Platform Opportunity for the Communications Industry

The VW Golf and Audi TT share a common platform, as do Chevy and GMC SUVs. The foundations for these automotive platforms are, firstly, critical shared dimensions (e.g., between front axle centerline and driver’s hip point) and, secondly, the placement of hardware (e.g., chassis, floor pan, powertrain) within those dimensions. Sharing an automotive platform maximizes the return on engineering investment by keeping a check on the development costs for unseen structural elements and by reusing the platform across several (market segment) vehicle types to generate multiple lines of sales and economies of scale.

Automotive and telecommunications industries exhibit platform commonalities. Communications service providers (CSP) serve several consumer and enterprise segments with service offerings that operate over a common network infrastructure. Standardization applies to unseen structural and operational elements such as network elements, chip sets, roaming. Is this as far as the platform model goes? Might there be other platform models for the communications industry to pursue?

A Different Kind of Platform

The commercial success of Amazon, AirBnB, Alibaba, Alphabet/Google, Facebook/Meta, Netflix, and Uber has drawn attention to other types of platform business models. These platform models provide for open, participative infrastructure that creates value for all participants. They match external producers and consumers. For example, App developers sell to consumers, homeowners rent to strangers, and private car owners provide transportation on demand.

The conventional business model for many firms relies on value creation using internal staff and resources. Platforms operate between external producers and consumers, giving rise to the notion of the inverted firm. Value is a function of third-party producers, consumers, and their interactions. One immediate challenge for traditional firms is to design a framework that incentivizes providers over which they have no traditional management control. A CSP can direct its product management and developer teams, for example. Life gets more complicated when dealing with independent entrepreneurs, innovators, and developers.

Platforms Go with Ecosystems

Adopting this platform approach is akin to operating a multi-sided business model. That is because a CSP needs to focus on maximizing use of its network and network capabilities in multiple dimensions. Users of these capabilities include the CSP’s internal teams, independent developers and service providers, and end-users (various types of consumers and enterprises). This boils down to ecosystem orchestration.

As illustrated, ecosystem dynamics and a platform provider’s development trajectory (growth in number of developers and services they offer and growth in user base) will oscillate over time. This will be a byproduct of how platform operators recruit and adjust developer incentives while simultaneously encouraging user adoption through service innovation and pricing. There is a (lagged) feedback effect as the pace of end-user adoption justifies the early ‘providers’ remaining on the platform and attracts additional developers/service providers to drive further end-user growth. Cross-subsidization, pricing/tariffing adjustments, platform-user education, and tool support (capability discovery, exposed interfaces/APIs, roadmap to evolve platform functionality) are some of the ingredients necessary for a successful platform.

Experiences and Ambition

Platforms and ecosystems are important for the future of the communications industry. The concept is already under discussion in some of the early ideas about 6G strategy.

There are lessons to be learned from experiences with platform initiatives in the IoT area given the role of IoT platforms and partner communities in enabling IoT applications. Early approaches pursued walled garden rather than open standard approaches. That explains pockets of growth in automotive IoT and utilities. The limited openness of walled-garden approaches creates entry barriers for third parties. This has consequences for producer-consumer-user scaling. It might explain why information service providers (e.g., Google, IBM) did not experience massive market growth and backed away from the IoT market.

As the communications industry switches to address enterprise sector demand with 5G and 6G systems, there will be a role for platform business models. There are early examples in the form of network service, and API exposure initiatives. Their success depends on cultivating developer communities, specialist service providers, and enterprise user involvement in using network-enabled services.

As it apparent from the IoT sector, the commercial opportunities lie beyond connectivity, higher up the technology stack, closer to applications, and aligned to customer performance metrics. Technical and business model platforms are steppingstones on this path.