Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

Mobile Networks as a Two-Sided Platform - Case Open Telco

Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

Mobile Networks as a Two-Sided Platform - Case Open Telco

Article excerpt

Abstract

Internet companies have utilized the benefits of open innovation and open APIs for a long time, but mobile operators are just entering the open domain with a concept referred to here as Open Telco. This paper investigates how open APIs can be applied to mobile networks in order to transform them from a one-sided into a two-sided platform where new business models can be utilized. The research method is based on a single case study using a representative usage scenario. The research framework, applied in this case study, was driven by the literature analysis. The research was started by creating a set of usage scenarios for analysis by an expert group. The most representative case was then selected for a closer examination with the results presented in accordance with the research framework. According to the results, the Open Telco concept creates an ecosystem that enables a two-sided platform. However, positive network effects require at least national coverage; developers want innovative pricing schema and novel payment services need changes for regulation. Finally, the research limitations are expressed, the proposals for the next steps are given, results are compared with the literature findings, and conclusions are drawn.

Keywords: Open Telco, Open API, Two-sided platform, Single case study, Network effect

1 Introduction

Openness has not been the underlying driving force in the mobile domain. Instead, mobile services have been technology and standardization driven as well as, strictly controlled by operators, who have decided the terms on which developers have been able to create novel services. This approach has been called a closed or walled garden model. For end users the closed model offers both positive and negative impacts. The end user experience is consistent, although, the service selection can be limited. Access to external service portals can be allowed, but price discrimination often violates the principle of network neutrality. Until today, the closed model has been very successful, but the weak signals indicate things can be about to change. In 2010 for the first time in Finland, the number of sent text messages did not grow anymore (Site 1), while the average revenue per user (ARPU) of TeliaSonera has been in decline for most of the decade (Site 2). In addition, a high customer churn rate continues to be a major challenge to operators. On the plus side, the exponential increase of mobile data usage [9] has been positive, although, unfortunately, the data income has grown only linearly [2].

The ARPU measure has some limitations, however, because it does not take into account multi-subscription-users. The average profit per user (APU) would be a better standard point of comparison [35], but those figures are not publicly available. Nevertheless, Figure 1 summarizes the key problems in the mobile domain. New revenues from data services do not yet fully compensate for the losses caused by the decreased number of voice minutes. Furthermore, subscribers easily change their operator, because all operators offer the same basic services, and there is no operator ecosystem that would serve to attach customers to any specific operator. Simultaneously, regulation has systemically lowered the barrier for the operator swap. Figure 1 clearly reveals the moment in 2004 when the number portability feature was introduced in Finland. A high churn has a direct negative impact on the ARPU value. The churn has also increased during the last few years, but the exact reason is unknown. One factor may be found in new legislation, defined in 2006, that allowed the subsidization of 3G phone purchases. In 2011 more churn is expected, because a new law will allow customers to change their operator, even in the middle of the agreement period.

Instead of the closed models, operators may find new opportunities in more open strategies. At the other extreme, operators can partly or fully omit the service domain. …

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