Mobile Broadband market in 2012, is at an interesting stage and is almost an academic example of an industry grappling to segment the market, price it and remain at least profitable if not maximize it. There are numerous studies that will indicate that at current flat price data schemes for mobile broadband, investments will far outstrip consumption or revenues. It can perhaps be argued that the entire industry got entangled with issues related to data abusers for a long time; But now telecom operators will tell you that data abusers of flat rate tariff on data volume (GBs per month) don’t comprise more than 2 to 5 % of the overall subscriber base. So the flat rate data schemes with fair usage that were rolled out across the world during most of 2011 and so far were not relevant for 95% of the market which never contributed to data abuse. Guess it all started in 2009 with AT&T.
Now that we have better understanding of data consumption in future, it’s going to be an exciting time for the operators, to explore, discover, innovate and succeed in segmenting the market, rolling out different pricing schemes and then build long-term and hopefully sustainable differentiation; all supported by highly advanced and complex technology landscapes. Not forgetting that one player/ operator, who will not shy away from cutting prices down unprofitably, to spoil all the hard work; strategies adopted by operators, have to be sustainable in 2 to 3 years horizon. And then, of course, you have the well funded OTT players, But that’s the story of the industry for at least 10 years now.
Here’s what we recommend telecom operators should do:
1) Focus on that 10% of the premium subscribers that bring in most of your revenues. Any churn in this base means, huge impact on revenue loss. Various reports have different forecast, but it can be safely assumed that 70% of the mobile broadband traffic will be Video (Cisco VNI report), and close to 20% would be web/ data. Similarly close to 40% of the subscribers cause congestion in the network at some point or the other. What simplistically this tells us is that I have to provide better services to my 10% of the subscriber base who contributes to most of my revenues but suffers during congestion because of another 30% who don’t give me as much revenue. In all likelihood, my 10% premium subscribers would be streaming video, or uploading videos on the internet, or browsing some newspaper site, or doing banking. So how is it that I can make life easy for them and keep them. Remember any reduction in churn from these customers is savings in loss of revenues.
2) Pick one service that you think you can really beat the Over the top player. Any competition with google or apple is not easy. But operators have the advantage of operator billing. Remember prepaid is seeing increasingly fast penetration even in the US now. Google and Apple don’t store the credit card information of prepaid customers. As the days of economic gloom get extended, this trend will only increase. So if there is one service, most likely video- mobile tv- that operators can do a good job, then it has the potential of becoming a money spinner. Question is how do I ensure, the quality of just one service without massive investments on upgrading the network.
3) Build variables in your network, that will help you implement different strategies. Any price plan by mobile operator today is a combination of Data + Voice + SMS + may be a service like Facebook in the developing world. They key is, whether operators have the ability to try speed, and a combination of services to differentiate. More importantly, do they have the ability and wherewithal to try a new business model. The services will get segmented even finer now, for example, a video where consumer and service provider are unwilling to pay versus banking where service provider if not the consumer is willing to pay. Can I capitalize on it? And how?
4) Last is the whole machine to machine wave. The jury is out on what role operators will play except connectivity. And before making a blanket recommendation, we believe machine to machine and enterprise segment is an area where not all operators will be able to play a role beyond connectivity
We will follow up on what happens in a quarter from now and provide more updates on trends.