1. THE REDESIGN OF MOBILE BUSINESS
Business Model Research at IBBT-SMIT
Pieter Ballon
Simon Delaere
Olivier Braet
Theme Number: “The redesign of mobile business”, INFO, Vol. 9, Issue 5,
August 2007
2. Overview
Introduction
Business model research at SMIT
The redesign of mobile business
The redesign of spectrum management: the Cognitive Pilot Channel
FSM and Cognitive Radio
CPC concept
CPC business model scenario analysis
Revenue Models
The redesign of mobile service provision: IMS versus E2E
Two competing paradigms
Strategic business issues
Advice for IMS operators
2
3. Overview
Introduction
Business model research at SMIT
The redesign of mobile business
The redesign of spectrum management: the Cognitive Pilot Channel
FSM and Cognitive Radio
CPC concept
CPC business model scenario analysis
Revenue Models
The redesign of mobile service provision: IMS versus E2E
Two competing paradigms
Strategic business issues
Advice for IMS operators
3
4. Business Model research (1/2)
Innovation in ICT almost per definition a complex and multi-
stakeholder process
Technical architectures are designed (biased) towards specific role
distribution and revenue streams
Convergence and
modularity require
fundamental re-thinking of
this design approach
Business modelling makes QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
design choices and
interdependencies explicit
from value network
perspective
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5. Business Model research (2/2)
Business Model Matrix
Crucial elements of any business model
Control and Value parameters
Viable business models present a strategic fit between control and
value parameters
Research
Empirical: case based, stakeholder interviews
Exploratory: scenario based, simulations and modelling
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6. The redesign of mobile business (1/2)
Mobile telecommunications industry has
been a closed innovation system
dominated by telecom vendors and
mobile operators
Current MO Business model
Exploiting spectrum scarcity
Bundling services with network
access
Both elements are put under severe
pressure
Flexible Spectrum Management: the
end of spectrum scarcity?
Mobile Internet: the end of bundling
services with network access?
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7. The redesign of mobile business (2/2)
Role of the mobile operator not necessarily over
Core assets in terms of quality of service, personalisation, billing
relationship etc.
Need for strategic rethinking of business model: from closed system
to multi-sided market
Towards strategy of platform leadership: owning central module instead of
complete system
Fostering ecosystem of complementary innovators
Influencing architectural design through open interfaces combined
with core IPR assets
Balancing control and consensus strategies towards complementors
Adopting a neutral and systemic mindset towards global industry
Explorations of new platform positioning
Cognitive Pilot Channel (E2RII project)
New Mobile Service Platforms (SPICE project, MCDP project, Video
Qsac project)
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8. Overview
Introduction
Business model research at SMIT
The redesign of mobile business
The redesign of spectrum management: the Cognitive Pilot Channel
FSM and Cognitive Radio
CPC concept
CPC business model scenario analysis
Revenue Models
The redesign of mobile service provision: IMS versus E2E
Two competing paradigms
Strategic business issues
Advice for IMS operators
8
10. FSM and Cognitive Radio (2/4)
Germany – Poland (extract)
Start of the match 21:00
900 MHz band - Dortmund
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11. FSM and Cognitive Radio (3/4)
Regulatory drivers
Introduction of secondary trading
Step away from pre-defining ownership of frequencies
Creates a market for spectrum
Confronts the cost of retaining this spectrum
Increases spectrum efficiency, reduces scarcity
Introduction of flexible spectrum use
Step away from pre-defining use of frequencies
Promotes innovation & efficient use of spectrum
Answer to convergence of technologies, services & industries
Both concepts
are being implemented in many countries
lead to fluid, dynamic spectrum markets
make the advantages of reconfigurability clearly visible
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15. Operator based model
Value network and customer control high
Large parts controlled by one party
User 1 Device User 2 Device
Intelligence centralised (spectrum availability,
terminal usage profiles, billing history, location data
etc.
CPC ≠ spectrum broker, = integrated part of
operator’s infrastructure aimed at lower
CAPEX/OPEX, higher ARPU
Value defined in terms of complementarity
Operator 1 CPC Operator 2 CPC Easier data transfer, less conflicts, easier
maintenance
Cost and revenue concentrated
Spectrum usage rights & infrastructure needed
Costs multiplied by number of operators
Harmonization of multiple frequencies necessary
Probably only for existing, large scale, multi-RAT
operators
RAT 1 RAT 2 RAT 3 RAT 4 But: revenues also concentrated
User value aimed at intimacy
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16. Intermediary based model
Value network and customer control low
CPC role resides outside operator’s domain
User 1 Device User 2 Device
No control over information distributed, no customer
intelligence received + competition with others’ info
Consequence: customer lock-in difficult
CPC can act as neutral marketplace, BUT this requires
additional (sensitive?) information to be transmitted, and
enough granularity
Potential information deficit in multi-broker situation
More potential conflicts and technical complexity
Reg./Interm. CPC Intermediary 2 CPC
Cost and revenue concentrated
Cost different in regulator/intermediary variant
Intermediary variant needs revenue sharing agreement
Clients might be subscribers and/or operators
More interesting than decentralised scenario
User value aimed at substitution
Competition between many operators with duplicate
technologies and services
Cost- and quality-based strategies
RAT 1 RAT 2 RAT 3 RAT 4
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17. Hybrid model
Value network and customer control intermediate
User 1 Device User 2 Device CPC partly within operator domain flexibility and direct
customer relationship
BUT: upper hierarchical CPC level functioning as open
marketplace
Modularity and distribution of intelligence higher more
complexity
BUT: more control for operators to manage their own
Reg./Interm. CPC Intermediary 2 CPC channel
Cost and revenue mixed
CAPEX and OPEX needed on both CPC levels
advantage for larger operators
BUT: spectrum flexibility of 2nd layer CPC makes it
cheaper
Operator 1 CPC Operator 2 CPC Revenue structure dependent on regulator (= revenues for
operators) or intermediary (= revenues shared) variant
Mixed user value strategies
Operator’s may lock-in to own CPC and pursue
complementarity strategies
Users may buy unlocked devices and pursue substitution
strategies based on cost or quality requirements
RAT 1 RAT 2 RAT 3 RAT 4
Intermediaries may become active brokers for users
Operators could strike deals with intermediaries
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18. Model comparison
I. Operator-based system II. Intermediary-based system III. Hierarchical system
User 1 Device User 2 Device User 1 Device User 2 Device User 1 Device User 2 Device
Operator 1 CPC Operator 2 CPC Reg./Interm. CPC Intermediary 2 CPC Reg./Interm. CPC Intermediary 2 CPC
RAT 1 RAT 2 RAT 3 RAT 4 RAT 1 RAT 2 RAT 3 RAT 4 Operator 1 CPC Operator 2 CPC
RAT 1 RAT 2 RAT 3 RAT 4
Table 1: Overview of CPC domains of analysis
domain of anal ysis domain aspects operator intermediary hierarchical
1. control value network control high low medium
customer control high low medium
2. cost and revenue structure cost distribution centralised centralised both
revenue distribution concentrated both both
3. user value product positioning complement substitute both
intended value type intimacy mix mix
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21. Overview
Introduction
Business model research at SMIT
The redesign of mobile business
The redesign of spectrum management: the Cognitive Pilot Channel
FSM and Cognitive Radio
CPC concept
CPC business model scenario analysis
Revenue Models
The redesign of mobile service provision: IMS versus E2E
Two competing paradigms
Strategic business issues
Advice for IMS operators
21
22. Introduction: Two competing paradigms
IMS = IP Multimedia Subsystem
Client-server architecture
To aid the transition to IP-based services in mobile and
fixed telecommunication networks
SIP: Session Initiation Protocol
For the following services:
Voice-over-IP (VOIP)
Rich content delivery
Presence
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23. Introduction: Two competing paradigms
E2E = End-to-End
The Internet is (intended to be) a network without central
intelligence, a stupid network (David Isenberg)
Kempf & Austein: The Rise of the Middle and the Future of End-to-
End, http://tools.ietf.org/html/rfc3724
Internet is based on the end-to-end principle
Every user may reach any other user via the IP address
All “services” may be offered anywhere and may be
accessed from everywhere
This is also valid for voice and other communication
“services”
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24. The Internet
Two theses:
1. IMS & E2E are close substitutes...
Most of the components of an IMS could be
replaced by E2E applications that
exclusively reside at the end-nodes of the
network. These applications could perform
almost all functionalities that can be
enabled within the IMS framework.
2. ... but will exist alongside one another
the coming years.
How should IMS operators adapt?
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26. IMS Strategic Business Issues: Overview
Better load balancing Better load balancing?
Functional View on resources available in the “IMS is not the Internet”
Architecture design network
Barriers for app. developers
Open API’s are possible
Relative slower time-to-market of
Accelerated time-to-market of new new products and services
products and services
Optimization of applications for the
chosen devices
Presence as non-innovation
Presence as innovation
Value network dependencies can Walled gardens hamper open
Value Network design be controlled market entry
Quality control of delivered Complex and slow new service
Service design services deployment
Richer services Access restriction to application layer
More customer empowerment over functionalities
service selection and consistency of
the end-user experience
Lower capex and opex Unclear business case versus free
Financial design New revenue streams offerings
Less innovative: innovation not at
end-nodes
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27. IMS: Functional Architecture Issues
Better load balancing
View on resources available in the network
But... IMS is not the Internet
Note this
Source: Richard Stastny (voipandenum.blogspot.com)
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28. IMS: Value network design issues
Value network dependencies Walled gardens hamper open
can be controlled market entry
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
IMS: Service design issues
Quality control of delivered Complex and slow new service
services deployment
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30. E2E Strategic Business Issues: Overview
Functional Rapid and simple application Application development
deployment dependent on software platform
Architecture design Scaling via bandwidth sharing requirements
between end-nodes End-to-end does not scale
Quality of Service workarounds Lower Quality of Service
(DiffServ: IETF rfc 2474 and
2475)
Value Network design Deverticalized industry Application level bottlenecks
structure is more efficient emerge
Service design Best effort trumps 100% Best effort only aims for price
quality of service if it’s free leadership
Stronger network effects
Financial design Cost is decentralized Cost & management effort is
pushed to the edges
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31. E2E: Functional architecture issues
Rapid and simple application Lower Quality of Service
deployment
Development effort distributed
Scaling via bandwidth sharing
between end-nodes
E2E: Value network issues
Deverticalized industry New bottlenecks emerge
structure is more efficient
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32. E2E: Service design issues
Best effort trumps 100% Best effort only aims for price
quality of service if it’s free leadership
Stronger network effects
E2E: Financial design issues
Cost is decentralized Cost & management is pushed
to the edges
QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
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34. Six points of advice for IMS telecom operators
1. Negotiate new revenue sharing models with content industry
Beware the Joost scenario
2. Loosen requirements on application developers and device makers
Beware bypassing scenarios (SIP-calling in pdf!)
Features blocked in the past: Call timers on telephones, WiFi
technology, Bluetooth, GPS services, internet browsers, easy
photo file transfer capabilities, easy sound file transfer
capabilities, e-mail clients, ...
3. Share user data with application developers
Development time for mobile applications can be drastically
lowered
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35. Six points of advice for IMS telecom operators
4. Apply interoperability strategies
Winner-takes-all of Internet: Users of P2P-apps are also stuck in
walled gardens
Enum: tElephone Number Mapping
5. Offer smart identity management
Towards pseudonymity
OpenID
6. Support user and service mobility
TCP/IP protocol still does not lend itself to maintain
communication with ‘things that move’
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36. QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.
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