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Consumer services conundrum: Ownership vs. access

Apple has built a huge business around ‘ownership’ – of content and devices. But the digital world may be at last moving to an access model, something telecom operators are already very good at. Things could get interesting

There are lots of ways to describe the business that telcos are in –and want to be in— when it comes to residential services. Most often, the discussion revolves around the idea of the “dumb pipe.” Carriers want to avoid being a raw conduit at all costs. The challenge, however, is: what exactly is the alternative? What does it mean to build a business around “smart pipes.”

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Sometimes it’s helpful to look at a problem in a slightly different way. The debate over dumb vs. smart pipes puts the telco network at the center of the discussion. What if we thought about user needs instead? Then, I believe – and a slew of recent developments seem to point to this trend as well – the debate becomes one about ownership vs. access. And that’s a much more interesting and fruitful conversation for telecom operators to have.

Spotify, Netflix, Hulu and Content as Access

To get started down this path, consider much-hyped music streaming service Spotify, which recently debuted in the U.S. after making a huge splash in Europe (CP: Spotify, with its streaming gigabytes of music, arrives in U.S.). In a recent interview with Fortune, Spotify CEO Daniel Ek talked about how providing access to – rather than ownership of – music represents a fundamentally new model:

This model works very differently. If you think about the history of music, it's really been around how you need to buy this record, you need to buy this album or you need to buy this song.
And what Spotify is saying is ownership is great but access is the future. People just want to have access to all the world's music, people want to have -- you know, share a song, and that's the song that matters to them in this second.

That model (which admittedly, has yet to catch on via services such as Rhapsody or Microsoft’s Zune) is fundamentally different than the iTunes buy-and-download model. But it’s not like subscription/access models are something altogether new. Cable and pay TV runs on a subscription model. Over-the-top services like Netflix and Hulu Plus run on a subscription model. And of course telephone services, both wireline and wireless/SMS, are essentially subscription services as well.

Hey, Telcos Are Pretty Good at Access

The interesting thing here, of course, is that telecom operators are actually pretty good at running subscription- and ARPU (average revenue per user)-driven businesses. They are good at provisioning and providing access to networks, and they are getting better and better (via mobile and now the cloud) at providing access to services.

Indeed, today’s most sophisticated over-the-top access models actually come from cable and telco providers, which manage multi-level authentication schemes that span the content value chain and let customers access video content across their cable systems AND online (via services like Xfinity, FiOS and services like HBOGo).

Multi-network, multi-service authentication is a great enabling business for telecom operators to be in – and a great content services-centric extension of their core network business. Another great extension is content delivery, including video optimization and CDNs. In fact, just today vendors thePlatform (which provides the authentication systems we just discussed) and Elemental Technologies (which has solutions for distributing over-the-top content to smartphones and tablets) announced a partnership and deal with Comcast to deliver multi-screen over-the-top video.

In moves like these and others, the building blocks of an “access-driven” view of digital content distribution start to come together. And it opens up even more roles for telcos to play: services aggregator, multi-service biller, network quality-enabler, advertising insertion engine – all driven by a view that content is something to be accessed and not necessarily owned. It’s essentially the same vision that is driving the “cloud” industry, which is really just another name for enabling online access to content and services.

Let’s be clear. Apple -- with its ownership-centric view of content distribution – is hardly hurting. The company continues to turn almost everything it touches to gold. And if Apple has been slow to “creatively disrupt” its own winning business model, there is growing evidence that it is at least considering it. Spotify may at last lead Apple to delve into music streaming (or risk being routed-around itself), while Apple’s iCloud business is built around ideas of synch and access (CP: With iCloud, Apple changes definition of ‘cloud’ to fit own needs). Meanwhile, in recent days, Apple has been rumored to be considering making its first big plunge into the “accessing content” business, mulling a bid for over-the-top streaming video provider Hulu.

So Apple may ultimately find its way into the content “access” business. And it may come to dominate that business just like it has the download-and-own model as it does today.

But it may also find itself meeting up with a competitor in the telecom industry with decades of experience in the access business and a much firmer feel for how to compete on this new playing field.

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© 2014 Penton Media Inc.

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