Is the 'Subscription Mentality' Holding Back the Telecom Industry?

Whenever I see discussions about new network technologies like LTE or WiMAX, the usual metrics and terms always crop up: subscribers, ARPU, "per month" and so on.

Yet I've had a nagging feeling for some time that it's this focus on subscribers and subscriptions that is holding back the telecom industry, especially in mobile. It's frozen into business models, standards, architectures, financial reporting and expectation, remuneration and bonus structures and countless other facets of the industry.

A couple of months back I pointed out how this mentality leads to standards that further entrench existing business models. I've also highlighted what I refer to as The Tyranny of the SIM Card on numerous occasions. It's no coincidence that the S in SIM stands for "subscriber".

Now obviously subscription models are certainly desirable, whether they are on a long-term contract basis or a prepaid model. But the notion of an ongoing, regular "monogamous" commercial relationship is not necessarily necessary or appropriate, especially for data connectivity.

The main benefit of "subscription" relationships from the end-user standpoint is a consistent phone number, and in fixed telecom a consistently-managed piece of wire. Having an easy payment mechanism is useful too.

But we already benefit from many other telecom services than those we "subscribe" to ourselves. They're embedded around us in daily life: credit-card swipe machines, hotel broadband services, WiFi hotspots, click-to-call websites and so forth.

As individuals, we don't "subscribe" to electricity, yet it's all around us, and we use it multiple times a day, with multiple individuals or companies or governments picking up their share of "our" usage fees. Imagine if you had to have roaming agreements, that meant you paid a fee for your implicit electricity consumption when you sat underneath another person's or company's light bulb.

I'm wondering if this is a model we should look at for telecoms as well. If I'm in a bar, trying to tell a friend how to find it, why am I doing it on *my* phone? Why not the bar's phone, as that instance of communications is part of the bar's implicit business model?

Certainly, there's a huge argument for embedding data connectivity into devices - why should I need a "subscription" to connect my PC to mobile broadband? Maybe Samsung or the retailer should bear the cost and administrative overhead?

I think this will happen gradually, and with it I also see the supposed link between "subscription" and identity evaporating even further. I think Google (GOOG) gets this with Google Voice - why should a network operator presume to "own my identity" simply because they provide me with a number?

Whenever I see "subscriber" numbers for LTE or 4G, stretching out to 2015, 2020 or beyond, I see someone who's blinded by the subscription philosophy. I think by 2020, it will be a concept seen as quaint or niche, rather than typical. Yes, I know it will make all the business model spreadsheets messy, but that's tough - I just don't think subscription-type relationships are the way people will consume most of their communications in future.

Disclosure: No positions

Comments

[KATurcot:]

Agreed. The only reason the scale hasn't started to tip is because Apple and AT&T have the current "killer app". Two companies that are deeply entrenched in controling their customers vs providing the best service. The wolves are at their feet however. The likes of the federal Broadband Initiatives Program, the Broadband Technical Oppertunities Program, Open Source software and the work comming out of Google represent a formatable compeditor. When (not if) those compeditors converse with the next killer app. The ivory tower of the likes of Verizon and AT&T will fall.

Our collective jobs include makeing sure congress understands and doesn't allow the legacy business model lobysts to get congress to creat laws that protect these legacy bussinesses at the expence of the movement of the industry in this - obvious - growth direction.

K Turcot

Jul 30 09:58 AM

[calixtus:]

Credit card swipe machines are currently taking heat because of the existing per-transaction model. The customer may not have to pay directly, but the merchant does. In the long run, the customer pays for the increased costs of doing business.

Other "non-subscription" services, like ATM's, are really hidden subscriptions. Customers of other banks pay "foreign ATM" fees, while customers of that bank are paying for the privilege through checking fees or reduced interest rates on savings.

It seems like you are advocating a method where either billing is done on a per-use basis by a middle man, or through hidden fees bundled with a service or product.

If I pulled up in your driveway, parked an RV, plugged into your electricity, and lived in it for a month, your electric provider would not bill me for it. But I would wager that you would ask me to contribute to the bill.

Jul 30 12:12 PM

[c smith:]

why should a network operator presume to "own my identity" simply because they provide me with a number?

Because they don't simply provide you a number, but THE ABILITY TO CONNECT to the existing network. They don't own your identity in any way shape or form, but they deserve to be paid for building and maintaining the network, which is decidedly not FREE as some people believe. Why is this so complicated for the "don't be evil" crowd to figure out?

Jul 31 01:52 PM

[c smith:]

You want to know the ultimate "killer app"? How about THE NETWORK ITSELF? Somebody has to pay for and maintain it. It doesn't just fix itself when a hurricane blows through town, for example. Don't know where the goofy idea that the network should be "free" originated, but it should be put to rest, along with its goofy first cousin, "net neutrality".


On Jul 30 09:58 AM KATurcot wrote:

> Agreed. The only reason the scale hasn't started to tip is because
> Apple and AT&T have the current "killer app". Two companies
> that are deeply entrenched in controling their customers vs providing
> the best service. The wolves are at their feet however. The likes
> of the federal Broadband Initiatives Program, the Broadband Technical
> Oppertunities Program, Open Source software and the work comming
> out of Google represent a formatable compeditor. When (not if) those
> compeditors converse with the next killer app. The ivory tower of
> the likes of Verizon and AT&T will fall.
>
> Our collective jobs include makeing sure congress understands and
> doesn't allow the legacy business model lobysts to get congress to
> creat laws that protect these legacy bussinesses at the expence of
> the movement of the industry in this - obvious - growth direction.
>
>
> K Turcot

Jul 31 01:57 PM