One of the things that I thought about extensively over the last couple of weeks is that each of the primary applications/services (loosely defined) provided by companies in telecommunications and media and entertainment industries are being radically transformed by the web: voice, video, and publishing. If we look at the order in which each of those industries have been impacted there is a sensible progression:
(1) Publishing – the web was originally text based, so these were naturally the initial services brought to the web.
(2) Voice – once the networks became reliable enough to handle real-time communications, Skype, Vonage and others were able to offer their services over the IP networks.
(3) Video – over the last few years the web Is becoming a serious competitor to the traditional providers for entertainment audience forcing the content providers to use the Internet as a distribution mechanism.
The impact is magnified by the fact that well funded companies are knee deep in each of these areas. For example Google is a competitor in each of these areas with services like Google Books, Google Voice, and YouTube.
The initial reaction to the web by the companies in this space was to take a defensive stance. For example the mobile service providers created a “walled garden” using IMS for voice and video services. The IMS architecture has a concept called an Application Server that would be certified by the NSP and interoperate with and store data within the IMS services, for example the Home Subscriber Service (HSS). This architecture follows logically from the 2G wireless standards that allowed CAMEL applications (like SMS) to reside “in the network” and be certified by the NSP. This “walled garden” approach has been shot down by Net Neutrality provisions by the FCC and has created the opportunity for OTT communications companies (like Ribbit) to provide services like SMS and voice OTT.
Now that the competitive landscape and the rules of engagement have been defined, the big question is how do traditional companies survive and thrive taking these dynamics into context? By applying the same monetization mechanisms that have made these companies successful in the past, which are the same mechanisms implemented by successful web businesses, like transactional billing, subscription services, and search/advertising we are starting to see some opportunities to increase ARPU in this space (or at-least less of a decrease):
(1) The Associated Press is using the Azure ‘Dallas’ services within Azure to create a monetization mechanism for their news archives. This AP service charges for per-transaction access to content that other companies can provide to their audience forcing web companies to pay for the content that they access.
(2) Ribbit for Windows 7 (the converged communications desktop) combines value-added services like social networking, advertising, maps and search to traditional telephony services like voice, SMS, voicemail to create new subscription and advertising-based revenue streams.
(3) The TMF WAVES catalyst provides a secure environment for content consumption by requiring a subscription to a video service or on a per-transaction monetization model. This model can open up new revenue streams by allowing content providers to distribute content that is not available over the web, like old episodes of TV programs.
Some companies certainly see opportunities in this space and others are more concerned with playing defense. But if history is any indicator of the future, the companies that embrace the economics of the web and the concept of openness will win in these industries. Open platforms and open standards have been the keystone of every successful software platform in the past. The ultimate winners will compete based on the quality of content and service and moving headlong in to the new economic realities.