Introducing Telco 2.0 - A Business Primer

By Thomas Howe

Name a Web 2.0 business model that doesn't depend on advertising. Anyone? Beuler? We may all be forgiven when we fail to name a second business model, as the success of Google, Facebook and MySpace drive both investors and customers into such a frenzy that countless startups are funded with no other value proposition than to be able to aggregate large amounts of subscribers such that one day ... we could advertise to them. 

For those who struggle with naming a second model, I would like to introduce Telco 2.0. In the first of a two part series, I want to put forward the unique business proposition Telco 2.0 offers and how it differs from everything that went before it.

From a business perspective, three points are important to understanding why Telco 2.0 is such an interesting place to invest money, time and attention. Telco 2.0 refers to telecom software and services that sit "over the top" of other services such as the Internet, the PSTN and mobile networks. These applications interface with the networks below them to provide services, and use the Intranet as the way subscribers are attracted and acquired, and as the way subscribers manage their services. 

As a direct result of this approach, Telco 2.0 has three identifiable business advantages over the last generation of telecom application deployments:

• 1) Telco 2.0 applications do not require massive investment into infrastructure, as they ride "on top of" other networks.  Telco 2.0 applications connect to these networks through Web Services APIs, which are paid by the transaction and avoid investment into "big iron" approaches.  A decade ago, multi-million dollar investments into hardware to support a new service was a common requirement.  With voice APIs, the only requirement to support my development is a credit card with a hundred dollar credit limit.
• 2) Telco 2.0 applications can be successful with a small handful of customers. Since massive investment is unnecessary to develop the application, insanely large revenue targets are unnecessary. Since the service runs on top of the existing world-wide Internet and PSTN networks, everybody with a connection to the legacy networks can sign up for the Telco 2.0 service. In essence, exactly like a web site, you can deploy your application to the world with a single click, and exactly like a web site, you only need to capture a very small piece of the pie.
• 3) Since a small number of subscribers can make a service successful, Telco 2.0 applications can be extremely targeted, extremely narrow and extremely valuable to those who need them.  The direct result of this is that Telco 2.0 applications can charge significantly more than traditional services, more than making up for whatever inefficiencies may arise from designs that ride on top of another's network.

As I meet and speak to those outside the telecom world, I often see the eyes glaze and the disdain rise when I mention "operators" and "carriers." Just like good business models, respect for traditional carriers is sometimes hard to find. My only response is simple: Name any other industry that has convinced every adult on the planet to give them $30 a month for a completely renewable resource. (In fact, isn't that the real problem? It's too renewable?) I believe that there's more than one way Telco 2.0 will flatten the traditional telecom market, and that's really going to be impressive.

Now, other than the advertising industry, name an industry so poised to take advantage of what Web 2.0 has to offer, and if you do, I'll ready my resume tonight.

My bet is that I'm going to bed early.

Thomas Howe is a long-time telecom consultant, writer, and speaker who is the CEO of the Thomas Howe Company, providing expertise in improving the business process with real-time communications. His website is at http://www.thomashowe.com