Reader Forum: A smart pipe begins with the content cloud

Editor’s Note: Welcome to our weekly Reader Forum section. In an attempt to broaden our interaction with our readers we have created this forum for those with something meaningful to say to the wireless industry. We want to keep this as open as possible, but maintain some editorial control so as to keep it free of commercials or attacks. Please send along submissions for this section to our editors at: [email protected] or [email protected].
For operators, the days of organic growth through new customer acquisition are essentially over. According to CTIA, U.S. market penetration is upwards of 95% while in other parts of the world it’s over 100%. The cost to pull subscribers from the competition will only go up. If operators are to maintain positive growth curves in revenue and profitability, it’s critical to maximize return from each customer through a focus on extending customer lifetime.
Operators’ valuable time and money are being wasted pursuing a “me too” strategy of building standalone branded services like music and mobile TV; or trying to achieve a toehold in the applications market segment. These approaches just don’t make the cut as differentiators in a marketplace littered with free and “freemium” music and social networking offerings. In consumers’ eyes, operators are not digital media brands and never will be. Why waste valuable resources trying to compete with these brands?
With over-the-top competitors like Apple Inc., Amazon.com Inc., Google Inc. and even device makers trampling over the operators’ relationship with their subscribers, the operator risks rapid erosion in market position and with it will be relegated in the ecosystem to a dumb pipe. It’s time to adapt or step aside. Operators can do this by recognizing their core strengths and then leveraging those strengths to become integrated into modern consumer behaviors.
Operator value: Through the eyes of consumers
Beyond bandwidth and the network, what still remains a constant with consumers even as this new marketplace develops? As proven through the evolution of voice services – consumers value operators for:
–Convenience/simplicity;
–relationship;
–reliability;
–security.
As long as the operator delivered on these core principles the consumer was largely satisfied. The limited set of voice and messaging services that are grounded in these core principles have thrived. Meanwhile, other value added services, like walled-garden mobile Internet, branded music and gaming, faltered.
At the center of the new user-content ecosystem
In the era of social networking, user-generated and premium digital content there is still a fundamental need for services that rely on the core strengths of operators. Foundationally, a trusted network is still required – be it physical or in the ether – as are services that simplify consumers’ interactions across these networks. The operator’s new sweet spot should be as a digital media hub that enables consumers to easily access, share and store their digital content anytime, anywhere and across any device. This approach lets operators act as complimentary facilitators for media companies, rather than being in direct competition with them. Also, by leveraging their core strengths against digital content needs, operators will achieve both immediate and long-term revenue.
Own and extend the customer lifetime
If operators can create a compelling and personalized service in which the customer’s content is the integral part, customers will be kept longer and more value (i.e. revenue) will be derived from them. Unlike “siloed” digital content services that only focus on one type of media or activity, operators’ cloud services that are integrated across a broad range of lifestyle activities are less easily replaced, transplantable or discretionary in nature. As for subscriber demand, at NewBay I’ve seen upwards of 40% attach rate during the introduction of these services and 20% conversion rates from launch to ongoing subscribership. On the retention side, usage patterns and profiles have indicated these users are 35% to 45% less likely to churn. Clearly there is an interest among subscribers for these services and it represents a market opportunity best suited to the operator.
Real value
Operators can benefit from the near-term revenues generated from cloud services in the form of subscription fees, advertising and premium content up sell, but the real value comes from the extension of customer lifetime. Using cloud-based content services to extend just 1% of a 65 million customer base by four months, from 36 months to 40 months, would yield an additional $135 million in gross revenue based on a $52 per month average revenue per user. Given the most tenured customers are also the most profitable, how can one ignore any service that would help extend lifetime beyond current standards?
It’s clear that the value of a content cloud offering should not be overlooked when determining a long-term revenue strategy in an increasingly limited organic growth marketplace.