“Providing content services is a big money, high risk strategy that should not be undertaken without careful thought and planning. Once operators have started down the road towards content provision, if they get it wrong they could lose everything. They might as well order several hundred million dollars from their central bank and have a huge and expensive bonfire. It is not just the cost of the necessary investment that they will lose – if they do not take legal and regulatory issues seriously they could find themselves as the loser in some very expensive court cases. The damage to their brand could be irretrievable. And diversion of scarce managerial resources could result in opportunity loss from alternative investment.” Teresa Cottam, author of Pricing and Billing for Content – Creating New Revenue Streams from Content (first issue published January 2002)
The promise of content services
Content is the great hope of the telecoms industry. Content services are seen as the way operators can:
• pay for their next-generation networks by opening up new revenue streams and markets
• resist becoming bitpipes in the face of commoditisation of their traditional service offerings
• differentiate themselves from their rivals in an increasingly competitive market
• reduce churn by locking customers in to ‘sticky’ services and by increasing customer satisfaction.
But although there is ubiquitous acceptance of the key role content will play in the future telecoms market, there are many issues that still need addressing if content services are to achieve the strategic goals of operators. These include:
• back-office issues – such as billing, pricing and rating
• legal and regulatory issues associated with supplying content – such as rights, content piracy, regulatory restrictions and attitudes to various types of content, liability for libellous content and copyright infringement
• business and strategic issues
• financial issues – such as the complexity of pricing and payment.
Pricing and Billing for Content, the new continuous information service from Chorleywood Publications looks at each of these issues in detail, providing in-depth analysis, a definitional framework and a wide variety of profiles based on primary research that describe the current thinking of influential players in this market.
A fundamental choice
This is a matter of faith: if operators do not believe that content services will make money, they should not even try to provide them. Instead, they should concentrate on becoming the best bitpipe there is and seek to make money that way. After all, it is a market they understand and someone has to provide the infrastructure for the networked economy. If operators do believe they can make money out of content, then they shouldn’t play at it. Content provision is a serious, mature market. They need to spend serious amounts of money on doing it right and they need top-level, strategic involvement.
Strategic attention is needed
Many vendors have tried to frighten operators into investing in new BSS systems to support content services, explaining that the requirements are revolutionary and new. But they have done this before with other services and operators are wary. Operating under mounting debt burdens and having already invested heavily in BSS, many operators are playing a ‘wait-and-see’ game or are trying to ‘sweat’ their existing investment to gain the maximum ROI. Some operators, however, are oblivious to how weaknesses in their BSS systems will undermine or disable the shiny new services they are planning to offer.
Operators frequently fail to understand how charging and billing for content will affect their back-office processes. Often they do not even consider back-office issues such as billing until they are nearly at the end of the service development path. Chorleywood Publications has heard of cases where operators have designed innovative new services, have negotiated content supply contracts and have then been unable to launch services simply because their back-office systems cannot support them. There is clearly an organisational gap in some operators, whereby part of the organisation is racing ahead, dreaming up new services and new revenue streams, while other parts – the IS department, for example – are (barely) holding everything together with string and sticky tape.
Operators’ back-office systems therefore require top-level management attention – possibly for the first time ever. Senior management needs to take a good hard look at the BSS infrastructure and decide where it needs investment: which functionality is a necessity, which is a ‘nice-to-have’ and which can wait for now. Senior management needs to understand that, as bitter a pill as it seems, without adequate investment in the back office, next-generation networks and licences are worthless, because they lack the means of monetising the services that will recoup their investment. In the race to win a share of the vital revenues that content services will provide, operators that cannot bill for services will fall at the first hurdle. A robust and scalable back-office infrastructure, however, will become a strategic asset.
Is ‘wait-and-see’ a valid strategy?
It is clear from the research that Chorleywood Publications has done amongst operators worldwide, as part of the Global Locator database project, that many operators are adopting a ‘wait and see’ approach. As stated in our recent report Global Trends and Market Forecasts in Telecoms BCC 2001, operators worldwide are telling us that they are not going to invest in new billing systems in the same volume that they have in recent years.
The ‘wait and see’ approach’ involves watching early adopters and seeing where they go wrong and what they do right – letting someone else take the risk. This is certainly a valid thing to do, especially if you can’t afford to get it wrong. But, taking this approach means that you could lose vital ‘first mover advantage’ – even ‘second mover advantage’. From a partnership point of view, waiting too long could be disastrous: you could end up watching everyone else dancing while you sit partnerless, because all the best partners have already been taken.
The opportunity to ‘wait and see’ is therefore a finite one. If you haven’t already acted then at least start preparing now. Think about the kind of business you want to be. Think about how you are going to re-engineer your business to deliver that vision. Research potential partners. Watch what everyone else is doing and get ready to move quickly.
