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TMF and the Economics of Subscriptions

  • I had an interesting few days at Telemanagement Forum in Nice last week.  I have tended to be a TMF skeptic. When I worked for a company that fought tooth and nail against an un-named OSS/BSS suite vendor – I found their all too obvious self-serving fingerprints on the SID hard to bear. Vendor capture of standards – like any legal ploy to limit competition - is an all too common business strategy.  Standards bodies are stuck in the middle… they need vendor sponsorship to survive. But this year I have to say I enjoyed TMF a lot more – it was busy and dynamic…

    A couple of impressions….
    ·         I did not have a moment free the three days I was there.  I had interesting discussions with everybody including my competition. I would say that the crowd is getting older – our industry is no longer young. 
    ·         I noticed Microsoft had a large presence…. though not as big as Oracle. Oracle had an black, red and white stand that acted as the imposing gateway to the rest of the exhibition.  There didn’t appear to be anything free on offer.  A have to say they do maintain a coherent brand…. Though their jingoism is quite 20th century.  Does Ironman = Übermensch?
    I also gave a new presentation on billing with George Huitema of TNO.   The premise of the presentation was simple – “Subscription based” billing (aka all you can eat) only makes sense when supply is infinite. The minute consumers of a service compete for resources the subscription model falls apart. When you rely on subscription models – including those with bundles (1000 minutes for the 10$) or with fair use (prohibitive pricing after 10 GB a month) – the unit cost is essentially free. But free is not free to the consumer – as users max out the network the amount of time spent to get your next kilobyte goes through the roof – and time = money.  We described how this leads to three unfortunate outcomes:
    ·         Consumers that aren’t in a hurry will crowd out those that are… meaning the Oracle fan downloading Ironman will crowd out the business user trying to upload a contract revision. The businessman will stop using the 3G and go to landline where his time is better managed.
    ·         Companies  will hear complaints and try to increase network investment to the point where supply exceeds demand…. Unfortunately this has failed historically (try to make a phone call at 6pm in Singapore).  It is unlikely that capacity will exceed demand in data for quite a while.
    ·         Blindly increasing capacity in 3G / 4G not ecologically friendly.  Wireless base stations use a lot of energy…  
    Unit pricing – charging for the service delivered – not just charging for access in a subscription only model – makes everyone happier if there is resource contention…. In other words transport, electricity (the grid), telecommunications (bandwidth) and the new boys on the block Cloud and SaaS (CPU, Disk, IO, Memory….).   We spoke about quite a bit more…. you can find the presentation on the TMF website.  
    If you can think of other industries where the crowding out effect is relevant let me know.

    - Doug

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