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Cable Technology Feature Article

September 30, 2009

Free Voice and Broadband: Only a Matter of Time?

By Gary Kim, Contributing Editor

It is only a matter of time before some, or perhaps many service providers -- especially those in the mobile segment of the business -- start providing free broadband and voice services, said Douglas Daberius, Nokia Siemens Networks (News - Alert) Head of Solutions Management for Subscriber Data Management products.
That startling notion, which would bring to fulfillment a notion popular in some circles in the late 1990s that "bandwidth wants to be free," requires a major, and perhaps unattainable, shift in revenue models, though.
Simply, the argument is that by capitalizing on identity management, a variety of revenue streams can be built that rely on partner revenue rather than end-user subscriptions.
And though it might seem far-fetched, the historical precedent is shown by over-the-air radio and TV networks, which have made all of their revenue from business partners, namely advertisers.
By extension, Daberius argued, if communications service providers -- and one thinks mobility operators are the logical candidates -- can leverage their knowledge about users in highly-personalized ways, it is at least feasible in principle to envision significant marketing, transaction and advertising revenues.
Whether such revenues ever would be high enough to completely offset subscriber revenues is perhaps another issue.
Still, said Daberius, service providers "right now" have the ability to revolutionize their business models using identity management.
It’s not a big step from managing a particular subscriber’s data in the various silos across n organization, to managing that same subscriber data for online shopping sites, banks, credit card companies, and other commercial services.
In fact, Daberius said he believes transaction fees paid by such partners ultimately could be bigger than what service providers now earn from subscription fees.
The math is simple enough. One simply looks at the value of transactions, looks at which transactions can be conducted from a mobile phone, attaches a small fee to each transaction and then multiplies by the expected number of such transactions.
Most service providers might not be persuaded that anything significant is possible in the near term. But most likely would agree that some amount of effort is worthwhile, to see if it actually is possible to grow potential revenue in this way.
Basically, the idea is to monetize all of any users' electronic relationships to make it less expensive but much easier for users to access and use online services.
The idea is to facilitate many economic transactions, across all of a users' social networking sites, with a single log on, on any device a user happens to be using at the time, taking advantage of location, presence, user interests, demographics and social networks to facilitate transactions.
It is a challenging notion, and could possibly be a significant, though not exclusive, driver of mobile service provider revenues at some point in the future. Perhaps the best historical example there is the cable operator experience. After decades of plumbing the advertising market, operators now earn about five percent of revenues from that source.
One can argue that consumer transaction volume is greater than the volume of advertising. One might even concede that getting a small partner fee to facilitate many of those transactions could be a big business. What remains unclear is how big a factor service providers ultimately might be in that business.
"Free voice and broadband" would be a disruptive marketing platform. But partner revenue from transation services does not have to displace all or even most of an operator's current revenue to provide immense value.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Marisa Torrieri