A business model for a Telecom 2.
0 start-up
Nicolay Bang, Ivar Jørstad, Tore Jønvik, Do van Thanh, Paal Engelstad, Boning Feng and Do van
Thuan, Mobicome Project members
Abstract— Started with some definitions of Telecom 2.0 and
a brief discussion of business models, this paper then asked if
there still are opportunities for start-ups in the Telecom 2.0
world. The authors proposed a user-centric approach for a
telecom start-up. The business model is centred on multiple
identity support, holistic Internet customer care, and safe
online transactions.
Since it is part of the poster session, the paper is written in
such a way to ease the making of the poster.
Index Terms—Free-for-all, Identity, Mobility, Self-service,
Subscription, Web 2.0, Privacy, Information Control.
I. INTRODUCTION
I T is time for the telecom to re-think of their business
models. In this disruptive new world, they need to find out
what’s wrong with their traditional business models and
what they have to do to fix them.
“Web 2.0” is actually a set of ideas and technologies to
restart the Web after the dotcom bust. And so Web 2.0
encapsulates several trends. One is the shift from
applications on individual computers to services on the web.
The web is becoming the platform for sharing, collaboration,
and participation for service providers and end-users alike.
With its software connotation of better and more stable
version, Web 2.0 has enormous appeal and is applied to so
many things. The telecom world adopts that convention and
names different efforts and projects to reshape the industry
“Telecom 2.0”. We will examine some definitions of
Telecom 2.0 later on.
In this time of economic downturn, will Telecom 2.0 –
whatever its meanings, allow for start-ups? And if so, which
business model should a start-up utilize? Is there a magic
formula?
Manuscript submitted July 31st, 2009.
Nicolay Bang is with Linus AS; e-mail: n.bang@linus.no.
Ivar Jørstad is with Ubisafe AS; e-mail: ivar@ubisafe.no.
Tore Jønvik is with Oslo University College; e-mail:
tore.jonvik@iu.hio.no.
Do van Thanh is with Telenor ASA and the Norwegian University of
Science and Technology; e-mail: thanh-van.do@telenor.com.
Paal Engelstad is with Telenor ASA; e-mail:
paal.engelstad@telenor.com
Boning Feng is with Oslo University College; e-mail:
boning.feng@iu.hio.no.
Do van Thuan is with Linus AS; e-mail: t.do@linus.no.
978-1-4244-4694-0/09/$25.00 ©2009 IEEE
II. TELECOM 2.0
Depending from which perspective, Telecom 2.0 has several
definitions. However, all definitions exhibit the will of
looking beyond the boundaries of organisations for ideas,
technologies and solutions.
A. Definition: Smart Cooperation
To some Telecom 2.0 = Smart Cooperation, i.e. Operators
are moving toward exposing network intelligence to third
parties –thus moving from closed network model (NetCo) to
an open platform model (WebCo). Operators will envision
their business around the services they offer and could offer,
not the infrastructure they use to provide them.
B. Definition: Network as a Service -- NaaS
Applying Web 2.0 technologies, NaaS seeks to provide
network intelligence (through for instance XML Web
Services) to web application developers, thus enabling the
symbiosis of the telecom world and the internet.
C. New business models urgently needed
Despite of its promises, Telecom 2.0 is slow to catch on
because the lack of revenue-share models (‘how the
developer makes money?’). Internet developers will keep
finding workarounds and the cheapest alternatives rather
than leveraging operators’ capabilities (for instance getting
location directly from the device instead of querying the
network).
With the convergence, there are now more than 2
stakeholders those were traditionally in the telecom world.
Historically operators have always provided pipes. Now that
the pipes are becoming bit-pipes, they should strive to offer
even greater pipes through cooperation and open innovations
rather than trying to compete in the applications arenas.
III. BUSINESS MODELS
A. Definition
A business model is a representation of what and how a
company does to make money. More specifically for the
Telecom world, it is ways of monetize services that run on
each operator’s network, including network and
infrastructure. This paper will used this simple definition to
survey successful business models in various industries from
manufacturing, telecom to the Internet.
Complete definitions of business models can be found at
[2] or [3].
 B. Free for All
“Free for All” is a class of business models that challenge
conventional wisdom about charging for goods and services.
These business models are now the foundation of entire
industries: Give away the cell phone, sell the monthly plan;
make the videogame console cheap and sell expensive
games; install fancy coffeemakers in offices at no charge and
sell expensive coffee sachets. Until recently, everything
"free" is really just a cross-subsidy — the shifting of costs
from one product to another: get one thing free if buy
another, or get a product free only if pay for a service. The
web and especially the most popular Web 2.0 sites use “Free
for All” as the cornerstone of their business models. There is
however a twist: the customer is not the consumer. With
Facebook and the like, users are the fishes caught in their
net. They sell them to the local (or not so local) restaurants.
In other words they are not Facebook or other social
networking sites customers. Advertisers are their customers.
The consumer will get everything free for being part of the
“product” to be sold to the “advertising” customer. Free
newspapers on the metro are among the first to use this
business model.
The cost of products is falling pretty fast too. In fact,
bandwidth, processing, and storage are becoming cheaper
for every day. On the web everything is heading toward the
path of gratis. For every day, the marginal cost of digital
production moves closer to nothing.
Those two trends are driving the spread of free business
models across the economy. The first is the extension of
cross-subsidy to more and more industries. Technology is
giving companies greater flexibility in how broadly they can
define their markets, allowing them more freedom to give
away products or services to one set of customers while
selling to another set. The second trend is simply that
because of the speed at which industries of all sorts are
becoming digital businesses and thus able to exploit those
economics. A classic services business formerly based on
human economics (things get more expensive) switched to
software economics (things get cheaper). Therefore, free
becomes not just an option but the inevitable destination.
C. Subscription Business Model
Traditionally, the telecom has been doing business with
addresses (lines or mobile phone no.) and the business
model is basically subscription based with various service
plans.
The old traditional models of the telecommunications
industry have been undergoing change for a long time.
Change has come due to mobile services, VoIP, and changes
in how the local loop is valued. In 1997 about 16 percent of
revenues came from mobility services. In 2007, more than
49 percent of end user revenue came from mobility services.
The new local loop owned by the cable companies has had a
huge impact on Telco business. Long distance has changed
and is now primarily a wireless business. It is time for a
telecom firm to discuss with its customers about their needs
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and not only about why the phone is not working. Therefore,
a Telecom 2.0 start-up must definitely be a Mobile Virtual
Network Operator (MVNO) in order to build up a substantial
subscriber base while having a stable and sustainable income
too. It is inevitable that there will be complementary
business models to the subscription business model that
allows for growth. When Google turned advertising into a
software application, a Telecom 2.0 should also switch to
software economics.
IV. A TELECOM 2.0 START-UP
A start-up needs an appropriate business model to extract
values from innovations. There are four factors that are
critical to every start-up:
• The people,
• The opportunity,
• The context,
• The risk and reward.
Despite some of the most unreliable mobile-network
coverage in the developed world, one in four households has
now gone mobile-only. Mobile operators store more
information on their subscribers than banks; who did they
call and when, which text messages are sent and received,
location, user profile, free minutes/texts remaining and much
more. Operators also run a valuable set of services like
billing, send SMS/MMS/email, user alerts, voicemail, IVR
services, chat, etc. All of which they have kept to themselves
and have exposed only in a few cases to other networks (e.g.
SMS roaming) or resold aggregators (e.g. premium SMS
billing, location).
But operators have not really exposed this combined
intelligence (user information + network services) to any
third party. This asset is really a dormant revenue
opportunity.
The strategy is obviously quite simple:
• Becoming a MVNO to build up a customer base:
competitive and fair prices
• Implementing FMC (Fixed/Mobile Convergence:
first converged voice services, next unified
messaging services
• Offering Identity and Internet presence: “the free for
all” component
The requirements are
• Actively cater and support third party service
development and innovation: true and sincere
openness (Open innovation)
• Willingness to share customer attributes with other
parties
Virtually everything Google does is free to consumers,
from Gmail to Picasa to GOOG-411. However, Google has
started to sell services to businesses and premium users. One
can guess that introducing elements of a subscription based
business model is a wish for stability and sustainability.
The rise of "Free for All" business model is being driven
by the underlying technologies of the Web. Just as Moore's
law dictates that a unit of processing power halves in price
every 18 months, the price of bandwidth and storage is
dropping even faster. That is, the costs of doing business
online come closer to zero.
A. Better than Free
The problem of sustainability applies to all Free-For-All
business models. How can vendors profit from giving away
products? In his essay “The Magic Cauldron” [3], Eric
Raymond likened Open Source economics to the Welsh
myth about the goddess Ceridwen who could command an
empty cauldron to produce nourishing food. How can an
empty cauldron to generate profit? Raymond discusses many
business models for doing just that. We will explore how
these ideas apply to the proposed business model in
subsequent papers.
Apple iPhone is definitely the showcase of a better
business model than “Free.” Even with Apple’s departure
from the “follow-up payments and revenue sharing”
business model and the cut of the entry-level model price in
half, the cost of acquiring an iPhone is still high, but yet
more popular than ever. Because of the decline in prices of
almost everything and the increment of wealth, it seems that
the consumers can afford high quality products, and are
keener to try new services as well. Another explanation is
that the iPhone might give them the feeling of status, of
belonging to a community of smart users.
B. Not Just Business
Gone are the days when it was enough to simply focus on
circuits and minutes, customers now need a far higher
degree of interaction and look for suppliers who will talk
business solutions with them. Also all business-customer
communications should migrate to the Internet. Not only
will Internet customer care improve the customer
experience, it is also a way to cut costs for a start-up.
C. What The Customer Wants?
A Telecom 2.0 start-up must provide FMC (Fixed/Mobile
Convergence) services. What does FMC mean for operators
and customers? The customer wants services irrespective of
the type of device and access, yet she doesn't want to switch
between different operators and neither wants to use several
devices but a single phone or data device with many
services. The services must therefore be “user centric” and
not be dependent upon the network infrastructure.
To offer FMC services, the start-up will probably enter
into Mobile Virtual Network Operator (MVNO) agreements
with wireless operators. With the right FMC architecture and
an MVNO agreement, the start-up will be in an excellent
position to capture enterprise customers with a service that
offers a number of unique benefits. Managed FMC services
improve user mobility and productivity, providing each user
with one phone, one number, one voicemail, one directory,
and one bill, as well as full, consistent features across multi-
site enterprises and between both wire-line and wireless
networks. Managed FMC services will significantly reduce
capital expenses per user and total cost of ownership.
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Outsourcing telephone services makes it easier to predict
expenses, reduces the number of networks the enterprise
needs to manage, helps control costs via least-cost routing
over IP, and supports telecommuters and travelling
employees by giving them access to enterprise telephony
features no matter where they are. Finally, FMC gives
enterprises an easy migration path to full voice over IP and
even PBX replacement.
Beside FMC attractive services, with the convergence of
the telecom world and the Internet, the start-up can create a
stronger bond with its customers by offering a wide range of
highly differentiated and 'sticky' converged branded services
that are extensible with other SIP-based applications. The
combination of fees from fixed and mobile services and
from PBX replacement can increase average revenue per
user by as much as a factor of four.
V. IDENTITY-BASED DESIGN
A. Upward Mobility
The term "cell phone" certainly doesn't do justice to the
modern polymorphous handset.
“The device formerly known as the cell phone” could now
be called the “vade mecum”, Latin for “go with me”. This is
what sailors in the Age of Discovery called their little
handbook of nautical knowledge, conversion tables,
addresses, foreign language phrases, instructions on
appeasing savages, notes, etc. that they carried with
themselves everywhere, probably about the size and shape of
a formerly-known-as-cell-phone device. This is why the
mobile phone is the centred piece of the strategy.
B. Identity 2.0
As more of our interaction with service providers take
place online, clearly establishing whom we are has become
essential. How do you prove you are a legitimate user, let
alone that you should be treated specially? We will share our
vision for how users and service providers will communicate
identity and why telecom should provide several digital
identities to customers.
The start-up will provide users with a “certified” online
identity and several “verified” pseudonymous identities with
which they can label their blogs, forum posts, and virtually
any online activity.
C. Internet presence
Today's consumers want to choose between a range of
service offerings available for a variety of different devices,
from cell phones to PCs, MP3 players, TVs, and gaming
consoles. They want to be able to buy broadband Internet
access from one company and then choose from a host of
Internet-based firms for online content and services.
The idea behind the start-up is that use of the portal is
completely free to subscribers. Anyone can set up a forum or
a blog at no cost. With provided identity and the mobile as
the security token, the portal will be the safe haven for the
customer while surfing the Internet.
 Revenue can also be generated by leveraging the content
in many ways.
D. Other Recommendations
The benefits of this business model can be summarised as
follow:
• Low threshold
• Get information and provide attributes without
revealing identity: privacy
• Improve quality of services
• Increase/improve service offerings
• Attract visitors, prospects and keeping customers
• Added values to third parties
• Improve quality of statistics due to Telco subscriber
identities
• Security, safety: safe haven vs. walled garden
The focus should always be on the core market, customers
and applications.
VI. SOME SCENARIOS
The emergence of the information society has its costs and
one of them is that increasing amounts of information about
us –citizens, consumers, are collected and shared between
agencies and corporations. Most would wish to have
complete control over their personal data; however they
want even more ways to protect their children. Most children
nowadays have had mobile phones since their first day at
school. They are texting, posting pictures on their blogs,
online and open to the whole world. In providing digital
identities and strong authentication schemes, the start-up can
raise the awareness of parents and children of the risks and
opportunities of the new Telecom 2.0 and get in return their
trust and loyalty to the business.
The start-up can also run loyalty programs for the local
business. Information and customer care schemes otherwise
reserved to the largest corporations are now available to
local shops around the corner.
Because of a massive-networked world devices need no
longer be self-contained. In fact, applications are really
distributed: they can physically run in one device, their
associated data can reside in another, and their controls can
reside in a third. The Apple iPod, with its links to iTunes and
a PC is one of the earliest examples. Other examples are a
new Kodak camera that automatically dumps its images to
the user's PC when passing a wireless hotspot; Medtronic's
latest pacemaker that sends live heart data to a website; and
a Korean appliance maker that lets owners control their
washing machine from the Internet. The mobile phone can
function as a virtual dashboard or control panel to online
services, including Internet applications and services.
Mobile operators could replicate the mobile phone's
controls on a web-based Virtual Panel that lets users manage
their contact lists, set features, manage stored messages and
photographs, purchase content, etc. The larger and more
capable browser interface would do much to clarify and to
enhance the user experience.
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The mobile phone as the Universal Virtual Panel can
control any networked device and –ultimately– to
orchestrate functionality across devices.
For example, if your car has GPS and your home air
conditioner is networked, your car should be able to adjust
the temperature when you get close to home. Likewise, if
you bought viewing rights to a movie, you should be able to
view it anywhere and on any device.
VII. CONCLUSION
Telecom operators are reaching the end of the road with
their closed end-to-end telecommunication business. They
must now enhance the user experience in an environment
where there are millions of stand-alone networked devices,
applications and services that don't easily talk to one
another. Some sort of universal identity token is needed and
the wireless operators are extremely well positioned to
provide this universal virtual Internet device with their
existing mobile handset, Web portals, and BSS/OSS assets.
It's the trying times for the incumbent Telco’s, particularly
those that don't adapt to change well. And when we think
about the legacy Telco’s and change, we realise that most of
them don't embrace change or adapt well. A start-up that
concentrates on communication services while providing its
subscribers security, complete control over their data and the
freedom of choices would have a chance in a troubled
telecom world.
ACKNOWLEDGMENT
This research was partly funded by the Norwegian
Research Council under the Eureka program.
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http://business-model-design.blogspot.com/2005/11/what-is-business-
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[4] Eric Raymond, The Magic Cauldron, 2001.
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