Continuing on the themes I touched on in my last column, I’d like to address this topic as a model for service providers to work from. In many respects the idea of a service provider being a platform play is déclassé, trivializing them into little more than a launching pad for other people’s services. This really isn’t a message they want to hear, especially incumbents, who up until the past few years have done very nicely being almost totally network-centric. In this world, Capex is all about making the network bigger and stronger — after all, it’s their primary asset, right?

 

This was largely true in the pre-Internet world where subscribers had limited choice and their needs were almost an afterthought. Remember Lily Tomlin and her famous telephone operator character — “we don’t have to be nice — we’re the phone company”? That’s almost unthinkable today, where subscribers are a mere few mouse clicks away from switching carriers. With the advent of IP-based services and near-ubiquitous broadband access, the balance of power has shifted from the network to the subscriber.

 

IP may be a boon for carriers in terms of lowering their Capex and Opex requirements, as well as enabling them to offer a wider range of services, but it’s also been good news for subscribers. IP translates into choice and flexibility for subscribers, empowering them like never before. If you don’t think is a game-changer, just ask any teenager how well the local phone company is serving their needs. Nada.

 

Translation — not all subscribers are created equal. In fact we’re all different, and if given enough choice, each of us will probably come up with a unique set of services and features that we’d like. I would say this holds equally true for telephony and TV. If I could build my cable package channel by channel, my wish list of channels will be very different from my wife’s. The same would be true for voice features. I don’t care for call display, but she can’t live without it. The permutations are endless, and now that the IP genie is out of the bottle, this is not good news for traditional service providers.

 

Their business models are built around pretty basic, standardized offerings that work for most people — so long as they don’t have much choice. Not only does this make their business simpler — for billing, provisioning, servicing, R&D — but also in terms of optimizing their networks and maximizing their profits. Any business would want that, but if it comes at the expense of innovation and choice, the natural laws of free market forces are stifled, and the needs of consumers are not well served. That’s what we have regulators for.

 

We all know how the Internet has changed this, and service providers who continue to hold network-centric views of the world are in trouble — whether they know it or not. One of the strong themes that came out of eComm was the need for service providers to be more customer-centric. Networks may constantly be evolving, but so are subscribers and they require much more care and feeding. Furthermore, subscribers can go elsewhere if they are not happy — the network will always stay put. If the service provider misreads the market or makes poor investment decisions, both assets will depreciate in value. This is a worst-case scenario, especially for the subscriber. When ARPU starts declining, this trend is very difficult to reverse, regardless of how much spending is done to upgrade the network.

 

Conversely, when carriers make the right moves, both assets effectively appreciate in value. The network appreciates in the sense that it is generating a better ROI — the physical assets will always decline in value over time. More importantly, though, the value of the subscribers really does increase in terms of ARPU. I would argue that the upside potential is far greater for subscribers than the network when all the right moves are made — but this can only happen if the service provider is truly customer-centric.

 

This leads to the question of whether a service provider should focus on becoming a platform play. In this scenario, the business focus is on the subscriber, and providing the right mix of services by any means possible. This is really the Web 2.0 mantra where systems are open and fluid — not controlled and fixed. The driver for adopting this model would be the recognition that the existing business model is outmoded and traditional revenue streams are in decline or gone altogether and will never be recaptured in their original form. In this scenario, the enlightened carrier will come to see that being too network-centric is hurting their business, and that without subscribers the network has no value.

 

What these carriers are beginning to see is that subscriber behaviors and needs are very different today, and to keep them, they must tap into those needs. They already are losing much of the subscriber’s attention as they migrate to Web-based platforms and applications such as Google, Facebook (News - Alert), Flickr, YouTube, Twitter, Skype etc. Service providers are missing out on these shifts in a big way as they have no way to become part of these conversations. As subscribers continue migrating to these environments, the carrier’s network has diminishing value, and they risk becoming reduced to “fat, dumb pipes.”

 

Service providers are struggling with this challenge, and striking the right balance of being network-centric and subscriber-centric may be the most important issue facing them today. If taken to the extreme, it is possible for a service provider to be solely a platform play, where the network and transport capabilities become secondary to their ability to mix and match the right services for a particular audience of subscribers.

 

One such example that we saw at eComm was Ribbit (News - Alert), who position themselves as a “new kind of phone company.” Their Amphibian offering is a Web-based platform that hosts a potentially endless variety of applications that subscribers can download and use as they like. This is radically different from the traditional telecom model, and while being very early stage, is a glimpse of what a platform play could look like as these concepts start to take hold in the mainstream. When they do — it’s not if in my mind — traditional service providers will have to work a lot harder and faster to shift their focus. I’ll have more to say on this in my next column.