LinkNYC is rolling out free municipal 1Gbit/s WiFi in New York City. It will make its money from the advertising space on WiFi kiosks that are replacing the phone booths in New York. Google is deploying a low-cost WiFi-first MVNO in the US. Microsoft has said it plans to do the same, while Facebook could also follow suit. With data fast becoming a commodity, telcos could soon find their core business undermined and eroded by competitors they did not see coming.
Over the last couple of years, many telcos have started to evaluate what that business is. Are they selling a limited set of communications services? Or are they selling a wider range of digital services?
Last September/October, I ran a survey of more than 100 telcos on their plans for digital transformation. Pretty much everyone agreed that the move to digital is needed for survival and growth, and that to make this move telcos will have to sell more personalized offers. There was also a consensus that when it comes to interacting with customers telcos could learn a number of lessons from the over-the-top (OTT) players. On the one hand, they need to embrace the OTT companies, which are a good driver of data traffic and can provide content that will differentiate a telco's offerings. At the same time, telcos are learning to sleep with one eye open, as the OTT players also represent their biggest competitive threat. The telcos get this. They know they've got to change.
Nowhere is this change needed more than in the back office and BSS (business support systems). This is not just a case of upgrading a billing system to enable charging and billing for different bundles that the telco wants to introduce. What's needed is a sea-change in terms of how telcos view BSS. If it's seen as an IT function whose job is to collect usage records, allocate those to a customer, rate them and then bill for them, there may be trouble ahead. This is the same way telcos have been running mobile billing systems for the last 30 years and will not work in the highly competitive digital world.
Telcos need to be winning not just a customer's communications spend but also as large a percentage as possible of their digital spend. To do this, BSS technology needs to be seen as a strategic resource that drives marketing, customer service and network activities. If it is not, and telcos embark on a journey of digital transformation, they may suddenly find they cannot get their new digital products to market quickly enough. Nor will they be able to monetize those products, because the billing system won't be able to quickly spin up new offerings and features, including sponsored data, content partner revenue sharing and personalized context-aware offer management.
On the plus side, telcos understand they need to change their BSS. This is why some are opting for large-scale billing transformation projects. But these are neither quick nor inexpensive. I have heard of one operator whose billing transformation project is expected to last five years. That's great news for the vendor, but it could see the customer writing its own obituary after handing over a very large cheque for billing transformation. The migration from one large billing system to another will slow down the rollout of many new products as telcos wrestle with more tools for packaging, launching and monetizing their offerings. By the time the new system is ready, a telco may have seen OTT players lure a big chunk of its customer base to low-cost or free data-connectivity services. Quite simply, the market is moving too fast for telcos to even consider large, expensive and lengthy billing transformation projects.
It's a bit of Catch 22 situation. Telcos have to upgrade their BSS, but they simply don't have the luxury of time for a large-scale effort.
One option some are considering is the use of of adjunct systems to "fast track" BSS transformation. This involves keeping legacy systems and running them until the end of their natural life. Existing billing systems, for example, work well for postpaid customers for circuit-switched voice traffic, as do intelligent network-based charging systems for pre-paid. A telco could continue to use these as intended while adding a real-time charging system in the middle for all new data traffic and usage of digital services. This would gather details of data usage in real time and pass a record to the billing system. That way, the customer benefits from real-time data charging, alerts and control. Data can also be used to support other new functions -- such as real-time analytics and contextual offer management. Moreover, as voice traffic moves to IMS, and more traffic goes through the real-time charging system, reliance on the billing system falls over time. There is a gradual, market-led migration from billing to real-time charging.
One potential drawback here is that a telco will actually increase the number of systems in its BSS stack. Yet the alternative does not look viable. The mobile industry is littered with stories of large-scale billing transformation projects that failed after several years, by which time the CIO who made the original decision has been replaced twice. The industry is moving at too fast a pace for large-scale billing transformation to work.
LinkNYC won the franchise for "phone booths" in New York in 2014. Less than two years later, it's rolling out a network of advertiser-funded, free 1Gbit/s WiFi kiosks. That's the pace of change that telcos need to compete with. Are their BSS technologies up to it?
— Martin Morgan, VP Marketing, Openet