opinion


Plain old billing is where the real pot of gold could be

In the rush by operators to roll out app stores, cross-network widgets and other services designed to lure Web developers and users, it is easy to forget that perhaps the greatest asset that operators have to secure themselves a long-term place in the digital-content value chain is plain old billing.

Although operators’ content offerings are becoming overshadowed by the profusion of application stores being launched by handset and OS vendors, it is interesting to note that many of these vendors want to enable their stores with carrier billing. IPhone App Store copycats they might be, but one thing they don’t feel they can get away with copying is Apple’s single-minded exclusion of carrier billing from its store. All applications bought on the App Store are billed through Apple’s online-digital-content platform, iTunes – leaving operators well and truly out of the picture.

Not so in the case of Nokia’s Ovi Store and Microsoft’s Windows Marketplace for Mobile. Both stores are being enabled with carrier billing wherever possible. And most other vendors launching app stores are reportedly planning to do the same, even though carrier billing is extremely costly. Carriers charge a percentage of the revenue billed through their networks. The average for off-portal content transactions in Western Europe is about 30% – which is phenomenally high compared with the single-digit percentages charged by credit/debit-card and online-payment providers.

But handset/OS vendors realize that it is going to be hard to get sales going on their nascent stores without carrier billing. That’s because they do not have existing billing relationships with end-users, and it is unrealistic to think that most users will be happy to key in their credit-card details on their phone before they try to make their first purchase on a store. Most users will give up before trying.

Payments for the masses

At the same time, the vast majority of mobile users around the world don’t own credit or debit cards – either because they are too young or because they live in parts of the world where bank accounts and plastic money are rare. This is predominantly the case in most developing countries.

So if most app-store sales end up being billed via mobile networks, operators will reap handsome profits from services that they won’t have had to spend a penny to deploy and market – just as they do through enabling billing for third-party off-portal services.

Another enticing opportunity afforded by operators’ billing relationship with mobile users is that of enabling mobile payments on fixed-line Web services. That is already happening through applications that mobile billing aggregators are making available to Web-site owners, which enable users to key in their mobile numbers to pay for digital and, in some cases, physical goods through their mobile accounts.

After the onslaught suffered by operators from online and PC brands such as Google and Apple – which are doing a good job of disintermediating carriers from the mobile content value chain – operators have the opportunity to counterattack and tap into some of the revenue being made through digital content and e-commerce on the Web.

Operators have a far greater chance of generating revenue from billing than from trying to compete in the provision of content-and-application services with brands that are simply better at it and have more street cred than they do.

But to ensure that mobile payments become mainstream, mobile operators must become less greedy and substantially lower the extortionate rates they currently charge. In the long run, it will pay off handsomely for them.

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2 comments

  1. Neil Philpott 26/10/2009 @ 1:49 pm

    Using an existing billing relationship as the mechanism for charging for new services has strong appeal to the customer as well as making sense to the biller. However, ensuring this is and remains the perferred billing channel for the customer presents challenges in price list management, credit limit management, revenue sharing, etc as well as more complex issues such as consumer trust and confidence. Furthermore it brings the telcos into head-on competition with the card companies and on-line retailers who have been doing this for a long time. After years of 2.5G, 3G and broadband, it remains to be seen whether telcos can make this a success.

  2. Andrea Willige 29/10/2009 @ 4:29 pm

    If this wasn’t the slow-moving telecoms sector, you’d say that it was all a bit old hat.

    The industry has been talking for years about the need for operators to leverage their (powerful!) billing relationships for these purposes. But nothing has happened. Apple has slipped past, and in spite of Nokia and MS, I wouldn’t be surprised if other big (esp. global) brands went down the same route. Why share revenue when you can have it all? Especially when sharing is likely to involve convoluted settlement processes, technical intricacies and delays?

    I agree with Guillermo. Operators need to make a radical strategic decision: give up their ambitions of being independent content providers — they have largely missed that boat anyway — and turn their trusted relationships with subscribers into an asset that will appeal to content providers. To succeed with this approach, they need to provide and attractive billing environment for both content providers and subscribers alike. This will mean making the most from their billing systems, including serious investment in more advanced billing and settlement processes and systems where they’re not already in place.

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