Cable Identity and ARPU

There are two identity activities (the two factor authentication service) which cable service providers already provide and which can be monetized:

  1. as a credential service provider, leveraging the security capabilities of modem and router equipment attached to their networks.
  2. as an attribute provider, leveraging enrollment and account status information about subscribers.

Identity services allow individuals to authenticate themselves, authorize transactions and give consent to attributes about their identity to be shared with relying parties. Cable service providers are strategically able to verify information. They can provide an excellent user experience with minimal data entry. With a subscriber’s consent, they could make form data entry very easy. They are well placed to provide services within an identity framework because:

  1. they are regulated to protect the privacy of their customers
  2. they verify identities as part of the contract provisioning process
  3. they are able to verify identities face-face through their retail stores.

There are 4 types of cable service provider related transactions:

  1. Subscriber Verification – receiving name and address and verifying it against billing address information.
  2. Active/Inactive Verification – confirmation if a phone number is active.
  3. Account Type checks – many risk mitigation specialists believe there is a higher level of fraud when a transaction is associated to a pre-paid account than a post-paid (contract) account.
  4. Compliance Checks – different compliance regimes and regulations affect many aspects of making outbound calls. In the US, the Telephone Consumer Protection Act (TCPA) requires information about where the phone is located so the time-zone can be used to comply with time-of-day limitations and even whether or not a telephone is registered to a household or a business. All this information has to come from somewhere and the cable service provider is the best, most authoritative source of these simple attributes.

Already, we know cable service providers are both attribute and credential providers. However, there is additional revenue which can be expected from introducing new identity services.

Recently there have been various industry recommendations to switch from ARPU, average revenue per user, to ARPA, average revenue per account as a primary measure of unitized revenue. Factors like churn can drag ARPU down so cable service providers need innovative strategies which boost it up. When ARPU is increased by just one penny a month it has a big multiplier effect. That single penny increase in ARPU for cable service providers with 2 million subscribers adds $240,000 dollars to the company’s annual revenue.

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Participation in identity, especially as a means for subscribers to prove they have an established account and payment history provides an important value to the subscriber. A cable service provider that provides the subscriber with tools to make their online experiences more rewarding and less painful should expect to earn subscriber loyalty. Subscriber loyalty reduces churn and churn is a significant source of operating cost and margin loss, since in order to maintain the same number of customers with the same revenue, cable service providers would have to invest more in adding new customers in order to offset the loss of existing customers. Churn reduction can be as valuable to cable service providers as revenue or ARPU enhancement since it goes right to the bottom line in terms of operating margin.

Specific to the attribute market, cable service providers have a lot to commend. They provide the only globally unique identifiers which can be used by a subscribers to cross between their virtual, online world and their physical world. In many cases they have high quality information (like billing and service addresses) that have the benefit of being updated each time the subscriber pays their bill. Cable service providers are also, at their core, technology companies.

One of the biggest challenges cable service providers face is their lack of comfort with the concept of inverse competition. It does not come naturally to the zero-sum view that cable service providers, have of competition; i.e., “If I obtain a subscriber, I am preventing my competitor from obtaining that subscriber”. Cable service providers need to think of their participation in fraud-prevention and identity verification programs as a cooperative venture in which each party receives more benefit from cooperation than they would if acting independently. The identity market has a federated economy of scale that is very different from the zero-sum market for minutes, data and devices.

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