Driving the next generation of business innovation: An RCR Wireless News Feature Report

Today’s telecom operators are facing perhaps the most competitive threats to their business that they ever have. Device manufacturers, operating system companies, over-the-top service providers and large digital content giants are each developing their own relationships with individual end users and enterprises. Faced with these challenges, the most forward-thinking service providers are culling their business intelligence to find new ways to connect with their customers and new ways to earn revenue from those connections.
An operator in the Asia-Pacific is teaming with a municipality to monitor cellular traffic along city streets and combining that information with street sensors to predict traffic congestion, and then selling that information to transportation companies whose livelihoods depend on quick deliveries. Utilities are partnering with telecom operators to deliver smart-meter solutions to buy and sell energy at nonpeak times with real-time billing for consumers. A pizza delivery chain can work with an operator to access location information to better serve their customers, and perhaps even charge the pizza to their cellphone bill. In many cases, this innovation is forcing new partnerships, new flexibility from the operator and new revenue models. With these partnerships, it is often too early to tell who is a potential competitor and who is a potential partner, but the fact remains that change is going to have to occur at an unprecedented pace if operators want to cash in on new revenues from new sources.

The content revolution
The phrase “fat, dumb and happy” could be used to describe yesterday’s telcos. Globally, many of these companies were monopolies once owned by their federal governments and later spun off into the private sector, with a huge installed customer base and little competition. Nearly all of their revenues came from voice communications and they could roll out network improvements in a controlled manner, and match those improvements against new revenue streams. Somewhere along the way that business model changed as operators began to deploy expensive third-generation networks that operated on equally expensive wireless spectrum bought for high prices at auction. This “build it and they will come” mentality didn’t necessarily pay off initially for service providers, as consumers were slow to embrace clunky data offerings.
However, the often-talked-about tipping point in the space came when AT&T Mobility offered Apple Inc.’s iconic and now-beloved iPhone. The first generation of the iPhone certainly had its share of shortcomings, but nevertheless the stage was set for mass consumer adoption. That phenomenon spread lightning quick around the globe as operators worldwide embraced newcomer Apple as a device manufacturer. However, Apple brought its own business model to telecom operators, including its own branding demands and most importantly, its proprietary App Store on its iTunes platform. Apple takes a 30% cut on revenues that application developers get when someone buys their product. The operator is left out of this equation, leaving it to make money only from the data plans it sold its customer.
These revenues are racking up into bil