Customer data analytics: New revenue option for network operators

The TM Forum believes facilities-based network operators should invest in high-quality analytics tools to provide advanced customer data analytics to other service providers in order to create new revenue from the vast amount of customer information they collect and secure a place in the next-gen services value chain.

Note from the editor: In this month's column, TM Forum President and COO Martin Creaner looks at how telecom operators

can play a role in providing customer data analytics to other service providers to improve customer experience and carve out new revenue streams for themselves throughout the communications value chain. The trick will be to develop a business model that effectively uses data mining and analytics tools to find relevant customer usage patterns.

Network-owning operators don't want to be cut out of the next-gen services value chain, which means their business plans must evolve to make them essential.

Martin Creaner
President and COO, TM Forum

You only have to look at the worldwide phenomenon that is the iPhone, the hundreds of millions of active Facebook users and the popularity of Gmail and other applications from Google to see that today's communications world is vastly different from just a decade or two ago. Where once operators ruled the telecom landscape largely because they owned the network infrastructure that delivered services, today the service provider and content developer reign supreme in a world where apps trump fiber or broadband.

Even the terminology for different kinds of companies that deliver services is shifting. Companies that offer communications services are called service providers, but only about 5% of these providers are actually "operators" -- meaning companies that own an actual network. We will continue to see services offered by providers that aren't operators at all, and that will offer services ranging from the traditional (voice, texting and Internet) to a much broader range of services (automotive, health care and security).

While these changes bode extremely well for end users, who will have many more service choices than ever before, what do they mean for traditional operators that could easily end up as "dumb pipes" (although I'm not fond of that term)?

The point is that without a strong business strategy, operators will be cut out of the value chain entirely, even though they own the means for transporting services to customers. Their revenues won't dry up completely, but they'll stagnate, at best, leaving few opportunities for growth and making it more difficult to maintain strong positions in the industry.

Network-owning operators don't want to be cut out of the next-gen services value chain, which means their business plans must evolve to make them essential.

Network operators can use customer data analytics as value proposition

If operators just sit back and hope that their infrastructures will guarantee them places of prominence in the world of communications going forward, they will be sorely disappointed. Service providers are already able to reach out directly to end users, so operators need to get back in the game and find their slot in the value chain. In fact, it's not a given that they even have a slot anymore -- they need to prove they deserve a seat at the table quite simply by being useful.

Between a small percentage of services that will not involve an operator at all, and another small chunk that will be controlled entirely by the operator, there is a huge segment in the middle -- about 60 to 70 percent of service revenues -- where operators have to fight to get a piece of the market.

They need to be creative for service providers to want to work with them rather than bypass them. The key to this strategy is data. We'll see a lot of innovative business models going forward that involve advertising of some sort, but advertising will not fill the gap between services customers are willing to pay for and those they expect to be free.

There's plenty of evidence that many customers will be willing to part with personal information in exchange for communications services. It's almost a barter system; you give me your personal data, I give you free texting. While there may be some merit to this business model, one group of players in the value chain is already sitting on an absolute treasure trove of customers' personal information: the operators.

High-quality data analytics can make operators a touchpoint for customers

In order for operators to remain the force they were in the 20th century, they need to become the kings of the data mountain. If they use the data intelligently, there's no reason operators can't play a role in half of the services going to end users. The data they currently hold can be used to improve customer experience, help service providers better target their offerings and deliver advertising just when and where customers want it.

But to do that, operators actually have to do something more than just sit on the data and hope something happens. They need to look at it closely using analytics tools and use data mining techniques to discover patterns to make sense of what they have.

In essence, operators need to become the main touchpoint for everything a customer is doing; the place where people go to understand the customer experience. This is gold in an industry that thrives on information and knowing what to deliver to whom, when and in what format.

TM Forum's most recent Insights Research report, Exploiting Analytics: How to Improve Customers' Experience, focuses on this theme, with a detailed look at how data analytics can be used throughout the customer lifecycle, including targeting and marketing, acquisition, retention and more, in order to improve the customer experience at every step along the way.

We understand how critical it is for operators to distinguish themselves from the crowd, increase customer spending, improve brand loyalty and ultimately reduce customer churn rates. Data analytics will go a long way toward fulfilling those goals and ensuring that the operators don't get left behind.

About the author: Martin Creaner is the president and chief operating officer of the TM Forum and has worked in the communications industry for the last 18 years. Creaner held a number of executive positions with BT and Motorola, where he led the 2.5G and 3G OSS solutions development activities. He sits on the board of a number of telecom companies and is the chairman of Selatra Ltd.

This was first published in November 2010

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