Content: The Frontier for RA?

They used to say that 3G stood for girls, goals and gambling. That reduces the network to its purpose as seen by the customer. The network itself is uninteresting; what matters is the content it distributes. Telecoms companies have spent an extraordinary amount on equipment and software so customers can watch video highlights of their favourite football team’s last match whilst sitting on the bus. There is a gulf between what people want (to see a goal) and how they get it. In the modern era, how people get what they want can depend on so much. In the example, the customer’s experience is built upon the use of better materials that makes for a longer life of the tiny battery in their handset, and the management of the radio spectrum to enable the signal to be sent uninterrupted, and the use of remarkable mathematics to condense the content into the fewest possible signals whilst stopping people listening in, and the cameraman’s skills in following the action on the football pitch, and countless more besides. The operator is just one link in the chain of people and businesses that delivers the content to the person enjoying it. The customer does not need to care about how the content gets to them, just like they not particularly care how a washing machine works so long as their shirts look clean and they do not particularly care how a train works so long as they arrive on time. What they really care about is when they expect something, pay for something, but do not get what they expected and paid for. As revenue assurance practitioners get involved in content, they need to be clear on how far they want to get involved with content, and the real reasons why people pay for it.

In a sense, there is nothing new in the idea of telecoms companies distributing content. What I say to somebody else during a phone conversation is still content of a sort. When people talk about content, they mean the kind of content where the same content is delivered to many recipients. In other words, they are talking about content that has more value because of the size of the audience. But the pricing of content is more sophisticated than that. Content can be valuable because many people want it, like the girls, goals and gambling of 3G. It can be valuable because some people want it a lot, and are prepared to pay a premium for it. A good example of that is business news and stock market data. It can be valuable even if nobody wants to receive it, so long as somebody wants to send it. Advertising is the most obvious example of content that gets paid for by the source, not the recipient. Telcos face a question of how much they want to be involved in making money not just by providing a pipe that content flows down, but by expoliting the content that flows down the pipe. There is also a question of how much they can make money from content – both because of competition and because regulators will intervene to ensure there is competition. In the midst of this, RA departments need to look again at their mission. If the mission is to help the business make money – without limits – then RA will check not just that customers are billed for the content they receive, but that customers are willing to pay for it. If not, the business can suffer. The telco pays a cost for the content, and if the forecast of demand is wrong, the cost paid for content is wrong too. This is not just a straightforward equation between the amount charged to the customer and the amount paid to the supplier. There is also the cost of working with a supplier (overheads like integrating a supplier to provide the content and recurring processes like settlement) and the opportunity costs of providing the wrong content (customers will not search indefinitely for content so making it easy to find the wrong content has a cost in people finding it too hard to find the right content).

All of these questions sound a world away from the concerns of RA. We expect marketing people, not RA people, to judge what kind of content might sell and for how much. Therein lies the heart of RA’s dilemma. If the future of telecoms is to make a premium by distributing valuable content, and avoid the trap of selling only a dumb bitpipe, then RA is at risk of assuring only the dumb bitpipe part of operations. When businesses sell a customer a phone conversation by the second, and when customers pay for a conversation by the second, then it is clear why you need to get the charges right and receive the money for the service sold. When businesses sell girls, goals and gambling, and customers pay for girls, goals and gambling, business news and advertising space, the relationship between the services sold and the charges rendered is no longer so straightforward. RA can try to step up and extend its role to really understanding what drives customer profits and satisfaction, or it can stick to assuring the bitpipe, almost ignorant of what people use it for and hence why customers pay, what they are paying for, and why they might stop paying. The obstacle for RA here is one of imagination; not everyone will be able to make the leap and it is not clear if there are any executives who would even expect RA to do so. It would be easier to trust management of non-linear relationships between services and money to the kinds of people who feel more comfortable with them, especially the kinds of people who work in Marketing. RA might then stick to what it knows well, which is the simple linear relationships between selling a unit and charging for a unit, be it a unit of time or a unit of bandwidth. The problem for RA is that only the dumb bitpipe business model is based on selling time and bandwidth. That means the ‘hot topic’ of RA might start looking like a leftover from old-fashioned telcos, from a time when dinosaurs walked the planet and the consumer’s choice of services meant deciding whether to make a call or waiting for someone to call them.

There will always be some value in assuring the bitpipe side of operations, but if profits are driven by content and how it is packaged, the value in assuring the bitpipe side of operations must diminish in significance relative to the business as a whole. That is what makes content, and the effect it will have on business models, the real frontier for RA. RA may return to what it was originally: a discipline for pioneers, who wrote their roadmap on a blank sheet of paper as they went along. Or RA may be penned in by the frontier, as it narrows around them, leaving RA doing a useful job in an area of reduced importance compared to the real drivers of profits and cashflow. Either way, the frontier is there and its importance is going to grow unless operators just give up on the content-led model and accept their fate is to make money from dumb bitpipes alone. The signs are that most telcos fear becoming dumb bitpipe suppliers, even if they are not sure how to avoid it. In the meantime, the question for RA is whether it goes to the content frontier, or if it waits for the frontier to come to it.

Eric Priezkalns
Eric Priezkalns
Eric is a recognized expert on communications risk and assurance. He was Director of Risk Management for Qatar Telecom and has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and others.   Eric was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He was a founding member of Qatar's National Committee for Internet Safety and the first leader of the TM Forum's Enterprise Risk Management team. Eric currently sits on the committee of the Risk & Assurance Group, and is an editorial advisor to Black Swan. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.   Commsrisk is edited by Eric. Look here for more about Eric's history as editor.
  • Mike Willett

    Eric,

    Yours is a valid argument and I think you are suggesting RA move more towards “revenue management” (which probably needs more definition).

    I think RA has had a role to play with “how” products are used already. Taking traditional voice in mobile, I’ve always felt that SIM boxing, where arbitrage is involved rather than outright non-payment, is an RA issue as pricing plans are exploited and are used outside the intentions of the service provider. Perhaps your ideas on content might be a further step past pure leakage focussed work.

    Mike