Carriers have lost a great deal of their relevance for end users. People of all shades, individuals, employees, information workers, etc, are looking for solutions that meet their demand, not connectivity per se.

In our view, four trends matter significantly for carriers since they strike at the heart of their customer facing relationships in the shape of changing end-user behaviour:

• Applications have become the focal point for end-users. Phone or connectivity features are less interesting. The carrier brand is not seen as the destination to turn to for app-demand. Merely 18% of business users would turn to a carrier for apps compared to 49% who go directly to the classic app stores. Carriers ought to get closely involved in HTML5 development as it paves the way for OS-independent Web-based apps, thus potentially limiting the influence of operating systems like iOS or Android over the ecosystem. Carries must strive to accommodate where possible app developers to remain somewhat influential ecosystems players.
• Users buy devices directly. There is an increasing push by device manufactures (traditional like Samsung and Apple and emerging such as Google, Amazon etc) to sell devices directly to the customer, both business and consumer, and outside the carrier channel. This robs carriers of their main service distribution channel and undermines their potential to monetise value added services.
• Carrier-selection is becoming more ad-hoc and temporary. The emergence of embedded software SIMs “interrupts” the relationship between user and carrier. End-users will increasingly be able to select carriers after they purchase a device and for certain circumstances like content consumption or for international roaming. As a result price wars for basic connectivity will increase once again.
• End users turn to over-the-top players for content and communications. OTT players like Google, Apple, and Amazon are becoming ever more central destinations of end user activities through their app stores, their social media features and commerce and content platforms. But OTT are also moving into core areas of carrier activity such as billing (e.g.: Google Wallet), and of course communications (e.g.: Apple FaceTime, Tango, ooVoo, Google Talk, hookflash).

These shifts in end-user behaviour make any adjustment for carriers all the more challenging. End-user behaviour is essentially an external factor over which carriers have little influence. Carriers themselves need to change to adapt to this new environment and:

• embrace aspects of the OTT business model. First to target customers that do not buy connectivity from them. Second to target those potential customers who reside outside the carrier network infrastructure. Central to such an OTT approach is a network-agnostic course regarding service delivery.
• develop much more flexible charging models. Dynamic, real-time and multi-dimensional charging is all about choice and personalisation. Transaction management offers carriers the chance to develop solutions to analyse commerce opportunities, to provide merchant discovery and to evaluate of sales leads, loyalty schemes, and post-transaction support. Carriers ought to take into account the particular context a user is dealing with (e.g.: international roaming; watching a HD video; real-time video vs app download in the background) and what financial resources a user has at a given time (e.g.: a father’s vs. a child’s budget; advertising sponsored vs post-paid content).
• bundle devices, apps and content with connectivity. Devices with “connectivity-built-in” are already reality. Amazon’s Kindle, for instance, introduced the concept of “the sending party pays”, by establishing a commercial relationship between itself, the content provider, the carrier and the end user. Going forward, apps themselves will come with “connectivity-included”. For instance, a movie might be made available for 20 minutes as a promotion, before users are given the opportunity to buy the movie which then has “connectivity-included” based on a revenue share agreement between the content owner and the carrier.

The true opportunity for carriers is to build the most flexible “platform” that empowers end users to access those apps that they like best via the devices they prefer at any given time, ensuring the best possible experience and taking into consideration end-user spending possibilities and habits.

This transformation process requires a complete overhaul of carriers’ wholesale operations and their approach to partnership management, including their operator billing merchant clients and their OTT co-opetition. Overall this task is certainly within reason and does not require rocket science – but implies a huge cultural shift, a reduction in size, structure, and brand management of carriers.