Distilling market noise into market sense

VisionMobile is the leading research company in the app economy. Our Developer Economics research program tracks developer experiences across platforms, revenues, apps, tools, APIs, segments and regions, via the largest, most global developer surveys.

The key to successful telco API strategies and freeing voice from telephony

A few weeks ago in association with Ericsson we published the Telco Innovation Toolbox paper. The paper introduces ten economics and strategy frameworks that help operators to accelerate their “digital” strategies, make the right innovation investments and avoid costly mistakes. Previous posts published on our blog explained the economics of telco disruption. Today’s and the following posts focus on how telcos need to respond to remain relevant and discover growth opportunities.

Freeing voice by challenging century-old assumptions

You can download the DOWNLOAD REPORT.

Keys to successful telco API strategies

It is common for telcos to see developers and content providers as a source of direct revenues, or even push for “redistribution of profits” from OTT companies to telcos. These strategies are destined to fail because of fundamental conflicts with developers’ business models.

For example, Internet business models usually assume free or almost-free distribution: the last-mile bandwidth is paid by the user, and is free to the service provider. Attempts to ask developers pay for the wireless data will not only be faced with natural resistance, but have the potential to render the business models of many mobile and Internet companies unsustainable. Faced with such challenges, developers will quickly find alternatives, as happened with location and authentication, which were once only provided by telcos at a mass scale.

To be successful in API initiatives, telcos need to consider developers as value-added resellers, and therefore design their API propositions for win-win outcomes. In other words, the business models of telco APIs need to be aligned with the business models of developers [Tweet this].

But what is a developer? The reality is that the developer ecosystem is a complex mosaic of large and small companies, communities and individuals. VisionMobile’s developer segmentation model classifies developers into eight categories that differ according to developer motivations and commercial drivers. Some developers are after direct monetisation (e.g. ZeptoLab, the author of popular Cut the Rope game), some are after user reach (e.g. Facebook), and yet others are looking to extend their non-mobile products and services (e.g. Nike, DropBox or FedEx).

There is no such thing as an “average developer”. Telco API business models therefore need to be designed to target one or more specific developer segments. A “one size fits all” approach to telco API business models can severely limit the available market.

What is a developer

Many entrepreneurs, development companies and individual developers operate according to the principles of discovery-driven planning described in Chapter 6. Meanwhile, high barriers to experimentation result from many telco API practices, like up-front payment, extensive legal arrangements, demanding certification requirements or long-term contracts. To reduce friction and help developers discover new user needs and opportunities, telco API business models need to subsidize experimentation and be designed for the ability to fail and retry cheaply. [Tweet this]

More specifically, if developers are charged based on telco API usage, the app’s business model must have a stable, usage-based income stream. This is rarely the case. By allowing free, small-scale usage of the API, telcos permit developers to experiment with multiple business models, including free, until a sustainable, workable business model can be found.

Developers should be offered assistance to scale and deepen their business, by using the correct “business model polarity”, as shown below. Instead of charging developers upfront and creating unnecessary friction to experimentation and API adoption, telcos need to align the business model of the API with those of developers. For example, Facebook and LinkedIn are both social networks. The two, however, are driven by rather different business models. The alignment of API business model with Facebook will mean helping Facebook drive user acquisition and user engagement. The alignment of API business model with LinkedIn will mean helping users make valuable business connections.

Business model polarity for developers

Most developers face fierce competition in the platform app stores, and are in dire need of differentiation and competitive advantage. Telcos can attract developers by affording them access to local audiences, through innovation realized by telco APIs in their three business layers: access, services and distribution.

Key questions telcos need to ask when evaluating innovation investments

  • Which developer segments are you targeting with your API strategy?
  • Are the business models of your telco APIs aligned with the target developer segments? I.e. how the target developer segments build a sustainable business.
  • How are you exposing telco assets such as distribution, retailing and voice to help developers cater to new markets and niches?

 

Freeing voice from telephony

Telephony, as a model for human communications, is essentially based on 19th century technology and user needs. Freeing voice from telephony can be achieved by questioning the deeply ingrained assumptions of the telephony communications model, and experimenting to find use cases and business models that work.

Telephony is considered a declining business, despite globally increasing dependence on communications. There are two reasons for that. First, in many markets, telephony has become “good enough” for most users; i.e., users are not willing to pay significantly more for improvements to voice quality or reliability. This makes telephony a commodity service with little differentiation value beyond price. Second, telephony is a rigid, one-size-fits-all service that does not have the flexibility to cater to thousands of user needs. That makes it less and less competitive with new models of communications, which better suit the new basis of competition: choice and flexibility.

While telephony revenues are in stagnation or decline, people are not talking less. They just attribute less and less value to telephony. [Tweet this] Phones used to be the only way to remotely catch up with a friend, engage a sales prospect, get information about a product, or just flirt. Not any more. Today, many everyday communication needs are better served by innovative alternatives that don’t fall within the narrow definition of telephony.

Telephony, as a model for human communications, is essentially based on 19th century technology and user needs. Significant technological advances made telephony more efficient, accessible and inexpensive, but little was done to challenge the deeply rooted assumptions of this legacy communication model: Dedicated communication links, expensive centralized switching, synchronous communications, dial-talk-hangup cycle, intrusive etiquette (caller decides on the time of the call), and more.

Freeing voice from telephony can grow voice traffic by taking voice services into new communication modes and use cases, creating great value to users, telcos and developers alike. [Tweet this] Freeing voice from telephony can be achieved by questioning the deeply ingrained assumptions of the telephony communications model, and experimenting to find use cases and business models that work. Many successful OTT companies do just that — unlocking the value of voice by innovating around all the components of a voice session, as show in the next figure.

Freeing voice by challenging century-old assumptions

Notwithstanding the buzz around new OTT services, telcos are still considered the primary providers of voice services. That puts them in an excellent position to transform telephony into a thriving ecosystem of services designed for the new basis of competition: choice and flexibility. For example, using telephony APIs to lock enterprises into voice/data plans.

Replicating OTT solutions under the telco roof, or focusing on improving telephony using VoLTE or HD voice will not be enough. [Tweet this] Telcos need to create unique value to users by taking voice into diverse sets areas of new cases and contexts such as web telephony, anonymous calling, permission based calls, group calling, voice messaging, dynamic call routing, do-it-yourself IVRs, call referral tracking, and more. Creating healthy developer ecosystems around voice services that are anchored by telecom operators is the best way to achieve this.

WebRTC is a technology that promises to bring voice and video into the web browser. At the same time, it offers an excellent opportunity for telcos to innovate by extending telecom services into the open web and freeing voice from closed telecom networks. The focus of WebRTC innovation should be not on technology, but on building developer ecosystems for voice services, discovery of new use cases and experimentation with new business models, and not on technology. If telcos won’t do this, competitors will.

Key questions telcos need to ask when evaluating innovation investments

  • What voice (not just telephony) use cases can help your enterprise customers to achieve their goals both internally and towards their clients? I.e., How can you offer voice APIs to drive enterprise sales of voice and data plans?
  • How can telco APIs be leveraged to free voice from telephony by challenging telephony assumptions?
  • How can you structure your voice APIs and services to enable developer ecosystems to uncover more use cases?

As usual, we are looking forward to your feedback! Please click here to leave us a comment or send us an email to strategy /at/ visionmobile dot com. Don’t forget to download the DOWNLOAD REPORT.

- Michael
@mvakulenko

  • http://weblog.cenriqueortiz.com C. Enrique Ortiz

    Good post, thanks.

    Related to this, see a blog I wrote titled "On Voice Apps" — http://weblog.cenriqueortiz.com/voiceapps/2013/02

  • http://technorati.com/people/PaulineMar/ technorati.com

    Hmm is anyone else experiencing problems with

    the images on this blog loading? I’m trying to find out if its a problem on my end or if it’s the

    blog. Any feed-back would be greatly appreciated.

    • http://www.visionmobile.com/ VisionMobile

      Don't see any issues – please let us know if the problem persists

VISIONMOBILE BLOG

Distilling market noise into market sense

3D Printing: The 3rd Dimension of Mobile Marketing

3d-printing

Despite the hype, 3D-printing today is far from a household technology, mostly used by non-professionals for fun, entertainment and utility.…

Continue reading ...

The kingmakers of the Internet of Things

image00

For the first time we have data to understand who IoT developers are, where to find them and how to…

Continue reading ...

The 3 key Apple Watch features that nobody talks about. Yet.

apple-watch-09

If Apple wants to create a new, large product category out of smart watches, it must empower developers to discover…

Continue reading ...

VISIONMOBILE RESEARCH

Research on the app economy and developer ecosystems

App Profits and Costs

AppProfits

This research report examines the critical success factors for a profitable app, and how business and technology choices, such as…

Continue reading ...

Developer Segmentation 2013

Developer Segmentation 2013

The Developer Segmentation 2013 report delivers a needs-based segmentation model that actually works, with extensive profiling of the eight principle…

Continue reading ...

App Economy Forecasts 2013-2016

App Economy Forecasts

This report investigates the relative sizes of the app economy: developer population by region and platform, distribution of revenues, revenue…

Continue reading ...

Please fill out your details to download Report: Telco Innovation Toolbox (PDF).

*we ask for your email so that we can keep you informed about our future research, according to our privacy policy. You can unsubscribe from our updates at any time.

Having trouble downloading? Email Us!

Please fill out your details to download Report: Telco Innovation Toolbox (PDF).

*we ask for your email so that we can keep you informed about our future research, according to our privacy policy. You can unsubscribe from our updates at any time.

Having trouble downloading? Email Us!

Our Developer Economics Survey is Live!

Contribute to our developer research - the free report with key findings will be out in Feb 2015.

TAKE THE 10min SURVEY

Close