Evolution of Revenue Models in Telecom Stack

Revenues

Operators (MNOs) get 70% of the Revenues  of the industry, where us OEMs get about 15% of the revenue. For instance in the Indian context the revenue from MNOs is about $ 25b, compored to $ 7 billion of all OEMs. Bharti alone does about $ 7b revenue. MNOs make most of the revenues of the industry.

Distribution – while the Telecom Operators get most of the revenue, the largest operator in the world has about 300 million end users. Compared to this Nokia has about 1 billion handsets in the market place. The reach and distribution of OEMs is far greater than the MNOs.

Moving to Capture Value Across the Stack: Apple started in Device Design, however since then has moved across the spectrum. Today it has become

1. a service provider through the App store model.
2. An integrated provider which provides Hardware, OS, UI design.

Similarly Google started as a SERVICE Provider (Search company, ad sponsored),  however has moved on to become an OS provider (Android). With that it will start controlling the customer footprint (end –devices), in addition to being a service provider. Its recent moves in the US, by acquiring spectrum are to meet its aspiration of being a Service Provider in the near future.

Nokia started as a Device manufacturer and providing OS. Its new initiative and aspirations are to become a Service Provider – the Ovi service  has been started to meet these goals.

1990 – 2015 transition

What you will notice is that MNOs focused on being service providers while OEMs focused on being better in their area in the 90s. Today they are moving across stack to increase customer stickiness and get a larger pie of the revenue.

Over the next 5 years – MNOs are likely to strengthen their base by focusing more on Network as a service (Naas)

Mbilling (micro billing)

Widgets (applications)

Service as an inventory (providing  service apps on devices – and making it easy).

OEMs, meanwhile will  cross optimize their strengths in Device design, UI design and core apps, OS. They will also try to move into the MNO segment to get a larger pie of revenues

The chipset manufacturers will focus on scalability, performance and optimization of their OS.

From Hardware to Service Revenues

As we saw above revenues need to move from hardware (one-time) to Services (recurring). They also need to move from Downstream (customer pays the service provider) to Upstream (partners pay the service provider). Google is a classic case of Upstream revenue – For the customer, the service is free – it is paid by the Advertiser (who pays for 97% of Google’s revenue).

Over time

1. Revenue will move from one time to service
2. It will move from Downstream to Upstream