21st Century communications

SOCIAL NETWORKING - The changing face of communications

People are communicating more things to more people than ever before, and not just  by phone anymore. Internet-enabled communication models are gaining audience, attention and market share at the expense of traditional telecommunication providers. Can telcos fight back and find new growth opportunities in this rapidly changing ecosystem? The challenge is not just in understanding the technology, but also the unfolding fundamental shifts in human communication behaviour say Chris Pearson and Rob van den Dam

A  growing number of people are visiting social networks. According to Comscore, approximately two-thirds of the worldwide Internet audience are regularly visiting social networks. This trend is universal. In South Korea, considered by many to be the world's most developed social network nation, more than 90 per cent of teens and almost half of the entire population are members of Cyworld.  In the United States, 80 per cent of the young adults, 60 per cent of teens and 30 per cent of adults use social networks. And in the UK, 90 per cent of teens spend time on these sites.

Social Networks have become a primary destination for a rapidly expanding universe of online users for managing and enriching a digital lifestyle. They provide the ability for them to communicate, to develop their identities, to build a network of relationships, to find information, to share experiences and self generated content, to buy products, and more. 
With numerous communication tools at their disposal, social networks are becoming integrated communication hubs. The integration of MySpace and Skype, for example, illustrates how social networks and communication applications can converge to benefit users. With more than 118 million active MySpace users and over 370 million Skype registered users around the world, this partnership connects two of the most popular communication platforms on the Internet to create the world's largest online voice network.
A number of telcos are already responding to the challenges and opportunities of social networking. Many have initiatives underway that range from simply enabling online social networking sites to extending their offerings to the mobile communication environment, to even building their own, proprietary social networks. For example, telecom operators such as Sprint, AT&T and Vodafone enable MySpace and Facebook members to access their profiles from their cell phones. And Vodafone recently launched Connect to Friends, a Facebook application that enables Vodafone and non-Vodafone subscribers to communicate with each other from either a PC or a mobile phone.

The widespread social networking phenomenon is a reflection of shifts in two long-term communication trends:
1. communication patterns are changing from point-to-point and two-way conversations, to many-to-many, collaborative communications, augmented with links, videos, photos and multimedia content that substantially enrich the user experience.
2. control of communications is shifting away from the proprietary domain of telecom providers to open Internet platform service providers.

The so-called Net Generation - the digital natives who have grown up in a technology-enabled and Internet-connected environment - is at the forefront of shifting social communication patterns. Their preference is for staying connected, sharing, creating content, multitasking, assembling random information into patterns, and using technology in new ways. They are the wisdom-of-crowds generation that grew up rating peers, physical attributes, products and services, etc.

They are native speakers of technology, fluent in the digital languages of computers, the Internet, video games and the mobile phone, and often living in a state of continuous partial attention. For many of them, social networking is supplanting email, and even voice, as the preferred method of communication. But the shift away from traditional communications to social networking is not limited to this generation. A growing number of adults now use social networking to get what they want from each other, instead of from traditional media and institutions.

The second trend, the shifting control of communication media from the domain of telcos toward a more open communication platform, is the result of widespread availability and affordability of connectivity and communication tools/devices. With better, cheaper technologies and greater use of broadband, the Internet, and wireless networks, open platforms such as social networking sites, are becoming ever-more viable platforms for communication services - and consumers are responding eagerly.

The combination of shifts in communication control and patterns is redefining the competitive landscape, giving rise to new business models. In contrast with traditional communication models, emerging models are based on open platforms that support many-to many and/or collaborative communication patterns.

Traditional communication 
The traditional model, characterized by two-way point-to-point communication is the domain of traditional telco providers. It is the largest segment in terms of revenue and subscribers, but it is showing signs of slow growth as other models take hold. Wireline revenue is declining and although, according to Gartner, global mobile services revenue is forecast to grow 7.6 per cent from 2007-2012, the mobile subscriber base has reached saturation in key developed markets.

Open and Free
This model offers alternatives to traditional point-to-point communication services on open Internet platforms. Companies in this domain provide basic communication services such as VoIP for free or at very low cost. Many of these services threaten profitable traditional services such as long distance calling and mobile roaming.

Providers in this space include VoIP provider Skype, Google with GoogleTalk and Microsoft with Windows Live Messenger, which offer PC-to-PC voice services along with instant messaging and chat. With over 370 million registered users worldwide, Skype has, in a matter of five years, come close to creating a truly global telecom service.

Many of the players in the "open and free" space, such as Microsoft and Google, have considerable resources and leave little room for a commercially viable response from telcos beyond repackaging existing services into "convenience bundles." Some telcos, however, seemingly have embraced the model and are partnering with disruptive new entrants. As an example, the mobile operator 3 in Australia and the United Kingdom has partnered with Skype to launch the 3 Skypephone, to attract and retain customers.

Gated Communities
This model focuses on group communication and collaboration in the Telcos's "walled-garden" and will appeal to users and enterprises with a preference for the more secure and reliable communications environment traditionally provided by telecoms.

The most obvious opportunity here is extension of social networking to the mobile where operators continue to retain some exclusivity. Research companies such as Informa and Juniper estimate that by 2012, mobile social networking will represent a market opportunity of between US$22.5 and US$52 billion, and telcos should be able to seize a share of that. 
Recent studies have revealed that more than 40 per cent of iPhone users in the United States, Germany, France and the United Kingdom are visiting social networking sites. In South Korea, a mobile user visits Cyworld on average eleven times per day. The mobile service of the Japanese social network Mixi, which started as an online site, has turned out to be hugely successful with mobile page views already outnumbering online page views.
Telcos have also an opportunity to play a role in the delivery of fully integrated collaborative services to enterprises and organisations that value carrier-grade capabilities in a secure and reliable environment. According to Forrester, enterprise spending on Web 2.0 collaboration technologies is forecast to grow to US$4.6 billion globally by 2013, with social networking as the top spending category.

Shared Social Spaces
Shared Social Spaces facilitate collaboration on the open Internet. The main providers in this space are Over The Top (OTT) applications such as MySpace, Bebo, YouTube and Facebook. And virtual worlds such as Second Life belong to this domain. Also such parties as Microsoft, Google and Nokia, with its OVI/Share platform, have entered the fray.

As many of these players integrate telephony services, they have the potential to become fully integrated, end-to-end communication platforms. Though the revenue model remains unproven, they are drawing attention away from traditional communication service providers and are contributing to their slowing growth.

In addition, these types of applications put additional strain on already-burdened network infrastructure, particularly with the rapid increase in video content sharing and distribution. Cisco forecasts that by 2012, the sum of all forms of online video, including TV, VoD, Internet and peer-to-peer (P2P), will account for nearly 90 per cent of all consumer Internet traffic, a large portion of which will flow through OTT applications. According to Ofcom these types of OTT services will impose additional £830m (US$1.4 billion) in bandwidth costs on UK Internet service providers, without a corresponding revenue model.

To deal with over-burdening OTT traffic, telecom operators have options that include filtering or blocking OTT traffic, but this is unsustainable in many jurisdictions as it violates net-neutrality principles. Instead of protesting about the OTT bandwidth demand, Telcos should embrace the demand. Network and computing infrastructure optimization techniques such as traffic shaping and content delivery network (CDN) technology can reduce the cost of delivering high bandwidth content and potentially lead to new business models that even can capture value from this increasing OTT traffic.

The social networking phenomenon arose from significant shifts in communication, driven by the widespread growth of Internet connectivity and the emergence of interactive online communication tools. These shifts have been redefining a century-old industry, with the result that the advantages enjoyed by traditional communication service providers are beginning to wane. Telcos can, however, remain relevant in the face of changing user sentiments and demands if they take bold steps to adapt to this evolving marketplace.
Telcos can begin by taking advantage of the window of opportunity in mobile social networking, and also bolster their capabilities to serve the evolving, broader communication needs of enterprises. They should partner with, or acquire, existing players, to proactively develop the capabilities required for success. We already see some examples of such moves. In October 2008, Telefonica signed a global agreement with Facebook allowing it to integrate access to Facebook's mobile service and applications from all of Telefonica's mobile Portals. And in May of that year Vodafone acquired Zyb, a Danish mobile social network, with an eye on extending its social networking capabilities.

Telcos should also focus on enabling other participants in the value chain to benefit from distinctive telecom capabilities such as location, presence, text/multimedia messaging services and conference calling, in this way also generating revenue for themselves. Vodafone's Connect to Friends application in Facebook is an example of such an approach.
In addition, telcos should work more closely with OTT and/or CDN (such as Akamai and Limelight) providers to reduce the cost of delivering high bandwidth content (e.g. video, music) in response to increasing demands for such services. This can be achieved through network and computing infrastructure optimization techniques such as traffic shaping and caching of content close to the edge of the network using CDNs. Such approaches can potentially lead to new business models that capture more value from this increasing OTT traffic.

Over the long term, telcos should broaden the scope of their traditional voice business to more actively encompass both point-to-point and many-to-many collaborative models, which include voice, internet-based communications and content, and align the organisation and industry partnerships accordingly.

The fundamental change in the way we are now communicating is driving the evolution of a new communication services ecosystem that will force significant and bold changes by existing providers if they wish to remain an integral part of the communications landscape. The journey will not be without risks, but the option of doing nothing is a luxury many providers cannot afford. Revenue from traditional services will continue to decline and highly resourceful Internet information providers and IT companies continue to grow in the communications space to claim a larger share of communication time.

Chris Pearson is Global Telecom Industry Leader, IBM Global Business Services.
Rob van den Dam is EMEA Telecommunications Leader of the IBM Institute for Business Value and can be contacted via: rob_vandendam@nl.ibm.com

Article Source: http://www.eurocomms.com/features/112883/SOCIAL_NETWORKING_-_The_changing_face_of_communications.html