Service Provider Models Create New Revenue Opportunities for MDUs
By Bill Clark & Ellacoya Networks Inc.
It’s one of the ironies of broadband services in the age of instant messaging, e-commerce and terabits of bandwidth. All the bells and whistles in the world don’t matter at all if customers shrug when greeted by lowest common denominator services.
Customers are looking for more than just access services and mass-market applications. They are looking for new, customized services that enable a business imperative or a lifestyle activity unique to them or their organization. Unfortunately, what customers are getting is a confusing rush of providers offering similar, undifferentiated services.
The old model of service introduction—market research, product development, beta test, commercial rollout—is showing its cracks in an era when access methods range from PCs to PDAs, communication sessions involve all manner of voice, video, HTML, wireless and e-mail. Customers have done what customers are expected to do: customize and specialize. And it’s high time service providers and carriers caught up.
The emerging business model of Service Agency may be just the ticket to close the gap between customers and their service providers. A Service Agency is a traditional service provider that has transformed itself from a provider offering network plumbing only, into a provider offering valuable network, content and applications services. These applications and services can be offered and maintained by the service provider itself, or through partnerships with content creators, connectivity companies and applications providers.
"As an early adopter of the Service Agency business model for multi-tenant unit commercial buildings, Everest Broadband is building out a flexible network infrastructure that allows for partnering to bring next-generation services to business subscribers," said Joseph Varello, vice president of corporate development for Everest Broadband. "A complete architecture for individualized next-generation networks is capable of changing the way providers do business."
MDU service providers like Everest, Urban Media and Allied Riser Communications are contracting with building owners and managers to deploy broadband infrastructure within office buildings, residential units, universities, schools and municipal offices. Once the buildings are wired for broadband, the Service Agency business model enables the rapid rollout of new, value-added services by partnering with other application providers and local businesses, leveraging those service offerings to increase customer satisfaction and per-subscriber revenue.
The effect of personalized services is already being felt. According to company reports, analyst numbers and government figures, the average annual revenue per subscriber for AT&T fell to $209 in 2000 from a previous high of $250 in 1998. Conversely, America Online climbed to its high point in 2000 of $265 per subscriber. The shifting market and the demands of customers will compel more carriers and service providers to innovate and explore new business models.
Service Agency creates a valuable relationship between the provider and the customer where differentiation comes not from price, but from the service provider understanding and empowering the customer. Service providers become active enablers that add value, rather than passive managers of broadband conduits. Service Agency propels partners into new markets with a brand name and sales force they couldn’t previously have mustered. For customers, Service Agency gives them a vastly larger service menu that can be easily tailored to their requirements.
Service Provider Models Create New Revenue Opportunities for MDUs
By Bill Clark & Ellacoya Networks Inc.
Underlying the Service Agency concept is a service generation system that provides access to best-of-breed applications and services. Providers or managers of MDU services can more easily attract new tenants and retain existing ones. And tenants can easily customize the look and feel of a personalized service portal for their users.
The applications they will be able to choose from are practical and broad: unified messaging; project collaboration and management; videoconferencing; distance learning, e-commerce, finance, accounting and spreadsheet software; human resource management; customer relationship management; supply chain management; and enterprise resource planning (ERP), among several others.
"Personalization--whether for consumer or enterprise customers--is key to service provider profitability and gaining customer loyalty," said Deb Mielke, president of Treillage Network Strategies. "The Service Agency model provides a solid basis from which service providers can build the corporate and consumer product/service packages that are critical in developing and maintaining customer identity in the electronic economy."
Service Agency Pioneers
Many providers are focusing their network expansion on a building-by-building rollout of the Service Agency model, working with MDU tenants and building management, but also with carriers, applications service providers and other parties as necessary.
Internet access has become just another checkbox on a list of communications and networking requirements for any MDU business tenant, along with dial tone, fax machines and voicemail. Such commodity services are low-margin and don’t help a service provider stand out. Consequently, commercial MDU providers are quickly introducing new value-added services like business TV (CNBC, Moneyline) and content services (video-streamed headline, specialized e-mail alerts about stock market developments, even sports scores). In addition, they’re forming partnerships with overnight delivery firms, office supply stores, application providers and others wanting to sell to the high densities of prospective MDU customers.
Upstart service providers with their eye on the residential MDU market are taking their broadband infrastructure into high-end subdivisions. They’re deploying Ethernet across the wide area as well as wireless access and digital subscriber line connectivity. They’re coming to market with a product portfolio that includes more than just voice and Internet services. They’re also offering personalized TV, online banking, school bulletin boards and takeout and delivery services
Clearly, the matrix of partnerships at the heart of Service Agency creates a complex set of business relationships as retail and wholesale operations intertwine. Moreover, the services ultimately viewed or used by a customer might actually get resold many times through different levels of wholesalers. Regardless of the business relationship struck between the service provider and partner, both expect it to result in new revenue streams.
Implementing A Service Agency Business Model
Conceptually, Service Agency encourages innovation, builds customer loyalty and conceals complexity. By using the open intelligence resident in network directories, Service Agency extends network control over advanced service functions to partners and end users, either to create or personalize the services they need. Without such openness, providers become a barrier to change, connections are pre-provisioned and static, and the customer has to adapt to the network, rather than the other way around.
Open intelligence goes beyond making simple decisions about source and destination addresses. Open intelligence funnels traffic among different network points, whether a digital certificate repository for encryption or a media gateway that converts voice bits into packets for voice over IP. The network then establishes connections based on a multitude of factors like bandwidth, priority, time of day, user group affiliation, response to failure and billing plans.
From a unified services launch pad come network services, applications and targeted advertising for the golfing executive, the cost-conscious office manager or an administrative assistant browsing bargain vacations a few days previous. The portal provides access to applications and services that are linked to the network elements through the directory system so that the appropriate network delivery attributes, whether QoS parameters, tiered service levels, or encrypted VPN tunnels can be activated or provisioned when selected by the user.
Such a personalized Web portal is the true vision point where a subscriber can access any service, anytime, anywhere. Its purpose is to provide all the applications and services of interest to a group or individual subscriber, in an easy-to-use, Web-based format. Consequently, by enabling a highly personalized user experience, the relationship between the service provider and the subscriber is strengthened and the application or service is enhanced.
A provider can become a Service Agency over time in steps that follow the expansion of their business. Adopting the model over time eases the transition and impact on operations. Providers can initially deploy service generation to improve their internal operations and then apply more and more of its functions as their service portfolio expands.
Extraordinary changes in technology, regulation, and customer expectations have simultaneously collided on the telecommunications scene. Staying ahead of all of the change is nearly impossible. Providers need a new business approach to minimize the risk while exploiting the tremendous opportunity of change. Service Agency is the business approach to give providers command over the complex, ever changing currents of the industry, highlighted in Figure One. Service providers who ignore the potential of this new business model risk being left behind, maybe to the point of extinction.
Service Agency recognizes the high value of the existing relationship that providers have with their customers. Distribution power gives providers the edge in the industry. The focus of differentiation is not on services, but rather on the buying experience of their customer. With an easy way to select the hottest services and personalize the delivery, customers stay happy and loyal. Service Agency creates significant and profitable new revenue streams for providers to build their business.
The Service Agency business models gives providers the edge they are looking for and is particularly well suited to the market conditions and customer requirements of MDU service providers. With Service Agencies acting as brokers between customers and partners, customers receive the fullest possible range of communications and applications services. With Service Agency, the MDU service provider need not be the expert in all applications and services, but can instead focus on providing the flexible network environment where applications can be personalized and delivered seamlessly.
Through partnering or developing applications internally, the rush is on for service providers to offer the best experience and most comprehensive set of services to the end user. In the end, the best bells and whistles are the ones the customer can select himself.
About the Author
Bill Clark is Director, Product Marketing with Ellacoya Networks. Ellacoya is an innovative technology company developing next generation data communications equipment --the Service Generation System platform, which consists of both hardware and software -- for service providers and carriers in the emerging Intelligent
Services Provisioning market.
The author may be reached with questions or comments via email at bclark@ellacoya.com