Smarter Services Pack Revenue Punch

A new study, commissioned by Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), quantifies what many mobile operators probably already know: Services that use customer information, location, presence and other information to personalize or tailor offerings are the key to better returns on their network investments. (See Tellabs Study Finds Mobile Ops Missing Revenues.)

The study, conducted by STL Partners, says mobile operators can increase cash return on investment by almost 2 percent by making their networks smarter -- configuring them more efficiently, adding network security and device management, and using Wi-Fi offload and traffic shaping to handle congestion, for example.

But the real payoff comes when mobile operators develop smarter services. Cash return on investment is almost 6 percent for services that are personalized based on customer data, or that use information including location, presence, payments, identity and authentication. Included in the smarter services bucket are differentiated pricing and charging schemes, tiered offers and two-way business models that generate revenues from content or applications providers.

The study is a follow-on to another Tellabs-commissioned report by STL, which was released at Mobile World Congress in February and forecast a revenue drought for mobile operators if they continued to offer unlimited data plans and lookalike services. (See Tellabs Predicts Profit Drought for MNOs.)

"Today's mobile operators are earning returns around 5.8 percent, which is about what utility companies earn," says Tim Doiron, Tellabs's director of IP and Mobile Internet. "Smarter services are derived from smarter networks, and taken together, they put mobile operators in the 13 percent ROI category. That's closer to what a company like Google is making, at 16 percent."

There are of course, major challenges to doing this, including deployment of next-generation equipment with the ability to do things like run network analytics or identify traffic types by application, Doiron says -- and that's, of course, where Tellabs hopes to be of help. (See Tellabs Smartens Up Its Routers.)

But there are operational challenges as well, to include the siloed organizational structure of many network operators, and the need to implement dynamic policy control in order to personalize services in a scalable, efficient way, Doiron points out.

The study spells out, in graph form, what's easiest for mobile operators to do and which changes are going to be hardest, and prioritizes the investments required to create the "happy pipes" (their words) needed to deliver smart services.

For example, more efficient network configurations and Wi-Fi offload services are considered relatively easy, while developing differentiated services is among the hardest tasks.

Tellabs is making the entire study available for viewing and you can find it here.

— Carol Wilson, Chief Editor, Events, Light Reading

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