Service Providers Need to Be More Alert to "Under-the-Floor" Threats

While OTT providers show up clearly as potential threats on service provider's radars, they would be well-served by paying close attention to potential competitive threats from "underneath" their core asset, the network. So says STL Partners in its 32-page "Telco 2.0 Report."

STL foresees telecoms network operators "suffering from a creeping loss of control and ownership" of network infrastructure either due to deliberate actions, such as outsourcing, or through actions on the part of external agents, such as government and greenfield competition.

"Telcos are losing control, and in our view losing influence over their core asset - the network. They are worrying so much about competing with so-called OTT providers that they are missing the threat from below," STL states in a summary of its Telco 2.0 Report.

Critically, they are losing out on opportunities to launch new services to third-party providers, along with being cut off from their core network assets. "Outsourcing networks to third-party vendors, particularly when such a network is shared with other operators is dangerous in these circumstances," the report authors write.

"Partners that today agree on the principles for network-sharing may have very different strategic views and goals in two years' time, especially given the unknown use-cases for new technologies like LTE.

Given the above and the uncertainty of business models associated with emerging mobile broadband networks as well as fixed digital multimedia services, telecoms network operators should "retain as many business model options as possible," according to STL.

According to STL's report:

  • Increasingly valuable services will be provided by third-parties, though operators can provide a few end-user services themselves. They will, for example, continue to offer voice and messaging services for the foreseeable future.
  • Operators still have an opportunity to offer enabling services to 'upstream' service providers such as personalization and targeting (of marketing and services) via use of their customer data, payments, identity and authentication and customer care.
  • Even if operators fail (or choose not to pursue) options 1 and 2 above, the network must be 'smart' and all operators will pursue at least a 'smart network' or 'Happy Pipe' strategy. This will enable operators to achieve three things:
    • To ensure that data is transported efficiently so that capital and operating costs are minimized and the Internet and other networks remain cheap methods of distribution.
    • To improve user experience by matching the performance of the network to the nature of the application or service being used - or indeed vice versa, adapting the application to the actual constraints of the network. 'Best efforts' is fine for asynchronous communication, such as email or text, but unacceptable for traditional voice telephony. A video call or streamed movie could exploit guaranteed bandwidth if possible / available, or else they could self-optimize to conditions of network congestion or poor coverage, if well-understood. Other services have different criteria - for example, real-time gaming demands ultra-low latency, while corporate applications may demand the most secure and reliable path through the network.
    • To charge appropriately for access to and/or use of the network. It is becoming increasingly clear that the Telco 1.0 business model - that of charging the end-user per minute or per Megabyte - is under pressure as new business models for the distribution of content and transportation of data are being developed. Operators will need to be capable of charging different players - end-users, service providers, third-parties (such as advertisers) - on a real-time basis for provision of broadband and maybe various types or tiers of quality of service (QoS). They may also need to offer SLAs (service level agreements), monitor and report actual "as-experienced" quality metrics or expose information about network congestion and availability.
Written by Kevin Kutcher at 14:00

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