.gif)
Billing the iPOD phone
Richard McBride looks at the profitability challenges of the iPOD phone and examines how OSS applications such as interconnect billing and mediation can help operators transform this new musical device into a commercial success for all
Just when consumers were getting used to the idea of 3G, along comes another mobile gizmo to get all excited about. Get ready for the iPOD phone, Apple's ticket into the world of wireless communications. Worried about mobile operators eating away at profit margins with their latest hybrid music phones, Apple has developed an iPOD handset that promises to set new trends and blow the competition away. This is a strategic business move for the computer giant, whose iPOD media music player has become the most successful hand-held musical gadget in history.
Apple's achievement is remarkable, but compared to the mobile phone industry, iPOD's future growth rate seems small and limited in scope. This explains Apple's decision to produce an iTunes phone with global leader Motorola, which will be launched with much fanfare in the first quarter of 2007.
Like all new technologies – most notably 3G – the new phone has been the subject of much controversy, with some pundits warning of business cannibalisation, cost-prohibitive technology and overambitious designs. The pod-phone's dream of massive global sales cannot be achieved under these conditions, leaving Apple with a device that, once again, only sells to the same, small number of users. Apple and Motorola have done nothing to assuage the negative press either. Instead, the mega brands have admitted to 'significant hurdles' in its attempts to create a pioneering new phone.
Show me the money
Making money for everyone is probably one of the biggest hurdles of all. After all, despite the phenomenal success of Apple in building a market charging for music downloads, research has shown that more than 80 per cent of iPOD owners do not pay for digital music. Just 17 per cent of European iPOD owners purchase music on a monthly basis, according to a report by Jupiter Research. However, 30 per cent of iPOD owners download music illegally for free and 23 per cent do the same with video. The figures include paid-for music, as well as tracks downloaded free from legal and illegal sites.
The iPOD phone, therefore, has to come up with a way to make sure that it's a profitable gadget for everyone involved. But Motorola and Apple have very different views about the future of music on mobile phones than the network providers. The duo wants to let customers put any digital tune they already own on their phones for free. That would help Motorola increase phone sales while helping Apple expand its dominance of digital music. The wireless operators, however, want customers to pay to put music on phones, and if this isn't possible then Apple and Motorola must offer other opportunities for them to make money.
Once Apple-Motorola and the carriers figure out a costing plan for all the music downloads and a way to divvy up razor thin profit margins, the next step will be for operators to find a way to bill for the services. They will need to know, for example, how to charge teenagers for downloading the latest music in real-time on the iPOD phone or offer cheap downloads of seventies favourites to yuppies, while enjoying maximum profitability.
Indeed, the complexity for charging and giving customers what they want – without losing money – is greater than it's ever been for operators – mainly because the profit margins for music downloads are very slim for operators. That is why effective intercarrier billing and mediation will be crucial for operators if they want to maximise revenue from every bit of network traffic on their networks. This can only be established with a flexible, real-time technology that can track any type of data generated by services supported by the iPOD phone and to use that data for settlement purposes. This is key to making things work in this new mobile environment.
Greater understanding
Fortunately for the mobile business world, technological advances have been made to enable carriers to gain a greater understanding of how to settle bills with customers while providing them with clear pricing options in real time – whenever and however they want. And, surprisingly, it is probably the easiest problem facing Apple, Motorola and the mobile carriers. Most operators in Europe have already upgraded their networks to accommodate the need for this type of business advantage when 3G was launched.
Equally important to the success of the iPOD phone is the ability to maintain relationships with intercarrier partners. Profits may be slim, but operators must find a way to be compensated by ISPs – in IPOD's case, the music companies supplying tunes – for the use of their networks to support services. Mobile players must also have the capability to compensate partners for delivering services – to the mobile users. Billing and mediation applications make up the central nervous system in the network. Convergent mediation gathers the network usage data for billing purposes and feeds to the interconnect billing system, which then produces the bills necessary for compensating everyone involved in delivering a service to a mobile customer. This method of billing is usually the first or second source of income generation for operators.
With the right back-office systems in place, operators peddling the iPOD phone can automatically split the bill with its content music providers so everyone is making as much money as possible through the iPOD service delivery chain. This method of billing can potentially generate hundreds of millions of dollars in revenue, most of which can be reinvested in the business to keep end-user service costs low. Technical flexibility in OSS billing is important to bring new services quickly to market – without having to worry about the process of charging end users or third party vendors. Every calculation is done automatically, so operators can spend more time on developing their business plans and focusing on what the market wants from the mobile provider. Within a single platform, the operator can process, calculate and print subscriber bills without any human intervention. Best of all, intercarrier solutions can support the rating and billing for any type of billing event, regardless of customer type, product or payment method.
Many OSS billing solutions are ready for iPOD's billing challenges, but are the mobile operators ready to capitalise on the flexibility of such a solution?
The big challenge for Apple and Motorola isn't about the technology surrounding the make up of the phone or the lack of technology to help bill for services. Everything is available except for the commercial models that are going to sell the gizmos. This is the biggest hurdle left for the iPOD phone and probably one of the main reasons why its launch has been put on hold for so many months. Coming up with a way to profit from this technology will be a big challenge but once its overcome there will be music in everybody's ears for many years to come.
Richard McBride is Director of Settlement and Strategy at Intec www.intecbilling.com
Share this article with others
Post to del.icio.us
Printed from http://www.eurocomms.com/features/111524/Billing_the_iPOD_phone.html
Comment on this article
Skip to comments
We encourage users to analyse, comment on and even challenge European Communications's articles, including the one above - 'Billing the iPOD phone'
User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site.
Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. We will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site.