Telecoms & Broadband Business Newsletter - December 2014

Editorial: - Data mining – the next driver of mobile revenue

BuddeComm has often argued that in both the fixed and the mobile telecoms markets the actual telecoms element is a utility – a utility that allows for an enormous range of new services, new business models and new applications.

For this reason we have argued for more than a decade (since 2002 to be precise) that structural separation of the vertically-integrated telecom model is needed in order to unleash the huge potential of telecoms. If that doesn’t happen technologies will be applied that allow the users to bypass the barriers set up by the telcos to protect their utility. The operators have this gatekeepers advantage as the utility is at large a natural monopoly and they don’t face any serious competition in the utility element (infrastructure) of that market.

The internet, smartphones and over-the-top (OTT) services are all examples of successful ways of bypassing the stranglehold that the telcos have on this market. The operators don’t like these new companies on their turf, but, despite their ongoing complaints – at national and international level (ITU, EU, etc) – that these newcomers are using their utility and bypassing them, they have so far failed to address these problems more structurally, to either become a utility operator on a wholesale basis in order to service this market or to become an innovative retail provider and compete with these OTTs on a services level.

As the conservative telcos don’t want to change their models we increasingly see regulators making changes aimed at separating the infrastructure and services elements. We see this on the fixed network in, for example, the UK, Singapore, Australia and New Zealand, and recently on mobile networks in Austria Ireland and Germany also.

Unfortunately, so far the organisations (competitive telcos) who profit from these developments and are now able to more successfully use these infrastructures often don’t go any further than offering ‘me too’ services – basic voice and access services – so this not leading to innovation and competition beyond price.

So we are – and have been for a long time – waiting on new innovative companies to enter this market. Our argument has been that, as telecoms is a utility, many organisations could build new products and services on top, whereby the revenue would come from the services rather than from the telecoms element. To a certain extent we have seen this happening with the OTT and internet services; but because of the structure of the market so far customers and providers were still faced with the reality that users of those services have to buy a telecoms package first, before they can use any services that are becoming available over that network.

Obviously this is one model. However we have argued that – in a structurally separated environment – some companies would be more than willing to pay the telecoms costs – embedding them in their retail product – and offer their service, without a separate telecom charge to the users. Obviously advertising has been touted as one such potential model, but that hasn’t taken off in any serious way.

Perhaps the ability of data mining could, either directly or indirectly, deliver such a breakthrough. Upfront we would like to state that BuddeComm strongly believes that data mining should only be allowed generically and that if any personal data needs to be mined it should only be done with the implicit permission of the user.

Having said that, many large-scale retail operations (banks, insurance companies, department and supermarket chains, government agencies such as healthcare, local councils, etc) could benefit enormously from data mining and would be willing to take care of telecoms costs to enable their users to use their services and share their data with them.

Mobile networks in particular, based on LTE, are ideally suited for such purposes. However, in order for those organisations to develop viable services network costs should be available to them on a utility (wholesale) basis. Alternatively telcos could develop data mining services that would allow their wholesale customers to offer attractive retail packages directly to their customers. This would, of course, put enormous pressure on the capacity of the mobile network and would require fibre access to all of the mobile towers, which, in 4G and 5G environments, need to be situated deep in the streets, suburbs and towns. VoLTE can be applied as well to increase the capacity on the 4G network by eliminating analogue voice services, which would allow for more data capacity on the network.

The free WiFi networks are a good example of what is set to happen. Also these networks can be – and many already are – used for data mining, and the fact that they are sprouting up everywhere is a clear indication that the ‘free’ concept can work. Obviously the WiFi operators don’t suffer from the stranglehold of the telcos and are thus able to build those totally different business models that warrant their investment in that infrastructure.

It will be interesting to see what is going to happen in the mobile market. Will the mobile network operators be innovative enough to start offering wholesale services that would allow for new telco retail services that could include free access, free VoLTE and other data services? Or will organisations that recognise the business opportunities of the data mining facility of the mobile networks start offering their own services – either by using WiFi and/or based on regulatory changes forced upon the mobile operators, as is beginning to happen in Europe: http://www.buddeblog.com.au/frompaulsdesk/mobile-consolidation-unavoidable/ that would allow those retail organisations to use the network on a utility/wholesale basis? There is certainly never a dull moment in our industry.