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Femto research gives business model pointers

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If the lack of a business model for residential femtocells has been something worrying some operators, then research from Park Associates, commissioned by the Femto Forum, may give them some pointers.

To download the full set of slides, which go into more than I highlight in this note, you can gain access here. But I thought I’d pull a couple of points out that interested me – to do with business models and the business case.

Churn and retention
First off, 12% of UK and German customer, and 22% of Spanish customers whose current operator could not provide a femtocell, said they would be very likely to switch to a new provider if they had a femtocell offering.

But more interestingly, amongst those who said they were likely to churn within the next 12 months, there was a much higher indication that they would avoid churning if their operator were to offer them a femtocell “at a price that you like”. Around 30% of the European consumers said that they would be very likely to stay with their operator if that happened. That looks like quite a powerful customer retention tool – and potentially a much cheaper one to an operator in terms of subsidy than a free handset upgrade.

Parks also found that the level of interest in femtocells grew as consumers’ propensity to churn grew. Those who were extremely unlikely to churn were also unlikely to find femtocells appealing. Whereas 40% of those who were very likely to churn were interested in a femtocell. You have to add to this the fact that Parks also found that it is the highest ARPU customers who are most likely to churn.

In other words, femtocells do seem to provide an attractive option for those thinking of churning and that customer retention (especially) as well as customer acquisition should be built into the business model.

Which services might they pay for?
The other aspect of building a business model is in seeing the potential for using femtos to deliver Value Added Services. Parks asked its respondents about a number of services, giving them a high, medium and low price point for each service. The good news for operators is that there was substantial interest in most of the services, at all price points  albeit amongst those already termed “femtocell fans”. For example, 65% of those polled expressed interest in the virtual home number, even at the high price point. And 98% expressed interest when the price was at its lowest. Services such as cellphone remote control, family alerts, virtual home number scored best. But even more unlikely products such as music sync and photo sync attracted some sort of interest – with 15% of the sample finding that feature appealing even at the highest price point.

NOTE: The Femto Forum commissioned Parks Associates to conduct this research in six nations: the U.S., the U.K., Germany, Spain, China, and Japan. The US research in fact dates back to April 2010 but the five other countries were surveyed in October 2010.

 

Global survey finds 60% of broadband households interested in femtocells

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The Femto Forum and international research firm Parks Associates today announced that femtocells, small wireless base stations designed to provide five bars of local wireless signal strength, are climbing up global consumers’ “want” lists as determined by the most comprehensive survey to date of consumer attitudes toward femtocells in developed markets.

The survey, which included 6,100 consumers across six countries (China, Germany, Japan, Spain, the United Kingdom and the United States), found that nearly 60% of broadband households with mobile phones are interested in femtocells, with improved indoor voice coverage serving as the leading driver for interest. Further findings show that femtocells could prevent large numbers of consumers from changing carriers due to poor voice coverage, while also strongly appealing to heavy mobile data customers.

The survey revealed that not only is the quality of in-building voice services the chief driver for femtocells, it is also the single most important criteria by which consumers rate their mobile operator. The improvement that femtocells bring to voice services could prevent up to 42% of consumers currently considering leaving their operator from doing so. Furthermore, 18% of consumers are willing to switch to an operator offering femtocells and 36% of consumers in multicarrier households might switch carriers in order to consolidate with a single provider offering the service.

The findings are also said to show that heavy mobile Wi-Fi users are among the most interested in femtocells, with approximately 83% finding them appealing. This finding contradicts the notion that Wi-Fi alone resolves all indoor coverage issues, and can be attributed to femtocells’ abilities to improve voice coverage and preserve battery life. In fact, heavy mobile data users of all descriptions were so interested in the technology that they were willing to pay the most for femtocell services among all surveyed.

Among those who wanted femtocells, 68% found at least one advanced femtocell service either very or extremely appealing. Such services include Virtual Home Number, which rings every cell phone in the home, or Family Alerts, which warn when a subscriber such as a child or elderly relative has left or returned home.

“Despite the survey covering mature mobile markets, the results show that consumers’ biggest concern remains the most basic one – voice coverage. This is not only driving significant interest in femtocells, it is also the central reason why most consumers switch wireless operators,” said Harry Wang, director of mobile product research, Parks Associates. “However, the appeal of femtocells clearly extends beyond improved coverage. A significant number of users are very excited by the advanced services enabled by femtocells, indicating that the appeal extends widely. Beyond this, heavy users of mobile data are both the most interested in femtocells and the most likely to pay for the service.”

“This research underscores the importance that femtocells will have on a global scale, and is a clear indicator of the widespread adoption that we can expect in the coming year as consumers become more aware of them,” said Simon Saunders, chairman of the Femto Forum. “Already in the US, femtocells outnumber outdoor cell towers, with subscribers installing these plug-and-play access points to greatly improve wireless coverage in their homes and offices. And, while coverage is a key benefit, there are a variety of other advantages that femtocells enable including improved battery life and faster data speeds that will allow for advanced consumer applications and services.”

MACH Wholesale Roaming Solution selected by Swisscom

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MACH, a provider of hub-based mobile communication solutions, has announced that Swisscom, Switzerland’s leading telecoms operator, is to implement MACH’s Wholesale Roaming Solution. 

Combining MACH’s data clearing, financial clearing and settlement services, the Wholesale Roaming Solution is said to promise to deliver Swisscom optimised cash flow, reduced revenue leakage and accelerated financial clearing and settlement for its roaming business, while reducing the time to market for new advanced roaming services.

Tommy Bertling, Senior Marketing Manager, Pricing and Roaming, at Swisscom comments: “The MACH Wholesale Roaming Solution is about simplicity.  We have one point of contact to deal with, one settlement payment each month and one portal which delivers full transparency.  We have estimated that outsourcing our financial clearing and settlement to MACH costs three times less than if we maintained the same operations in-house – and I estimate the figure is similar for data clearing.  If we were to replicate the work MACH does for us we would need to set up over 600 agreements with each of our preferred partners across the globe – this is far too much to do for any operator and would stop us from concentrating on what we do best.”

MACH’s Wholesale Roaming Solution is claimed to remove the complexity that has traditionally surrounded data clearing and financial clearing and settlement, freeing Swisscom from the need to maintain in-house technology and resources to oversee the vast amounts of data and funds that flow between its partners’ networks every year.  Swisscom further benefits from the ability of the MACH platform to offer an integrated solution with one view for roaming wholesale, retail and financial data, enabling it to fully control, analyse and optimise its business at the group as well as subscriber level.  MACH’s auto-repair function, corrects the most common TAP errors ensuring that less revenue is leaked through incorrect billing reconciliation.

“Swisscom has been a customer of ours for more than seven years, demonstrating the trust it has in MACH to deliver the most advanced platform for high-quality, reliable, flexible and transparent clearing and settlement, that meets all of its business and regulatory requirements,” says Artur Michalczyk, General Manager, Roaming and Interconnect Services at MACH. “MACH handles over 150 billion transactions on a yearly basis, underlining the unrivalled experience we have in helping operators like Swisscom concentrate on their core operations while gaining savings on both capital expenditure and ongoing operational costs.”

Providing complete CDR-to-cash management, MACH’s Wholesale Roaming Solution combines rating and tariff management, billing interoperability and transaction management as well as advanced reporting and business intelligence. It also provides access to the company’s Multi-Lateral Settlement Pool (MLSP) which, unlike bilateral solutions, consolidates multiple payment transactions into one settlement transaction per member. This benefits Swisscom through optimised cash flow, improved efficiency and a reduced exposure to bad debt. In addition, Swisscom is secured against potential losses from roaming fraud by implementing MACH’s  fraud protection system.  MACH’s service is also said to enable further cost savings for Swisscom by removing the need for it to add NRTRDE to its in-house fraud system, a costly and time consuming process.

Small telco. Big fraud exposure. Managing fraud with limited resources

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Webinar now ready to view

Date: Tuesday, 1 March, 2011
Host: Keith Dyer, Editor, Mobile Europe

Presenters:
Matt Wilkinson, VP of Global On-Demand Solutions, Subex
Thomas Walker, Principal, Business and Solution Consulting, Subex

Telecom fraud losses plague service providers of every size – small, medium and large. These fraud losses are a direct hit to bottom-line and increase communication service provider’s operating costs. The CFCA (Communications Fraud Control Association) Global Fraud Loss Survey (2009) estimates that telcos lose approximately 4.5% of their annual revenues (US $72-80 billion globally) due to fraud.

Particularly in a small telco, there are fewer people and resources available for managing operations efficiently. To add it, license-based solutions for fraud management functions are simply too expensive for small telcos. In spite of these challenges, there is a greater need to manage business efficiently.

Join Subex, the leader in fraud management solutions, as they present a live Webinar, “Small telco. Big fraud exposure. Managing fraud with limited resources” on Tuesday, March 01, 2011 at 12 pm GMT. Speakers from Subex – Matt Wilkinson, Vice President of Global On-Demand Solutions, and Thomas Walker, Principal, Business and Solution Consulting, Subex – will discuss how to effectively manage fraud in a small telco environment. During the Webinar, they will cover:

• How fraud could affect small telco’s bottom line;
• The various types of telecom fraud;
• Challenges for small telcos in particular;
• Various fraud management processes, systems and delivery models; and
• Which process suits small telcos depending on its size and business requirements

View webinar here

Ofcom’s in-building contradiction on 900MHz 3G

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When a consumer benefit is not a competitive advantage

Ofcom has announced that operators who wish to refarm existing 2G spectrum for 3G services can go ahead from today, following advice it gave to the Government in October 2010 recommending that the 900MHz operators be allowed to refarm their spectrum without having to release blocks of spectrum to other operators. But it appears to have forgetten one of its own recommendations, so eager is it to proclaim the benefits of spectrum liberalisation.

Back in October, Ofcom said that the T-Mobile/Orange merger that created EverythingEverywhere’s (EE) shared network had considerably reduced the competitive impact of allowing the two 900MHz operators to open up that spectrum for 3G. EE now has enough sites and spectrum to offset the advantage Vodafone and O2 would have from 900MHz coverage, Ofcom found. EE will also be allowed to use its 1800MHz spectrum for 3G, by the way.

But as Mobile Europe noted at the time, Ofcom also discounted the idea that allowing Vodafone and O2 to re-use 900MHz spectrum would give them a competitive advantage by being able to offer improved in-building 3G coverage.

Ofcom said then “the extent of the improved quality of coverage is relatively small”. The regulator found that the extent of this advantage will be dependent on the construction of buildings and the location of the user within the building. “Little or no advantage would exist in many easier to serve indoor locations. In addition, other ways of dealing with poor indoor coverage, such as in-building repeaters and femtocells have become a more plausible strategy for EE/H3G to address residual areas of coverage disadvantage since our February 2009 consultation,” the regulator’s statement said.

Yet today’s release listed “improved in-building coverage” as a “significant consumer benefit”.

That sets up a slight opposition. Ofcom’s position is that consumers will benefit (significantly) from improved in-building coverage, but at the same time this will bring no competitive advantage to those operators able to provide that improved coverage. After all, it’s not as if operators ever compete in terms of who’s got the best network. What, sorry?

An Ofcom spokesperson said that Ofcom had not claimed there would be no benefits in terms of in-building coverage. No, it had not. But it had, as we know, said that “the extent of the improved quality of coverage is relatively small”. Yet now it is listed as a “significant consumer benefit”.

Mobile Europe: “So it is a consumer benefit, yet not a competitive advantage for the operators?”

Ofcom spokesperson: “Yes”

In one respect, of course, refarming both 900 and 1800MHz means that 3G service provision will in time mirror 2G service provision. There will be 3G users on 900MHz and 3G users on 1800MHz and few will be likely to notice the difference in terms of in-building coverage, lessening any competitive disadvantage for operators without 900MHz spectrum. 3 UK, currently with a 2100MHz network through its MBNL JV with T-Mobile, however, could be at more of a disadvantage.

But what we’re left with is the likelihood that Ofcom was casting around for as many “consumer benefits” of spectrum liberalisation as it could, and decided to chuck in improved in-building coverage, even though by its own reckoning that improvement is likely to be “relatively small”.

Ofcom opens up more frequencies for 3G services in the UK

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Ofcom has today introduced a new measure that it says will help mobile phone operators to increase mobile broadband speeds, deliver improved in-building coverage and widen mobile broadband coverage in rural areas.

From today the airwaves used by mobile phone operators for 2G services, such as making phone calls and sending texts, will be available to provide 3G services, such as mobile internet browsing.

Mobile phone operators could previously only use a limited amount of spectrum – the airwaves that mobile phones and other wireless devices use to communicate – to deliver 3G.

The remainder of their spectrum holdings was licensed in the 1990s with a condition that it could only be used for 2G services – mainly voice calls and text messages. This spectrum could in future be used to meet the growing demand from smartphone devices and the like for 3G services, says Ofcom.

LG unveils glasses-free 3D for mobile devices

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LG Electronics announced it will showcase a 4.3-inch glasses-free 3D display for mobile devices at the 2011 Consumer Electronics Show (CES) in Las Vegas.

“LG sees tremendous growth potential in the 3D mobile display market,” said Dr. Jong-seok Park, President and CEO of LG Mobile Communications Company. “With our key understanding of displays, entertainment and mobile technology, LG is looking forward to debuting this exciting new way to watch 3D movies or play games on your mobile phone.”

Featuring a WVGA touchscreen and 480×800 pixel resolution, the 4.3-inch 3D display offers the optimum screen size for watching 3D on a mobile device. Viewers can watch videos or play games without straining their eyes with the display’s immersive 3D technology that provide ‘exceptionally bright and flicker-free images’.

Making 3D glasses a thing of the past, LG’s 3D display uses an applied parallax barrier technology, which delivers a series of light-blocking slits attached to the front of the LCD panel. The slits, or barriers, ensure that the left and right eyes see different images, creating an illusion of depth and a thoroughly convincing 3D effect, says LG.

Working closely with LG Display, LG says it has also drastically reduced crosstalk. The new display has straighter, more upright barriers that are very precisely aligned to the LCD panel. This technological advance not only means smoother, brighter, crosstalk-free images, but also a wider viewing angle than on previous parallax displays.

Qualcomm to acquire Atheros

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Qualcomm and Atheros Communications today announced that they have entered into a definitive agreement whereby Qualcomm intends to acquire Atheros, a specialist in technologies for wireless and wired local area connectivity in the computing, networking and consumer electronics industries.  The acquisition is said to be intended to help accelerate the expansion of Qualcomm’s technologies and platforms to new businesses beyond cellular and provide access to significant new growth opportunities.

“It is Qualcomm’s strategy to continually integrate additional technologies into mobile devices to make them the primary way that people communicate, compute and access content.  This acquisition is a natural extension of that strategy into other types of devices,” said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm.  “The combination of Qualcomm and Atheros is intended to accelerate this opportunity by utilizing best-in-class products for communications, computing and consumer electronics to broaden existing customer relationships and expand access to new partners and distribution channels.”

Atheros’ current president and CEO, Dr. Craig H. Barratt, is expected to join Qualcomm as president of Qualcomm Networking & Connectivity.

“Qualcomm and Atheros have a long history of collaboration and share a culture of technical innovation and execution excellence,” Barratt said.  “The Atheros team will build upon Qualcomm’s strengths and leadership to bolster our customers’ ability to deliver innovative and differentiated products in the increasingly connected world.”

“With this acquisition and our complementary products, Qualcomm will be in a strong position to take our successful mobile strategy of bringing the best technologies together into a systems solution and apply this to new opportunities,” said Steve Mollenkopf, EVP and group president of Qualcomm.  “We see this strategy as central to helping our customers capitalize on the ubiquitous connectivity and seamless experiences that are developing across mobile phones, computing and consumer electronics.”

Qualcomm has entered into a definitive agreement to purchase Atheros for $45 per share in cash, representing an enterprise value of $3.1 billion.  The transaction has been approved by the Qualcomm and Atheros boards of directors and is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of Atheros’ stockholders.  The transaction is expected to close in the first half of 2011.  Excluding amortization of acquired intangibles, Qualcomm expects the acquisition to be modestly accretive to earnings per share in fiscal year 2012, the first full year of combined operations.  Qualcomm intends to finalize its estimates of the transaction’s financial impact, as well as the accounting for the transaction, upon deal close.

AdSpend on mobile games to reach nearly $900 million globally by 2015, says research

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A new report published today by Juniper Research forecasts that adspend on mobile games will increase tenfold over the next five years. By 2015, adspend on this platform will reach $894 million, up from $87 million in 2010, fuelled by increasing brand interest in mobile as an advertising channel, and apps – of which games are the dominant sector.

In the report, games such as Rovio’s Angry Birds are making a significant impact through offering full versions of their games free to end-users and funding them through in-game advertising. Opportunities in this area have been strengthened by the launch of key platforms designed to optimise the deployment of ads within applications, most notably Apple’s iAd in July 2010.  Similarly, Juniper says it found that games are being successfully deployed as marketing tools by brands, such as, Barclaycard and Volkswagen, providing new revenue opportunities for developers, such as, Fishlabs and Firemint.

According to Mobile Games report author Daniel Ashdown, “Angry Birds has been a huge hit over the last year on the iPhone since its launch; but arguably its relative impact, in terms of downloads, has been bigger on Getjar and, more recently, on Android Market, as a result of offering the game free with ads. Users get a great game for free, but advertisers get significant product/brand exposure; the same is true of mobile games as marketing tools.”

Nevertheless, the report forecasts that, while growth in adspend on mobile games will be higher than end-user revenues, this latter business model will continue to be the primary source of revenue for players in the industry. By 2015, end-user revenues, which comprise those from pay-per-download and in-game purchases, will still be ten times higher than adspend, says Juniper.

ZTE reports global terminal sales volume increased 50% to 90 million units in 2010

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ZTE, a global provider of telecommunications equipment and network solutions, has announced its total annual sales volume of terminal products jumped nearly 50% to a record number of 90 million units in 2010.

ZTE’s terminal product sales experienced rapid growth in both international and domestic markets. By 2010, the growth in both local and high-end overseas markets such as Japan, France, the UK and U.S. had become the main source of demand for ZTE handsets, it says. The fastest-growing market was in Europe, where year-on-year sales volume growth reached 150%. The U.S. market achieved year-on-year growth of 100%.  

ZTE was also ranked the No.1 Chinese vendors in terms of 3G handset sales volume, according to a research report by market research firm iSuppli. The report also noted that ZTE is leading China’s incremental market for 3G systems with an 11% share and is ranked No. 1 in the TD market with a 21% market share.

The increasing presence of Chinese manufacturers can be attributed in part to the growing popularity of the Android mobile platform, which has created new opportunities for Chinese vendors, including ZTE. ZTE has also won major tenders from leading Chinese operators, enabling the company to quickly become a leading player in China’s mainstream 3G handset market.

iSuppli noted that 3G Smartphones priced at below RMB1000 are popular among Chinese consumers — a segment in which ZTE is exceptionally strong. For example, the price of ZTE’s N600 Android 3G Smartphone is under RMB1000, allowing ZTE to secure a record 80%, or 240,000, of the 300,000 units to be purchased by China Telecom.

Globally, the rapid adoption of high-end Smartphones further promoted the ZTE brand across virtually all markets. ZTE’s bestselling Blade Smartphone model (known as V880 in China) has been made available in more than 20 high-end markets including the UK, France, Germany, Finland, Norway, Turkey, Hungary and Japan. Demand was so strong that the product sold out by the first weekend after its launch in Germany, Greece and Hungary. Monthly sales unit volume continued to grow and was up by tens of thousands, says ZTE.  

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