I rarely write about telco in my personal blog. This time, I’m going to. That means there will be a few links here to the website I run (whatphone.com.au.) Sorry about that but WhatPhone is telco focused, so it’s the best place to share content mentioned in passing, which is relevant.
The solution in a nutshell
There is a problem which has been on my mind for about 6 months now. Money tends to go to things which are scarce. That’s why diamonds and city parking spots are expensive.
When Australia launches 5G, (a most believe that will happen in 2020), data will no longer be scarce (which I’ve written about before ). If you think it’s a strange point of view to suggest something which so valuable now could quickly get given away for nothing, remember: You used to pay 25c for each text message you sent spend a few bucks an hour for international calls. Now, voice and SMS are mainly free, international calls are included in contract plans, and you use Skype let you call your Grandma in Alaska for nothing.
The question then, as people transition to the new 5G service, with phones which can use the new super-fast data speeds, is how do the phone companies maintain their business models? At the moment, they charge you per GB for data. In the background, your data usage is increasing. The phone companies match that every year with competition keeping prices low.
One of the alternatives is a / are subscription model(s)
Keeping this in a B2C context, subscription models are seen as more convenient for users who never have to remember to order the product, it’s just there when they want it. They can cancel it when they want to which many find convenient.
Subscription models work for businesses, too (selling to consumers) because they make it easier for businesse to predict their revenue on month by month basis. Many companies, including Microsoft, are moving to a monthly charge for their service. To state the obvious, monthly charging seems to have worked well for Netflix and they’re doing OK.
Inspiration came from considering the customer, not the technology
I think the reason I’ve been stuck on this problem for the last 6 months is that I have been looking at it from the telco end, ( i.e. data won’t be scarce, so how can they charge for it ) not the consumer needs end. This fallacious approach occurred to me while I was constructively passing time one Saturday afternoon.
We’re in the second half of 2017 as I write this, so, 2020, which is when industry insiders (my friends who still work for the telcos) tell me that 5G will be rolled out is only two and a half years away. I hear there will be tests of 5G services, undertaken by Telstra, starting next year. How would I spend the next 30 months if I worked at a telco?
What’s working now
As covered in many places, some of the telcos are doing well at adding entertainment into their phone plans. This provides some level of insurance against data, network and product commoditization. Telstra has some great sports content. Optus’ music packages on their prepaid plans are hard to beat. OVO Mobile does well on niche sports, too. In many meaningful ways, they are already charging for this service each month. (Optus explicitly charges $15 per month for access to the EPL – the English Premier League.)
Charging for a service is where the telcos want to be. They fear being seen as a dumb pipe. They have made a start at it with their entertainment service. So, what needs ( which could be addressed by telco services ) will people have in 2020? How will things change between now and then? What are the opportunities for telcos, in charging for services, from those changes?
Factor 1: Driverless cars
- Access to the internet from the car:
If the average commute time is one hour and you no longer need to watch the road, you’re free to work, chat and view content from your car. Adding your car’s access to the Internet to your phone plan will become a necessity, even if you’re just renting the car for a couple hours each day.
Around 30% of the economy is made up of transportation services. When driverless cars come in, and Forbes predicts 10 million by 2020 in America alone, there will be a great need for the re-education of some displaced workers. Telcos creating content and leading its provision to customers could be a very worthwhile service.
Factor 2: Internet updates between now and 2020
- Everything in the cloud:
There is already a lot in the cloud. From a consumer standpoint, Dropbox, Google Drive, Microsoft’s OneDrive and a bunch of others all offer services and storage in the cloud. With quantum computing coming and the recent news that these quantum computing services will be offered from the cloud, Telstra already provides zero rated access to Microsoft’s OneDrive, and it seems like this will be a growing need. Charge for it as a service.
- Wireless replacing fixed broadband:
Recent developments with mobile data plans suggest that wireless broadband may soon be more ubiquitous and affordable than their fixed equivalents. Charging for a cellular connection but limiting it to use in the home could create new revenues for the telcos and could be worth more than any other service listed here.
- More hacking:
Hacking may have changed the course of recent elections, delayed Iran’s nuclear program and cost businesses globally $billions in the last 6 months alone. It’s only going to happen more. Providing hacking prevention, or security services and using their network smarts could be more service revenue for the telcos.
- More surveillance:
Government, businesses and the telcos themselves will be surveilling us more to sell us stuff and counterterrorism threats. Telcos could offer Blackspot programs – i.e. allow you to turn off this surveillance for a fee. Naturally, if you’re a terrorist, they would be obliged by law to turn your details over in the event of a court order.
- Augmented reality starts:
There are so many companies looking at AR now, it won’t be long before your headset is online, too. Sell the data required for this as a service.
- Offline access:
At some point, whichever network you’re on, you’ll go into a coverage blackspot. 5G’s zero latency and huge bandwidth mean whatever device you’re relying on could know that and suck down the services you need before you enter the blackspot to keep you going while you’re offline. All the emails you might want to read. All the music you might want to stream. All the TV shows or educational content you might want to engage with while you’re out of coverage.
Factor 3: Automation and ageing population
- Remote medical services:
The ageing population will want and need more support. This will involve doctors, nurses, councillors/psychologists. Providing either directly or partnering to provide these is an opportunity for more service revenue – perhaps pay per use.
- Business access:
Business is going to be more about human interaction, soft skills, emotional intelligence and face to face interaction. Offering laptop access, video conferencing and telco as a service for business could be new revenue.
What’s the size of the problem we’re trying to solve?
What’s current APRU (the industry measure for success, Average Revenue Per User) let’s say $30 per user per month and see where we get with these new services.
There is plenty of room there to grow services
The phone companies have a feature to them that sets them apart from any other business. They own the last mile connection to your phone. That means they can charge you what they want for it. They have huge customer bases and lots of data on you so they can target these cross-sell and upsell services to you.
We are used to paying for a handset to be connected to the Internet and buying data with which we do anything we like. The price for that can be undercut in a race to the bottom caused by competition but it takes a while, and the main competition (on price) comes from the MVNOs and telcos own their pricing.
This sort of solution wouldn’t be hard to put in place. Telcos can partner for the content and services and use the data they have for upselling. It’s early days for this idea. I will continue to think about it.
Australia’s premier telco comparison site: https://whatphone.com.au/
I always just assumed that Quantum computing services would be offered from the cloud. Engadget is one of the few I’ve seen to have written on the subject: https://www.engadget.com/2017/07/17/google-puts-quantum-computers-to-work-in-cloud/
There’s not much out there that I could find on the subject of preferring monthly payments. This site was great ( and his business seems to be going well, too. https://www.entrepreneur.com/article/
Forbes driverless car consideration is good: https://www.forbes.com/sites/oliviergarret/2017/03/03/10-million-self-driving-cars-will-hit-the-road-by-2020-heres-how-to-profit/