Top 3 "Next-gen" Telecom Subscription Monetisation Opportunities

Navigating the inflection point

As the world recovers from the pandemic, a song keeps playing in my head. It's Michael Bublé's – It's a new dawn, It's a new day, It's a new life, For me, And I'm feeling good. The world has never been more connected: connectivity that has facilitated real-time collaborations across timezones, and equipped humanity with the unprecedented advantage of fighting the virus as one. And today, as we gradually return to a more hybrid-model of work, learning and life – we appreciate the value of the subscription economy much more than ever before, and wonder how it survived and thrived during this difficult period?

Taking a simple example of streaming online media – with the ‘stay at home’ order in place, according to Nielsen, the total streaming time grew to 156.1B minutes per day in the US (between March 9-16), compared to 127.6B minutes during the last week of February. In March, streaming accounted for 23% of consumer TV viewing time, up from 21% in February and 14% a year ago.

Zuora recently released a subscription impact report for COVID-19 that showed 22.5% of companies were seeing their subscription growth rate accelerate in March this year, compared to the previous 12 months. In addition, its Subscription Economy Index (SEI), found last fall that subscription revenue grew by more than 350% through the past 7.5years. This goes to show how the subscription model’s flywheel effect has gained momentum during the pandemic.

This presents a big opportunity for innovative telecom operators to capitalise the current crisis by offering new digital services that customers are happier subscribing to – with the outcomes they want, when they want them, rather than purchasing a product with the burden of ownership.

Telecom exceptionalism is dead

The traditional telecom model of “consumer, phone, network service, and customer service” was like driving a product economy. Comparatively, today’s telecom model is in line with IoT, where data is the new oil and can deliver immense value to a customer, whether a business or an individual. With process automation, data could move to and from any number of endpoints and can be used to experiment and enhance digital service offerings for the subscription economy. 

These new innovative “Next-gen Telecoms” are building greenfield mobile networks with a broad portfolio of services. Some of these are – 

• Rakuten in Japan, that entered the MVNO market in 2014 and now operates more than 70 businesses spanning a broad range of online and offline services, from ecommerce to professional sports. By linking these diverse services through a common membership and loyalty program, the company has created a unique and robust ecosystem of partners. In the first quarter of 2020, Rakuten members spent $58B on Rakuten products and services, a 32.7% year-on-year increase. 
• And Reliance Jio in India, that was launched as a mobile operator in 2016, has since become the country’s largest operator with 387M customers and a 36% market share. At the end of last month, Jio raised over $15B from 11 investors through selling stakes in Jio Platforms including a partnership with Facebook, which invested $5.7B. 

So, the essential question is how do these operators innovate and capitalise the subscription economy? To find out, let us briefly look at the technical aspects and then assess the business strategy and market opportunities.

From a technical standpoint – the implementation of cloud native architectures and principles, underpinned by strategies of network disaggregation and extensive use of open APIs and open network topologies, result in telecom operators having the ability to offer a wide variety of innovative digital subscription services. Operators can quickly adjust these services to new demand while providing a compelling customer experience. Also, the use of 5G Edge architectures provide a virtualised and decoupled RAN with standardised, open hardware and software frameworks, an optimal mix of edge and centralised data centre resources, and pervasive automation with zero-touch control. Lastly, implementing a cloud native BSS layer provides flexibility with its modular nature and adaptability, partner-centric B2B2x business models, intelligent customer journeys and marketing automation.

Assessing the business opportunity – the 3X3 "Next-gen" Telecom subscription business model in Exhibit-1, presents two dimensions: first – digital services; and second – key strategy elements ensuring market capture, customer retention and financial growth.

<Exhibit-1: 3X3 "Next-gen" Telecom subscription business model>

In this article, I will discuss the three digital services and their subscription economy use cases. The business strategy elements shall be covered in my next article on AI in Marketing – so watch this space on LinkedIn Pulse.

Telecoms as IoT service providers

Today, IoT services are the fastest growing sector in the telecom domain. IoT subscription businesses achieved the highest annual growth rate of Average Revenue Per Account (ARPA) at 14.3%, more than 2x the SEI average of 6.5%. 

Last month, Deutsche Telekom launched the world’s first open platform for IoT – and with this hub, different IoT ecosystems can now play together seamlessly. This revolutionary approach allows data and applications, from different IoT sensor devices, to be easily delivered where they are needed using an integrated dashboard or directly into the systems and user interfaces. The illustration in Exhibit-2, lists additional examples where telecom operators are offering IoT services in partnership with leading technology players across six different industry units. In five years from now, the IoT subscription market is estimated to reach close to $90B in revenue.

<Exhibit-2: IoT subscription market opportunity for telecom operators by 2025>

The growth in IoT raises several questions including – what are some of the high-value technology opportunities for the IoT telecom subscription service market, which technology will grow at a faster pace and why, what are the business risks and threats to these technologies, which technologies have the potential of disrupting the local and global markets, and what are strategic growth opportunities in this IoT telecom service technology space? You will find answers to some of these questions in my previous article, where I present the AI-driven IoT Application Ecosystem and discuss some of the associated technical architecture aspects. For an exhaustive description of IoT service clusters and use cases, drivers and roadblocks, customer benefits, role in the ecosystem and net addressable market, go-to-market challenges, monetisation models, technology enablers and cash flow profiles – you can reach out to me.

Telecoms as OTT service providers

Research And Markets reports, that the Over-the-Top (OTT) services market for subscription video-on-demand (SVoD), online gaming, music streaming, and communication, is expected to grow from $81.6B in 2019 to over $156.9B by 2024, at a CAGR of 14.0%. This aggregation of content is also apparent in the proliferation of the gaming industry, with sports streaming services predicted to drive advertising and sponsorship growth beyond $500M by 2023, while media rights in the sector are expected to climb above $400M. 

In today’s pandemic-stricken world, mobile-connected devices with advanced capabilities are fundamentally the biggest catalysts for the growth of the global OTT services market with regards to streaming content. Exhibit-3 illustrates the rapid growth of weekly time spent watching videos per week across different channels – and how SVoD services are slowly eclipsing the traditional video services.

<Exhibit-3: The rapid growth of OTT SVoD>.

The role of ‘Telecom as OTT service providers’ competing with established players such as Netflix, Amazon Prime, Hulu, Google and HBO – presents operators with an opportunity to capitalise OTT service subscription sales including fees associated with memberships and access to content, audiobooks, digital videos, eBooks, and digital music.

Telecom operators leading the race in the OTT subscription economy are:

• AT&T's Warner Media launched its brand-new SVoD streaming service ‘HBO Max’ on May 27, 2020. HBO Max is the newest entry in the world of OTT players, and it aims to quickly cement its place in the populous race
• Rakuten launched the Rakuten Sports OTT service in June last year 
• Turkcell launched Fizy for music incl. video streaming and TV+ for SVoD
• Reliance Jio launched JioTV and JioCinema along with JioFiber that supports several OTT apps including SunNXT, ZEE5, Disney+ Hotstar, SonyLIV, Voot, ALTBalaji and Amazon Prime.

The growth in OTT may raise questions pertaining to your business and market, such as – what are the opportunities in the OTT subscription market for your business, what does your OTT competitive landscape look like, what are the data regulations that will impact your OTT business, what are the primary growth factors and present day dynamics for your market. For an exhaustive description of OTT service sets and business and market specific insights – you can reach out to me.

Telecoms as Data Broker service providers

Today, accurate and timely data is forming the backbone of many business units – from customer behaviour analytics to better market offerings, to sales and performance forecasts, and procurement and supply chain optimisation. Gartner reports, that by 2022, 35% of large organizations will be either sellers or buyers of data via formal online data marketplaces, up from 25% this year. As illustrated in Exhibit-4, Statista reports that the daily digital data interactions per connected persons worldwide will multiply 16x from 2010 to 2025. In 2025, nearly 20% of all data created will come from the interaction between people and devices – including mobile phones, tables, wearables, personal assistants; and amount of device data will be 75% of computer created data. This data will be carried through on telecom operator networks.

<Exhibit-4: Daily digital data interactions per connected persons worldwide>

These statistics make data marketplaces and the role of ‘Telecom as Data Broker service provider’ a very interesting addition to the subscription economy. As an example, in the case of intelligent marketing for businesses – consumer preference and interest data can be sold to personalise and target ads and also measure campaign effectiveness.

Some telecom operators have started taking initial steps towards this trend:

• Telefonica launched a new division to sell aggregated information to retailers with insights of their customers
• Vivo Brazil installed a solution that analyse users’ data and offers them products that match their needs
• T-Mobile stores and analyses 17B events/day to understand network performance and optimise CapEx
• Orange has worked with highway operator Autoroutes du Sud de la France to forecast traffic using location data

Here are three related topics for you to read – 

• 5G “Sliced-Edge” Architecture: Enabling 8 business service lines
• Unlocking 5 Deep Learning AI apps with Quantum Computing
• Delivering AI-driven innovations in a post COVID-19 business boom

Conclusion

Even before the pandemic, consumers were demanding more value from their traditional telecom operators. It is now time for those operators to take advantage of this booming subscription economy and develop new scalable digital services offering smart and connected experiences to the consumers. It is true, that while a subscription strategy has several advantages – it also entails specific challenges. The strongest telecoms are those that have the highest digital IQ – but as the on-demand economy gathers steam, with consumers expecting all sorts of products and services to be a click away, there is little forgiveness for service flaws. 

What did you find most interesting in this article? Would you like to learn more about a specific example shared on next-gen telecoms? Do you agree with the three digital services use cases presented above? Please leave your comments and questions below, and feel free to share this post if you found it interesting and valuable.

Also, if you would like the citations for this content, then reach out.

– Ashish Kar

Author is a Chief Architect @PCCW Solutions, with 24+ years in the ICT industry and an innovation gameplanning coach. He has built a Silicon Valley innovation lab and designed a Digital Subscription Monetisation platform and several AI-driven solutions for telecom and retail organisations. He can be reached on email at [email protected].