Multi-media & e-business.

WIRELESS DATA APPLICATIONS – BUSINESS PERSPECTIVE. Author: P. Abraham Paul.   Dated 10 May 2003   

Introduction:

The current scenario of Telecom and e-Business:

The past few years witnessed much hype over projecting the business potential of 3G Telecom, Voice over IP and growth of INTERNET dependant e-Commerce and e-business. Network operators/ISPs realized that most of these high tech propositions, though conceptually attractive and forward looking are really going to take more time, huge investment and coordinated efforts to convert these to market friendly and revenue earning products. It was difficult to make out a viable business case out of 3G. However, lately the approach has been more pragmatic and realistic. The discussion here may not be construed as a pessimistic approach against the advancement of technology or modern concepts and solutions.

The INTERNET is the best thing happened in the world of Information & Communication, but many ISPs flunked as their original business plans later turned out to be not sustainable. 2.5G and 3G technologies are great advancement in telecom technology, but concepts alone cannot be sold and make money.  Many who dared to indulge in licensing in 3G had to bite dirt for their too quick decisions based on premature business ideas prompted by sales talk of the quick witted smart aleks of the industries and the money market.

The discussion here is about how to get over these obvious hurdles and make the broadband possibilities suitable for contemporary and future business needs and so that the presently stagnant e-business would really take of. The time is now ripe as next one or two years will see a quantum leap in the realization of these concepts.In the GSM arena, the SMS has become a power communication tool, WiFi and Wimax bearers have provided more viable alternatives dramatizing the wireless data world, the data communication and VoIP merged with Internet is becoming more practical, user friendly, economic and faster, and therefore are gaining universal acceptance. All these are good news to the end users but not so for the service providers as an prospective business case. 

1.       Consequence of technology advancement: . The advancement in telecom technology and convergence of voice and data will adversely impact the Telecom Network providers business plans because of the major shift from Voice based usage to Wireless Data and Internet based service usage will inevitably shift the business and along with the shift of revenue also.   

The reasons are:   

i)    Non-viability of Network Operators/ISPs taking the role of Application Providers. 

The Network Operators/ISPs are mainly access providers and cannot effectively perform as Application Providers. This is because the major data related activities will be in the PDN in the vast IP world and PSTN/PLMN operators/ISPs will not be able to effectively get into this business and manage highly diverse and dynamic requirement of extremely large base of clients widely distributed in the limitless area of IP network. The GPRS / UMTS are bearers which provide suitable network and  pipe for access and WAP is only an application protocol. The Network Operators can at the most provide only very generic and universally specific and ’Device to device’ multimedia services, which is going to be a minute fraction of the whole business need.  Same is true with the ISPs. 

The vast amount of individual and standalone e-business units and service related applications are widely spread beyond the boundaries of Network operators licensed area, and therefore are to be taken care of by large number of Service Providers and Business units in the PDN. 

 ii)     Major portion of revenue moves from Network Operators to Service Providers  and e-Business units in PDN.  

Impact of Voice Data convergence and transition of major part of usage from Voice to Data service will have great impact on the of Telecom business models in terms of investment and revenue realization. The Network Operators have no control on tariffing, rating, charging and billing of "external client" based service and usage. At the most they can only charge their subscribers for the access by measures of quantity and not for the real value of the transaction.  The value of the transaction can be determined only at the Service provider/vendor level and therefore, the revenue realization also rests with them and  they are the real beneficiaries of the advancement of high technology.  

Therefore, as the scenario changes, a good part of end user revenue will move from PSTN/PLMN Network Operators to various Content Providers/Service Providers/e-Business units in the PDN which is spread far beyond the licensed area of the individual network operators.   

iii)    The network operators will eventually lose exclusive ownership of their customers:  

With opening out of Private Long Distance carriers and convergence of Voice and Data and with predominance of Data service, ownership of end user is no more remain stuck with any single Network Operator. 

As the e-Services and e-Business takes of, the Telecom Network Operators and ISPs will further lose their monopoly in holding on to exclusive ownership of their customers in terms of  the revenue generated from them.   

The end user at their own will and pleasure, will have option to choose and use different Network Operators/Service Providers who would provide them efficient, competitive and quality service and eventually will have direct dealing with the e/business Providers for the services and with it these service related revenue also goes to them.   

iv)    Role of Telecom equipment vendors:

 ·         The Telecom Vendor’s business will have adverse impact as Network Operators do not find adequate return on these high tech investment.  

Telecom Vendors are already affected due to Network operators reluctance in investing in High tech: The advent of telecom evolution is great business for vendors if only their customers are willing to invest for inducting these technology in their networks.  Due to reasons mentioned earlier, the trend is not positive and hence affects negatively the business of Telecom Network system vendors.   

b) The Telecom Vendors cannot get into Application Business in the PDN  

              Major telecom vendors cannot get the vast business of Application and Business support system sales.

The vast amount of Application and Business support systems in the limitless area of PDN is the most revenue earning part in the whole business. These are highly diverse, dynamic and widely distributed across the whole IP world. Such infinite number of small and standalone and individually tailored needs cannot be customized, sold and maintained by major telecom vendors.

It is not foreseen for any major vendors to venture in to this business and majority of the service providers/e-business units do not need and also cannot afford the major vendor systems.

So the business of the vendors is limited to selling of generic and very specific Application systems for the Network operators which is going to be only a small fraction of the market as the real business value lie in the external IP world. It is more likely that the Network operators also will prefer to hand over the Application business to external Service providers.

  2.  Payment Gateways in PDN for revenue appropriation: 

              Special methods are needed to handle Micro-payments involved in e-business.   

The end users are real beneficiaries from all these, but such major shift in telecom business will have negative impact, at least initially, for the Network Operators. This being the situation of business, Network operators cannot dare to indulge in high investment that is needed for the high-tech data networks and access pipes to support other’s e-business with no means of adequate return on their investment  

The network Operators /ISPs therefore, need to find strategies and methods to get adequate share of the revenue collected by e-business units from their customer who use their network and resources.  

The e-business and e-services related to 2.5G and 3G and Data services over Internet involve High Volume of Low Value payments and these cannot be done by direct payments or handled economically by the banks, regular credit card companies etc. Also these payments can neither be handled by the Network operators/ISPs nor by the Service provider/e-business units as the value of each transaction is known only to the e-Business/Service provider who finally sell or provide the service.

 This is the most critical issue and the high tech telecom and IP related e-Business cannot take of and the Network Operators/ISPs cannot hold on with sustainable business plans until this issue is addressed and resolved. Micro-payment Gateways in PDN is one such idea to get back part of the revenue generated from e-business based on data services.   This need coordinated efforts by all stakeholders and the regulators.   

Concept of Payment Brokers middle way systems.  To be in line with technology advancements, the network operators have no choice but to induct the new technology systems in their networks and find means and ways to ensure sensible business propositions and viability.  As the data related services become predominant, and the revenue potential moves from Network Operators/ISPs to Service Providers and e-Business units, the Network operators/ISPs have to look for methods to grab their share of revenue generated in the PDN to survive.  Here is the emphasis of the Payment Broker systems, which manage the accounting of payments, apportioning of it and sharing the revenue generated between the stakeholders.The payment broker system cannot be managed by individual Network operators/ISPs as the Service Providers and e-business units are common platforms shared by customers of many different Networks/ ISPs.  

3.    So the points in nut shell are: 

a)    The Network operators can only play the major role of access providers and not major application providers. It is folly to attempt provision of multifarious application services other than ‘device to device’ services by network operators.

b)       Majority of the revenue generated is going to be in the PDN of the infinite IP world.  The Network operators cannot have control on the revenue generated and do not get the rightful share of this revenue as a decent return on their higher investment in providing access to data related services.  So the network operators will be reluctant to invest on high tech systems for opening out fast access to external IP world.

c)       There will be no exclusive ownership of Customers considering the revenue point of view. The customers use the Network operator’s network but the major portion of the revenue generated from them directly goes to the pockets of large number of external agencies that provide e-business and e-service.

d)       There will be negative impact of Telecom vendor’s business as Network Operators are unwilling to do major investment in high tech unless they are assured of adequate revenue. The telecom vendors cannot venture to get into the large-scale application and e-commerce support system business in the vast IP world.

e)       It shall be possible to address this by introducing concept of Payment Gateways in PDN for apportioning the revenue. Micro-payment gateways can take care of the high volume low value transactions that happen in the PDN. These need special methodology and coordinated efforts of all concerned.   

Conclusion: Most of the advance technology systems are now the monopoly of Network Operators/ ISPs and System vendors.  It is necessary to take these out into the user premises by melding the technology with user intensive systems and applications. For the telecom service providers, the voice call revenue is dwindling due to competition as well and saturation of usage and they need to forge into more and more broadband products business  to survive. To realize all these effectively, it is necessary for the Network operators/ISPs and regulatory bodies to standardize the e-business related charging, billing and payment procedures. 

Common Payment broker systems are needed to take care of adequate revenue share to network Providers / ISPs as to compensate the high investment needed to induct high tech and provide enough pipe for their customers to access the Service providers and e-business units. A Charging gateway is just another network element sitting in PDN. Interestingly the Payment broker system can be located any where in the PDN and can provide service to large number of Network operators /ISPs and the e-business units and application service providers in PDN. The Payment Broker systems shall be a common platform Service Provider system in the PDN and not to be tried by Network Operators.  This could be the ideal philosophy to adopt in every country, in order to avoid stagnation in the e-business growth and full exploitation of benefits and advantages of modern technology. With right perception and direction, these disconnects in concepts can be rectified and the e-Business will see ample growth in the coming years. It shall be possible to achieve quick overall telecom growth, with benefits for all, the Network Operators/ISPs, Business owners. the Service providers, the Telecom Vendors and the Consumers as end users.                                   ----  Concluded ----