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The partnership imperative

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The choices facing operators are becoming simpler. This is not to say they are becoming easier. We now accept that ‘OTT’ players – or Digital Service Providers (DSPs) – are both friend and foe.
The partnership imperative

In some arenas, the greater agility of DSPs will take revenue from operators. In some, allying with them will reduce churn and increase customer loyalty. At the moment, partnership revenue models are still being explored, but some are already proven. If operators choose to attract, support and keep consumers then they must partner or focus on a network centric wholesale model.

In order to embrace partnerships, operators must realise that the days of high margin, ‘bill after the event’ business are over. Instead the model must be low margin, high volume – and, on the face of it, high risk. And real time.

Carrier billing is one new business model that is already proven. By partnering with specialised platform vendors and DSPs such as Google, operators can provide ‘one click’ in-app purchases to their customer base. The list of operators launching this service is growing almost daily and proving successful. It is also proving compelling for DSPs, as conversion rates increase by a factor of ten, and revenues increase by similar rates. At the moment the model works for purchases such as buying extra lives or bullets within games but as the idea of using a phone account as a payment method becomes familiar, the potential may be far greater than we currently believe.

The second partnership opportunity is with a whole range of DSPs. Even WhatsApp, widely seen as the archetypal competitor to operators’ SMS revenues is a useful partner. By offering free WhatsApp to prepaid customers (even if they have no credit left) operators become attractive to a very specific segment of the market. Music providers are also proving compelling partners. Now the majority of music is streamed over mobile networks and the music industry is seeing a resurgence. In turn, customers see operators in a different and attractive light when music is bundled with an offering. Setting aside the debate as to what service operators are able to offer, with net neutrality laws becoming a reality, all manner of DSPs as partners make more compelling offerings for operators. Where and how the revenues flow from partnerships is still becoming clear. What is already clear is that not partnering is not an option.

Probably the largest opportunity but the least clear model is the Internet of Things (IoT).  The IoT is clearly a huge – according to Cisco a $19 trillion – opportunity. What can be connected will be connected. The IoT will be a slice through every industry on earth. Operators, though, need to work out where they sit in a new eco-system, which will provide a business of the very greatest scale and possibly the very smallest margin. Whether operators are the service providers, partners or simply the connectivity providers (or all three in different arenas) will become clear in the next few years.

Partnerships make sense on many levels. They provide products for operators to sell, thus getting them past the uncertain world of supplying ‘data.’ Partnerships provide extra reach, marketing opportunities and brand value. Although it is a step into the unknown, the risk of not partnering is simply too great. But operators need to do two things to make partnerships work. The first is to implement the ability to be responsive in real time and transform the culture to embrace that change. They must think like their online partners. The second is to realise that their greatest asset is trust. And that can be leveraged to great advantage. 

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Alex Leslie
Publisher of DisruptiveViews

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