According to Gartner, telcos still secure more than 60% of their revenue from selling fixed and mobile voice. As this revenue is eroding significantly, telcos tend to offset the decline by offering rich applications under a retail model (B2B or B2C). But, beyond the retail revenue opportunities provided by the Huawei IMS services, telcos can furthermore expand their business and bolster their position in the value chain by opening their networks, and monetizing service enablers with new business partners. Several telcos, mostly in Western Europe and North America, have started this transformation process and now open their once sacred network infrastructure to monetize their assets. IMS provides the capabilities to help telcos tap into these innovative business models qualified as 2.0.
Defining 2.0 models for telcos
Many telcos approach the issue of third party integration based on an operator-centric model with a limited range of walled garden services, monetized through the end users' bills.
2.0 for telcos is about moving to a model where end users can choose among a wide variety of services developed by telcos and by third parties using open application programming interfaces (APIs) and open network enablers. 2.0 for telcos supports innovative business models such as advertising, revenue sharing and API or QoS access charging. These models can be seen as similar to the wholesale business except that they are not built the traditional way and telcos can choose what privileges they keep and which enablers they expose.
In other words, 2.0 models are about redefining the Telco' s position in the value chain, leveraging key assets such as service enablers, extensive user data and regular billing relationship with end users.
Monetizing service enablers
Telcos will no longer be able to invest in network capacity while getting little or no return on investment. To generate that return, they can leverage their enhanced network capabilities. They indeed own their networks and their IT systems as unique assets. Exposing service enablers such as QoS, authentication, billing, communication and content platforms is a way for them to generate new revenue from new business partners. And IMS makes that exposure easier.
As an example, when regulations allow it, end to end quality of service managed by core functional blocks such as Policy and Charging Rules Function (PCRF) for mobile networks and Resource and Admission Control Subsystem (RACS) for fixed networks can be monetized with third party over-the-top (OTT) players that require a minimum bandwidth to properly deliver their services (e.g. cloud based enterprise services or video streaming applications). Telcos that do not have to follow any net neutrality regulations can easily implement this type of business model (net neutrality being for the moment only a US centric concept).
Telco' s authentication, billing and customer care platforms are uniquely trusted and can also be exposed for third party services. For instance, in developing countries, mobile authentication provides enough security to support small financial transactions transforming telcos into potential bankers. Huawei IMS, through its unified subscriber center (USC) database, offers several open authentication methods to third parties. These include an identity management (IDM) front end using SOAP or XML interface for a standard secured authentication (username and password) and an eGUP interface for database federation (exporting authentication information to third parties systems). For transactions such as banking, which require high security, an encrypted SIM-based strong authentication is also embedded as part of the HLR functions embedded into the USC.
Billing and customer care for third parties have already been widely used for voice-based value added services (900 numbers in the US, audio text services elsewhere), but can now, thanks to IMS, be expanded for multimedia services such as video on demand (VoD) and interactive services. For instance, voting or gaming can bring significant revenue opportunities when provided by third parties and directly available on TV. If end users can vote for the latest "Miss Universe" on TV, directly using the remote control of their TV type and without having to type laborious overcharged SMS, the vote rate will be significantly higher.
Furthermore, most of the IMS based application servers also provide APIs for third parties to develop rich applications using communication and multimedia enablers. Click to dial, messaging (e.g. SMS) in the communication field, IPTV features such as content discovery, content management and content delivery in the multimedia field, are examples of enablers that can be exposed to third parties to facilitate innovation and generate revenue for telcos. To make this happen and to help telcos open their services to third parties, IMS natively provides open northbound interfaces to expose these enablers.
In a few words, IMS is an open standard that allows telcos to open their networks, expose service enablers, and generate new wholesale B2B2C revenue.
Monetizing user data and launching application stores
In the IMS architecture, the convergent user data, stored in the USC, gathers all the information about end users in a consolidated database. Information about fixed, broadband and mobile user behaviors is automatically uploaded from the network and stored in the database. This information enables telcos to highly profile their end users and to create broad monetization opportunities. For instance, by cross-referencing VoD purchase habits with mobile location, it becomes easy for telcos and advertisers to push the right content at the right moment on the mobile screen, increasing the promotional impact and thus the revenue. Profiting from this rich data is made possible thanks to the eGUP interface on the USC used to facilitate automatic requests to the database. Several telcos have successfully launched a dedicated advertising business unit such as Orange in Europe.
Regarding applications, it is commonly accepted that mainstream and core services such as voice and IPTV will be delivered by dedicated application servers available in the Huawei IMS portfolio. But the mid-term needs of end users are becoming more segmented and unpredictable, so a flexible solution to easily develop and launch services is required. The Huawei service delivery platform (SDP) is the answer to this need; it offers a comprehensive toolbox that can be used by telcos or by third parties to create and run applications in a very flexible way, to interface them with the IMS core and the BSS/OSS systems and to expose those applications to the end users. In other words, the SDP is the technical answer to build an application store and to service the long tail needs coming from the end users with more and more diversified and profitable services coming from telcos or from third parties. In this model, the SDP is valued as a service execution environment together capabilities of the telcos: Telcos bill the end user and reverse part of the revenue (generally 70%) to the application owner. The 30% commission represents the value of the enablers used to deliver an end to end service to the end user.
One API to foster the 2.0 models
By opening their networks and tapping into the 2.0 models, telcos will supplement revenue from providing network access to customers with a mix of new wholesale and retail income coming from services and enablers. Based on analyst studies, this could lead to a significant increase in revenue over the next 5 years, able to offset the declining revenue from voice. IMS through its native open interfaces, and IMS + SDP as a flexible tool for service development, allow telcos to quickly grab new market opportunities with advertisers and other new business partners. The question remains, however, of how telcos can attract developers to create innovative applications. Some telcos have launched their own programs such as the Orange Partner and AT&T Developer Programs. At the same time, industry initiatives such as One API aim at homogenizing interfaces so that developers can easily access a large market and help telcos to make the 2.0 models become a mainstream commercial reality for them.