FEATURE: Telecom NZ on the evolution of the operator role

In a new series sponsored by Connect2Media, ME quizzes operators about their approach to content. First up, Telecom NZ...

Six years ago, when ME was born, the mobile world was a very different place. No smartphones, no app stores; instead ringtones, Java games and operators were the only show in town.

Now, things have changed. Operators and their VAS teams are still here, but their place in the content universe has changed.

In this series of interviews, sponsored by Connect2Media, ME talks to operators about how they're adapting to the new market dynamics.

First up is Matt Gadsby, product manager for mobile VAS at Telecom New Zealand.

What have been the biggest changes to the VAS operation in recent years?

The structure of the original portal was bound up with the old CDMA network, which limited what we could deliver in terms of content. But obviously the market was different back then anyway, with most downloads being ringtones, wallpapers and ringbacks – which we called callertunes. 3G arrived in 2008 and we expanded the store to include full track music and games, which were powered by Livewire/Groove Mobile. But slowly 3G changed consumer expectations of content, and where they could find it. They started looking beyond portal for entertainment – on the internet and in app stores.

So how is Telecom NZ responding to that challenge?

I've been here 18 months and in that time we've worked towards creating a new era for the operator portal. But you have to pick your battles, and we know that there's no going back to exactly how it was. At at one point we had four people in the content team. Now there are two of us, and the rest is handled by aggregators.

How do downloads compare to the 'heyday' of the operator deck?

Well, our ringtones and full track downloads have fallen significantly since their peak. Games have held up better, remaining at around the same rate as they were back then. I think that's mainly because of the nature of games, which evolve and improve as time goes on. We also made the decision to close the mobile TV department.

So the operation is smaller, but we still have an extremely popular content portal. In fact, it attracts 500,000 unique visitors a month. Generally the presentation of content is better than before and the catalogue is kept fresh. We have 200 games at any one time and 3m music tracks.

How do you plan to build on this base?

As an operator you do have certain advantages, which you must cultivate I think. The most obvious is in payments, because all the evidence suggests that people will buy more if they can do so from the phone bill. And then there are data costs, which we zero rate on our portal. This is working very well with our Android games portal, which is attracting a lot of downloads even though, as you know, there are many Android stores out there.

We also have a marketing advantage, with a catalogue that goes out to 120,000 households a month. We have to use these channels, as there isn't the budget for expensive campaigns.

What's been the impact of smartphones?

Like anywhere else, they are changing people's attitude to content. We have 10,000 users a month upgrading to smartphones of some sort, but there are differences between the New Zealand handset base and a typical European one. There are a lot more ZTE owners for example, which need to be catered for by content providers. Generally, we tell them that they need to port for as many as possible; the best game will sell fewer than the worst game if there are not enough builds.

Are you experimenting with new business models?

To be honest, it's still pay per download. We're looking at ad-funded, rentals and so on. Subscriptions are tricky, given the history of subs in content. Pre-loading is another way to get people to try our portal. New Zealand is operator-dominated in handset retail, so 95 per cent of phones are carrier-branded. That gives us an advantage.

Ultimately, even with great success, the total value of entertainment sales to an operator can't compete with voice and messaging. Why bother?

It's a fair question, and I think the answer is that all operators want to drive data adoption, and content can help to do this. Long term, I believe the operator's role in content will be all about billing and well-chosen partnerships. We have to work to create new bundles with content providers – in music streaming, say – that deliver compelling services to consumers that are easy to use and pay for. I definitely see that strategy as key to the future.

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