friday food 071109 redesign of mobile business
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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
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
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� 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
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
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� 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
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
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modularity require fundamental re-thinking of this design approach
� Business modelling makes design choices and interdependencies explicit from value network perspective
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
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� Research
� Empirical: case based, stakeholder interviews
� Exploratory: scenario based, simulations and modelling
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
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� 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?
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
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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)
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
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� 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
FSM and Cognitive Radio (1/4)
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FSM and Cognitive Radio (2/4)
Germany – Poland (extract)
Start of the match 21:00
Germany – Poland (extract)
Start of the match 21:00
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900 MHz band - Dortmund900 MHz band - Dortmund
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
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� 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
FSM and Cognitive Radio (4/4)
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The Cognitive Pilot Channel (CPC) concept
� FSM may invoke a particular information deficit
� E2R proposes Cognitive Pilot Channel as a solution
?
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Operator 1
UMTS
2 Ghz
Operator 2
WiFi
2.5 Ghz
CPC
Operator 1
WiMAX
2 Ghz
Operator 3
WiFi
2.5 Ghz
Operator 1
GSM
1800 Mhz
Operator 1
GSM
1800 Mhz
Operator 1
GSM
1800 Mhz
Operator 1
GSM
1500 Mhz
1
2
3
4
CPC business model scenario analysis
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Operator based model
�Value network and customer control high
� Large parts controlled by one party
� 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
� Easier data transfer, less conflicts, easier
User 1 Device User 2 Device
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� 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
� But: revenues also concentrated
�User value aimed at intimacy
Operator 1 CPC Operator 2 CPC
RAT 1 RAT 2 RAT 3 RAT 4
Intermediary based model
User 1 Device User 2 Device
�Value network and customer control low
� CPC role resides outside operator’s domain
� 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
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RAT 1 RAT 2 RAT 3 RAT 4
Reg./Interm. CPC Intermediary 2 CPC
� More potential conflicts and technical complexity
�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
Hybrid model
User 1 Device
Reg./Interm. CPC
User 2 Device
Intermediary 2 CPC
�Value network and customer control intermediate
� 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 channel
�Cost and revenue mixed
� CAPEX and OPEX needed on both CPC levels �
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Operator 1 CPC Operator 2 CPC
RAT 1 RAT 2 RAT 3 RAT 4
� CAPEX and OPEX needed on both CPC levels �advantage for larger operators
� BUT: spectrum flexibility of 2nd layer CPC makes it cheaper
� 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
� Intermediaries may become active brokers for users
� Operators could strike deals with intermediaries
Model comparison
User 1 Device
Operator 1 CPC Operator 2 CPC
User 2 Device
RAT 1 RAT 2 RAT 3 RAT 4
I. Operator-based system
RAT 1 RAT 2 RAT 3 RAT 4
II. Intermediary-based system
User 1 Device
Reg./Interm. CPC
User 2 Device
III. Hierarchical system
Operator 1 CPC Operator 2 CPC
Intermediary 2 CPC
User 1 Device
Reg./Interm. CPC
User 2 Device
Intermediary 2 CPC
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RAT 1 RAT 2 RAT 3 RAT 4Table 1: Overview of CPC domains of analysis
domain of analysis 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
Revenue Models (1/2)
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Revenue Models (2/2)
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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
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� 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
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
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� SIP: Session Initiation Protocol
� For the following services:
� Voice-over-IP (VOIP)
� Rich content delivery
� Presence
�
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
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� 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”
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
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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?
IMS
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IMS—
Strategic Business Issues
IMS Strategic Business Issues: Overview
Functional Architecture design
Better load balancing
View on resources available in the
network
Open API’s are possible
Accelerated time-to-market of new
products and services
Optimization of applications for the
chosen devices
Presence as innovation
Better load balancing?
“IMS is not the Internet”
Barriers for app. developers
Relative slower time-to-market of new products and services
Presence as non-innovation
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Value Network design Value network dependencies can be controlled
Walled gardens hamper open market entry
Service design Quality control of delivered services
Richer services
More customer empowerment over
service selection and consistency of
the end-user experience
Complex and slow new service deployment
Access restriction to application layer
functionalities
Financial design Lower capex and opex
New revenue streams
Unclear business case versus free
offerings
Less innovative: innovation not at
end-nodes
IMS: Functional Architecture Issues
� Better load balancing
� View on resources available in the network
� But... IMS is not the Internet
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Note this
Source: Richard Stastny (voipandenum.blogspot.com)
IMS: Value network design issues
� Value network dependencies can be controlled
� Walled gardens hamper open market entry
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� IMS: Service design issues� Quality control of delivered
services� Complex and slow new service
deployment
E2E
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E2E—
Strategic Business Issues
E2E Strategic Business Issues: Overview
Functional Architecture design
Rapid and simple application deployment
Scaling via bandwidth sharing between end-nodes
Quality of Service workarounds (DiffServ: IETF rfc 2474 and 2475)
Application development dependent on software platform requirements
End-to-end does not scale
Lower Quality of Service
Value Network design Deverticalized industry
structure is more efficient
Application level bottlenecks emerge
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structure is more efficient emerge
Service design Best effort trumps 100% quality of service if it’s free
Stronger network effects
Best effort only aims for price leadership
Financial design Cost is decentralized Cost & management effort is pushed to the edges
E2E: Functional architecture issues
� Rapid and simple application deployment
� Development effort distributed
� Scaling via bandwidth sharing between end-nodes
� Lower Quality of Service
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� E2E: Value network issues
� New bottlenecks emerge� Deverticalized industry structure is more efficient
E2E: Service design issues
� Best effort trumps 100% quality of service if it’s free
� Stronger network effects
� Best effort only aims for price leadership
� E2E: Financial design issues
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� Cost is decentralized � Cost & management is pushed to the edges
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� E2E: Financial design issues
CONLUDING—
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—
Advice for IMS operators
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
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� 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
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
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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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