New revenue models and opportunities for operators

September 30, 2010 - Openet


The advent of next-generation networks promises a variety of new business models and revenue opportunities, but the behind-the-scenes complexity of the network will have to be able to facilitate those new revenue models. In essence, what was once a pretty complex set of policies is only going to get more complicated.
“All of the excitement around mobile growth and data with smart devices could bring the infrastructure to its knees,” said Nigel Upton, director of real time BSS at Hewlett-Packard Co. As third-party content providers deliver services over the network, it is more important than ever that all of the information is collected without losses and everyone involved in the value chain gets a true picture of what is taking place on the network.
Data consumption challenges 
Operators have spent enormous amounts of money building out networks based on assumptions of how the network would be used, said Tom Donnelly, co-founder and EVP at Sandvine. Operators implemented flat-rate pricing as they attempted to entice customers to use the network. While that effort has been successful, it also taught end users to expect all-you-can eat plans. However, as end users start to consume content on their devices, the business model has to change, Donnelly said.
Operators set a precedent with flat-rate pricing, but now need to change that pricing model to one more geared to data consumption, agreed Chris Hoover, VP for product management with Openet. Now, end users are starting to really consume data on their devices, and carriers are having a difficult time managing the traffic.
Plus, carriers used to be able to predict when peak traffic times would occur and adjust the network accordingly, Sandvine's Donnelly pointed out. As the industry moves toward 4G networks, carriers are not going to be able to predict what next app will be an explosion. “Service providers all over the world are trying to manage the consequences of their phenomenal success.”
Carriers are trying to address this traffic demand by offloading traffic and imposing policy controls, but both solutions have their own problems, Hoover said. “Operators need to increase their revenues, manage network congestion and capex expense, and not irritate customers.”
Even with monthly caps in place, it can be difficult to manage traffic so the network remains uncongested, said Hoover. Customers may use a lot of data at the beginning of the month, when they are on a fresh set of megabytes. New OSS solutions promise to evolve from a blunt instrument to a precise one that can surgically manage traffic where the congestion is occurring and when it is occurring.
Customer experience rules 
Meanwhile, customer expectations are higher than ever. “Connectivity isn't enough anymore,” Donnelly said. “People judge the network based on the applications' quality of experience.” Customers have come to expect basic security, quality of service and proper billing, said Juniper Networks Inc.'s Greg Maudsley.
New revenue models 
However, the move to new billing models can be a positive experience, said Sandvine's Donnelly. Network policy controls can be applied in a good way. Congested networks need intelligent congestion policies so a file transfer may take longer, but the customer can use his phone in the meantime.
Customers, especially business customers, can be upsold premium services, said Juniper's Don Meyer. Business customers collaborating on sensitive documents over the air certainly will pay for the assurance that their information is secure. “Carriers can become more relevant to subscribers by offering them premium services that they can store in the cloud.”
On the consumer level, split billing and connectivity included as part of a content offering are expected to become more popular.
Split billing involves getting revenue from more one source, Hoover explained.
So an end user may pay something to download a piece of content, and the content provider may pay the carrier as well. For example, an end user subscribing to a movie can get the first 15 minutes of the video paid for with a high quality of service, which may come from the content provider. If the end user wants to continue to pay for the higher quality connection, he may have to agree to charges or advertising.
Likewise, magazines may charge $7 for a subscription to the content, but the connectivity piece of downloading the content to your device may be already included in that $7 subscription, Hoover said. “We used to think things were mind-boggling complex five years ago. Now the obsolete is understandable.”
OSS/BSS policies
Operators are going to have to install more complex policy management tools, Hoover said. As cable providers talk about TV anywhere, imagine this scenario. John Doe starts watching HBO on his TV or personal computer then wants to move the content to his mobile device. The network will have to know that John Doe is authorized as an HBO customer, the devices he is moving his content between, and make sure that it is John Doe accessing the content on the mobile device and not Sally Doe, because she is only 12 and doesn't have access to the content. Operators are taking baby steps. Even with the advent of 4G, there's no silver bullet in the end that will solve all the complex problems.
Nevertheless, operators are uniquely positioned to handle these kinds of complex billing transactions, said Jay Emmet, general manager of OpenMarket. Consumers have learned how to consume content on the handset, even paying for it in the cases of ringtones and games. Premium SMS was the first generation of mobile payments, but the space is evolving quickly. Operators will be able to remain relevant to end users because they are good at billing for microtransactions. “No one does the low-cost, high-volume charges like the phone provider.”


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