The development of applications - especially those in high demand - is an important driver for any network provider today. It is not enough to simply offer services as consumers are demanding more and better content all the time and in order to drive sustainable revenue streams, new business models are needed.

 

Therein lays the challenge: selecting the right business model to enable application development so as to drive sustainable revenues that align with strategic goals. To help in the process, Alcatel-Lucent (News - Alert) has developed core business models that help build the case for ACP collaboration.

Operator Led - This model allows the network provider to take full responsibility for the program, establishing direct, standardized relationships with many ACPs.

 

Aggregator - This model is defined as a partnership approach as responsibility is shared between the network provider and content aggregator.

Mass Wholesale - ACPs are granted access to the network, yet has no direct relationship with the end users.

Enterprise Customer - Instead of providing applications directly, the network provider enables enterprise owned applications.

Trusted Partner - A one-off approach to establish a relationship with an ACP to enable a specific application.

 

Internet Model - The creation of new applications or services does not involve the network providers as they only provide bit delivery.

Now that the different business model options are defined, how does the network provider make a selection that best fits within their environment? One process is to evaluate the financial benefits of each of the business models. While one model may offer direct revenue from the sale of third-party applications, another may help reduce subscriber churn or market share as it generates limited revenue from application sales.

In an Operator Led model, direct financial benefits are on the lower side as there is a large population of free applications, the low revenue share the network provider takes and the large number of low-volume, niche applications. By comparison, the indirect financial benefits can be significant

The Enterprise Customer model derives 100 percent of its total benefits from direct revenue sources such as API usage and developer onboarding fees. For Operator Led and Aggregator models, they derive 93 percent and 97 percent of total benefits from indirect sources, respectively, based on Alcatel-Lucent comparison models.

While it is important to evaluate the potential economic benefits of each business model, it is equally important to assess the costs. Network providers must take into consideration the start-up, fixed recurring and variable recurring costs, as well as brand loyalty effects across Application Enablement models.

Those models with high startup and high fixed portion of recurring costs are considered high risk. From a truly investment perspective, network providers who prefer a low startup and low fixed recurring costs may prefer the Trusted Partner model.