Despite 2009’s dire economic straits, mobile providers are actually in a great position these days to capitalize on new, emerging ideas for how to offer and charge for next-generation services. The economy has certainly had no negative impact on the consumption of high-bandwidth mobile services. On the contrary, Apple’s iPhone 3GS, which sold more than 1 million units in the first three days of its release, and the fervor surrounding Motorola’s new Google Android-powered DROID phones, proves that consumers are clamoring for devices that can handle bandwidth-intensive applications and media-rich services.
Mobile subscriber growth is also expected to increase en masse, even in markets hit hardest by the economic downturn. But at the same time, an increase in the popularity of flat-rate mobile data plans and a vicious pricing war threatens to shrink profit margins for mobile operators unless they can devise smarter ways to keep generating new profit opportunities.
High-value mobile services have proliferated wildly in the last five years: ABI Research predicts that by 2014, this explosion will result in mobile Internet users “sending and receiving more data in one month than in the whole of 2008.” And operators must contend with information flowing not only to users, but from them, as well, with sites like YouTube and Facebook reporting record user upload activity in recent months. All this new network traffic affords mobile operators more opportunities to interact with customers and offer them something new.
But even with all these new opportunities to interact with consumers, operators face an increasingly tough battle to sustain current revenue margins. One of the biggest fights in this battle will be to control the rising network management costs of delivering more content and services in different ways, especially where flat-rate plans will limit the total value a provider can realize from any one subscriber.
Emerging trends in policy control, bandwidth management and traffic-shaping technologies present solutions to these challenges that can create opportunities for new profits. Enabling and restricting what customers can and can’t do on their handsets allows the service provider greater control over network traffic while enabling them to demonstrate a greater understanding of customers’ needs.
In developing and emerging markets like Africa and the Middle East, future subscribers will be from younger, lower-income demographics. Mobile operators’ biggest opportunities in situations like these are to align themselves with a brand with a brand that exudes “cool.” Younger consumers want the “in” technologies, the newest devices and then these things offered to them in a personalized way that makes them feel like a unique, valued customer. In this way, they can create loyalty in the youth market that will stay with them when they buy higher-value services like mobile e-mail and Internet browsing as working adults.
In Africa, for example, an absence of physical banking locations has made mobile money transfers one of the most popular services. Young Iranians used video phones to show the world what was happening during their election. And in other Middle Eastern countries, religious ceremonies are communicated to handsets so that users are never out of touch with their mosque.
Another piece of this strategy is to partner with third-party companies that attract youthful consumers, and create promotional campaigns that can produce new revenue streams for both provider and partner. This echoes the model that AT&T forged with Apple to launch the iPhone.
But while sharing revenues with one partner can be done relatively easily, when multiple partners are involved, profit-sharing policies become complex very quickly. Implementing new charging models like this requires network monitoring systems to automatically communicate subscribers’ actions to policy control and enforcement systems aligned to specific profit-sharing models that have been negotiated.
In more developed markets, this combination of devising new revenue-sharing models, particularly for mobile advertising, is increasingly teamed with efforts to manage existing bandwidth so that per-customer revenue does not decline.
Juniper Research predicts that by 2014, annual mobile advertising spend will near U.S. $2 billion. If providers are to capture any portion of this revenue, they will need to align network monitoring and policy systems to both share relevant data: subscriber preferences, network habits, possibly even location. Mobile devices are very personal objects. So providers and advertisers must work to ensure they only offer customers things that truly add value to their experience.
Surging bandwidth consumption and more complex data management processes are stretching networks to their limits. This is another important issue, and opportunity, for mobile providers to address. Flat-rate offerings are pinching profit margins and making expensive network backhaul programs unviable. U.S. providers like MetroPCS and Verizon Wireless have indicated that LTE technologies present a more commercially viable option than WiMAX-based infrastructure builds. Mobile operators will need to monitor how bandwidth is being consumed and be able to shape traffic flows on the network to create a faster, more consistent experience for consumers. AT&T has received criticism for its low network access quality, and with more bit-hungry services on the way, customers will only experience poorer quality if network access is not managed effectively.
The recession has made for a significant landscape change. But customer attitudes and activities are actually giving operators more opportunities to reap new revenues if charging and traffic policies can be brought bear. The trick to realizing revenues from these opportunities is designing systems, policies and models that present real added value to subscribers at every possible instance, maximizing the value of each customer, bolstering trust and maintaining a high quality of experience.
John Aalbers is CEO of Volubill.