Up until recently, mobile operators had all the controls over how much data a customer used. Go over your limit and you’re getting hit with overage charges, or you’re speed is throttled and you’ve got to buy an add-on to get the speed back.
This didn’t sit too well with some content providers. If customers are nearing overage charges, then they’ll ease up on their app usage – which can hit the revenues of some content providers. If the speed is throttled too much then some apps (e.g. video) become unusable – and this hits the content providers revenue and the quality of their customers’ experience.
Back in March this year, there were news reports that Netflix had been throttling the speed of delivery with some mobile operators to 600Kbit/s. The reason: they didn’t want their customers going into data overage, getting hit with large bills, and presumably blaming their large bill on watching too much Netflix on their mobiles. Needless to say some operators were not best pleased by this. After all, Netflix could be reducing the operators’ customers’ data usage (and therefore the operators’ revenues) by controlling the quality of their videos on mobiles.
Netflix have taken the sensible approach and given the choice to the customer. In early May they updated the Netflix app (iOS and Android) to let customers adjust the quality of the video streamed to their phones. If they want higher quality video that uses more data then they select a high data setting on the app. This is fine if you’re on a high (or unlimited) data plan. For those on lower data plans, they select the lower data setting on the app. This helps the customers better manage their data usage and give them their Netflix fix at the same time. As for how much mobile data Netflix consumes, the default setting on the Netflix app will provide streaming for about 3 hours of video per gigabyte of data, which amounts to speeds of 600 Kbit/s. So customers now have the choice, stick with the default setting or use more data watching higher definition Netflix or use less data for watching video at a lower quality.
Giving customers more control makes sense. As operators move toward personalisation, we’re going to see increasing levels of customer self-care and self-management of services. Controlling the quality / definition of Netflix video to fit their budgets is a good example of where the market is going. Operators need to embrace this move to personalisation. Netflix are very good at providing content, and they’re pretty smart when it comes to personalisation as well. This move to let customers decide on the delivery quality of their content is a good example of smarter engagement with customers. This is good news for operators and there is a huge opportunity for operators here. Netflix have shown that they work with mobile operators. With their global roll out, Netflix see working with operators as a common sense way to extend their customer base. For operators, they know that people don’t buy data as a product. They buy and use services enabled by data. They buy content. Letting people manage the delivery speed (and cost) of Netflix TV and movies to their phones, and giving more control to customers is indicative of where mobile operators need to head. At present an operator partnership with Netflix involve, say 6 months, free Netflix fees in a high end data bundle. However, what if different plans had not just the free Netflix monthly fee, but also say, 4 hours free zero rated use of Netflix – with the operator being able to manage the delivery quality for different bundles, at different price points.
The move by Netflix to give delivery controls to customers is good news for operators. It is not a content provider taking another bite out of diminishing data revenues. It shows the potential for partnerships and customer centricity. It also underlines that the move to greater customer personalization and engagement is underway and is inevitable for operators who want to make the move to become digital service providers.