Remodeling Revenue: Telco's Role in the Content Value Chain
By: Monica Ricci
The telco's future success depends on their ability to evolve from service provider to service enabler, and to do this CSPs must exploit the vital advantages they offer to both the creators and the consumers of content.
Cast your mind back a decade or so, to a time when telcos were preoccupied with identifying and profiting from the next "killer app." In retrospect, a telco “killer app” never emerged, and now that traditional revenue streams are eroding, you could make the case that voice and messaging were the “killer app” of the last decade. But now, still at the onset of the current decade, that voice and data killer app has lost its luster: a larger share of the customer's spending goes toward a range of digital content. Network capacity is increasingly consumed by streaming music and video, media downloads, games, social networking, productivity apps, and even new forms of IP voice and messaging, but telcos, thus far, have derived relatively little share of the spending on these services. A lion’s share of this content revenue goes to "over-the-top" (OTT) providers.
Should--or even can--telcos lay claim to a larger part of this revenue pool? At the heart of the debate is the telco's position in the overall value chain. The telco adds clear value--without the network, the content doesn’t get delivered. But larger questions remain about this value--how to quantify it; how to measure it; and ultimately, who compensates the telco for it? The customer? The content provider?
CSPs are currently investing in better defining their role in the content value chain. Their strategies vary from focusing purely on the carriage--being an efficient but “dumb pipe”--to competing directly with the “over-the-top” players by creating and distributing unique content through unique channels. While these are two extremes of the competitive spectrum, there is increasing recognition of the CSP’s vital role in the middle of the value chain, as a digital services aggregator, retailer or enabler. The CSP can enhance digital services by incorporating delivery guarantees and value-added services in its position between the consumer and third-party providers of content and services.
Within the past year, some of the world’s most successful telco brands have created separate business units with the objective of enabling connections between content consumers and the third-party providers of content and digital services: Telefonica created the Telefonica Digital business unit (September 2011); Verizon created Verizon Digital Media Services (July 2011) and SingTel launched its “Digital Life” business unit (March 2012). These new business units are focused on the CSP’s role in the digital services value chain and, in Verizon’s words, are “game changers,” for not only the content players they enable but for the CSPs themselves.
