Archive for June, 2010

Mobile Data Overtakes Voice In Revenue

Thursday, June 10th, 2010 by Jon Linden

Only 18 months ago I was sitting with a mobile operator who told me that their main objective was to ensure that data services didn’t cannibalize their voice revenue. The reason was simple – data service generated about 5% of the revenue.

Fast forward to June 2010. The sun is shining and the World Cup in soccer is just about to kick off, but more importantly Softbank Mobile Japan announces that data services for the first time overtook voice services in revenue in Q1! Japan has always paved the way for mobile data services, and NTT DoCoMo are expected to follow suit during the second half of this year.

But Japan is no different (at least not in this specific sense) than any other country in the western world. I see mobile operators here in Sweden spend the majority of their TV advertising on promoting mobile data services. It has become a differentiator and a big enough piece of the pie. We will shadow Japan and probably break the 50% marker in 2011 in many cases. Mobile data is a $50bn+ business this year in the US according to Chetan Sharma Consulting; a significant business where minor changes and adjustments in packaging, pricing, production cost and ARPU has a substantial impact on bottom-line.

Chetan Sharma also said that the US mobile subscription penetration was approximately 94% at the end of Q1 2010, and past 100% if we take out the demographics of 5 yrs and younger. Growth won’t come from winning new voice users, but from making the ones you have more profitable and to steal customers from the competition – e.g. with compelling data offerings. And you’ll have to control production cost since they’ll constantly expect more at the same price.

The conclusion is that mobile operators must take a seriously look at the packaging of their data services. “All you can eat” is not the best for (almost all) your customers, and it’s certainly not the best for your business case – especially as access speeds go up. That’s why we see more and more mobile operators moving away from flat rate data packages, as Cam referred to in his recent blog post. Tiered services are happening – thank God!

Eventually we will have options for people with different needs. But let’s stop for a second and consider what you’re trying to accomplish. Tiered services can either be a customer incentive or a cost insurance – or both. Don’t get too introvert in controlling potential exceptions with caps and limitations. This will add complexity, customer concern (even if they’re not even close to any limit/cap), and you’re up against some serious competition out there. But still, as said, small changes can have a big impact. Offloading peak hours to better utilize your network, attract new customers, or offer added value services that can boost ARPU can boost your profitability and ability to invest even more in your services and customer support.

I hate to say it, but we know from experience that devices (e.g. iPhone launches or subsidiesed phones) actually sell more subscriptions than any packages we produce. But service packages will support the devices and add to the differentiation. Make sure you know who your customer is, where he is, what applications he’s running, and what device he’s using – in order to accommodate his then current and general needs. Make sure your information is reliable since accurate intelligence enables proper business decisions.

So what are my recommendations? I’ve said it before (Do’s and Don’ts in Bandwidth Control) – keep it simple! Your biggest challenge will be to communicate it, implement it, and justify it (“is YouTube video or web?”). Know your customer. Define your target group and offer applicable services. Serving young savvy nerds with the same offering as unsophisticated 65+ Internet users won’t work. Don’t become too technology-driven and introvert in your business model. And avoid too many options since they will cause confusion.

So, do I need to say that we know this space and offer the solution you’re looking for? Well, we are, and we’re darn good at it! I look forward to you reaching out to me to discuss this further, but in the meantime I’ll kick back and enjoy some seriously good World Cup soccer. Sweden didn’t qualify this year, which gives Swedish mobile operators another four years to work out a business model that supports the network being flooded with real-time streaming video. Good luck (no irony intended).

Mobile Data Plans that Work

Monday, June 7th, 2010 by Cam Cullen

Mobile data plans have been in the news quite a bit lately, with Verizon (LTE plans) and AT&T (iPad and iPhone plans) updating the market on their mobile data positions. Verizon has all but announced that there will be no unlimited data plans on their LTE network, which is now scheduled to go live in 30-40 cities in Q4 2010, and people will pay based on their usage. AT&T announced that they are doing away with the unlimited iPad plan (already) and will now support tethering for the iPhone (but only for a 2GB/month plan). Other mobile operators also would rather have data plans based on usage rather than unlimited plans, but it remains to be seen how long or if operators with rich data devices can hold out, or if the pain of congestion will hit their network as it has for AT&T.

But is the ideal answer for mobile data to always bill based on usage? Although I understand the issues that are driving the operators to implement usage based plans (cost control, congestion management, etc.), I think that there are hybrid plans that could significantly accelerate the adoption of mobile data usage (and fixed mobile substitution for some users). Mobile operators could serve their customers better by offering flexible plans that were targeted towards different “consumer” types on their mobile network that were sensitive to application usage and time of day. These plans would be ideal for the new generation of rich media devices (Android phones/tablets, iPhone, iPad, and laptops) and accelerate their adoption by the consumer groups that covet the devices but are still afraid of bill shock (which will be even higher now that overage charges are going to be pervasive). It has been proven that devices can sell data plans, but the plans can also stunt the usage of the devices if using them becomes too complicated and expensive.

What would these plans look like? Most plans would be similar to the existing plans, with usage meters for the majority of data and separate usage meters for the applications that are attractive to specific consumers, with streaming video, audio, and file sharing leading the pack. Although web pages can be a lot of data (I once read an analysis that said the BBC front page was 1MB of data, which could cost you a pretty penny when you are roaming!), the real problem for mobile operators are long-lived streaming or downloading applications that can cause persistent congestion in a cell or on the network. Some examples of targeted plans:

  • Streaming Video: Monday through Friday 8 a.m. to 6 p.m., 25GB of data, unlimited nights and weekends
  • Streaming Audio: Monday through Friday 8 a.m. to 6 p.m., 10GB of data, unlimited nights and weekends
  • Unlimited Web: Unlimited web browsing and email, 2GB streaming media and other applications
  • Social Media: Unlimited Facebook/MySpace/IM/email, 2GB other applications

These plans could either be an add-on to an existing data plan, or part of different bundles for users. A very attractive iPad plan would offer unlimited web browsing, but a usage meter on other applications. I don’t see these plans as being negative towards Network Neutrality, since they will be selected by the users – as an alternative to the pure usage-based plan that the mobile operator would also offer. Time-based plans are already popular among mobile operators for voice, and could easily be popular among students and business travelers (i.e. Nights and Weekends plans).

My concern is that placing restrictive limits on bandwidth usage will stifle or limit the potential of the nascent market for rich data devices, or limit their use to Wi-Fi networks, which completely misses the goal of upgrades to LTE and other high speed mobile data networks – which is to make access ubiquitous for users (and not ubiquitous just for email). The challenge of implementing these plans is on the systems that would be used to meter the different applications (i.e. DPI systems) to ensure that the application classification is accurate.

An innovative mobile operator that offered these plans as an alternative to a more restrictive plan could tip the scales in their favor when competing for the “high value” users for mobile data. In the highly competitive mobile market, operators that think outside the box and find ways to best leverage the technology that they are already deploying in their networks will emerge victorious and profitable. Flexibility will be a key success factor.

As a user – would you be more likely to purchase a plan that gave you flexibility in how you used your mobile broadband?  I know that I would.