New Business Models and Revenue Models in Telecommunication Market
Introduction
“Telecommunication came from the Greek which means ‘communication at distance’ through signals of varied nature coming from a transmitter to a receiver.”
Indeed, telecommunications brought a great breakthrough through out the modern ages. This has been proven when it took innovations on the past recent years as part of its unfolding developments.
· In 1920, valve amplifiers made their first appearance; · In 1923, the television was invented
· In 1947, the invention of transistors gave birth to the field of electronics · In 1958, the first integrated circuit was built
· In 1969, the first microprocessor was invented
· In 1985, Guglielmo Marconi invented the ‘wireless telegraph’
According to studies, the invention of microprocessors led to the birth of ‘Internet’ of which importance has been constantly growing. This is due to the high flexibility given by the TCP/IP suite and the ISO/OSI protocols which provide a strong foundation on which communication among devices of different kind has finally been made simple and easy to achieve. Thus giving a wide opportunity of adapting today’s new business models for telecommunication industry.
Throughout the process of telecommunication innovation, a lot of business models were introduced. Since there is a need for innovation, the adoption of new business models has been voiced by many.
In the statement of some telecommunication professionals on the article ‘New Business Models, Yes but Revenue Model as an Afterthought can be hard work’, they have defined that “a business model describes the rationale of how an organization creates, delivers, and captures value-economic, social or other forms of value. Thus, the term business model is used for a broad range of informal and formal descriptions to
represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.”
Basically, business models merely define the strategies being imposed by certain telecommunication operators to modify growth of revenues. Upon implementing such business models, telecommunication operators must examine thoroughly these business transformations in concerning the status of revenue. But then, due to the
unfolding innovations, telecommunication companies must consider new business models to promote various services that are easy and idealistic to meet the needs of the consumers.
To identify what are these new business models, let us take the study done by Alcatel-Lucent written by Dr. Eshwar Pittampalli - Managing Director of Alcatel-Lucent, Murray Hill, NJ, USA; Marcio Nespatti - Senior Manager of Alcatel-Lucent, Murray Hill, NJ, USA; and Valerie Faudon - Vice President Marketing Programs of Alcatel-Lucent, Paris, France.
Their article ‘Business Transformation: Advanced Business Model for Converged Communication’ states that today’s business models extract value from intangible assets which generally focus on tangible asset-based connectivity revenues. Accordingly, service providers should thoroughly evaluate their present mode of operation to secure if it better suits the future mode of operations which will definitely support top line revenue growth.
In this case, Alcatel-Lucent suggested eight key business models of exploring new ways of reducing costs and maintains or increase revenues in the long run. These key models are the following:
· Wholesaling: It is when a network operator resells an asset to retail a service provider. The wholesaler is the ones responsible for owning and operating the access network and eventually offers connectivity to service providers.
· Outsourcing: It is the process of transferring the management of resources and day-to-day business functions to external supplier.
· Asset-sharing: It usually triggered when two or more services providers that individually own and operate networks share overlapping tangible assets. Upon having this model, it includes the ability for service providers to realize significant cost-efficiencies.
· Control Aggregation and Brokering: This kind of model merely involves the coordination of commercial agreement and technologies which supports the availability and legal distribution of user-generated content (UGC) and premium. It generates revenues when either individual directly purchase content or sign up
for subscriptions to premium content. Bottle neck of this model is the ability to manage the distribution while ensuring the integrity of content complying with the copyrights of authors and editors.
· Targeted Advertising: This type of business model refers on the connection interaction between individuals with the brands and people they want through multiple screens like mobile, computer, TV, and etc. In order to provide the right message to the right person at the right place and time, this model must be optimized.
· UGC and Communities: This model allows any user to generate and distribute multimedia content through calling for the development and deployment of platforms, tools and applications which can be developed by individuals or in a collaborative environment by multiple users.
· Fulfillment: This type of model is triggered when service providers leverage their established billing relationship with the end users to complete transactions and deliver services on behalf of third parties.
· E-Commerce and m-Commerce: It allow extending service provider network resources to support the buying and selling of products or services over electronic systems and mobile networks. M-Commerce simply allow consumers to pay goods and services with their mobile phone, thus turning their mobile device into “virtual credit card”.
But then, each of these introduced innovative business models may either reduce operational cost or will increase the top-line revenue.
For instance, Rick Halton - Vice President of Marketing at Hewlett Packard (HP) - spoke on defining business models during his speech on this year’s GTB Innovation Summit. He said, “Business models are about channels to market, they’re about building a lifetime digital relationship.” “For operators, it has become a marketing issue and it’s about making their ecosystems more attractive through payments and value add so people come to them”, he added.
On his point of view, he was trying to convey that today’s telecommunication service operators must embrace and adopt these business transformations to captivate the majority of the population on meeting their needs as consumers of the telecommunication industry.
Conclusion
Bottom-line of this assessment, there is a must on the implication of new business models to cope or adopt with the fast innovations happening in telecommunication industries. Just like what did Apple do to differentiate player - iPod devices - by giving people an easy way of loading music and video to their devices. Thus there is a need for telecommunication service operators to adopt with these business transformations to increase their growth of revenues.
Therefore, the effectiveness of business models can be determined on the status of current revenues.
References
Cellphones Etc., n. d., ‘A Brief History of Telecommunications’, viewed 25 June 2010, Available at: http://www.cellphones.ca/news/post003011/
Dr. Pittampalli, E., et. al., n. d., ‘Business Transformation: Advanced Business Models for Converged Communications’, Alcatel Research Group, viewed 25 June 2010,
Available at: http://www.lucent.com/enrich/v2i22008/article_c3a1.html
Global Telecoms Business, n. d., ‘Innovation is the key to new revenue generation', viewed 25 June 2010,
Available at: http://www.globaltelecomsbusiness.com/Article/2592459/Innovation-is- the-key-to-new-revenue-generation.html
TelcoProfessionals, 2010, ‘New Business Models, yes but Revenue Model as an afterthought can be hard work’, viewed 25 June 2010,
Available at: http://www.telcoprofessionals.com/Cato/blog/205/
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