Telcos' strategies to win back revenue

Key to creating smart pipes is the OSS and BSS says specialist vendor Amdocs

Wholesale options

There are seven MVNOs (Mobile Virtual Network Operators) in New Zealand but, according to Michal Harris’s presentation, this country has yet to experience a true MVNO market with multiple offerings.

As Amdocs marketing manager for market insight and strategy, Harris has studied MVNOs globally and says there are more than 600 MVNOs and 162 operator-owned brands worldwide. The global customer base for MVNOs will reach 2.4 percent of the total mobile subscription base – 186 million subscribers – by 2015. In Asia Pacific, MVNO revenue is expected to reach US $980 million by 2015, with the largest market being Australia.

The conditions that Harris says support a vibrant MVNO environment are regulated mobile termination rates, high pricing from mobile operators and market saturation.

MVNOs thrive in a competitive market because they are specific niche players. “It is all about [the MVNO] understanding me, what is my community and what is of value to me,” Harris says.

MVNOs have become such a strong force overseas that telcos can’t afford to ignore them. Harris says Orange in France has created a wholesale mobile business as a way to maintain market share – in Q1 this year it had 45.8 percent network market share, and 41 percent retail market share.

In the US, Sprint has pitched itself as the wholesaler of choice and its share of the market in Q2 last year was post-paid 15 percent, pre-paid 19 percent and wholesale 17 percent.

In New Zealand MVNOs are predominantly fixed-line providers wanting to provide mobile services to customers and they appear to have basic reseller agreements with Vodafone and Telecom.

Yet, Harris showed how an MVNO can become an innovative player, with varying levels of support from the network owner.

It could be as little as the telco providing the radio function and the MVNO taking care of everything else — roaming, service delivery, billing, CRM, distribution, marketing and sales. While at the other end of the spectrum some MVNOs are owned, or partly owned, by the service providers.

In Britain, the O2 network wholesales to a range of MVNO offerings. It has entered into a joint venture with supermarket chain Tescos, and it also owns giffgaff, a social networking MVNO. Giffgaff is such a lean operation that customer service is taken care of by the subscribers themselves. A customer presents a problem in an online forum and the first subscriber to provide the right answer being rewarded with benefits such as free calling hours.

MVNOs can become global businesses. Harris talked about Lebara which began in Europe and is now in Australia. Its target audience is first-generation immigrants and it provides international calling packages to their home countries. The company now has three million subscribers and annual revenues of $700 million.

Another lean MVNO is Daily Telecom in Italy. Harris says it is targeted at Chinese immigrants and has 200,000 customers and only two staff.

Then there are the machine-to-machine-to-human models, which Harris says “take wholesale to the next level”.

She used the Kindle from Amazon.com as an example. In the US the telcos Sprint, AT&T and Vodafone get a share of the revenue every time a book is downloaded – an easy way for a telco to provide bandwidth with no operating costs such as providing customer support.

But not all MVNOs are a success, the ESPN channel failed in its attempt to launch an MVNO five years ago.

To be profitable Harris says an MVNO must create a symbiotic relationship with its partners/owners, ensure a unique value proposition for a target niche, re-think the distribution strategy and select the right operational environment.

It must deploy right, deploy fast and continually innovate to retain its customer base.

And, MVNOs have to be quick and nimble because as soon as they come up with a good idea, someone else will copy it.

What consumers pay for services around the world

In New Zealand, Ultra Fast Broadband wholesale pricing will begin at $40, but what should consumers can expect to pay and what they get for their money will be up the Retail Service Providers. The most popular way of pricing services overseas is to bundle voice, data and video into one package.

At the Amdocs Conference in Singapore, Mike Losier from Liberty Global, provided the following cost comparisons between his cable company’s pricing in Europe. In these plans there are no data caps on fixed line internet services.

Europe – Liberty Global

25Mbps

Full digital video

All distance voice

Total: US $65

US market – average pricing

20Mbps

Full digital video

All distance voice

Total: US $120-130

Asia Pacific Market (Singtel offering)

15/50/8 Mbps

Full digital video

Voice

Total: US $65

OTT bundle in America (customer assembles their own bundle)

25Mbps with voice service - $50

Netflix movies on demand service - $8

Hulu television shows - $10

Total: US $68

— Putt attended the Singapore conference as a guest of Amdocs

Creative billing

Guy Hilton, product marketing manager, revenue management products, focussed his billing strategy on mobile networks. He suggests that technologists in the company could create “building blocks”, which the marketers could use to assemble plans such as:

• Reward the loyalty of prepaid customers by giving 25 percent back on the bill for every third invoice they pay;

• Provide real time alerts for data consumption – if a customer is running out of their data allowance send an SMS asking if they want to top up;

• Data happy hour – subscribers nominate an hour in the day (such as 8am to 9am) when they can have unlimited calling and low-rate data use;

• Create hybrid subscribers – voice plan on postpaid, data plan on prepay;

• Separate billing for business and consumer use on the same device.

Charge more for QoS

Alastair Hanlon, vice president market strategy, suggests that telcos charge more for quality of service. Perhaps install a “boost button” so that if the user has a poor experience while watching streaming video they can instantly increase their bandwidth allocation for a charge.

This idea was further explored in a presentation by Rebecca Prudhomme, vice president of products and solutions marketing, who played website video of an ice hockey game in her presentation. As the video streaming slowed down a message popped up on the screen suggesting that, for a fee, the user could boost bandwidth and enjoy a better experience.

When it came time to pay, the customer could download a video bill – which showed in cartoon-like graphics what had been spent and the discounts a subscriber might be eligible for.

Personal is profitable

In one demonstration Amdocs created a fictitious telco named Purple, and showed how to create a complete, connected experience for every member of a fictional family.

Mary, the mother, held the master account. She could download a movie, order pizza from the TV remote, monitor her son’s diabetes from her smartphone (he had a device attached to his body which regularly pricked his skin and sent her a SMS message about his glucose level), check on her daughter’s driving with a location app and tune into the home security system via the telco’s portal.

The level of innovation (the diabetes device, the car app) and partnerships (home security, pizza delivery) required to achieve the demonstration appears immense.

Rather than develop new devices and applications, Amdocs advocates that telcos facilitate an ecosystem of partners and start-ups on their networks.

Amdocs has created an innovation programme that supports start-ups in its effort to understand and be part of ‘the next big thing’. For example the IP-calling app Viber is part of the Amdocs programme.

It’s attracting interest from telcos, such as AT&T, which has located a research and development programme base beside the Amdocs centre in Israel.

As Loo Cheng Chuan, from Singtel, who was on a panel discussion on innovation at the conference pointed out, nobody wants to be Kodak (failed to see the influence of digital cameras) or Nokia (didn’t develop the smartphone).

Wholesale options

There are seven MVNOs (Mobile Virtual Network Operators) in New Zealand but, according to Michal Harris’s presentation, this country has yet to experience a true MVNO market with multiple offerings.

As Amdocs marketing manager for market insight and strategy, Harris has studied MVNOs globally and says there are more than 600 MVNOs and 162 operator-owned brands worldwide. The global customer base for MVNOs will reach 2.4 percent of the total mobile subscription base – 186 million subscribers – by 2015. In Asia Pacific, MVNO revenue is expected to reach US $980 million by 2015, with the largest market being Australia.

The conditions that Harris says support a vibrant MVNO environment are regulated mobile termination rates, high pricing from mobile operators and market saturation.

MVNOs thrive in a competitive market because they are specific niche players. “It is all about [the MVNO] understanding me, what is my community and what is of value to me,” Harris says.

MVNOs have become such a strong force overseas that telcos can’t afford to ignore them. Harris says Orange in France has created a wholesale mobile business as a way to maintain market share – in Q1 this year it had 45.8 percent network market share, and 41 percent retail market share.

In the US, Sprint has pitched itself as the wholesaler of choice and its share of the market in Q2 last year was post-paid 15 percent, pre-paid 19 percent and wholesale 17 percent.

In New Zealand MVNOs are predominantly fixed-line providers wanting to provide mobile services to customers and they appear to have basic reseller agreements with Vodafone and Telecom.

Yet, Harris showed how an MVNO can become an innovative player, with varying levels of support from the network owner.

It could be as little as the telco providing the radio function and the MVNO taking care of everything else — roaming, service delivery, billing, CRM, distribution, marketing and sales. While at the other end of the spectrum some MVNOs are owned, or partly owned, by the service providers.

In Britain, the O2 network wholesales to a range of MVNO offerings. It has entered into a joint venture with supermarket chain Tescos, and it also owns giffgaff, a social networking MVNO. Giffgaff is such a lean operation that customer service is taken care of by the subscribers themselves. A customer presents a problem in an online forum and the first subscriber to provide the right answer being rewarded with benefits such as free calling hours.

MVNOs can become global businesses. Harris talked about Lebara which began in Europe and is now in Australia. Its target audience is first-generation immigrants and it provides international calling packages to their home countries. The company now has three million subscribers and annual revenues of $700 million.

Another lean MVNO is Daily Telecom in Italy. Harris says it is targeted at Chinese immigrants and has 200,000 customers and only two staff.

Then there are the machine-to-machine-to-human models, which Harris says “take wholesale to the next level”.

She used the Kindle from Amazon.com as an example. In the US the telcos Sprint, AT&T and Vodafone get a share of the revenue every time a book is downloaded – an easy way for a telco to provide bandwidth with no operating costs such as providing customer support.

But not all MVNOs are a success, the ESPN channel failed in its attempt to launch an MVNO five years ago.

To be profitable Harris says an MVNO must create a symbiotic relationship with its partners/owners, ensure a unique value proposition for a target niche, re-think the distribution strategy and select the right operational environment.

It must deploy right, deploy fast and continually innovate to retain its customer base.

And, MVNOs have to be quick and nimble because as soon as they come up with a good idea, someone else will copy it.

What consumers pay for services around the world

In New Zealand, Ultra Fast Broadband wholesale pricing will begin at $40, but what should consumers can expect to pay and what they get for their money will be up the Retail Service Providers. The most popular way of pricing services overseas is to bundle voice, data and video into one package.

At the Amdocs Conference in Singapore, Mike Losier from Liberty Global, provided the following cost comparisons between his cable company’s pricing in Europe. In these plans there are no data caps on fixed line internet services.

Europe – Liberty Global

25Mbps

Full digital video

All distance voice

Total: US $65

US market – average pricing

20Mbps

Full digital video

All distance voice

Total: US $120-130

Asia Pacific Market (Singtel offering)

15/50/8 Mbps

Full digital video

Voice

Total: US $65

OTT bundle in America (customer assembles their own bundle)

25Mbps with voice service - $50

Netflix movies on demand service - $8

Hulu television shows - $10

Total: US $68

— Putt attended the Singapore conference as a guest of Amdocs

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