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Tuesday, January 23, 2007

Alternatives to end-to-end QoS: how to monetise smart pipes

Fantastic post over at Telco 2.0 today. Talking about simplifying the architecture behind IMS and other QoS-managed networks, by virtue of simply charging different "entry fees" at the edge of the network.

It always amazes me that a lot of people in the telecom industry completely fail to understand how yield management works in the airline industry "Oh, our network will enable you to give first-class service to out premium customers, and business-class for realtime traffic like voice". That misses out on the clever part - the fare code system. Making different amounts of money from exactly the same product. If I'm in economy with a V-class ticket, and you're sitting next to me with a Y-class, you will have paid a different amount, but you'll still get the same meal and legroom. (OK with some tickets you get a bit more flexibility re: cancellation & changes). It's partly to do with capacity - selling the cheapest seats first - but also to do with distribution (ie which travel agent). Budget airlines like Ryanair and Easyjet can be even cleverer about all of this, too, dynamically changing their pricing at a whim, and upselling with new "products" like early boarding.

I'm doing some research on wireless VoIP at the moment, and it still amazes me how primitive much of the rhetoric around QoS is. "Oh, it's voice, so it absolutely must have priority". Nonsense - you should be differentiating voice traffic based on context: your users do. I'll use SkypeOut for a briefing call with a company in the US that wants to pitch its strategy to me, but I'll use my landline if it's a client who's actually paying me money.


Anonymous said...

"It always amazes me that a lot of people in the telecom industry completely fail to understand how yield management works in the airline industry"

Er...perhaps because people only tend to work in ONE industry? Are you amazed pilots don't know how to run CDMA networks as well?
I get your point but a gaffe like that is worth laughing at....

Anonymous said...

Dean, you are way off in your observation here. MNO's absolutely understand 'yield management'; charging different prices for a pre-paid vs a post-paid voice minute or charging differently for an MVNO data byte vs an in-house data byte are prime examples of levying different charges for exactly the same product.

Dean Bubley said...

Oops, that's what I get for writing a quick blog entry before dashing out early in the morning....

I'd meant to say "a lot of people fail to understand yield management in the airline industry, yet still happily use it as an inappropriate analogy in their presentation slides when talking about QoS/CoS".... but forgot to write the second half of the sentence & didn't proofread it properly.

And I'd still say the latter example isn't a good one - it's not at all dynamic, like airline seat pricing. The prepay vs. postpay price ratio will (probably) be the same next week as this week, and certainly the same this second vs. next second. Whereas with flights (and the model the Telco 2.0 guys were referring to), the price can change in realtime.

Daniel Taylor said...

The idea of yield management is to approximate the area under the curve, so there need to be multiple price/quantity pairs -- the more the better (think calculus). So pre-paid is one example of price discrimination, but there need to be several.

As for the idea that this kind of knowledge cannot travel (pardon the pun) from one industry to another, that's ludicrous. Business schools exist precisely for this purpose.

I share Dean's amazement that the telecom industry just doesn't seem to get yield management. So much effort goes into protecting voice revenues that common business sense goes out the window.