Telcordia: More Services Are the Answer
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