Beyond voice and data - opening the door to data monetization

Communication service provider operating models have traditionally been well-honed and tested during an era in which services encompassed voice and data offerings. However, the increasing connectedness of things has turned processes, assets, and even products into living ecosystems comprising communication, cognition, and collaboration. The changes in expectation from enterprise and consumer customers alike necessitated by the maturity of 3rd Platform technologies (cloud, mobile, big data, and social platforms) are driving the transformation of service provider operational models.

In IDC’s 2018 Carrier Operations Transformation Survey of 72 operators across Asia-Pacific, 55% felt their operational transformation journey was in progress, with only 15% feeling they had concluded that journey. Only 4% felt that no transformation of their respective operating model was required and suggested that the message from customers has been received loudly and clearly.

Three primary realities exist in the communications services market:

Dwindling overall profitability. As customer usage shifts from high-margin voice and SMS services to low-margin data products, earnings are taking a hit. Necessary investments in infrastructure to meet exploding demand while maintaining quality of service impact cash flow adversely. From 2017-2022, IDC estimates mobile data average revenues per user (ARPUs) to fall by over 22% in the APEJ region, whereas mobile voice ARPUs will fall by over 7% in the same period.
Customer demands for agility. Customers expect the same experience anywhere, driving the expectations of fixed, mobile, WiFi, and satellite toward a performance and availability convergence. Failure to deliver such an experience leads to greater willingness to change providers, causing unprecedented levels of churn. Mobile data is expected to grow at a more than 35% compound annual growth rate (CAGR) for 2017-2022 in APEJ, whereas fixed data traffic will grow by 15% over the same period.
Keeping up with technology and competition. Operators must constantly innovate and improvise to keep up with shortening product life cycles. Further, more players are entering the telecoms market eager to embrace the technological boom, leading to overcrowding and shrinking market shares.

Telecom networks generate a huge amount of data, and much of this data is potentially valuable to organizations outside the telco itself. This presents a potential opportunity for data monetization that has long been considered huge but has proven difficult to realize. As operators face stagnating revenues contrasted with the need for continuing investment to maintain their core business, such opportunities become ever more important, and their motivation to find the best ways to exploit said opportunities grows.

The quantity of data theoretically available to telcos is enormous. The mobile network means that operators can track the location of all active SIMs in areas of mobile coverage. Those that operate public WiFi could also track position within their WiFi zones. Because of customer relationship requirements - and sometimes security regulations - operators need to know who their customers are. They have data stored in their customer relationship management (CRM) systems, such as verified identity and home address, and these can easily be complemented by verified demographic data, such as age and sex. Details, such as the number of devices in a household, and newer subscription features, such as shared mobile data, can indicate the size household subscribers live in.

The first steps

Before progressing to a monetization model, carriers must enable the following three items:

Operators need a big data platform before they can consider data monetization: For any data to be monetized, it must first be available. Operators should be harnessing their data to inform their business and drive decision making as well as have the technology platform in place to do so. Mechanisms to select and further process relevant data to make it suitable and useful for an outside audience will need to be added, but without this base, it will be hard to begin.
Operators must be sure the data is appropriate for outside use: Any external use of data must of course comply with any relevant regulations and consider the potential impact on customer privacy. When building data monetization products, necessary safeguards should be fundamental to the design. In almost every case, operators should sell the products of their analysis rather than the raw data.
Operators must meet a real market need with any data monetization product: To monetize data, there must be a willing market ready to spend money on the product being proposed. There needs to be a clear idea of how to connect with that market and an understanding of how the market will use the data in order to design the product appropriately. The main use cases for monetizing telco data can sensibly be collected into two basic categories: targeting data for programmatic advertising sales and everything else.

Overall, data monetization presents an opportunity for diversification and a new income stream. It cannot be expected to transform a CSP’s fortunes but is absolutely worth pursuing. There is no one-size-fits-all approach. A company’s broader strategy and circumstances much be considered:

Big data maturity is fairly widespread in the telecoms industry, but it is still worth saying that if a CSP is not successfully using its data to drive decision making internally, it will not be in a good position to help others use its data to drive theirs.
There is a range of proven use cases, and it may be tempting to jump in to several for maximum revenue potential, but the most successful data monetization efforts have concentrated at least initially in one area.
Understanding the target market is important. Data and analysis must be presented in a use case-specific way so that they are immediately useful to the target market. Working with partners can be helpful in this area. Vodafone found success collaborating to some extent with small sector-specific solutions providers to better target and hone its offering.
Reaching the target market is also essential to launch a successful offering and gaining ROI. Focusing on ways existing products and relationships can be used to reach a market may help identify the best use case to focus on.
For some, the best option will be to work with an aggregator platform. This reduces technology investment and lets someone else take care of the path to market but, of course, reduces direct income. Working with an aggregator does not preclude offering a direct product as well. Indeed, it can be an excellent complement.
From a privacy and customer relationship standpoint, use cases with aggregated data sets are easier to pursue than any using individual pseudonymized data and offer worthwhile prospects over effective monetization.
Individually targeting data and finding a way into the programmatic advertising value chain should not be ruled out by anyone. There are some solutions available that are worth exploring, and more will come to the market.
Without automatic opt-in, there is unlikely to be a viable business opportunity in data monetization. As long as the protection of privacy is absolutely assured (and regulations complied with), this is a fair approach, but it is also important to be proactive about communicating with customers on external uses of their data.

Hugh Ujhazy is the head of research for Internet of Things and Telco Practice at IDC Asia-Pacific

This article first appeared in Telecom Asia Vision 2019 Supplement