2.6 Mobile Data Business Model
2.6.2 Organisational Arrangements
The arrival of 2.5G and 3G mobile services will dramatically change the business logic underpinning mobile communications; a logic that was built for traditional voice only services. The shift from circuit switched to IP-based networks, combined with the evolution of the radio and terminal sides, will move control of value propositions from the mobile
access and core networks towards content and application creators distributed on the Internet.
This will give rise to new players looking to take their share of emerging business opportunities (Ovum, 2001).
In the traditional mobile voice value chain the customer buys airtime from a network operator based on equipment purchased from a manufacturer. In some cases, an intermediary service provider and a retailer may add value to the chain. The focus of 2G is on selling airtime with a number of different pricing schemes. New mobile data technologies will offer increased opportunities to new players, particularly in the area of content services.
Content providers who own the content (through generating, sourcing or purchasing it) will provide original information such as news, financial information, music, etc. Content packagers combine different content sources and offer access to content through portals.
Most packagers will not usually establish a direct billing relationship with consumers but rely on revenue from click-through, e-commerce, advertising, etc. Value added service providers on the other hand, establish this direct billing relationship and resale content or offer value- added telecommunications services (Bouwman, 2003).
According to Ovum (2001), the mobile data industry has not yet settled for a common and industry wide organisational constellation. There is no consensus within the industry regarding how business should be conducted. Even in the classification of the industry actors there is no common understanding. To be able to analyse the possible business models within the mobile data industry, a classification of the actors and their respective activities is needed.
Furthermore, a language to communicate and visualize how the industry is organised and what streams it contains is also required. Prem, (2002) presents a useful and comprehensive model of this, which is illustrated in Figure 2.8.
FIGURE 2.8: THE MOBILE DATA VALUE W E B
Adapted From: Prem, E. (2002). Innovative Mobile Services and Revenue Models. [Online].
Available at http://www. eutema. com/downloads (Last accessed: April 2004).
The new value chain reflects the convergence of telecommunications, IT and media companies. There seems to be a strong trend towards integrating as many value chain elements as possible into a company or holding. (Prem, 2002).
Bhargava (2002) lists the major entities or roles that are expected to emerge in the new value network or chain as:
> Mobile suppliers -manufacture and sell infrastructure for both voice and data networks, including the core and radio network equipment and terminals.
> Mobile network operators - own the infrastructure and licences required to operate a mobile network.
> Mobile service providers - provide mobile voice and data services to end-users by buying airtime from network operators and reselling it to end-users under their own brand name.
> Mobile virtual network operators (MVNOs) - these companies own network infrastructure and sell their services directly to customers using their brand name. They do not have a radio licence, and buy radio capacity from licensed network operators.
> Application service providers (ASP)- provide software-based application services to mobile network operators, service providers, MVNOs, and portals.
> Application developers - design and develop applications for the mobile world.
> Mobile portals - mobile portals offer an access point for mobile users to the mobile Internet. They offer access to content, links to other sites, applications, and services that can be accessed and operated from mobile terminals.
> Content aggregators- collect content from various sources and repack them in a user tailored offering that can be delivered to the mobile terminal.
> Content providers - produce content in a wide range of fields. Content can be in the form of textual information, game applications, banking services, specific database (e.g. airline ticketing), etc.
> Payment facilitators - provide payment facilitation services required for execution of online (mobile) transactions. This role can be performed by financial institutions such as banks and credit companies (e.g. Visa), or by companies providing only such services.
> Sponsors - sponsors most often pay part or the total cost of a service, making the service cheaper or free for the end user. Sponsors include sellers of products who are actively looking to promote their products through advertising in different types of media and by sponsoring services. Another type of sponsoring is subsidisation of devices, which is a common method to increase the number of subscribers or to attract new customers after the initial launch.
> End users - private and commercial users who buy mobile services from different types of players in the value web.
According to Ubacht (2001), most of the entities applying for a 3G licence have indicated their strong desire to assume the roles of the network operator, service provider and mobile portal. Other, more aggressive companies are also contemplating becoming payment facilitators and content providers. In figure 2.9 a simplification of the role models for the mobile data value chain are depicted.
FIGURE 2.9: ROLE MODELS IN MOBILE DATA VALUE CHAIN
Adapted From: Ubacht, J. (2001). UMTS: Question Marks for 2G Operators. Delft University of Technology Publication. Netherlands.
The role of content providers and value added service providers will increase. An example of this can be seen in Japan where the mobile operator NTT DoCoMo has an alliance with about five hundred partners to offer news, information and entertainment within their service concept, i-mode. One player in the value chain can of course assume more roles. Looking at 2G operators the question of provisioning 'merely' transport services or positioning themselves as service/content providers is an important one. Their main strengths are direct access to the customers, access to customers' profiles and management of registration and billing of usage.
Both the revenues and costs of the entity will depend on the position/roles the entity assumes in this new and emerging value web. Thus, a correct business case can only be prepared once the entity's desired position is known.
2.6.3 Financial Arrangements