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Telcordia: More Services Are the Answer

Sarah Thomas
5/27/2010

It is not a well-kept secret that wireless operators are seeking solutions to the influx of data traffic on their networks, but they may be pursuing the wrong strategies. (See Providers Ponder Planning Problems .)

Back-office software developer Telcordia Technologies Inc. 's survey of wireless operators spanning 75 countries indicated that most must reevaluate their billing procedures and readjust their business models if they want to survive the data tsunami.

Of Telcordia's respondents, surveyed at Mobile World Congress and CTIA this year, 73 percent said they expect to implement network-enforced hard limits, tiered services, or a combination of both to manage data traffic. (See No Surprise: Verizon Talks Tiered Pricing for LTE.)

Hard limits, along with data offload, are what most have been exploring today, but Graham Cobb, marketing director of Telcordia revenue management solutions, says more services -- not less -- are actually the answer. (See Deutsche Telekom Joins Rush to WiFi Offload and MWC Preview: Data Offload to the Rescue.)

"The last few months, the trend is away from looking at it as a network issue, but [toward looking at it] as a marketing issue," Cobb says.

The cost driver is the bandwidth needed in the network during the peak times, Cobb added, and limiting a user to a certain amount of downloads doesn't address the issue that they need to be spread out off of peak time. (See Telcordia Unveils Dynamic Pricing Tool and Mgmt World: Telcordia Offers Plan B.)

Operators should, instead, offer tiered pricing based on the speed of the connection, but package it based on the service. Rather than advertise "10 megabytes per second," offer a package "optimized for Web browsing and video" or one for "high-definition video." Consumers can identify their needs, which correspond to a certain speed, and buy accordingly.

"They are willing to accept it and understand what they are getting," Cobb says. "On TV, they are already paying for HD services. It's a model that's easy to explain."

Wireless operators can then let their customers change tiers as needed on a temporary basis. If they want to watch the upcoming World Cup, for example, they can upgrade their bandwidth for only the weekend of the games and pay more for the privilege.

It doesn't necessarily have to be the operators offering the bandwidth upgrades either, Cobb says. Content providers could pay the operators for access and bundle the charge into the price of the bandwidth upgrade. Alternatively, retailers can offer a promotion wherein a user who spends a certain amount of money at a sporting store, for example, gets to watch the World Cup on his or her mobile phone as a perk. Operators, content providers, and advertisers can offer as many promotions as they want, Cobb says.

"Operators are saying the challenge for the network guys is to manage the user's usage to protect the network, but they don't want to stop people from do things," Cobb says. "They want to monetize it, and they need a model the user understands, thinks adds value, and will pay for."

In emerging markets, Cobb says most operators are leapfrogging the intermediate steps of network management to create an overall mobile broadband data strategy. Brazil's Oi, for example, introduces a new voice service and a premium charge every few weeks. When its competitors follow suite, it drops the prices. It's looking to do the same thing on the data side.

While operators are exploring ways to respond, making any changes to their policies might not be that simple. A report from research firm Analysys Mason , which was released concurrently with Telcordia's survey, indicates that communication service providers spent 8 percent less last year on capex and network management systems in the US. They may need more time to shore up funds to update their infrastructure than Telcordia is suggesting -- or that skyrocketing data will allow.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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sarahthomas1011
sarahthomas1011
12/5/2012 | 4:34:34 PM
re: Telcordia: More Services Are the Answer


This is an interesting marketing model. Mobile TV companies always say that live events like the World Cup or Olympics bring in the most watch time, so consumers would likely pay more for just that event. But, won't that cause the same network problems if everyone pays to watch it live at the same time?

shygye75
shygye75
12/5/2012 | 4:34:31 PM
re: Telcordia: More Services Are the Answer


You've identified a primary disconnect here. Pricing strategies can help solve some problems with finite bandwidth, but there will always be a breaking point. As iPhone users in certain markets are finding out, that breaking point is not predictable from the user perspective.

paolo.franzoi
paolo.franzoi
12/5/2012 | 4:34:29 PM
re: Telcordia: More Services Are the Answer


 


I guess I am in the camp that it will be impossible for ISPs of any type to effectively charge more for high value content.  I MIGHT make an exception for short term live events, but I believe that Mobile providers in particular are unprepared for these.  I believe that all attempts to try to get paid this way will doubly fail, as not only does the network not get paid it adds costs to try to get paid as well.


The dumb pipe model is not new.  It has ALWAYS been a dumb pipe model.  This thought that there used to be a smart pipe is just fantasy.  What has happened is that there used to be a cost associated not just with the bits per second, but the distance that those bits travelled.  The former cost has declined dramatically and the latter cost has disappeared. 


 


seven

FredStein
FredStein
12/5/2012 | 4:34:29 PM
re: Telcordia: More Services Are the Answer


Good article and good comments.


Now let's remember we in the industry have been touting Mobile Internet for a decade. Now the users are using it. OMG. Now the MSPs are struggling to provide it, profitably.


Yup, good idea to monetize high value content, and high value time of day usage. Or conversely offer discounts for modest usage.


But, as others have pointed out, MSP still need to meet premium peak demand.


So... Look to Internet Offload as one way to increase throughput without huge CAPEX. Remember, the cloud and the mobile devices are following Moore's law. So their capacity for bandwidth doubles about every 1.5 years. The Core Networks evolve much slower because of all the rigourous testing and backwards compatibility. Bypass, bypass.

yarn
yarn
12/5/2012 | 4:34:25 PM
re: Telcordia: More Services Are the Answer


Hi 7, I'd add time as an additional factor and this is an old one. As Cobb said "The cost driver is the bandwidth needed in the network during the peak times". So there is differentiation in a billing scheme that rewards off-peak usage (and save cost by  flattening peaks). Of course mobile operators have been using this for their voice plans already so it should be easy to apply that to data plans as well, irrespective of any potential pricing schemes based on application type (and related QoS offered).


I agree the smart pipe concept is a fairly dumb. What is smart about requiring subscribers to push a button to make their service work as it should? That's just bandwidth on-demand and it never got much traction as far as I know, because many users don't know the difference between a Gigabyte and a Megapixel. A smart pipe should recognize what service you want to use and adjust accordingly.


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