The Challenges of Charging for Digital Services
I was fortunate enough to be invited to cover the Revenue Management Forum at the Management World conference last week in Nice. After a morning of keynote speeches, the so-called “Revenue Management Forum” kicked-off with a panel discussion led by BillingViews’ own Ed Finegold which explored the challenges of charging for digital services.
Both Max Michel, who has the excellent title of “Information System Anticipation Director” at Orange, and Stuart Madeley from Virgin Media were both struggling to fit their more traditional CSP billing systems into the new world of charging for Digital Services. The inevitable discussion about threats to the traditional business model by over-the-top players such as Apple and Google created an energetic debate at the front of the room.
Ed Finegold highlighted some research he has just completed in the US which uncovered the surprising statistic that 70% of consumers in the US would prefer to put the charge for digital content on their mobile phone bill. Plenty of opportunity for Europe and the rest of world, too, I suspect – but I also wondered if the two panelists had the necessary support or permission required to unlock this hidden value in for their respective organisations.
The first session left me with more questions than answers as well as an uneasy sense that the day-to-day telco billing manager’s to-do list was preventing them from stepping-up to implement the required changes that direct operator billing might give their companies in the new world of charging for digital content.
Part 2: The Electricity Distribution Crisis
Henk Ensing from TNO Telecom then gave an excellent overview of a project he has been running in the Netherlands showing the dramatic changes in the Electricity Distribution market. What’s that got to do with billing? Had Tony Poulos had a few too many beers when he put together the agenda?
Henk then produced a diagram that, for me, was the “AHA moment” of the seminar. Essentially the electricity distribution market has been designed around a single flow from electricity generator through to consumer.
This traditional distribution model has been thrown into turmoil with the introduction of consumers owning and generating their own electricity. The electricity grid now has to be completely redesigned as consumers now have the chance to trade electricity on a street-level, local or regional basis. The red “X”s are break-points in the diagram. They also present an opportunity for exchanges.
Figure 1: Old World / New World Electricity Distribution
So what’s this electricity distribution model got to do with billing? I was still struggling to find the connection – but all became clearer for me in the second half of the afternoon.
From Revenue Management to Exchange Management?
For the final session of the afternoon, we had Steve Zhang, CEO of Asia Info Linkage, Morton Brogger from MACH Sarl and Nanda Kumar from SunTec Business Solutions Pvt. Ltd.
The discussion was introduced by a phrase that Steve Zhang had taken from the morning’s session – that billing was moving to “Dynamic Trading on a Trust Basis”. He outlined an application that his company had developed which sounded quite cool – a sort of social media app that could transfer money. Where had I heard of that before?
NK from SunTec built on the idea talking of a “Value Exchange System” and it got me thinking back to the previous section where the traditional supply chain of electricity distribution was also moving to a set of networked energy exchanges. Maybe there was a link between the two sessions.
The traditional arguments that Telcos and Electricity companies had advantage through “economies of scale” seemed to be ending. The new world will be run by those who have “economies of exchange” as traditional revenue management streams were moving to a set of inter-connected real-time trading platforms.
In Search of the Evidence
Looking back at last year’s programme, the Bandwidth Exchange trialled in Dublin had come and gone and simply remains as an entry on the tmforum website:
http://www.tmforum.org/BandwidthExchange/12792/home.html
The new catalysts were on show and as buzzy as ever, and I uncovered two similar catalysts which were exploring the theme.
The first showed an example of trading circuits in the Australian National Broadband Network model which was called “Implementing an Open Wholesale B2B Marketplace”. With all the challenges that the programme has had, it was interesting to see that the marketplace was a key enabler in making the whole model work.
There was also an excellent demonstration on the “Data Centre of the Future” which showed the trend toward virtual data centres trading and exchanging chunks of cloud. If billing is getting a bit simpler on data services, provisioning is sure getting a whole lot harder.
I ended up on AsiaInfo’s stand to see the app. Still a demo, it had the picture of a glass of water. As you tipped your mobile phone, liquid poured out of your phone and into your friend’s account. I could see my children might use it, but I really wonder if the mobile operators would want all that liquid money changing hands. The regulatory and financial implications left my mind boggling.
Conclusion
After an excellent afternoon of deep thinking about the future of Revenue Management, I was left with a sense that the world really is changing and that, like the electricity industry, the changes are going to happen around exchanges, as the opportunities for arbitrage and smart provisioning keep cutting into traditional business models. As we move to true real-time charging, billing becomes liquid cash and opportunities abound to win and lose a lot in the new digital exchanges and casinos of the world of tomorrow.
Lorne:
As the TM Forum person responsible for keeping “so-called” Revenue Management relevant to the industry and our members through the Digital Storm, I found your observations very useful. The delegates to our event are in a good position to get the exposure to all of a track that the staff never can, though I did Chair/Moderate a couple of lively sessions/panels in the Revenue Assurance/Fraud Management area of Enterprise Risk Management.
What you’ll want to think about some more, IMHO, is how what TM Forum has dubbed Business Assurance, which includes Customer Engagement Management, Big Data Analytics, and Revenue Management, brings these three key focal areas together in a way that is relevant and useful to the general management of Digital Services Providers. One key concept that TM Forum will be developing much more is the concept of a Fabric of Engaged Parties (to include many different Party roles: Customer, Supplier, Partner, Owner/Shareholder, etc.). These Parties are the ones that will be intertwined in the Value Exchange system you discuss. Also, I hope you got a chance to see the Catalyst demonstration on Richer Services, Richer Ecosystems (see http://www.tmforum.org/RicherServicesRicher/14708/home.html) that displayed the Fabric in full.
Lastly, given that the theme of TM Forum’s Business Assurance Programs is centered around Customer Value Delivery to ensure Shareholder Value Delivery, using Big Data as the enabler for the Lean Extended Value Stream approach to making this real, I would say you picked up a massive undercurrent that will be surfacing in a significant way over the next couple of years in everything TM Forum is developing.
Regards,
Steve Cotton
Director, Business Assurance Programs-TM Forum
I’d just like to clarify that the research I cited is part of an as-yet unreleased survey from a major BSS provider. It will soon come to light. Though I was involved in creation of the survey, I cannot take credit for the data collection. I will write more about this survey once it is released officially so that our readers can benefit from its findings. -Ed F.
@Steve,
Thanks for your comments.
It is interesting that the discussion warmed up when we were talking about risk management. It was also interesting to see the analogies not just with electricity – but also with banking – where the risk of being “too big to fail” could equally be applied to the telcos. Just as the banks are now having to be regulated back to sensible structures and less risky work flows, so I see the driver for cloud services doing exactly the same to our Telecoms networks. The speed with which you could configure a test environment on the catalyst called Data Centre of the Future – combined with the need sometimes to create extra bandwidth for a short period (without locking-in to some 5-year term) means is surely a sign that the exchange model that supports existing supply and demand is broken. The new wave is emerging exactly where the catalyst was pointed at: the data centre.
Whilst I have been out of the swim with the TMF for the past six years, I am afraid that I find a lot of the language you use in your reply not particularly useful when applying it to the frontline when trying to help a company keep existing customers, on-board new customers, generate more revenue, reduce costs and out-smart the competition.
The form and the shape of the industry is changing dramatically from the inside out – and many of the old models are broken.
The catalysts show this, but I wonder whether the rest of the TMF is creating the new language and debating the new structures that will be needed to help service providers survive, compete and generate new (assured) revenue streams in the new world of opensource software, freemium / OTT / cloud services all provided to a new generation that prefer to use Facebook over email.
I saw evidence in some of the Catalysts that the traditional telcos are trying to embrace this new world. Perhaps, as you say, these subjects will be surfacing in a significant way over the next couple of years. However, in the game that many of my clients play in, waiting for two years may well be too late!