Monetise 4g / LTE : a rational and balanced approach !!

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Telcos are pouring billions of dollars into building out 4G networks. LTE will stimulate demand for video and media services, thanks to its lower latency and higher capacity access, and indeed mobile TV, video calling and video downloading show the strongest growth prospects. The point is that no single nontraditional service will be able to compensate for the erosion in traditional telecom revenue. Media/entertainment (including advertising), machine-to-machine (M2M) services, cloud computing and IT services are promising areas for generating revenue.

To monetise LTE , Telcos will need to define new business models and marketing strategies to drive acquisition and retention of subscribers, as well as adoption of high-value content and applications. Optimising mobile broadband economics is a complex challenge, and there’s always a temptation to try to solve complex problems with one ‘silver bullet’. Unfortunately this is impossible, as there are many different combinations of solutions will work at different times for different operators.Operator device portfolios are one of the most important factors underpinning network technology migration trends.

Smartphones offering a compelling user experience drove mass-market uptake of 3G mobile broadband subscriptions and LTE will be no different. In the LTE ecosystem, tablets seen to offer a greater prospect for revenue growth than dongles. It will be important to secure an attractive selection of smartphones and devices at affordable price points.To boost the need for LTE, operators can make partnerships to enable applications that allow customer enjoy the full experience of LTE.

Telcos need to adopt a balanced approach on how to monetize 4G networks by a thorough analysis of various technical , financial and commercial strategies : the desired outcome is to minimize the cost of access coverage while maximizing subscriber capture. A balanced strategic plan is founded upon :

• Effectively reengineer the broadband business model so as to reduce costs , manage data traffic , and develop a more sophisticated approach for pricing broadband access

• Unlock new revenue streams to justify the enormous network investments over time in the context of key customer drivers and applications ( cloud , M2M etc ) that generate fast ROI based on understanding the needs of target markets.

• Collaborate with OTT players since LTE’s all-IP architecture will create a more open environment for Over The Top (OTT) applications which threaten to further commoditize the network.

• Leverage the OSS/BSS to weaponise the CRM , Billing , Policy Control systems in order to ensure that all the data traffic is accounted for and billed to the correct entities.

What service providers need to do is to offer packages based on the service or application used that can be provisioned dynamically ,rather than on bandwidth allocation. Policy management tools play an important role here. By being able to offer management tools , the provider will be able to offer subscribers packages such as ‘ YouTube subscription’ , or ‘ online gaming subscription’ , or ‘ regular surfing and email subscription . Policy( PCRF ) is the brains of a network , especially for LTE networks that must make many more real-time decisions to maintain network performance and adapt the network to the subscriber.

In a Media Research survey, respondents pointed overwhelmingly to smart devices, video, and cloud services as the devices and services most likely to drive demand for 4G. Fully 40 percent already have partnerships with content providers to assure them higher quality of service (QoS) on their networks.Enhanced enterprise LTE solutions, such as videoconferencing on-the-go and remote access to business applications, can drive data consumption. Verizon Wireless is one of many LTE operators that offers 4G mobility applications and solutions for SMEs and enterprise customers. A survey shows that 67% of US businesses using LTE believe that it has resulted in increased productivity.

In order to offer a more competitive service than the OTT players KT is leveraging CCC for ICT business. CCC is a kind of domain-specific cloud technology, based on virtualisation. By unifying the platform for radio and several application services into CCC, KT can provide cross-layer optimised services between applications and radio. For example, they can utilise user contexts such as user ID, traffic content, QoS, location, and the radio environment to provide the most suitable service to their customers.

There are some valuable options for addressing the data issue from a technical point of view, offload perhaps the most valuable amongst them. However, these are not all the weapons in an operator’s arsenal. They can also look to manage the impact of traffic on their networks and their bottom lines by looking at different business model and pricing options. Operators can use the rich data experience of LTE to sell more data and develop new revenue streams. Video streaming providers such as Netflix alter the quality of video according to available bandwidth – so a 6-minute clip on LTE would consume 80MB compared with 27MB on 3G, thus driving usage. Operators are also bundling content with LTE or top-tier plans, enabling new revenue streams – for example, EE in the UK uses its film service (EE Film) to monetise data and receives sales commissions from video-on-demand provider FilmFlex.

On the revenue side, the bulk of revenue will be from ‘downstream’ subscription and pre-pay customers, and while helpful, that the near-term growth of new ‘upstream’ or wholesale / carrier services revenues alone would not be enough to cover the costs of capacity increases.Because LTE network latency is lower than 3G, operators can develop new revenue streams by selling bandwidth for wholesale services (such as utility and M2M services). Verizon is at the forefront of this with projects in sectors such as education.

MNOs can also experiment with bundling. Data sharing across devices is being offered, with the aim of monetising devices (such as tablets) otherwise lost to Wi-Fi. Tethering strategies are evolving, as operators try to monetise tethering by allowing it at as part of premium or top-tier plans. Fixed–mobile converged offerings are available and aimed at increasing revenue and reducing churn.

There are many different possible solutions and different combinations of solutions will work at different times for different operators :

* New air interfaces and spectrum will not be enough to on their own to cope with the continued rise in data traffic. Building more cells alone is not a solution, and it will be necessary to address costs and pricing

* The challenge needs to be approached both from the network, through policy-based control including tiering and maybe traffic-shaping, backhaul optimisation, and offload through femto cells or WLAN, and from the business side with pricing, potential tiered offers and segmentation

* Techniques have to be deployed to manage traffic to deliver customer experiences, particularly for cloud and TV services

* Since no single method of addressing capacity issues provides a complete solution and therefore a combination of offload, traffic management and segmentation is recommended.

* Mobile data optimization that includes content transformation is a crucial element in increasing the efficiency of data and video transport, by reducing the over-the-air payload on the RAN, and improving the subscriber experience with faster page loads and lower monthly data usage.

The companies that go to market with 4G services will have to be able to sustain them. The networks themselves will drive huge growth in data traffic. But changing business models also have the potential to explode transaction volumes. Not surprisingly, wholesale will be an important part of the 4G mix. The wholesale models most frequently cited are bulk access, machine-to-machine, and mobile virtual network operator.

However scalability and sustainability will also affect billing systems. CSPs will need to invest in the next generation of business-support systems (BSS) to manage customer-facing operations such as product, order, customer, and revenue management. 4G involves both capital and operating expenses, and those investments will have to be made simultaneously. CSPs will need to shift their perspective from cost to revenue management. For that, they will require more sophisticated policy and charging solutions.

The market dynamics of the Web2.0 will impact the LTE business models because it will be difficult to charge the user directly for the use of Web2.0 applications ( that will run fast and smooth over LTE pipes ) because Internet applications are associated with free usage. In view of this Telcos could exploit more indirect revenue sources : in a ‘multi -sided’ market structure the telco transactional platform can facilitate improved interactions and transactions between people and organisations : between advertisers and the end users.

Businesses can capitalise on 4G LTE for a wide set of applications, some of which are purely ‘horizontal’ while others are highly sector-specific, addressing needs unique to the industry. LTE’s advantages are of greatest relevance to applications for personal communication and collaboration, CRM and project management. LTE will deliver improvements in the performance of many existing applications, and make feasible new applications that depend on reliable high speed or responsive data transfer.

Within the next decade, and probably by 2015, one trillion devices will be connected to the network – most not phones – moving the communications industry from quad-play or multi- play to “Tera-play”. And LTE is one of the key enablers of a Tera-play world. For service providers, the benefits of Tera-play could be substantial with opportunities to drive revenue from an increasing number of high-value, multi-device, multi-service customers and infinitely larger personal and community networks.

Bottom Line : LTE Monetisation is predicated on many factors that play at the same time : dynamic data pricing / billing , appropriate device porfolio , Enterprise Verticals , wholesaling bandwidth , QoE and CRM , business model innovation , Cloud , OTT partnerships…and most of all : very clever thinking !!

Sadiq Malik ( Telco Strategist )

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