|Tom Forsyth, marketing director for service delivery solutions at Telcordia|
Recent research from The Cloud shows that mobile internet users are increasing their mobile data consumption at a rate of three to five times per annum. Similarly, analysts at Exane BNP Paribas predict that user demand will be almost 100 times greater per mobile internet user in Britain by 2015, than it is today. These statistics clearly highlight how just how much pressure the mobile networks are currently under with the continuous rise in consumers’ data demands. Heather McLean investigates.
Tom Forsyth, marketing director for service delivery solutions at Telcordia, states: “Clearly, mobile broadband is on the rise not just in the UK but around the world. The really scary part is this is just the beginning. In terms of penetration, Vodafone, for instance, has stated that across Western Europe only 30% of its mobile customers have mobile broadband. Of course the traffic situation is very different with large shares of traffic being generated by small sections of the consumer base and traffic being geographically distributed to create hot spots. Some of this is offset by the ability of smartphones to access WiFi, either public or in the home to offload some of the traffic.”
Only the beginning
According to figures from 3 UK (October 2009), data exceeds 90% of network traffic, compared to around 15% to 20% three years ago. Forsyth notes: “This is particularly important for carrier services providers, as they are using voice revenues to subsidise data usage, so obviously new business models are needed. There will be a point, not just with the UK networks but globally, where data speeds are seriously affected. Much work has been done globally in updating network infrastructure, but service providers’ business pricing models need to come up to date to be in line with these.”
Ben Timmons, senior director for business development at Qualcomm CDMA Technologies, remarks that according to Ericsson, in volume terms there is already more demand for data than voice. Yet he adds that in terms of revenue generating services, voice still leads the way. “In networks of the future, we expect everything to become a data demand, with voice carried over the data bearer by carrier grade IP. So ultimately the distinction will go away,” he says.
Yet Paul Gooch, COO, at The Cloud, states that unfortunately, not enough network operators recognise the value in following a preemptive strategy to overcome this demand for capacity on mobile broadband. Instead, he says operators are increasing the amount of data their users can access on 3G networks. “This sounds like great news for the consumer, but eventually the networks will be placed under so much pressure, that they will fail,” he notes.
However, Forsyth states that Telcordia, which talks with many carriers in both in mature and emerging markets, sees operators becoming aware of the challenge of meeting demand for data, and looking for ways to introduce tiered pricing models for example, to offset the strain on the network. The current model with volume based pricing will need to change to being based on quality of service or download rate, he states.
“Carrier service providers around the globe are addressing the problems differently,” Forsyth explains. “For instance, those in Spain and Finland are offering premium services today, while those in markets such as India are offering off peak data. Elisa Mobile, which operates in Finland and Estonia, charges corporate customers a premium to prioritise their traffic over standard plan, and Vodafone Spain is introducing off peak pricing incentives for consumers, so that bandwidth can be freed up at peak times.”
Forsyth adds that new tariff models must be linked to any attempt to impact traffic patterns, to encourage users to pay for what they need, and to move traffic to less heavily loaded areas and times. “However, by reducing prices for lower service levels and offering add-ons or top ups as well as discounted access when loads are light, service providers can make the new plans very attractive to users currently on ‘all you can eat’ plans, without having a major impact on profitability.”
HSPA+ and WiFi
The technology suppliers as well as the standards bodies are continuing to contribute to the enhancement of the efficiency of mobile networks and mobile devices. Timmons states: “We’re playing our part in that with HSPA+. The emergence of dual carrier will all play a key part in helping to ensure that available spectrum is used as efficiently as possible. Of course in the UK we are expecting that new spectrum at 800 Mhz and 2.6 Ghz will become available and this, along with the transition to UMTS 900 should help sufficient capacity be available.”
A recent analysis of the market by The Royal Bank of Scotland suggests the answer to the capacity crisis currently facing the mobile internet lies with WiFi. RBS foresees fixed and mobile networks becoming seamless in customer’s minds with smart devices automatically roaming onto WiFi where available. The customer’s desire to remove or at least minimize the effects of bill shock also point to an increasingly favourable attitude to free or on demand access.
Gooch adds: “A small number of network operators, such as O2, have already begun to recognise the value in incorporating WiFi into their customer offerings. For example, by using The Cloud’s WiFi, iPhone users who drop out of 3G signal range will automatically see their devices switching to WiFi, meaning they are privy to universal internet access. By adopting the available WiFi services, operators like O2 are also helping to alleviate the strain on the 3G networks by off loading the increasing data demand onto alternative means.”
|Ben Timmons, senior director for business development at Qualcomm CDMA Technologies|
Bill shock is a term that has been around for a while, but the problem itself is far from fading, remarks John Giere, Openwave’s senior vice president of products and marketing. “Indeed it had become so widespread and pervasive that it’s finally forcing preventative action. Recently the European Union enacted a rule that requires wireless carriers to cut off service when their subscribers’ bills reach a certain threshold, saving people from coming home to unexpectedly high mobile bills.
“Under the new regulations, mobile firm companies must warn their customers when they reach 80% of their chosen limit. Users have until 1 July to tell their service provider what their limit will be. If they don’t, it will automatically be set at £45, after which service will be cut off.”
However, Giere adds: “New rules from the EU protecting the consumer can only be welcomed as a positive move, but the proposed solution is still rather short-sighted. One warning and then stopping service altogether seems like a rather clumsy solution to a delicate problem.”
To get away from simply cutting an end user’s service off when they have passed the limit, Giere says mobile operators can offer a better, more transparent solution. “Rather than a single warning followed by service cut off (potentially in mid-sentence), the mobile operator can easily offer multiple warnings, each accompanied by a number of time or volumebased extensions. This approach can be applied to roaming customers, pre-pay customers and customers who purchase premium services.
“The key is choice and personalisation. Mobile operators can offer tailored mobile internet experiences for their users through controlled access to setting usage limits. The ability to choose how they want to proceed once they reach their limit will increase their confidence when using data services, and it will allow them to more fully utilise the mobile roaming facilities available to them. If a subscriber is reaching their limit on a regular basis, operators can credibly persuade them to upgrade to a more suitable tariff, generating extra revenue for the company,” says Giere.
Average users are unaware of their mobile data consumption and how it relates to their current subscriptions, therefore real time usage monitoring and proactively notifying customers is a good first step, but inserting service options such as buying a ‘data advance’ bundle or ‘bolt-on data pack’ at the point of interest empowers the subscriber and maximises profits for the operator while protecting the brand, Giere observes.
No one likes getting stung by a big bill at the end of the month when you finally realise how much time you have spent calling your friends or surfing the net. This is a key part of consumers’ mindset when choosing a service, remarks Gooch.
“People are increasingly turning to WiFi as a solution to navigating the end of the month bill shock, by turning up at a coffee shop or a restaurant that offers WiFi, people can either make use of the free access, or they can opt for the pay as you go option where they are completely aware of how much they are using and spending as they are paying upfront. By introducing more and more people to a pay as you go scheme, operators and service providers will remove the unwelcome end of the month bank balance hits, and ultimately retain the customer’s trust,” says Gooch.
Yet Timmons states: “Bill shock should not be an issue for UK mobile broadband users as there are plenty of options available, with pre-pay, post-pay, fixed rate unlimited usage and the rest.
There will always be a few individual horror stories, anecdotal or media-led, about surprisingly high bills. But there is enough information available out there for consumers to make well informed decisions on mobile broadband, and this is an extremely competitive market now.”
Timmons adds: “There is still something of a gap in perception and understanding in what mobile broadband can do. I don’t think it is a fear of big bills, more a gap in understanding. Perhaps more could be done to help the consumer understand what mobile broadband, either on a phone or on a dongle, can do. There is obviously a huge segment of the user community that already understands. We plan to continue to work with the carriers, the GSMA (through the mobile broadband service mark initiative), and the retailers, to help people understand what the benefits of mobile broadband are.”
How to sell
|Keith Horsted, development director at gteq|
Mobile broadband is now very easy to sell, agrees Chris Goodman, managing director at Focus 4 U. “In the past the cost was far higher and the available network was far less reliable, making the product only really viable for business users who regularly travelled and for whom price was not an issue. Now we find that increased demand has driven the cost down considerably, with this demand in turn giving providers the drive to greatly improve network performance and availability.”
Goodman continues: “As a mobile dealer, the demand for mobile broadband from customers is currently at a record high. Three years ago, we had only a handful of our customers with mobile broadband connections running alongside their traditional voice connections. We are now at a point where over 40% of our customers have at least mobile broadband connections, with the average being one for every four voice connections.”
Timmons comments: “We’d like to see increased innovation in pricing packages, increasing pre-pay or pay as you go; not necessarily reducing prices, just making things more flexible. As well as increased payment options we’d like to see more promotion. There is a substantial base of people for whom mobile broadband would bring value, and we’d like them to know about it!”
While Forsyth concludes: “The key is to incentivise consumers, whether through offering discounts for off peak usage, cheaper packages if consumers sign up to advertising, or by collaborating with other companies in the mobile sector to provide cheaper solutions for consumers.”