Telco 2.0 “manifesto” gets an update

UK-based consultancy STL Partners has delivered a second edition of its influential Telco 2.0 Manifesto, whose main thrust is that service providers must leverage their assets in new ways to place themselves at the center of the digital value chain.

Such so-called “two-sided” markets are less about using a vertically integrated network to bill for services directly and more about playing a middleman role delivering an array of wholesale and business-to-business services.

STL believes that telco-provided b-to-b services like identity, advertising, e-commerce, fulfillment, billing, payment and customer care represent a potential $250 billion market within ten years. STL analysts include CEO Simon Torrance and chief analyst Martin Geddes, both well-known in global telecom circles.

STL Partners previewed the second edition of the Telco 2.0 report in a post today on its Telco 2.0 blog. The manifesto both sums up and serves as a leaping-off point for STL’s research, including reports on pieces of the Telco 2.0 puzzle and twice-annual executive brainstorming sessions.

The work has proven influential in helping global carriers formulate next-generation business models. Carriers like BT – which, for instance, acquired app platform Ribbit this week to fuel its telco 2.0 strategy – have been active in the STL events and have cited the two-sided model as a core driver of its Web21C strategy.

The new Telco 2.0 Manifesto starts by describing the “telco 1.0” environment, characterized by vertical integration, where the network owner controls and bills for the services on its network – essentially a one-sided market. This model, even with new triple-play bundling opportunities, is under strain, STL said, with voice revenue slowing, video opportunities harder to enter than expected and data markets “not the golden goose after all.”

Beyond that, obvious new markets, such as online advertising, aren’t big enough to make up for the disappearance of the telco 1.0 market. “Advertising-funded services exist, but the entire online advertising industry — including Google — is still under 2% of global telecoms revenues,” according to the Manifesto. “Advertising alone cannot significantly impact the telco business model.”

The alternative is to drive new revenue growth by playing a key enabling role in two-sided b-to-b markets, STL says.

That new business model depends on the emergence of four key elements: more open, shared and utility-style infrastructure services (rather than single-telco, vertically integrated networks); service provider retail arms focused on a full array of “digital lifestyle” products, not just individual services; a rich wholesale delivery platform that turns over-the-top providers into customers rather than competitors; and a business process platform that creates value-added services that can be sold to a broad range of enterprise customers.