In my most recent post I hinted at identifying leading indicators of a different business model surfacing in the telecom / carrier industry, one that I think will transform our industry. At Mojo Lingo, our assessment and understanding of this new model continues to unfold and develop. As with all new ideas and changes, exchanges between involved participants from different parts of the business value chain is crucial to the successful development of those ideas. Please share your thoughts with us after reading this post. We look forward to your participation in the transformation!
ITSPs, MVNOs, purveyors of per-minute communications take note: I’m talking to you. When I use the word “carrier” below, I’m referring to any provider of measured service products such as minutes, messages or megabytes. While I would love for AT&T, Verizon, Vodafone, or Telefónica to come to me tomorrow and ask how to apply these opportunities, that seems unlikely to happen. The real opportunity in this paradigm-shifting business model is for industry disrupters: for Business VoIP service providers, Cloud PBX and Cloud Call-center operators, SIP trunkers and Mobile Virtual Network Operators. When I talk about the opportunities below, I’m talking to you.
The Common Problems
As explained by Ericsson, carriers are faltering for perhaps the first time in their histories (being a victim of success or a monopoly not withstanding). The issues behind this decline can be explained in two fundamental ways:
- Decreasing per-minute, per-message, and per-megabyte revenues (with the per-unit cost quickly approaching zero), as a result of intense competition
- Non-existent customer loyalty from an un-differentiated market – consumers feel no relevance between their service provider and their daily lives
The MVNO’s Problem
MVNOs are like natural gas marketers. For logistical and pragmatic reasons, only one company is allowed to maintain the physical infrastructure needed to deliver natural gas. Here in Atlanta (where Mojo Lingo is based), we have a government-regulated utility, Atlanta Gas Light. In an attempt to keep the market competitive, AGL sells its service wholesale to private companies, who in turn market it to customers. The product these private companies deliver is exactly the same. While there may be differences in their marketing/sales pitches, the only real way for these companies to compete is on price, and doing so inspires little to no loyalty from customers.
MVNOs are in a similar situation: the services they offer are no different from what can be obtained from incumbent carriers such as AT&T, Verizon and Sprint. Even worse, unlike the natural gas marketers, MVNOs are forced to compete directly against their host companies who run the physical infrastructure. It’s no wonder that MVNOs in the U.S. struggle to be profitable, much less survive at all. Those that show signs of success tend to be bought by their host network, as was the case when Sprint acquired Virgin Mobile. Most aren’t that lucky; historically, many MVNOs, such as ESPN Mobile, are overwhelmed by the staggering marketing costs associated with acquiring subscribers, and fail to hit the critical mass needed to stay afloat.
The ITSP’s and Cloud PBX Provider’s Problem
A few years ago it was good business to be selling simple Voice over IP connectivity, usually in the form of SIP trunks. This was considered hugely disruptive because the only real competition was the old, expensive PSTN. At first, life was great: a low cost of entry, good margins, and a rapidly growing customer base. But this gold rush did not last long: very quickly the per-minute cost of VoIP began to be pushed down. What was once a fat 10 cents per minute became 5, then 2, then 1. These days anyone can get U.S. termination for less than a cent per minute with no minimum commitment. Once you get down to fractions of a cent per minute, there’s really nowhere else to go.
Many companies noticed this trend and shifted their business model. Rather than sell per-minute, they began to sell a more complete system, an entire PBX in the Cloud. The focus shifted from low incremental revenue to the value of what was being delivered: the ability to communicate with your team and with your customers. While the client list may include dentists, real-estate agents, stockbrokers, farmers markets, work-from-home moms, hairdressers and retail shops, these companies were still creating a generic product for a broad market. When these customers shop for phone service, they wade into a sea of options, with little reason to choose one provider over another. Each customer sees the same exact value being created by each option: the ability to communicate in real-time with voice. The value of this singular service is relatively small in the minds of customers. Service providers will continue to face competition on all fronts, especially the option of using cell phones or something like Google Voice.
Take the example of a friend of mine who is a realtor: When the real estate market crashed, she faced an urgent need to cut costs drastically. One of the first things to go was her subscription to her cloud-based PBX. It simply wasn’t delivering meaningful value to her primary mission: to sell homes. In her case, phone service exists only to facilitate communication with customers in furtherance of a sale. Her cell phone (with some help from Google Voice) basically did everything her cloud PBX did, but for a lot less.
The Opportunity: Real-time Communications Applications
It’s not all bad news for carriers. A tremendous opportunity remains: powerful, industry-specific, real-time communications applications. When consumers purchase a subscription for service, whether landline or mobile, the fundamental thing they are signing up for is the ability to communicate, anytime, anywhere. While some have proclaimed the death of voice, the channel isn’t the point. The main reason voice is “dying” is because carriers have done essentially nothing to improve the experience of communicating via voice. The desire to use voice is not dwindling, though clearly it is changing fundamentally. Let me offer examples of three ways to improve the experience of communicating via voice:
- Embed voice channels into other apps. In part, this is the promise of WebRTC. Imagine being able to visit the website of a boutique and, when a question comes up, immediately ask your question to a live human via voice. Take it a step further: Imagine that person taking that call being able to access contextual information about your incoming call, including the portions of the website you visited immediately before calling. Even further: Record that call and assign a score to the person taking the call, by measuring the stress of the your voice over the course of the call. Then post the score into a virtual dashboard so that agents can compete. The end result? More satisfied callers.
Insert contextual information into existing calls. On one too many occasions, I’ve been on a conference call that’s run long. If I’m at my desk I can get a reminder that my next call is about to begin. But if I’m mobile and on the phone, I might not get that reminder. What if I could get a “whisper” informing me that my next appointment is about to begin? What if I could then press a button and send a message to my upcoming appointment that I will be late? Or, if I won’t be late, press a button (no numbers to dial or PINs to enter) that connects me to my next call.
Make the act of placing and receiving calls irreplaceably useful. How many blog posts, magazine articles, tweets and pundit speculations have we seen about the next “Skype killer?” What made Skype so powerful? Dead easy, high quality, integrated voice calling. Even more compelling is the success Skype has had due to its ability to share information in its most appropriate form. When sharing websites via Skype, either party can send a clickable URL to the other person—or share a picture and discuss it. With the simple click of a button, they can add any number of additional parties to the call. That’s all great, but these integrations could go further. They could venture into domain- or business-specific applications.
I believe that if we improve the experience of voice communication, then consumers will find voice more valuable, and thus increase their use of this facility. To a carrier, the actual channel of communicating is not necessarily relevant: carriers can, and already do, provide the service of real-time communications. How then to increase their relevancy, and therefore value, to subscribers? Ultimately: how do they escape the death-spiral of per-minute billing?
The Answer: Move Up the Value Chain
By directly offering enhanced services around the act of communicating, communication would no longer be a one-size-fits-all service. Many industries will benefit from the creation of custom communication tools, tools that are purpose-built to improve their specific customer service workflow, their marketing analytics, and their sales efficiency. The carrier, as provider of communication services, is poised either to create these services directly or enable third-party developers to create services that can be offered directly by the carrier to its subscribers.
In this post, I have stayed largely in the realm of theory. In upcoming articles, I will share ideas that we at Mojo Lingo are formulating. Ideas that use the rich palette of real-time communication options to create targeted service offerings, business plans, and market strategies.