THREE INNOVATION USE CASES

‘Telco 2.0’ consultancy STL Partners will later this year unveil new research into what it is calling real-world “use cases” of its two-sided business model view of the telecom industry — a world in which telcos play a middleman role helping “upstream” companies interact more effectively with more traditional “downstream” customers.

STL is providing TelephonyOnline and Connected Planet with exclusive access to the first U.S. Telco 2.0 “brainstorm event” in December, among the first places its use case research will be presented. As a sneak preview, STL contributed an early look at three uses cases for the two-sided model, representing pioneering service and business model innovation in the telco, content and Web 2.0 industries:

Vodafone

Vodafone's strategy, explained in recent speeches from CEO Vittorio Colao, is “getting more and more Telco 2.0,” STL Partners reported. Among the pieces: efficient pipes for its core network, smart pipes provided as wholesale services to others and top-level products for the consumer market. Those second two requirements represent the two sides of the Telco 2.0 coin — the first facing upstream customers with “disaggregated APIs” exposing key back-office services and the second offering end users traditional integrated services. Other 2.0 moves from Vodafone: enthusiasm about third-party partners — including some that might use Vodafone's billing infrastructure in a white label model — as well as news that social applications — i.e., communications — are today outstripping video — i.e., content — as the main driver of traffic on the Vodafone network. “It's not going to be easy to convert the biggest, baddest, vertically integrated telco on the block into a Telco 2.0 operator,” STL noted, but it called their progress impressive.

ESPN.com

Content providers have innovative new approaches to their business models, as well. STL Partners pointed to ESPN.com, one of the Web's biggest content providers. Not surprisingly, for a Web site driven originally by TV programming, video is becoming a bigger part of its mix. In 2008, the site served about 120 million videos per month — large, but still small in scale compared to YouTube or Hulu. But STL points to a relatively new product, ESPN360, as the company's real business model innovation. ESPN360 is a pay-per-TV play, but the billing and customer care is placed not on ESPN but on its ISP partners, such as AT&T, Comcast and Verizon. The lesson: At times it is better — and easier — to get value chain partners to foot the bill for Web content, even video, than to charge consumers directly, STL Partners said. A value chain approach to funding and making money from content is a key business model 2.0 approach.

Google Voice

In the past year, Google's “telco” strategy has become clear, with products such as Google Talk and Google Voice emulating current operator services and products such as Google Maps and Latitude aiming to be carriers to important new markets, like location-based services. This battle is occurring between two parties that have very similar core capabilities — both Google and the telcos “share a specialty in operating IT systems at very high scale,” STL Partners said. In very 2.0 fashion, the real challenges, though, are not technical, but in the areas of service delivery and business models: taking advantage of customer data, controlling the user interface, creating real value through location services, truly mobilizing a developer ecosystem and building next-generation billing/payment services. The best strategy for incumbent providers to beat Google, STL concluded, “is to grab [those] hilltops before Google does.”