Posts Tagged ‘mobile operators’

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).

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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.

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Deloitte Says 2010 Looks Great

Thursday, March 11th, 2010 by Jon Linden

The very nature of predictions is that they can be wrong. But sometimes they’re more substantiated, sometimes the source is more credible, and sometimes you just want them to be true. The former two apply to Deloitte Touche Tohmatsu’s “Telecommunications Predictions” that I read every year. When they predict, for this year, a 100% growth for products that help decongest the mobile bottleneck, then I also confess to wish for them to be true.

While over-all mobile operator spending is expected to grow 7% in 2010, some pockets of technology – where one of the first segments they point out is deep packet inspection (DPI) – can grow more than 10x thanks to a pressing need. In 2009 the last walled gardens were torn down, smart phones became data smart, user interfaces encouraged use of data services, and 3G connections became a true option to fixed broadband (I use it as such at my summer home and when travelling). Data volume has grown and will continue to grow accordingly.

I’ve pointed out in the past that mobile operators are more sensitive to bulky traffic due to higher cost per megabit and fewer available megabits in the access network. Mobile networks become bitpipes, hence it’s more important than ever to know if, what and when the network is being clogged up. The ability to build out network capacity fast enough, and to do it with an intact and feasible business case, drives a great demand for mobile DPI; a demand that will grow this year according to Deloitte’s predictions.

Deloitte says that “at the start of 2010, there should be about 600 million mobile broadband connections between laptops, netbooks, and smartphones” and they predict that “cellular data wireless networks will have gone from underutilization to congestion”. Most mobile operators have designed their networks for some growth, but congestion, also known as over-subscription in this case, is part of the equation. Deloitte predicts an access network issue. My experience is that this is not a big issue since new technologies, like HSPA+, are constantly released. End-users also expect and accept a lower speed when going mobile.

However, the underlying network is typically not dimensioned to support constant increase in access speed or a changing user behavior with longer and more frequent sessions. “Congestion issues sometimes have less to do with providing very high broadband download rates to a few users, instead, they often revolve around providing highly variable two-way bandwidth to many mobile users whose usage requirements change from minute to minute” to once again quote Deloitte. This has an impact on the entire network – from access to backhaul, and all the way up to core and peering.

There will always be overloaded cells due to design, subscriber take-rate, and the dynamic nature of roaming users who occasionally are in the same geographical location. Capacity is a constant game of catching up. DPI is the tool that helps you to plan capacity, identifies issues and resolves them – long-term or until a long-term solution is in place. A DPI deployment pays off almost instantly through better customer satisfaction and timely infrastructure investments. A pretty easy investment decision, right?

Light Reading predicted in 2007 that mobile DPI would be the growth engine for DPI. They expected mobile DPI to catch up with fixed DPI in 2010 and exceed it in 2011. This seems to be a pretty accurate assumption. Especially since we hook on a second locomotive to the mobile DPI train this year – LTE. Thought LTE might resolve access bandwidth constraint, it causes the same challenge for the rest of the network – at an even higher degree.

I suppose all of this is primarily of interest to our investors. Mobile operators are a prioritized market segment for us. No one is actually better positioned than Procera for success in this space. We have the leading technology, we have traction with strong references, and we’ve grown at a healthy pace that beats the competition. To me the above says that we stand a good chance of delivering yet another year of extensive growth, following two remarkable years of 75%+ growth while in a global financial recession. Stay tuned for how this prediction comes true.

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Mobile World Congress…It is all about the Apps!

Thursday, February 18th, 2010 by Cam Cullen

I have spent the week in Barcelona attending the Mobile World Congress event. Anyone that thinks that there is no vibrancy in the networking world should have been here to see the show. The halls were packed, the booths were busy, and the meeting rooms fully booked. There is a lot of excitement about where the mobile industry is going, and the opportunity that exists for mobile providers going forward.

One thing that jumped out at me during the show was the growing focus on the applications that are driving mobile usage. Yes, there was plenty of LTE hype, and lots of platform and operating system buzz (you should have seen the line for the Android developers lab as well as the push Microsoft made for Windows 7 Mobile), but focus seems to be shifting towards the applications that are driving mobile usage. The operators are keen on pushing new applications, because they will drive up data usage and increase the urge for users to upgrade their devices and service packages.

There is a clear recognition that mobile success may be won or lost on the application front. In the US, Apple has done a good job with marketing the iPhone by focusing on the everyday things that it can do to make your life easier with mobility (finding restaurants, checking on movie showtimes, etc). Google did a great ad during the SuperBowl (American Football for those outside the US) that showed Google search used to progress a storyline for a person’s life (http://www.youtube.com/watch?v=nnsSUqgkDwU) which is not specifically targeted at Android, but can be applied to Android and mobility. Microsoft was showing the same type of applications and integration at MWC as part of their booth show. Ericsson announced an applications store (eStore) with more than 30,000 applications that carriers can offer those apps to their own customers.  A new alliance was formed between 24 operators (including ATT, China Mobile, Orange, etc) called the Wholesale Applications Community (WAC) designed to simplify how application vendors get their applications to the end user.

Why is this important to a DPI vendor? Mobile operators who want to understand what applications are clicking with their users need to look no further than to a “robust” DPI system to understand what applications, clients, and software their users are running – even down to the device level. Application vendors obviously want the operators to know that their application is popular, since it will open up more opportunities to sell that application, whether it is through the operators own application store or the mobile OS store (iTunes, Android market, etc). The DPI “lite” solutions provided by some vendors will never keep pace with the ability of a dedicated DPI solution. At Procera, application recognition has always been a core element of our solution, we release updates every two weeks to keep pace with the new applications our customers encounter in the wild, and this includes mobile applications.

The applications that really jumped out at me are the “useful” applications that can simplify or make life easier for people. Simple navigation capabilities can be helpful even if you are walking through a large city – looking for a specific location for a meeting, searching for a restaurant, looking for a store. VOIP applications (which are finally being approved for mobile use by some operators) can be cheaper than international calls in some instances (or using the VOIP over wi-fi is even better). Even bar-code scanners that allow instant internet price comparisons are really useful if you are shopping and want to make sure you are getting a better deal.

As mobile operators look to understand what they need to do to generate revenue, I am certain that going forward, applications will be a big part of that plan – whether it is enabling some of the applications in real-time (even if it is not sold by the operator – like GPS), or form a retail perspective in their application stores. DPI can help them understand where their greatest opportunities are – and will allow them to service their customers better by meeting their expectations.

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Mobile Internet – Just A Bit Pipe?

Wednesday, December 2nd, 2009 by Jon Linden

I’ve argued that mobile Internet is “just another Internet access”. This used to be a controversial and provocative statement when talking to mobile operators who defended their premium network investments they made,  in order to deliver pretty fast Internet connectivity.

Imagine my surprise when I recently attended a traffic management conference in London where all mobile operators in chorus surrendered to being just a bit-pipe competing with wireline broadband… What happened?

I assume they’re realizing that they don’t have the recipe for the all-resolving secret sauce, which is why it currently feels a bit hopeless. Walled gardens didn’t work, a price war has driven prices down, customers don’t pay for added-value services, and another network upgrade, this time to the fourth generation, is just around the corner.

The good thing is that this puts the spotlight on the fundamentals – production cost. You consider how you can limit OPEX by minimizing helpdesk calls, you look at how you can maximize the utilization of your network, you want to automate up-sales, and you implement cost thresholds like volume quotas and international roaming control. Oh by the way, these are all things you can do using DPI.

Once we’re past this realization we must get ourselves out of this sorrow and start looking forward. Mobile Internet certainly has added value over wireline. The growth in mobile Internet is probably the best validation of this. But speed, i.e. bandwidth, is not one of them. Maybe it’s time to take the lead on selling non-bandwidth-centric services? How can you leverage mobility? For what customers is mobile Internet the only, or the best, option? How will built-in 3G modems in laptops impact the market and the ability to sell pre-paid services?

This is putting a lot of demand on the business developement and product management people at mobile operators. It’s time to get your moneys worth guys! Every case is certainly unique. Do you provide mobile and fixed line, do you go after specific customer segments, or are you the low price option? This will impact your strategy more than ever.

So I guess I must convert to the other side and argue “Mobile Internet is more than just a bit-pipe”. It doesn’t feel as controversial, but a man’s got to do what a man’s got to do.

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