Demand for innovative services and the corresponding spike in broadband traffic and consumption are changing the way operators define the value of what they sell. We talked to policy control specialist Sandvine’s co-founder, Tom Donnelly, on the shifting economic models at play.
What exactly is this idea of “better broadband?”
Tom Donnelly: We're at an interesting point in our industry, where there is clearly a growing demand for a wider and wider range of services, to the point where we don’t know what the next big thing will be. It wasn’t that long ago that I hadn’t heard of peer-to-peer or social networking or the idea of HD streaming media via something called YouTube. Each of these innovations brings increasingly strong demand for a broadband infrastructure that supports what consumers want with an appropriate quality of experience.
And what kinds of challenges does this present for the carrier?
TD: Service providers are rigorous in their demands for providing network availability and performance, and they still continue to invest in the network because of that. But capacity alone doesn't equate to customer satisfaction or having an optimally efficient network.
Better broadband requires an active engagement with the network environment for a variety of applications, to address issues like congestion in a proactive rather than reactive fashion. They need unprecedented insight into what's happening, consumer behavior, and where it’s appropriate to bolster efficiency. Anything you can do to best utilize that finite resource of capacity, the better.
But at the same time, bandwidth utilization goes up, but not necessarily the revenue. How can they solve the fact that the cost per bit doesn’t align with the revenue per bit?
TD: People that sell things tend to prefer value-based pricing. What is this worth to the people I'm selling to? Can I sell it for what it's actually worth? In broadband there’s this idea that value is a function of how many bits you're getting. But the price per bit shouldn’t be the ultimate objective in billing. It’s only one metric and not the most impactful one for users.
The carrier place in the value chain is changing as third parties and device-makers gain control of the customer relationship. What do they need to be ready for?
TD: Certainly service providers are looking for a way to get a return on their investment in infrastructure, and that’s not likely to come from them being in the content business. Again, it’s not about bits.
The ecosystem is changing very dramatically. The role of service provider is also in a state of flux. There are a whole bunch of really compelling and popular OTT apps that continue to develop. Any carrier that might have thought they could create sufficient differentiating content on their own is no longer thinking that, because there is a widespread understanding that you need the creativity and innovation of third-party.
What needs to happen is the development of different business models that offer a fair exchange of value for the quality of experience for these applications. The idea of the Internet being included: Buy a device and it comes with the necessary connectivity for that particular experience. Consumers buy the thing they want to consume and the connectivity piece is invisible. There’s an opportunity for carriers to have a lucrative role in helping to deliver and enable those.
To read the full Q&A at our sister site, Billing & OSS World, click here or on the source link below.
