Strategies for profiting from mobile data growth
The mobile data industry has evolved rapidly over the past two years, with the impact of growing 3G penetration, lower cost smartphones and USB laptop dongles, together with the popularity of mobile applications and flat-rate data plans. This has resulted in huge growth in data traversing operators' networks. The market has now reached a chaotic and critical point with network congestion being felt by operators and consumers alike.
In response, operators are introducing a toolkit of network congestion management strategies that will reduce costs and improve economies of scale by balancing traffic requirements across networks and implementing real time usage controls.
Policy control, data traffic offload, evolution to 4G, and network optimisation will incrementally reduce data delivery costs by more than 60 per cent over the next three years. A holistic approach that takes into consideration traffic growth, subscriber behaviour, and application trends is vital to long term success.
Policy control – how, when and under which circumstances subscribers can access networks, applications and services – will contribute cost savings of over 10 per cent, equating to over $15 billion in savings by 2013 in the US market alone.
Policy control provides real-time network, application, and subscriber policies that allow operators to manage mobile data growth and deliver personalised services on a far more refined level than was possible in the past. It helps operators prioritise traffic based on an individual users' subscription. So effective is policy control in reducing traffic peaks that data throughput in the busiest times can be reduced by 15 to 20 per cent, according to Chetan Sharma Consulting.
Shifting data traffic off a congested mobile network and onto another access technology fundamentally changes the economics of delivering that data. Offload is being implemented by operators globally to manage the total data throughput with, typically, two flavours: offload to Wi-Fi and offload to femtocells. In some regions, WiMAX deployments are also crucial to an offload strategy.
Operators deploying a data traffic offload strategy, using service control to ensure transparent and secure subscriber access, can expect annual network cost savings of about 25 per cent per annum by 2013.
Infrastructure evolution to 3.5G (HSPA) and 4G (LTE) lowers the cost-per-bit for data throughput on the network, thereby reducing overall costs. Network cost is lowered dramatically with each incremental technology deployment, with the evolution to HSPA and then LTE saving just under 20 per cent in costs, according to Chetan Sharma Consulting.
Cost reduction is only one side of the equation. Operators are now creating new service models that move away from unsustainable flat-rate plans towards tiered and usage-based pricing underpinned by subscriber, service, and policy control as shown in the table.
Flexible, dynamic, and personalised pricing models that reflect subscribers' preferences and context, bandwidth and application usage, and network conditions are the wave of the future.
Comparative cost reduction strategies, when placed alongside the new service models now being introduced, aid the development of sustainable business models for the mobile industry.
But pricing models will ultimately determine future success and growth in the sector. Unsustainable all-you-can-eat data plans will evolve to include flexible pricing models based on time-of-day, individual usage patterns, casual usage, application preferences, and location.
It is ultimately the responsibility of mobile operators to introduce these models with quality of service guarantees that are based on users modifying their behaviour. With that will come order from the mobile data chaos.
Innovative service models
Service models are evolving in a data-centric mobile world as a result of massive growth in data throughput. Flat-rate data plans are unsustainable for the heaviest users and innovation inevitable:
l Speed-rated: These plans offer operators the ability to increase revenue from the heaviest users by placing these subscribers on the most expensive tariffs, implemented through effective policy control on the consumer side.
l Time-based: Telecom Italia Mobile has successfully deployed time-based mobile data plans. The model implements tiered pricing based on the number of minutes a user spends on the data network.
l Bandwidth usage and application specific: Next generation policy control solutions enable operators to implement controls and pricing based on bandwidth usage or specific traffic types. Operators can flexibly charge for heavy bandwidth services such as video or peer-to-peer in real time. SmarTone-Vodafone, for example, is delivering tiered services in Hong Kong based on bandwidth usage and time, as well as applications on-demand using Bridgewater's policy control and subscriber data management capabilities.
l Time of day: Operators in mature markets have seen a clear time-of-day usage pattern emerge for mobile data. Similar to other utilities, they can charge more at peak times according to network capacity , or conversely, offer consumers incentives to download during quiet network times. Underpinned by policy control, dynamic and transparent pricing enables operators to effectively manage peak loads.
l Location-based service models: Traffic patterns over the past two years demonstrate that the most congested cell sites are in urban centres. Implementing charging models based on congestion is commonplace -London's congestion charge zone for example. Could operators implement a similar model on their mobile networks if guaranteed quality of service is the outcome?
l Quality of service models: Guaranteed QoS comes at a cost to operators, especially in mobile networks where bandwidth is necessarily a shared resource. But the emergence of ‘bandwidth boost' models- whereby a user is offered a short-term increase in bandwidth for a set fee for example – provide the opportunity to implement service level agreements.
l Ad-funded solutions: Mobile advertising is beginning to emerge as a revenue source for operators. With subscriber data privacy concerns now being addressed, mobile advertising could create new revenue streams for the operator, personalized offers for the consumer, and more brand awareness for the advertiser .
l Mobile commerce driven: Japan offers insight into a commerce-driven mobile data market, with an open ecosystem driving adoption and consumer spending on services. Leading mobile Internet players including Yahoo! Japan have developed a viable market for content, services and mobile advertising in partnership with mobile operators.