The IP Development Network Blog

In my final post ahead of Telco 2.0 next week, I would like to outline the key questions that I will be looking for answers to next week.

It is important for me to stress up front that the opinions expressed in this and all other articles on this blog (excluding the comments) are my own and do not in any way express the views of Telco 2.0 or STL Partners either directly or by association.

The background to this article can be found in two previous articles. The first piece looked sceptically at whether platforms are really in the telco domain when internet applications like Facebook, Joost and others are able to deliver much of the value with one global development. The second looked more optimistically at how a telco platform may be able to bring the safety and cost effectiveness which those applications need but cannot replicate.

Why would a consumer choose Telco 2 and not Telco 1?
Telco 1 is (for me) characterised by price competition and attempts to somehow project the image of superior quality. The problems with both are fairly clear - price competition is a race to the bottom, while quality of service is highly subjective. Anyone can claim to be cheaper and better - is your service even cheaper and even better...? Neither are sustainable.

A platform based Telco 2 has to put extra resources into exposing that platform to developers and developers need to jump through many hundreds of hoops to reach the same global audience. What benefit is that going to deliver to the developer and to Telco 2's customers?

It is stating the bleedin' obvious, but Telco 2 has to offer their suppliers and their customers something that they can't get from a Telco 1. That something, or that collection of somethings, has to be big and it has to be tangible to get developers to jump through those hoops and to get customers to think about something other than price.

The result is consolidation, meaning that there are fewer Telco 2s with more customers, more pricing power and hence more revenue each than there are Telco 1s. Why, because customers have chosen to drop Telco 1 in favour of those that have become Telco 2. In the end, only the customer's choice can determine the success of the Telco 2 platform, but that choice may be easier if there are no alternatives...

What is the value of the platform?
What can a telco platform based application do that cannot be achieved without the platform? What does the customer get from choosing a Telco 2 based service?

In the second piece I suggested ways in which applications can effectively be blocked from Telco 1 customers. This falls into two camps: applications which Telco 1 blocks because it cannot afford to deliver (like HD video perhaps?), and applications which block themselves (or pieces of themselves) from reaching Telco 1 customers.

The first of these is relatively simple to understand because it falls into something that is close to core telco business today - making networks more efficient. I won't labour that point because I have discussed it elsewhere ad-nauseum.

The Locked Gate
The more interesting area that I want to get you to think about is the second. Why would an application developer significantly disadvantage its customers that use a Telco 1 network?

Of course, Telco 2 throwing money at them for exclusivity is one way, but I suspect that this would not work with the bigger and better services that consumers are most interested in. Perhaps this Telco 2 ends up with a suite of niche aps but it will be a hard sell to make them into something that customers pay more for. Am I wrong? If I am, what is that suite and what is the differential advantage and price premium that can be extracted?

Giving the Application the Keys to the Gate
Something far more sustainable for the Telco 2, might be to have the application block itself. Why would a developer do this? I suggest that one reason may be to protect itself from legal issues. This may be the verification of age and/or identity that I mentioned in an earlier piece, another may be meet interception and other policing obligations that the law may impose now and in the future.

In fact, anything that you do in real life that requires an ID card might only be possible online if the consumer is using an application based on a Telco 2 platform that helps validate the user's identity. What are these? Banking may be one, pornography another. These two ends of the spectrum highlight the range that this may include.

But, I hear you cry, you can already bank or watch porn online today! Don't worry, I know... I will come back to this point at the end of the piece. Keep reading and it may start to make sense.

Eliminating Online Credit Card Fraud
A related area is payment fraud. If by using a Telco 2 platform, a service like WorldPay (or the credit cards that are used on such a service) can be insulated against fraud, significant sums might be saved. Hey, if WorldPay detects an attempt to pay with a stolen card, they could alert the Telco 2 who alerts the police immediately, giving precise location details...

If banks can eliminate this fraud exposure, might they offer a cheaper service to a Telco 2's customers? Might they even decline to service Telco 1's customers, perhaps after a tipping point has been reached?

Ok, so the above deals with mitigating the developer's legal and financial exposure and catching crooks, but there are upsides too. A Telco 2 platform may also be integral in delivering what has been termed the Holy Grail of advertising - personalisation. I wrote about this at length a while back, so I won't repeat that here but this is a different example of how identity, geography and location can deliver huge financial upsides to the applications.

Do Users Have to be Protected from Themselves?
Since I wrote that piece though, I have been made aware of many ways in which users have already given this data away. Some have freely and openly shared it with aps like Facebook, others have sold it for a song (or worse) while in other cases this has been quietly and much more secretively compiled by stitching together services like search, news readers and payment gateways.

A huge privacy issue facing the internet is "how I can make sure that data I provide today doesn't come back to haunt me in 10 years time". If I was 18 now and using Facebook to boast of my drunken exploits and womanising prowess, would I want my wife or my future employer reading about it, seeing pictures and watching videos of it all ten years later? Umm... no.

Would I want my kids reading about it all 25 years on? Photos of me at 18 are safely locked away (apart from the of me with back-combed hair that my mother-in-law is holding hostage): "what goes on tour, stays on tour" we used to say, but Facebook didn't exist when I was 18 - thank goodness.

These days, some muppet with a keyboard and a camera phone could seriously damage either their own (or worse someone else's) future. Can a Telco 2 platform help correct the mistakes we made when we were young? The demand for such a service may be practically infinite.

Growing Up
I suspect that at some point in the future, the data collection and storage on social utilities, search engines and payment gateways may come under intense legal scrutiny. Can this data, collected once, be used for eternity? Can it be used without explicit consent given at the time of use, rather that at the time of collection? I doubt it, but this has never been properly tested.

Can a Telco 2's platform help a) keep this data up to date, b) obtain consent at the time of use and c) create a chinese wall between your identity and the use of your identity? Yes is probably the answer, but how? That might take a little more thought.

Can a Telco 2 platform also help expand notice and takedown beyond the current copyright boundaries and into the social sphere? A key part of making such a process work would be clear identification of the user making the request, and validation of their right to request that content relating to them be removed. And of course, making the whole thing slick.

While the site in question may also have to act, such a validated request may shortcut much of the process and perhaps even remove the need for lawyers. Could the Telco 2 take responsibility for blocking content that has been requested removed but is not?

Telco 2 as The Big Brother
No doubt, there will be many readers hearing alarming implications for privacy. Indeed, the potential for abuse is clearly evident, but telcos are not applications - they have their assets fixed in place and cannot move their whole operation to escape legal obligations as an application conceivably could.

The Chinese Walls are vital. For sure, the Telco 2 holds a huge amount of customer data, but they do not benefit from its use so there is no incentive for its abuse. Much as is the case with old world telephony, the Telco 1 knows who you have called but they have no reason to use that for their own gain.

Locking the Gate
I said I would come back to this point and I have left it until last because it is unquestionnably the most difficult to conceive. What does the Telco 2 need to do to get the developers to play ball? It certainly won't be easy, but at its heart, the above relies on the Telco 2 making it impossible for the application to deliver its service without hooking into the Telco 2 platform.

I suggest that this is a three stage process.

The first stage is to develop the data sharing interfaces and to make them available voluntarily. This takes technical skills and is something that actually is not that hard for the Telco 1 to do. Telco 1 has, in all likelihood, not done so because they cannot see past this stage.

Stage 2 is to show the people with the real power - governments, lawyers and bankers - the dangers of the massively open model (child abuse, law breaking and fraud risks respectively) and how Telco 2 has the solution. Once there is a platform with the answers, some solutions might be legislated directly, others might arise because of the threat of legal action (getting jailed or getting sued) and others because liability insurance premiums skyrocket.

By the end of stage 2, it is likely that the biggest and the best aps are only available from Telco 2, so the final stage is easy. "Come and get it, Mr. Customer", Telco 1 cannot deliver.

Summary
I simply don't believe that a Telco 2 platform brings enough as a standalone entity, and there are potentially too many of them with too few customers each for the big global aps to work with. There has to be a big stick if the ap refuses the juicy carrot.

Fortunately, telcos are well practised at playing complicated games of legal chess because of all the regulation they have worked with for the past 25 years or so. There are some who can take your watch while shaking your hand!

The end result though is a place where I think we all want to be. Where the internet is a safer place for children and adults alike, where you have control over what people know about you, where you have control over how they use what they know about you, where you can remove content that you regret producing or that you regret someone else producing about you.

Some may find the approach a little underhand... But is there an alternative? If you skip stage 2, why would a developer jump through the hoops? If developers don't differentiate between Telco 1 and Telco 2, there will be no features to promote in stage 3, so your stage 1 investment would have been wasted. Does anyone have a better suggestion?

Labels: Telco 2.0

# posted by Jeremy Penston @ 10/11/2007 01:20:00 PM

Thursday, 11 October 2007

The Big Stick