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Published in Telecom Asia – May 31, 2010 – Monetizing mobile data traffic

Abstract: In the last couple of years mobile data traffic has seen explosive growth and has in fact crossed the voice traffic. CSPs have been forced to upgrade their access, core and backhaul networks to be able to handle the increased demands on the network. Despite the heavy growth in mobile data traffic the corresponding ARPU for mobile data traffic has only been marginal. So what is the way out for the Service Providers? This article looks at some of the avenues through which CSPs can increase their revenue in the face of increasing traffic demands by converting the growth in mobile traffic from a challenge to an opportunity.

Growth in Mobile Data Traffic
Mobile data traffic is exploding in carrier networks. In a recent report by Ericsson the findings show that mobile data traffic globally grew 280% during each of the last two years, and is forecast to double annually over the next five years. This exponential growth in data traffic has been fueled by the entry of smartphones, laptops with dongles and other devices hungry for bandwidth. The advent of smartphones like iPhone, NexusOne and Droid has resulted in several data hungry applications squeezing the available bandwidth of carriers. Smartphones are here to stay. Social networking sites on mobile devices and mobile broadband-based PCs also now account for a large percentage of mobile data traffic. In fact it is rumored that a major carrier’s network started to choke as a result of these bandwidth hungry smartphones.

Marginal ARPU issue
Nowadays professionals everywhere use their laptops with dongles for checking their emails, browsing or to perform high bandwidth downloads. However the ARPU from data traffic has been relatively flat or at most marginal. In fact one report claims that despite the phenomenal growth in data traffic the ARPU from data traffic has not grown proportionately. In fact the ARPU from voice traffic continues to exceed that of the ARPU of data traffic. This clearly defies logic. On the one hand there is enormous growth of data traffic but there are no corresponding returns for the Service Provider. To add to this situation there are now new devices like the iPad and its soon-to-be competitors which will start its demands on the wireless network. One of the reasons why the growth in ARPU for data traffic is not proportional to the data traffic growth is because of data schemes like “all-you-can- eat” or flat-rate charging. Such charging schemes result in excessive usage with little or no consequent increase in revenue generation. To make matters worse Over the Top (OTT) video service and other third party services place a heavy data load on the networks while siphoning away the revenue. Also the increased demands on the network necessitate the need to upgrade the access, core and backhaul networks to handle the increasing data traffic loads. The CSPs are forced to upgrade to LTE/WiMAX to improve the access and move their backhaul to the Evolved Packet Core (EPC). Hence the CSPs are faced with the situation where they do “more for less”. While they have to increase their CAPEX there is no corresponding ROI for the new hardware. This article looks at some of the possible ways the CSPs can monetize this growth in traffic.

Avenues for CSPs
There are four ways for turning this bandwidth crunch into an opportunity
1) Policy Based Traffic
The first technique is to study the usage patterns of the subscribers. The CSPs need to identify the applications that are most frequently used and have high bandwidth demands. The CSPs may be required to perform Deep Packet Inspection (DPI) to determine the kind of traffic in the network. The CSPs can then apply premium charging for these types of traffic. The CSPs need to have Policy Servers that apply different policies based on the type of traffic (data, video etc). The Service Providers can charge a premium for specific kinds of traffic usage based on the policies set. However the downside of this approach is that it may not go down well with the subscribers who have been using the flat rate charging

2) Mobile Ads
The second method which carriers can use is through mobile ads. This method avoids increasing the charge on customers. The carriers can maintain a fixed charge for the subscriber or in other words provide a subsidy to the subscriber by having the subscriber receive commercial advertisements, The Service Provider s can have a business model with the commercial provider and receive a small fee for carrying the commercial to the mobile. The mobile ads should be non-intrusive and should be non-distracting to the user. They can be displayed at the top or the bottom of the mobile phone for example when the subscriber is looking through his/her contact list. Alternatively if the subscriber is using a data intensive application the user may be required to watch a 30 sec commercial prior to the start of the video clip.

3) Revenue sharing with Content Owners
The third technique for the CSPs is to enter into an innovative business model with the content provider or content owner. Some lessons can be learnt by the business model of successful enterprises like Google, Yahoo, eBay or PayPal. These organizations receive a small fee for facilitating a particular service for example hosting an ad on the web page or facilitating a payment. So also the carriers should enter into a business model with the content owners where a small fee is received by the Service Providers for providing the network infrastructure for the music or video service. This would be akin to paying a toll for using a well maintained highway. So also the carriers should levy a small toll for the usage of it network highway.

4) App Stores
The carriers can also maintain app stores which besides providing downloadable applications should also provide for downloadable content for e.g. Music or video. So the carriers can generate revenue both from providing the content and also from providing the infrastructure for transport of the content to the mobile.

Conclusion: Some avenues for revenue generation in these times where the growth of data traffic is increasing at a tremendous pace is for the Service Providers to
1) Have the ability to differentiate traffic and use a policy manager and charge based on the data being transported. Provide a personalized service to individual users based on traffic types and charge appropriately
2) Subsidize usage for the subscriber through the delivery of mobile ads and enter into revenue share with the organization for whom the commercials are being provided
3) Levy a small charge to the content owners for the delivery of their content to the mobile users
4) Creatively use app stores for providing apps, music, video and other differentiated content.

Posted by T V Ganesh

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Published in Voice & Data Apr 14, 2010
CodeProject
Abstract: : In this era of technological inventions, with the plethora of technologies, platforms, paradigms, how should the India telecom network evolve? The evolutionary path for the telecom network clearly should be one that ensures both customer retention and growth while at the same time be also capable of handling the increasing demands on the network .The article below looks at some of the technologies that make the most sense in the current technological scenario The wireless tele-density in India has now reached 48% and is showing no signs of slowing down. The number of wireless users will only go up as the penetration moves farther into the rural hinterland. In these times Communication Service Providers (CSPs) are faced with a multitude of different competing technologies, frameworks and paradigms. On the telecom network side there is the 2G, 2.5G, 3G & 4G. To add to the confusion there is a lot of buzz around Cloud technology, Virtualization, SaaS, femtocells etc., to name a few. With the juggernaut of technological development proceeding at a relentless pace Senior Management in Telcos, Service Providers the world over are faced with a bewildering choice of technology to choose from while trying to maintain the spending at sustainable levels. For a developing economy like India the path forward for Telcos and CSP is to gradually evolve from the current 2.5G service to the faster 3G services without trying to rush to 4G. The focus of CSPs and Operators should be in customer retention and maintaining customer loyalty. The drive should be in increasing the customer base by providing superior customer experience rather than jumping onto the 4G bandwagon. 4G technology, for example LTE and WiMAX, make perfect sense in countries like US or Japan where smart phones are within the reach of a larger set of the populace. This is primarily due to popularity and affordability of these smart phones in countries like the US. In India smartphones, when they come, will be the sole preserve of high flying executives and the urban elite. The larger population in India would tend to use regular mobile phones for VAS services like mobile payment, e-ticketing rather than downloading video or watching live TV. In US, it is rumored, that iPhones with their data hungry applications almost brought a major network to its knees. Hence, in countries like US, it makes perfect sense for Network Providers to upgrade their network infrastructure to handle the increasing demand for data hungry applications. The upgradation to LTE or WiMAX would be a logical in countries like US. In our nation, with the growth in the number of subscribers, the thrust of Service Providers should be to promote customer loyalty by offering differentiated Value Added Service (VAS) service. The CSPs should try to increase the network coverage so that the frustration of lost or dropped calls is minimal and focus on providing superior customer experience. The Service Providers should try to attract new users by offering an enhanced customer experience through special Value Added Services (VAS). This becomes all the more important with the impending move to Mobile Number Portability (MNP). Once MNP is in the network many subscribers will switch to Service Providers who offer better services and have more reliable network coverage. Another technique by which Service Providers can attract and retain customers is through the creation of App Stores. In US, app stores for iPhone have spawned an entire industry. Mobile Apps from app stores besides providing entertainment and differentiation can also be a very good money spinner. While the economy continues to flounder the world over the Service Providers should try to reduce their Capacity Expenditure (Capex) and their Operating Expenditure (Opex) through the adoption of Software-as – Service (SaaS) for their OSS/BSS systems. Cloud technology, besides reducing the Total Cost of Ownership (TCO) for Network Providers can be quite economical in the long run. It is quite possible that prior to migrating to the Cloud all aspects of security should be thoroughly investigated by the Network Providers and critical decisions as to which areas of their OSS/BSS they would like to migrate to the Cloud. While a move to leapfrog to 4G from 2G may not be required, it is imperative that with the entry of smartphones like iPhone 3GS, Nexus One and Droid into India the CSPs should be in a position to handle increasing bandwidth requirements. Some techniques to handle the issue of data hungry smartphones are to offload data traffic to Wi-Fi networks or femtocells. Besides, professionals these days use dongles with their laptops to check email, browse and download documents. All these put a strain on the network and offloading data traffic to femtocells & Wi-Fi have been the chosen as the solution by leading Network Providers in the US. Conclusion So the road to gradual evolution of the network for the Network Operators, Service Providers are 1. Evolve to 3G Services from 2G/2.5G. 2. Create app stores to promote customer retention & loyalty and offer differentiated VAS services 3. Improve network coverage uniformly and enhance the customer experience through specialized App stores 4. Judiciously migrate some of the OSS/BSS functionality to the cloud or use SaaS after investigating the applications of the enterprise that can move to the cloud 5. Offload data traffic to Wi-Fi networks or femtocells.