Visionmobile: telecom operator innovation Toolkit (6) Chapter 4: Asymmetric business model

Chapter 4 asymmetric business model

As Ott manufacturers put more and more pressure on traditional profit centers of telecom operators, it is easy to regard the two as direct competitors. However, they do not compete in profits, but in value chain control.

Mobile Internet has become part of the digital service and content ecosystem. In this case, mobile operators, Internet providers, mobile phone manufacturers, software vendors, and content providers are all part of the same value network.

As Ott manufacturers put more and more pressure on traditional profit centers of telecom operators, it is easy to regard the two as direct competitors. However, Ott does not compete with operators for business revenue, but compete for the key control links of the digital value chain through business models that span consumer electronic products, online advertisements, software licenses, and e-commerce. Therefore, competition is asymmetric. Unlike carriers, Ott does not provide mobile internet services. In its business model, connection is as important as gasoline for automobiles. However, this is not provided by carriers rather than Ott manufacturers. This asymmetry makes it difficult for operators to protect the profits of some old business models.

In terms of economy, ISP connections supplement Ott services. Supplementary products are consumed together with other products (see chapter 1 ). When the supplemental price drops, the product demand increases. For example, gasoline is a supplement to cars. Cheaper gasoline means that people are driving more cars, and automakers see their business grow.

Likewise, Ott vendors are interested in promoting the commercialization of carrier connection services. Affordable mobile bandwidth means more smartphones are sold, more advertisements are seen, more software is sold, and more e-commerce websites are visited.

Although there is a symbiotic relationship between the operator and Ott at the connection service layer, there is a natural asymmetry between the operator and Ott at the service layer. As the connection fee is paid by users, Ott vendors are flexible in their business models. Ott vendors can charge, download, analyze, or purchase ads, and therefore the service can be free (such as viber) or near free (such as WhatsApp ), even cheaper than free (Google shares app revenues with carriers ).

The vertically integrated "all functions in one" telecom business model binds connection and service costs, making it impossible for operators to compete with Ott alternatives that are free or cheaper than free. The core voice and SMS services of telecom operators are suffering "indirect harm", rather than the result of direct competition.

Due to the asymmetry between operators and Ott business models, operators should avoid investing in services directly competing with Ott. Ott does not regard operators as competitors, but as a supplement to their services.

What's more, measuring the operator's digital business is not a direct profit, but whether it can help or protect Telecom's core business by increasing usage, locking users and promoting users' purchases. Similarly, the success of Kindle is not measured by how many devices are sold, but by Amazon's content revenue and data traffic to access its e-commerce business.

Instead of copying Ott, carriers should use their unique advantages to create user values that Ott vendors cannot compete with, such as localization, target users, privacy control, or MVNO (mobile virtual operator) service customization.

When evaluating innovation investment, operators need to ask the following key questions::

• How does an asymmetric business model affect your project? Does the project promote core business of telecom operators, or try to compete directly with Ott manufacturers?

• Does the project contain unique values that Ott vendors cannot provide (such as localization, target users, privacy control, or mobile virtual carrier service customization )?

• What is a supplement to core business of telecom operators (such as user Identity Management APIs)? If it is provided free of charge, it will promote core business of operators, attract developers, and weaken Ott manufacturers?

 

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