The content opportunity: How service providers can end the “dumb pipe” myth

We’ve all heard it: content is king. Right now, content is capturing consumer dollars, but all is not quiet in the kingdom--mobile operators and multiple systems operators (MSOs) are getting ready to storm the castle. 

There has been much debate about how these service providers can avoid becoming the “dumb pipe,” or merely a vehicle through which consumers seek out content and revenue changes hands, with little to no involvement from (nor revenue to) the provider. In cases where content delivery is direct to the end customer, those selling or delivering the content directly capture the revenue, opening the potential to disintermediate the middleman--in this case, the service provider.

Analysys predicts that the mobile content and entertainment services could have a market size of US $10.5 billion by 2005. Even today, as the industry just begins to launch these services in full force, research firm Yankee Group puts the market for offering premium content over wireless devices at more than $1 billion per year (excluding Japan and Korea).

Much of the discussion around content today centers around digital rights management (DRM). In the past, consumers would buy a book, video or CD, and own it. But in today’s mobile and electronic world, copying and distributing content is fast and easy; what's difficult is identifying its true owner. The implications of dealing with digital content are amplified as ownership rights come into the picture: When a consumer copies digital content and the quality is the same as the original, when does it become theirs if they modify the original content?

There are a multitude of new bodies to deal with for different content types and different roles. From music, TV, film and print, there are the creators, the performers and those who distribute the end result. The question of ownership includes another slew of parties: the content owner, product owners, aggregators/distributors and operators. The value chain is already complex, but as it gets bigger, the potential for it to become more complex intensifies.

As various market players work on the problem of DRM, service providers have work to do to shore up their infrastructure to not only handle content delivery, but transform themselves from a content delivery vehicle to a value-added content provider. In a recent audioconference, Yankee Group made the assertion that “MSOs and VoIP will fundamentally disrupt the traditional voice business. Competing for revenue in areas outside the comfort zone is essential for long-term success and perhaps survival.” 

As wireless carriers are building out and leveraging next-generation and IP-based networks, the ability to offer a variety of content over DSL is attracting customers worldwide, and those consumers are getting used to the availability of content on the go. The good news is that downloading ringtones, MP3 files, pictures and e-mail through the mobile phone is gaining in popularity. The bad news is that the carrier may not be doing all it can to profit from the content crossing its network. Meanwhile, an increasing number of consumers are gaining access to a wide variety of content from the bundled services offered by broadband MSOs. A few mobile operators are considering partnerships to add video services to bundled solutions, and still more are working on ways to maintain their brand as their customers roam between Wi-Fi hotspots. 

The effort to keep the customer thinking about their service provider and not just their content provider is firmly underway in the mobile telephony industry. However, analysts agree that the providers that are best poised to succeed at capitalizing on content delivery are the broadband MSOs.

In terms of enticing consumers to get their content from a particular type of service provider, often the type of bundled services available is key. Broadband MSOs such as Cox Communications and Comcast Communications have led the market in adding voice to the bundle. As a whole, cable operators are closer to deploying voice services than DSL providers are to offering video, especially in the United States. Many are considering ways to provide wireless services in addition to switched or IP-based wireline telephony services.

As MSOs build out or partner for access to IP networks, they are focused on the types of services they can deliver and making quality of service a priority across their IP networks. There is a common thought in the MSO community that voice over IP is just the beginning of content delivery over IP. As a result, there is activity around standardizing the way content is delivered over advanced networks. The new PacketCable Multimedia standard will enable MSOs to launch a wide range of IP services like enhanced gaming, enhanced video services or even video telephony.

Consumer portals will also be a focus for the MSOs to offer content services, where all types of IP value added services can be offered on a “try before you buy” basis and updated as consumer needs change. This new standard will enable cable operators to take advantage of services important to customers to position cable as the better access medium.

Cable operators know how to bundle content to attract consumer interest and will move quickly away from price and speed as a competitive advantage to using service differentiation to win broadband subscribers and create more inclusive bundles. Both types of providers can take three steps today to position themselves to become an important value-add to consumers seeking content:

1. Take the Lead on Content Partnership

By driving agreements with different partners to deliver content, service providers gain control of the revenue flow and earn a percentage of the revenue generated from content they offer their customers. By managing the partnership and the revenue, the provider becomes more than a delivery channel and instead, a revenue generating partner.

Delivering high-quality content that consumers demand is just one part of the industry’s challenge. In order for operators to truly capitalize on these revenue-generating services, they must be able to manage the complex partnerships they have with their content providers using tools that can react as quickly as the consumers make transactions.

By taking a proactive role in managing the relationships with content partners through the use of real-time revenue settlement tools, operators will be able to deliver the types of content that customers want. In the process, they will carve out a new route to profitability.

While increasing revenues through these new business models is attractive to mobile operators, they are unable to handle the management of these new relationships effectively within their existing infrastructures. Industry experts and operators alike agree that a single application to help manage these partnerships and configure revenue-sharing agreements dynamically plays a key role in the ability to capture meaningful content revenues.

In addition, such solutions must be able to reflect the varied levels of agreements with partners. For example, operators should be able to construct revenue-sharing agreements that incorporate flat fees, volume-over-time thresholds, multiple-element agreements and quality of service parameters.

Today, operators have no real ability within their existing infrastructures to change these agreements in a fast and efficient manner. In addition, operators don’t have a clear indication how services will evolve in terms of popularity and complexity, therefore effecting the speed at which more demanding partners may expect the operator to react to a change in requirements.

In order for operators to have the flexibility to quickly accommodate new services, they must also be able to create a variety of revenue-sharing agreements based on percentages amongst multiple parties as well as maximum and minimum thresholds.

2. Maintain the Brand and Provide a Consistent Customer Experience

This title probably evokes thoughts of customer-facing applications, and while certainly true that they have an impact, many of the critical tools to help customers recognize and stay loyal to a brand lie in the back office.

First, a single platform for revenue assurance that reaches across the enterprise is critical to a consistent customer experience. Because revenue assurance applications can ensure the accuracy of data enterprise-wide, it enables the customer service representative to have an accurate history of the customer’s lifecycle with the provider, in turn enabling a better-quality experience when the customer needs help.

As a customer transaction flows through ordering, network data mediation, rating and billing, those applications must be primed to handle on-demand transactions of any kind. If these applications can send and receive information to and from other applications using open standards, customer records can be updated in real-time and will contain more accurate information on customer transactions at any point in the process. This capability is especially important when customers need authorization to purchase or continue using a service or want to check the status of their account after making a transaction.

Providers will also have to master the ability to authorize transactions at the time of service, whether the request comes from prepaid, postpaid and hybrid account customers. As consumers set up business and personal accounts, balance management for multiple balances and multiple wallets per account will also become a strategic capability. 

Also, if the provider initiates and manages content partnerships through a revenue settlements system, it enables them to package the content for consumers with the service provider brand attached. Leading with the service provider brand keeps the provider front and center with the consumer while it also positions the provider to drive the share of revenue from the services delivered.

In addition, the billing statement itself is a branded, consistent vehicle to reach consumers with marketing messages about available content and services. Whether statements are delivered through the mail, online, through the set-top box or mobile phone, billing should not be overlooked as a recurring opportunity to reach out to existing customers.

3. Put the Customer in Control

As the number of services available to customers increases dramatically, these services are also becoming more complex. For service providers to keep up and still understand how customers use video, voice and data services, the customer must begin to organize and manage their own account and to buy and configure these complex services independently. 

One method of allowing customers to organize and manage their accounts is through account hierarchies. An account hierarchy can be set up in a variety of ways, including parent and child accounts, personal and business accounts, prepaid and postpaid accounts or to manage different types of devices and content delivery services.

The result: A customer’s profile is a composite of subscriber, billing, service and device characteristics that define the subscriber and the sessions they initiate. In other words, the service provider knows down to the individual customer level how their customers use their services, while customers can still store and update information in the way that makes the most sense for them.

Service providers must make it easy for customers to do business on their own terms, online, through mobile devices, or the digital set-top box. This gives customers more control over their interaction with their service provider but it also opens up many more options for promotions, content delivery and services for the service provider.

As the competition heats up, the providers that can accomplish the three steps above will have an advantage in the race to change from their role as an access service to becoming a true value-add in content delivery. We’ll all be watching to see which providers can not only stay in the race, but truly lead by leveraging their network investment to capitalize on giving the consumers what they want: content.

Dwayne Ruffin is CSG Systems' vice president of product management for broadband solutions and can be reached at dwayne_ruffin@csgsystems.com.

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