Master Thesis Proposal: Business Models for Mobile-broadband Media Services – Case Study Indonesia Telecom Market

Business Models for Mobile-broadband Media Services –
Case Study Indonesia Telecom Market

Master Thesis Proposal Report

Student:
Laili Aidi (aidi@kth.se)

Supervisors:
Jan Markendahl (janmar@kth.se), Royal Institute of Technology (KTH)
GregerBlennerud (greger.blennerud@ericsson.com), Ericsson Sweden

Examiner:
KonradTollmar (konrad@kth.se), Royal Institute of Technology (KTH)

KTH – Royal Institute Of Technology
Stockholm, Sweden
2012

Contents
Contents .........................................................................................................................1

1.
Introduction .............................................................................................................2

2.
Result .......................................................................................................................6

3.
Methodology ............................................................................................................7

4.
Time and Activity Plan .............................................................................................9

Bibliography..................................................................................................................10

1

1. Introduction
Background
The evolution of the Internet and development of the mobile device technologies have
resulted on paradigm shift in society and triggered higher expectation of the user. This poses a
considerable challenge for the telecom operators, such as weakening the consumer relationships
and diminishes revenue from existing voice and messaging services1. However, this is potentially
a perfect moment for mobile operator to launch profitable new businesses on top of mobile
broadband, encompass a wide range of services and sectors.

The recent data shows that by 2011, the number of mobile-broadband subscriptions has
increased to almost half of total 2.4 million Internet users, grew 45% annually over the last 4-
years, means it reached twice as fixed-broadband subscriptions2. There are currently 5 emerging
developing markets (Brazil, Russia, India, China, Indonesia), called the BRICI countries,
represent 45 % of the world’s population, that are predicted to add more 1.2 billion Internet
users by 20153. In these countries, mobile-broadband likely becomes preferred access
mechanism, as result of several factors, such as cheap but advanced-technology handset, as well
as limited availability of fixed-broadband. Thus, mobile-broadband has huge potential to be
source of core revenue and key to growth for the telecom industry in these markets, in contrast
to what is happening in developed markets where it is more as a substitution of fixed-broadband
business4.

Moreover, the combination of mobile-broadband and streaming media would also create the
next killer services, exploit new revenue streams for telecom operators, media companies /
content providers, service providers, payment providers and advertisers. According to Allot, the
mobile data usage grew 77 %, where multimedia streaming was the largest service accessed
worldwide that occupied 39 % of the bandwidth5. This is in contrast to what happened in fixed-
broadband, where the file sharing service dominated. Furthermore, the revenue in digital music
business also increased 8 % globally, followed by the growth in user streaming subscription,
download purchasing and expansion of the digital music service business across the countries6.

However, there are unique challenges for telecom operator to develop sustainable media
businesses in mobile-broadband, both in worldwide perspective, as well as Indonesia local market
perspective. First, as the delivery of media in mobile-broadband requires provider to serve the
customer with higher demand, there is incompatibility between business models of the initial
mobile data services with the current Internet services7. Second, it needs understanding for
differentiation in order to suit different types of customer segment8. Third, there is new general

1
__. (2007, Feb. 5). The Future of Voice. ITU New Initiatives Programme, Geneva, Rep. FoV/00. [Online]. Available:
http://www.itu.int/osg/spu/ni/voice/papers/Chairmans_Report.pdf
2
__. (2011). ICT Facts and Figures. International Telecommunication Union. [Online]. Available: http://www.itu.int/ITU-
D/ict/facts/2011/material/ICTFactsFigures2011.pdf
3
M. Aguiar et al. (2010, Sept.). The Internet’s New Billion. BCG., Boston, MA. [Online]. Available:
http://www.bcg.com/documents/file58645.pdf
4
M. Meeker et al.. (2010, Dec.). The Mobile Internet Report. Morgan Stanley. [Online]. Available:
http://www.morganstanley.com/institutional/techresearch/pdfs/Theme_7_Emerging_Markets.pdf
5
__. (2011, Feb.). Global Mobile-broadband Traffic Report. Allot Communications, Geneva, Rep. D261013 Rev 6. [Online].
Available: http://www.thecom.co.il/files/wordocs/A9RA7D4.Allot.pdf
6
__. (2012, Jan.). Digital Music Report 2012. International Federation of the Phonographic Industry. [Online]. Available:
http://www.ifpi.org/content/library/DMR2012.pdf
7
G. Blennerud. (2010, July). Mobile-broadband – busting the myth of the scissor effect. Ericsson Business Review, No 2, 2010
[Online]. Available:
http://www.ericsson.com/ericsson/corpinfo/publications/ericsson_business_review/pdf/210/210_strategy_mobile_broadband.pdf
8
M. Ljungberg, and A. Bolle. (2011, Feb). Mobile-broadband second wave – differentiated offerings. Ericsson Review, No 1,
2011 [Online]. Available:
Available:http://www.ericsson.com/res/thecompany/docs/publications/ericsson_review/2011/er_mobile_broadband_2nd_wave.p
df

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trend in the telecom industry, where there are new actors enter and introduce changes in the
market landscape1. Fourth, the digital piracy remains barrier to the growth of the business2.

Problem Definition
From the situations and problems rise above, there is a substantial need to investigate and/or
modified existing business models into suitable strategy options that are designed for the media
services in mobile-broadband as profitable telecom business sector. However, the business
model itself is a vast scope subject, as it covers broad range of aspects and seen in different point
of view. This field is still rarely studied scientifically and no such common basic conceptual or
analysis framework that is universally used in the academic world [1].

Meanwhile, as the telecom and ICT industry itself run in dynamic environment, there is also
no standard for its business model, as well as for the broadband solution, that applies to all cases
and various factors, such as demographical, social, economical and political situation. It can be
seen that despite the similarities among particular user segments across market, especially among
the BRICI countries, there are some major differences in usage habit, as result of linguistic
environment, income rate, telecom policy, as well as cost and availability of the services3. For
instance, despite 3G penetration is higher in Indonesia compare to other BRICI countries and
has been offered for couple years, its uptake is still remain slow (both in term of network and
handset penetration perspective), as well as low affordability of PC ownership. Moreover, social
networking, bulletin board systems and online forums are popular in Indonesia, but user in
general is unwilling to pay for online services as well as the content.

Indeed, the strategy used to monetizing these potentials and challenges has to be selectively
targeted to specific service and market. Hence the universal solutions would not be suitable.
Thus, the main intention of this thesis is to systematically research the suitable business model
options for mobile-broadband media services, which specifically focuses to Indonesia’s telecom
market, as one of the world largest emerging economy. In order to do that, the following 4
questions have to be answered:
1. What are the mobile user’s usage characteristics, especially in Indonesia, toward the media
services trough mobile broadband?
2. Who are the actors that currently involved in serving the media services, and what kind of
relation and business models they are using?
3. What kind of positions and roles that the telecom operators can take to provide media as
profitable mobile-broadband businesses in Indonesia?
4. What kind of bottlenecks, solutions and platforms needed to provide those businesses?

Related Works
There are lot of works have been done in Tele-economic field, that relate to the case study of
this thesis, either discusses the feasibility assessment of mobile broadband and services in term of
technical aspect or cognitive, or focuses on business model of mobile business itself, as
mentioned below:
1. Business Model, Actor and Network
Several researchers discussed and assessed the business models for ICT and telecom
sector using several types of approaches, such as the “bottom-line” analysis, including the
roll out and financial assessment. The works by Elnegaardet all (2009) [2] and Bohlin (2007) [3]

for example, did the tele-economic calculation, which are the network rollout assessment for
mobile-broadband access (in virtual or typical medium-large European country). The
objective is actually to present comprehensive viewpoint of radio access network investment,

1
R. Bamforth and C. Longbottom. (2011, July). Optimizing the online customer experience in Telecommunication [Online].
Available: http://www.oracle.com/us/products/applications/atg/quocirca2-opt-online-cust-exp-telco-520367.pdf
2
3
M. Aguiar et al. (2010, Sept.). The Internet’s New Billion. BCG., Boston, MA. [Online]. Available:
http://www.bcg.com/documents/file58645.pdf

3

by dimensioning the cost elements and making evaluation of providing specific amount of
user with specific forecasted traffic demand characteristic. Using this, the profitability and
viability of business model can be evaluated.

The other approach, that is also common in business model assessment, uses schematic
and reasoning approaches from the available theoretical building blocks. Moreover, as the
partnership gradually becomes one of the core competences in the business, thus it is
fundamental to also identify the actors and their roles, as well as to understand their relation
and interaction each other. There are numbers of works specialized to the ICT and telecom
business field that broad the business model analysis of traditional manufacture industry into
variety of actors, network, and interaction as well as strategy discussion.

One that can be taken into account is a work by Camponovo and Pigneur (2007) [4] that
made the Mobile Market Scorecard framework, consist of 4 complementary perspectives
(financial, industry, innovation, market), as well as discussed in deep the actors involved
using its MBusiness Framework perspective. Ballon (2007) [5] has set of similar domains for
the design and analysis of business model (value network, functional model, financial model,
and value proposition), and all of these are seen based on the twin issues of Control and
Value parameter. On the other hand, Bendahan et all [6] focused on assessing 2 principal
models for multi-actors analysis, the MACTOR model (based on the system theory) and the
Allas model (based on the game theory), including their respective strengths and weaknesses.
They then proposed the new MASAM model that capitalizes as well as overcoming those
previous. The wireless Internet service provider (WISP) industry in the Swiss market then
was taken as example assessment using this.

Meanwhile, Markendahl (2007) [7] presented comprehensive analysis of various
cooperation models that can be used by mobile operator to interact with different types of
partner, competitor and customer. This work identified the main drivers as well as how this
cooperation can be organized, and took 3 different types of service and market as case study:
the public mobile broadband access services, the services and solutions for indoor wireless
access, as well as the mobile payment and ticketing services. These works constructed
business models framework from the grounded theories and/or analyzed specific problems
using critical aspects that suitable for the ICT or telecom sector, so the discussion is actually
extended to the value configurations as well, such as the value network.

2. Technology Acceptance
Mobile media streaming service would bring shift in consumer habit of the early
consumer. The diffusion of new technology is actually a result of series of decision and
comparison factors of the user’s perception to the benefit and cost of adoption. Thus the
ability to predict this diffusion, including user’s readiness and willingness to pay and continue
using the service, plays important aspect in determining the suitable business model of media
service in mobile-broadband, as the potential user might not adapt to it in spite of its
availability in the market.

Many researchers have performed various theories and designed the frameworks to
analyze the factors that affect consumer intention, specifically for the new ICT or telecom
field. However, there are substantial theoretical and empirical works that accumulate to some
frameworks. The Technology Acceptance Model (TAM) [12]
was designed during the early
stage of computer, to modeling how individual perceptions would affect the intention to use
the new technology, as well as predict its further actual usage. However, it has limitations in
explaining the adoption of new technologies and services, such as giving more attention to
examine the factors that drive user’s adoption, rather than what drive user to continue to use
the technology, which is also important in determining successful sustainable business [13].
The Unified theory of acceptance and use of technology (UTAUT) [14] should also be taken
into account, as it was designed as extension of 8 previous models, in order to overcome its

4

limitations especially on considering social context and personal expectancy1.

There are number of works in the mobile internet field, such as the work done by
Nysveen et all (2005) [15], Pagani (2004) [16] and Lu et all (2005) [17], that adopted, extended,
or even combined several frameworks, including some of the mentioned above, to assess
range of mobile value-added services, due to their flexibility to fit in various case studies. The
methodology used in these works could be referenced and/or modified in order to make it
specific to the case and market we are currently studying.

1 Technology Acceptance Model (TAM), Theory Reasoned Action (TRA), Motivational Model, Theory of Planed Behaviour
(TPB), Combined TPB-TAM, Model of PC utilization, Innovations Diffusion Theory (IDT), Social Cognitive Theory

5

2. Result
This thesis is intended to do analysis of business model that make the discussion would
pertain to business, economical or technical. Thus, in order to design and evaluate the feasibility
of solutions, we will need to see it from multitude of different points of view. This Tele-
economic discussion would be range from different aspects, and provide these outcomes:
1. Strategies identification
We expect to be able to do classification and assessment of different types of existing
business model that are currently used to deliver the mobile-broadband media services in
other markets. We also provide insight of the of the Indonesia’s telecom market structure
and landscape, including the situation of the existing media and mobile-broadband
businesses. In other word, this result mainly concerns to the supply-side aspect, both of the
reference markets and target market.

The reference markets would be focused in some of European countries where the
mobile-broadband media services are currently taking of, while the target market is focused
to Indonesia. Thus, this discussion would contain the analysis of eco-systems, which are the
identification of actors, the business role and responsibility distribution among them, as well
as the drivers and challenges of their current strategy. This industrial background will be
structured as market maps with description of relation model between the telecom operator
and actors in the media as well as Internet industry.

2. Market understanding
The other outcome of this thesis is the understanding of Indonesia's telecom market,
which is mainly focused on demand-side aspect. In this context, we expect to get insight of
the customer in Indonesia toward the mobile Internet, especially the media services as well
as mobile broadband. The large majority of users are not interested to the technical details,
but more on usability, design, entertaining aspects, etc and the successful loyalty programs
demand the ability of providers to capture the actual or further composition structure of
these preferences.

Thus, before we able to identify the suitable business model options for this market, we
will first need to identify and predict the user’s patterns, which makes the discussion could
range to the aspect of loyalty and satisfaction, willingness to pay and continue using the
service, as well as expectation and perception toward it.

3. Recommendation
Finally, through those 2 comparative studies above, we will comprehensively analyze
feasibility of these identified different strategy options using the market understanding data
as the affirmation tool. In other word, we will asses and highlight the business model
options that most suitable to develop mobile-broadband media services to Indonesia
market, according to our understanding of that market.

This form will mix the discussion of technical, market and business feasibility and related
competences. We expect that, using our recommendation the telecom operators, especially
in Indonesia, can take strong position in delivering and building profitable mobile-
broadband media businesses in their market.

The accomplishment of this 3 types of result would help us to tackle 4 problems mentioned
in the background above: assessing the current business models, identifying the non-telecom
actors that hold critical positions of the mobile media business in other markets, modeling and
predicting the user needs for similar services in Indonesia's market, as well as forming the
suitable business model options that hopefully would excel the piracy that still become huge
barrier of the media business and transform as profitable business for telecom industry, especially
for Indonesia market.

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3. Methodology
Since this thesis looks into the saturation rather than the statistical validity, it is clear that the
main method that fit to be used in this research will be the Qualitative method [18]. However,
there is also a need to complement it using the Quantitative method, to get understanding and
snapshot of the general trend in this market [18]. In order to deliver the objectives mentioned in
the previous section above, the following 4 main research methods will be applied:
• Literature study,
• Data collection,
• Data analysis,
• Recommendation formulation.

The research will dive into range sources of theoretical perspectives, as we need to first
establish clarity of the theoretical building blocks, including the mechanism of how it works, as
well as the antecedent and consequence of them. The review of business model covers concepts,
frameworks, and strategies, where each one of these is elaborated and then argued how it relates
to this thesis. Moreover, to get deep insight and understanding of the business management, we
need to get understanding of the value chain and value network concepts, including how to
modeling the relevant actors and the relation among them. The industrial background as well as
technology acceptance factors will play important aspect that also bases the analysis, thus we will
also need to also include the discussion of current mobile-broadband technology, businesses
assessment and the most suitable frameworks to predict the diffusion of new mobile services.

Beside the literature study, there will also be data collection and analysis. This is done, as we
need to understand the business models of the media services delivered on top of broadband
connection in the worldwide markets today as well as current Indonesia’s telecom market
landscape. As this thesis does not actually intend to design such new solution, but to identify
and/or modify the existing ones into such suitable options, thus this is become requisite before
we then can analyze what are the relevant options for Indonesia market. In order to do that, we
will use 2 frameworks:
1. Value analysis framework
Our first approach for the Value analysis framework will be conducted using
Unobtrusive technique (content analysis) [19] from papers, specifications, etc, published by
technology providers, organizations, or business sources as pre-study analysis. This is done in
order to perceive the mobile-broadband and different kind of media service businesses
worldwide. For example, there are currently around 500 legitimate digital music service
providers, using different business models to deliver the service to the users in 78 countries1.
We will classify and select some of those that really relate to our case study market and put
our focus more into to the settled or potential mobile-broadband media service partnerships
between telecom operator and digital music service provider then assess it case-by-case. The
findings will be generalized; as well as comprehensive analysis is presented.

The second approach will be done using Non-probability sampling, which is the Expert
sampling [19]. We conducted the semi-structured interviews with several contacts in the
industry (mobile operators, service providers, media/record label companies, artist agencies,
and other potential actors) in the reference markets (mainly Sweden) as well as the target
market (Indonesia), in order to understand the context of their decision, intention and
opinion about the case we are studying.

1

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2. Empirical data analysis framework
This is mainly done in order to perceive the market patterns (behavior, expectation,
satisfaction, perception, and acceptance) toward the mobile services, especially media. We
will gather the data using the Simple random sampling survey [19], so we can get better
understanding of this target market, as well as snapshoot of customer affirmation. However,
as same as the Value analysis framework, the empirical data using Unobtrusive technique
(Secondary source) [19] will also take important part, in order to complement the data we get
from the survey (mainly market report or consumer data).

Moreover, as the user-segmentation drive importance aspect in delivering the mobile
services, we will need to get detail pattern of this differentiation. The large mobile user
population will be divided into several different segments. There are number approaches of
segmentation that could be used, for example the User-centric design, proposed by Dainesi
and Zucchella (2002) [8], which dissociate the consumer into 3 groups: Teenage users, Parental
users, and Professional users. Furthermore, we also need to assess the acceptance and
readiness of Indonesia’s user to the media consumption through mobile-broadband as well
as the business model options that have been preliminary analyzed before. Thus, we will use,
modify or combine the most suitable technology acceptance frameworks, based on our
review in the Literature study. Using this way, we can systematically analyze the user and
assess those business model options.

The analysis for assessment and recommendation forming will be adopted based on the most
suitable business model/s on the review in the literature study. In this preliminary stage, there are
currently several frameworks considered to be used in this research, one of that is the model that
was proposed by Chesbrough and Rosenbloom (2002) [9], as it able to mediates between technology
and economic values, using function that contain 6 components: Value proposition, Market
segment, Value chain structure, Revenue generation and margins, position in Value network and
Competitive strategy. The model proposed by Håkansson and Snehota (1989) [10], is also useful to
make cross analysis between ARA (Actors, Resource, and Activities) with the Value network and
competitive strategy component in [9]. Using this, we can get understanding on the different
types of actor involved and the contexts of their relationship.

It is also important to do this broadband business analysis in its complete ecosystem, in
order to get whole understanding and picture of what we are dealing with. The approach that can
be considered is, by viewing this as technological, business, and market development perspective
[11]. This consists of the network aspect, the user aspect, service that the network carry, and the
application delivered on top of it, as shown in Figure 1 below.

Figure 1. Broadband Ecosystem [11]

The last, the recommendation formulation will be drawn to answer the questions defined in
the problem definition, which will be presented through visual graphs, either using table, figure
or picture, following the descriptions of it. Beside that specific discussion, it is also possible to
conclude the general pattern about this market in relation to the other market, especially the
markets in the emerging stage, either as the drivers or obstacles point of view. Furthermore, we
will also include discussion of the limitations of this research and suggest possible directions for
future work.

8

4. Time and Activity Plan
This thesis will be performed for 20 weeks, including the report presentation, and 2 weeks
after that will be allocated for submission of the final revision, as well as paper version to the
conference(s). The time allocation and detail activity plan are described in the table 1 below:

Table 1. Time and Activity plan

9

Bibliography
Business Model, Actor and Network
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Technology Acceptance
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Research Methodology
[18] J.W. Creswell. Research design: qualitative, quantitative, and mixed method approaches. London: Sage
Publications, Inc., 2003
[19] W.M.K. Trochim and J.P. Donnelly. The Research Methods Knowledge Base. Ithaca, NY: Atomic
Dog, 1999

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