Monetizing MBB the smart way

CSPs continue to be squeezed financially. Data volumes are increasing exponentially, with new-generation networks like LTE driving mobile data usage. These can create new revenue streams, and help mobile service providers stay competitive. However, the ability of most telcos to monetize MBB hasn’t kept pace with the rise in data consumption, so profits are diminishing.

It’s not enough to add more cookie cutter offers or unlimited and basic tiered data plans. It’s getting cheaper to get online but sales volumes are declining, and markets are shrinking. A flat rate all-you-can-eat pricing model lacks stability, sending service providers into a downward spiral because it ignores growth potential and shifts the competitive focus from quality and service differentiation to price. 

Successful offering strategies are essential for fixed and mobile operators to directly manage mobile broadband operators, and there are several that CSPs can use to leverage the benefits of LTE and capture market share. 

What to offer

An unlimited flat-rate offering divides the cost of the network evenly across the customer base, and is extremely simple to implement and market. Competitive differentiation is based on price and access speed, shifting focus from quality and service differentiation to price competition. But it exposes carriers to the risk of diminishing returns based on the cost-plus pricing model, and it can create congestion by encouraging overconsumption. 

A use-based offering shifts more of a network’s costs to the heaviest users. It can make bandwidth utilization more efficient and encourage better compression technology to deliver content online. Use-based offerings are susceptible to anti-consumer manipulation by CSPs. They can suppress activities that are generally encouraged like future growth and innovation on the Internet and cause some customers to avoid services.

CSPs must remove barriers to use, address individual needs, and finally create new revenue streams. Incumbents in particular should lead the market by creating sustainable revenue models, analyzing consumption, marketing new products immediately, and conveying the value of more advanced services to customers.

A value-based offering for broadband will enable a better match between the price customers pay and the value they derive from services, so it is important to start defining tier levels that fit consumer behavior, profiles, and use needs without impacting customer spending. For example, demographics and psychographics through new multi-sided and data-driven marketing models can identify and personalize offers to a variety of market micro segments, increase customer value, and reduce churn.

Some CSPs exploit the traffic explosion introducing new data-centric offers and commercial models to improve revenues, retain customers, and monetize network investment. Such offers succeed only when they’re paired with a reliable LTE network.

The Vodafone group offers VAS extensively, including big names like Spotify and Netflix, to promote a premium network experience in regards to speed and coverage. The US market tends to have a family oriented approach to mobile services like share plans. In Europe, the approach is more personal, leading some MNOs to focus on multi-device offerings for single customers, for example, Wind Magnum, which offers one extra data-SIM in addition to voice plus data plans. 

Sample Offering

App Specific Offering: CSPs can retain customers, stimulate data usage, and generate new revenues by giving customers unlimited access to social networks under a value-for-money package that detects the customer’s attempt to use a specific service. This could be an HTTP music site, or applications like VoIP, IM, Facebook, and YouTube. Offerings can be based on service type, for example, downloads, mobile TV, or music streaming; content type; device type, such as smart phones or tablets; time of day; loyalty points; and usage behaviour. 

Below are some examples:  

Amazon customers can pay US$0.99 to download any book from the Harry Potter series.

To get existing customers more comfortable with the idea of using mobile data, CSPs can give free or low cost samples of mobile broadband that steer them towards plans.

It is difficult to determine how many people would use mobile social media without a promotion. For example, Turkcell reported that its free Facebook offer helped spark an 820 percent increase in mobile Facebook use in 2010. By the end of the year, 6.5 million Turkcell customers were accessing Facebook on their phones each month. Equally, Twitter Zero led to a 340 percent increase in mobile Twitter use. These translated into significant up-selling opportunities for the company. Turkcell sold 30,000 social media packages in the first week the add-on was available, and 600,000 in the first four months. Turkcell reported that this promotion increased ARPU by 9 percent.

Smartphone users can enjoy unlimited Skype-to-Skype, discounted international calls in “always on” status for US$2.99 per month and Windows Live Messenger for US$2 per month. 

Bandwidth on-demand offering: CSPs can improve customer QoE and generate new revenue by offering on-demand methods when customers subscribe to a higher QoS service, for example, a boost button to improve QoS on YouTube. 

Time and location offering: CSPs can provide data offers based on specific times and locations to target causal mobile broadband and short-term travelers, for example, special packages with a certain data cap limited by hours, days, or weeks.

• DIY offering: CSPs can attract more customers and improve customer experience by allowing customers to customize their tariffs and services according to their own needs; for example, happy hours and preferred destinations, location based charging, preferred communication channels, and interest in future promotions.
• Multi-tier offering: CSPs can offer data plans with multiple tiers: flat-rate first for trial followed by a use-based pricing model, before moving to flat-rate pricing again when customers are drawn to 4G networks.
• Digital services such as mobile money, IoT, and cloud services for consumers and enterprises are a blue ocean for CSPs; they’re aiming to create double-sided business models to either compete or forge tie-ins with players such as OTT service providers. Established customer and billing relationships coupled with a large amount of behavioral data are key advantages enabling CSPs to widen their presence across the digital services landscape. Some examples are below:

AT&T’s wireless network powers two-way vehicle communications, remote engine diagnostics, and the infotainment feature in Tesla’s cars.

Verizon offers home automation and energy management solutions that can be controlled remotely from iPod touch, smartphones, or Fios TV.

Vodafone’s connected cabinets’ service enables retailers to monitor cabinets’ stock and temperature remotely and view real time itemized sales.

Malaysian provider Digi held a promotion allowing customers five consecutive days of unlimited WhatsApp access. Singapore’s SingTel recently began bundling WhatsApp with its tiered pricing plans.

Canada’s third-largest wireless provider TELUS signed a strategic partnership with Microsoft to promote VoIP provider Skype on its network’s smartphones. Skype runs on both Wi-Fi and the wireless networks, and although using the latter incurs data charges, TELUS customers receive unlimited Skype-to-Skype voice calls and instant messages. TELUS allows its customers the option to purchase Skype credit and have the charge turn up on their monthly TELUS bills.

To shift to value-based MBB offerings, CSPs must first develop new strategies by establishing new objectives, a timeline, and KPIs that extract the most value from MBB assets, as both the broadband service and service delivery differ from traditional voice services. Thus the traditional strategies applied for voice networks may no longer be useful. 

Next, they must assess whether the current organization is vital for CSPs to support value-based offerings. For example, vertical silos need to be dismantled to facilitate integrated service delivery and communication across different lines of business. 

Finally, the operating processes need to be redesigned in a way that encourages the seamless delivery of services and improve customer satisfaction. For example, marketing departments need to develop and deliver new communications plans that clearly cement the benefits of the new offering in customers’ minds. To eliminate bill shock, carriers must also develop tools that enable customers to easily monitor how much they’re consuming and alert them when those levels are nearing tier limits.

The bottom line is that innovation in multiple directions is the key to driving new groundbreaking offerings and improving customer experience. 

Innovation strategy

The marketing organization needs innovation capabilities to build a long-term offering strategy and ecosystem based on pricing, services, and consumer behaviors. It’s also vital to work on the following aspects:

• Understanding the differentiation capabilities for empowering CSP’s commercial and marketing strategies and objectives, and identifying where to invest in mobile broadband capacity, while avoiding over-dimensioning and unnecessary expenditure. 
• Adapting the CSP portfolio and business model to a digitization strategy and market trends.
• Analyzing and articulating how systems and technology transformation can transform and improve business efficiency.
• Innovating new products, processes, services, or ideas to cover core, near-core, and non-core telecom business.
• Ramping up customer experience by understanding their needs to eliminate weaknesses and optimize delivery channels.  

Service differentiation is the best option for CSPs and their customers. CSPs benefit through new revenue channels, improved network utilization, and the ability to offer differentiated service models by optimizing individual user experience at the right price point. The industry should move away from flat rate penetration pricing and start experimenting with new offering models based on sophisticated traffic analysis and traffic prioritization mechanisms that result in more advanced pricing structures. 

Competitive differentiation can be based on multiple value dimensions that could combine pricing, traffic, consumption, and consumer analysis. With multiple differentiated offerings, consumers can pay for what they need because they will receive the QoS and value they expect from their subscription plans.