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:
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.
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.