that Vodafone had implemented this as part of the device management process – people joining 360 could send them an SMS message, and their DM platform would collect their contacts data and process it into their 360 account. Arguably, this is the point of 360 – to keep Vodafone relevant in an era when phone numbers are becoming less important.

5. Spotify: Identifying Scarcity

Faisal Galeria of Spotify compared the highly-rated startup to Skype and Kayak – he argued that all three startups had prospered through identifying specific pinch points of scarcity and addressing them. Skype users no longer have to worry about spending too long on a phone call, for example, and therefore they’re willing to both reduce their own costs and Skype’s by signing up other people in their social networks.

He argued that music is no longer scarce, as it is now essentially free to reproduce it; the scarcity has migrated to other elements of the value chain.

6. What is Free?

P2P file-sharing is free to the user, but only if you ignore the cost in terms of technical learning, time, and malware. Of course, it’s not at all free to upstream content providers, in that they don’t (directly) derive revenue from it. The sense of the word free that matters here is that anything that wants to compete with file-sharing has to at least appear to be free.

This means that there has to be an effective wholesale model in place so that operators and rights holders can get their share, while the product appears free at the point of use. With these elements in place, innovators can then get on with offering better adjacent services – search, discovery, recommendation, linking, and security (no viruses!).

7. RCS: Too Slow, Too Narrow

A key point in the panel discussion arose when Bobby Rao was asked if Vodafone 360 implemented the GSMA’s Rich Communication Suite (RCS) standard. He remarked that they had considered it, but that they had decided to build it entirely on W3C technologies “because it was quicker”, and because these could be relied upon to be available on the broadest possible range of devices. This is a further indication that mobile applications are likely to be increasingly Web-oriented, and raises further doubts about the more widespread adoption of RCS.

Another important point regarding Vodafone 360 is that, as Bobby Rao put it, it’s the first customer for Vodafone’s APIs. In much of the IT industry, it’s routine for the design of an API to be used as a way of streamlining the design of the entire product, and for the internal development team to be the first users. Providing the facilities for rapid prototyping will be as much use for internal innovators as for external ones. It’s also an important step in preparing the API suite for launch, and a major signal of commitment to the project.

8. Mutant Hybrids

An element of the Serving the Digital Generation report’s Customer Participation Framework is the idea of ‘hybridity’ – people want to apply online communications to the problems and opportunities of their existence offline, and vice versa. Nathan Richardsson of CCP Games, the publishers of EVE Online, pointed out that in-game communities are also communities outside it. Similarly, Vodafone 360 is designed to bridge between the multiple identities its users maintain in different online and offline communities.

9. Telco 2.0 Conclusions: Open Enthusiasm

Delegates who commented through the Mindshare process were mostly enthusiastic about Vodafone 360, and those who were familiar with Spotify were even more enthusiastic about it. There was some concern about how the business model for Vodafone 360 might work, and considerable curiosity as to whether it would eventually encompass voice. One delegate suggested that Vodafone should release the product as open-source software.

It was also very noticeable that the enthusiasm for Spotify is concentrated in the UK. Very few non-UK delegates seemed to be familiar with it or even aware of it.

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10. …App Store Scepticism

There was lots of cynicism in answer to the question “How successful will the current focus on consumer apps and app stores be for operators?” with 55% expecting that app stores won’t be significant. However, the optimists were split three ways between “generate significant new revenue”, “significantly reduce churn”, and “both”; taken together, 40% or thereabouts were expecting significant amounts of revenue or a worthwhile reduction in churn. Interestingly, Bobby Rao argued that Vodafone wasn’t expecting a significant uplift in revenue from the app store element of 360 – it was simply a necessary “table stake” in order to have that capability.

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