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Dec 1

Fight or Flight is the Fundamental Service Provider Choice

Many global service providers now face a classic “fight or flight” choice. Faced with an immediate threat to life, humans experience physiological changes that prepare them to respond to an immediate stress by fighting or fleeing. Some might argue that service providers now face similar choices. The “fight” response can be seen in service provider efforts to create their own over the top apps and otherwise invest in upgrading existing legacy services.

The “flight” response has more tactical expressions, but basically amounts to a “harvest and invest elsewhere” effort. The determination is that, fundamentally, no matter what a contestant does, the revenue stream cannot meaningfully be “saved.” The fundamental assumption for the “fight” strategy is that a product category can be revitalized and sustained by investment. The fundamental assumption for the “flight” strategy is that the product category either cannot be revived, or that the financial returns will not match the returns from investing elsewhere. That is the challenges posed by over the top messaging and voice apps, for example.

As customers increasingly use services such as Skype, BlackBerry Messenger and WhatsApp, service providers must decide whether fight or flight is the proper response. “Joyn” is an example of “fighting,” as it attempts to create a carrier-owned substitute for over the top mssaging services. But much service provider attention now seems to be in the “flight” direction. New pricing plans instituted by Verizon Wireless as one example of flight. Share Everything essentially creates a flat-fee “use the network fee” that includes unlimited domestic calling and texting. That’s a defensive measure to keep some voice and messaging revenue while revenue growth occurs elsewhere.

But most flight strategies entail finding new sources of revenue. That is why Telefónica set up its "Digital" division in September 2011, to develop new products and services that create new customer value. The flight response also is one reason tier-one service providers around the world are taking a look at growth opportunities such as advertising, banking and machine-to-machine initiatives. Some might include cloud computing businesses among the top possible new areas as well. Capital investment also is another example the “fight or flight” choice. How much capital should be invested in fixed networks, if investment in mobile networks is a viable alternative? So far, most service providers with a real choice have favored mobile networks.

Source: IP Carrier