What if Uber became a telco?

Written by on September 13, 2016 in Billing & Payments, Opinion with 10 Comments

Knot TangleIf you were tasked with starting up a brand new, greenfield communications network do you think you would opt for a traditional telco OSS/BSS support infrastructure or opt for a much simpler all-you-can-eat subscription model?

If you opted for the latter you are either and non-telco person or a liar. Let me explain.

For a start almost every new network that has begun operation in the past ten years has opted for a traditional infrastructure. This isn’t because the people backing such networks opt to go that way it’s just that the only people they hire to help in the construction of the business inevitably come from telco backgrounds. They in turn bring with them their traditional thinking and knowledge and of course they will stick with what they know best.

And if the new venture opts to get expert advice from existing consulting firms or systems integrators they are about to be taken down the same route, for obvious reasons. This is an industry that has mastered the art of survival, not of the fittest but of the ones that can make things most complex.

We constantly hear cries about the cost of maintaining legacy systems yet we continue to purchased them and commit to their upgrades for decades because no one has the courage to say “enough is enough”.  The logic in going down this path is that we want to account for every minute, every second, every byte of every network transaction so that we can maximize income and it’s these systems and methodologies that have held us in good stead.

We have also mastered the art of checking all of the systems with other systems to ensure that no revenue leaks and no fraudulent activity occurs, resulting in further loss. But maybe, just maybe, all of this could be avoided simply by charging every user a monthly subscription fee, paid in advance (pre-paid model) if their credit is unworthy, or in arrears by credit card or direct debit, a facility that most people now have access to.

You would think that with all the data analytics available to us in this day and age we could effectively calculate the cost of building and operating a network and extend that to a revenue model based on subscription that could accurately predict the number of users needed and what price to charge to become profitable.

Then take into account the savings from all those extraneous BSS and OSS components that would not be needed and you would probably end up with a reasonable business.  After all, you really only need to know who was accessing the network to ensure that they are paying customer and if anyone is abusing the system.

Your main concern would be whether your network was able to meet capacity requirements and if you are really smart you would have all your support infrastructure cloud-based or contracted to third parties with comprehensive SLAs in place.

Better still, all your customer interactions could be managed via a self-care app and bots removing the need for expensive customer service representatives and associated CRM/call center systems.

If you felt the need to supply more than simple network services and internet access you could always opt for third-party OTT services and bill for them using the same subscription model but make them responsible for support.

You see how easy it could be and how many millions of dollars could be saved? Yet there is probably no single network operating in this simplistic, totally feasible way today. How long before an ‘Uber’ comes along and turns the telecoms industry upside down?  Experience shows that no amount of regulation or industry lobbying will be able to stop an activity that is so logical, so simple and so beneficial to consumers.

And what’s stopping existing network operators from going down this route? Hmmmmm….

This article was first published on TelecomAsia.net

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About the Author

About the Author: Tony is a freelance writer, regular speaker, MC and chairman for the telecoms and digital services industries worldwide. He has founded and managed software and services companies, acts a market strategist and is now Editor of DisruptiveViews. In June 2011, Tony was recognized as one of the 25 most influential people in telecom software worldwide. .

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  1. Martin Morgan says:

    EU removal of fair usage caps on roaming legislation could very well see an Uber type company coming in and disrupting the industry. This legislation means it’s open season in the EU and easy for consumers to pick and use the lowest cost service they can find – from anywhere in the European Union. Telcos will find it tough to compete if they continue to behave like telcos. Some of them have seen this coming and are changing…….some others are just getting started – but are they leaving a bit late to begin to transform their businesses?

  2. Robert Curran says:

    Good question! I think that telecom has never been in a better position to reinvent itself. It certainly has new market potential in areas like IoT. It has network virtualization as a new tool in the box, and it has technologies like AI that can address what AT&T has referred to as the final 20% of the automation challenge.

    Perhaps “thinking like a telco” is what’s stopping telecom. If Uber were a taxi company, it would have drivers and cars, and offices and rent and and and… . It doesn’t. What it has perfected is the matching of demand to supply, at a price point that is competitive and profitable. In real time. (Without having to own the supply! Genius!) That is certainly a model that telecom can embrace – or face disruption from without.

    (btw you might want to Google for some parallel thoughts on “Why Doesn’t Amazon Sell Telecom?”)

    http://virtualizedworld.com/2016/03/why-doesnt-amazon-sell-telecom/

  3. Avatar Phil Harvey says:

    One thing Uber does well is match supply with demand, instantly, and match the price based on the availability of that supply. I’ve traveled the exact same route several times, at different times of day, and paid different prices each time, for instance.

    What traditional service providers struggle with, at the moment, is providing demand-driven services. I’ve always wondered why I don’t just pay for what I consume (video, voice, etc.) vs. paying some flat-rate that has little or no relation to what I’m consuming and when I’m consuming it.

    Anyway, Uber always “feels” more fair to me. Telco products and services never do, and it’s a huge problem. But, telcos can change and become more Uber-like, which I’d definitely like to see.

  4. Francis Haysom says:

    Nicely put! Telco really does suffer from an endowment effect that over values what has always been done over what could be done. There are some examples of telcos going in this direction (Free and Three come to mind) but even here you still see the tug to monetise minutes and Gigabytes. Telcos are still using a pricing model that aligns with a physical allocation of a circuit to a call. The network has moved on from this and the discrepancy between the network and the pricing model is the opportunity for any disrupter.

    In terms of BSS/OSS I think even in the disrupter these still exist. However, not in the bloated form that many of these take today. The average billing system is a set of functions that form an archeological record of historic product management choices. We need to be evolving a mentality with all BSS/OSS of understanding the business case of each function in that BSS/OSS.

  5. Avatar Bob Machin says:

    I guess it depends what you mean by ‘doing an Uber’. Hard to see the Uber business model working for telco without all of us being able to contribute spectrum and bandwidth and match it up in real time with demand, pricing accordingly… a scenario which would lead to us being invited before each call to consider what price we’ll be paying for it this time, whether we couldn’t wait till later when it’ll be cheaper, etc. etc. Not quite the simple model that most of us would like for our comms needs and I bet the BSS needed to support it isn’t that straightforward either.
    So I guess this this version of ‘Uber’ is the one that stands for any disruptive business model, upsetting a staid old complacent industry – in this case offering simple pricing and making big savings in the back end. But I’m not sure there’s still all that much for a disruptor to attack. I had to take out my own personal subscription recently – iPhone from EE – and the deal that I signed up to looked awfully like the simple monthly subscription that you describe. For the last three months I’ve paid the same amount, in arrears, for all my mobile comms needs, and I don’t expect that to change for the next year or two. I wouldn’t mind it being cheaper, but it could hardly be simpler.
    Your point about BSS is well made all the same, and I confess myself to being, by your reckoning, either a non-telco person or a liar. Hard to imagine me setting up a network, but if I was setting up an MVNO or some other network-driven retail enterprise, simple charging would be a given, and there’s no way I would countenance installing my own IT with all its attendant overhead and horror. Either it would be coming out of the cloud, as-a-service, or it would be outsourced to a third party that could do the job better, cheaper and at less risk than me.
    In passing, it’s a while since I’ve heard ‘cost-plus’ mooted as a pricing model…

  6. Avatar James Messer says:

    That time is here. The largest IOT implementations in the world have selected native cloud-based agile monetization platforms, at the expense of the slow and expensive “safe bet” legacy providers.

  7. Avatar Cato Rasmussen says:

    Whether Uber or not, the biggest danger in times of change is to act by old logic. That is amongst the thing Tony is putting his finger on. We have been sticking technology on to existing processes for decades. While it gives quick wins or an immediate effect, it does not sustain – why do we still talk TTM? Everything Telcos have been focus on is to scale traffic on networks to drive down network unit cost. I suggested to Tony some 3-4 years ago some changes to pricing and accounting of products vs. service. Now this is happening -IFRS15. I bet what we will see soon is Amazon Echo, Apple Viv in inverted in multi channel for both internal and external. Think what that will bring when customers and partners are invited in to the eco-system. But rather the Uber, what about the Gig-economy?

  8. Avatar Henk Ensing says:

    Good question, I thought Apple would have done it by now. What with all talk on embedded sims and all… For some reason it didn’t come to fruition (yet). Oh well, they have more than enough money in the bank, haven’t they?

    You won’t be surprised to hear me say that the focus should be on the services offerings and how they are provided (pretty much Uber’s forté) and not so much on figuring out afterwards if every bit of revenue can be assured.

    Get to know your customers, provide them with a reliable, functional product and sell it at a price level customers are comfortable with – and you can definately rely on selfcare. For that, you’d need something vaguely resembling a BSS/OSS solution combined with a not quite ‘as much sushi you can eat’ proposition. Sure, there are regulations to adhere to, but I expect them to be an integral part of the standards that Cato mentioned (such as IFRS15).

    Sounds doable.

  9. Lorne Mitchell says:

    The really interesting analogy between Uber’s business model and the legacy telco regime has been missed entirely in this article, in my view.
    Your whole thesis seems to be based on the unnecessary cost of OSS/BSS – and that somehow the way that traditional telcos have operated is fit for extinction from a meteor that killed off the dinosaurs!
    Even a subscription model will need some sort of BSS or subscription management system. And there still needs to be policing of some sort to make sure that people were not abusing the network (i.e. using more data services than they were entitled to – assuming that voice and messaging services were in the basic subscription).
    Some incumbent telcos have already done something similar with FTTC services about three or four years ago – Telefonica in Spain being a good example. They completely rewired their OSS/BSS by creating a bespoke software environment which was all hard-coded in India. But they now have a bespoke OSS/BSS legacy environment to maintain – albeit at perhaps a lower price point than the much more expensive stuff that software vendors try to sell into the industry.
    If you are running any network (as opposed to reselling it), you will also need some sort of OSS to monitor and control the network.
    So – OSS/BSS is not going to be replaced, just re-designed. Legacy systems still power a lot of good old revenue collection machines. And the real value of a comparison between Uber and the traditional telco business model has, for me, been totally missed!

  10. Avatar Dominic Smith says:

    I’m a bit late to this party, but thought I would add one further comment about Uber that has not been mentioned thus far – the reason I like Uber so much is that they’ve cracked the payment part of the service.

    The matching of supply and demand is obviously very clever, and being able to see where your driver is and the route they follow is also really handy. But it’s the fact I don’t need to worry about having enough cash (in the right currency) or have to hope the cab driver has a credit card machine. It’s all taken care of by the app.

    However, this only works because of the trust that has been established. The first time I ever took an Uber I remember worrying if it was going to be expensive. When it turned out to be cheaper than expected, I was hooked and have used it regularly since without having to worry about our old friend “bill shock”.

    It’s also worth commenting that though the payment is really simple, the pricing/charging bit clearly is not – I challenge anyone to work out how the price per mile, waiting times and surge pricing actually work. But then as a user of the service I don’t actually care how it is calculated – I’m just comparing the value of it with the convenience / cost / time if I travelled using public transport / black cab / driving and parking myself.

    Most Telcos are by now good at the payment part, whether it’s direct debit, credit card or prepay; the main problem they face is not understanding the value that customers get from their services.

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