- Alert), “The danger is when consumers feel squeezed, new players will show up and provide “good enough” WiFi-based services.” She warns, “There are already tentative steps being made in this direction. Tablets and connected devices like the iPod touch are stealth weapons that could easily become much more potent if device makers decided to go there.”
In addition, the bring your own device (BYOD) era is blurring the line between device and data usage for personal and work purpose. The use of such devices means that if mobile data usage plans stop being unlimited, and caps are deemed unreasonable, employers are going to seek ways to minimize the use of cellular services in favor of alternatives. In other words, while short-term mobile service providers could benefit from some WiFi off-load to relieve congestion on their networks, if that traffic is not going to one of their WiFi hotspots or affiliated entities the revenue impact could be significant longer-term.
Enter the "Smart Revenue" model
So what’s the solution to the mobile operator dilemma? Merling suggests the key lies in the emerging applications-centric economy. She posits that if done correctly this can help drive mobile carrier revenues—but only if they move away from charging for bandwidth.
“If you bill for data access, you are implicitly affirming that data access is the most important thing your network provides,” Merling stresses. “For some carriers, being a dumb pipe might be a perfectly smart business model for their market. But for many, there is opportunity to break free from the dumb pipe moniker.” The logical conclusion is that if bandwidth is merely a commodity, carriers are unlikely to succeed in the long run by making it their primary focus.
One way to address the very real economic challenges faced by carriers is re-examining market practices around providers of services that hog bandwidth. Should over-the-top provider be charged for bandwidth use? Merling suggests another idea, which Alcatel-Lucent (ALU) calls "Smart Revenue". It is based on the optimization of network assets in support of application enablement for evolving ecosystems where mobile operators can play not just a foundational role providing access but also be key participants in value-added revenue generation.
“Turn the equation around and make it about quality of service,” Merling proposes. “Give over-the-top players service level agreements with guaranteed bandwidth and charge them for quality of service.” She states that doing so means the interests of all the players are now aligned:
Carriers receive compensation for providing excellent service OTTs get the best possible delivery End users get a quality experience
The acceleration of 4G LTE (News - Alert) deployments around the world also offers mobile bandwidth opportunities for addressing challenges without making bandwidth itself the main focus of service pricing.
“Imagine using multi-broadcast to schedule off-peak downloads,” Merling suggests. “End consumers could obtain credits for offloading traffic to off-peak hours. With this approach consumers would be given incentives that would help shape network traffic. The stick has been tried; why not give the carrot a chance?”
When you come right down to it, Merling concludes, consumers now own their destiny and content providers have the responsibility to ensure high quality customer experiences. Carriers are part of the equation, but no longer the center of it.
“Instead, they must provide services that give rise to a proliferation of third-party solutions, all of which rely on carrier services,” Merling summarizes. “You take a small slice out of each transaction from the solution provider. This is different from charging online players for bandwidth and isn’t about charging per API call; it’s about charging for a service. Smart revenue is better than dumb pipes.”
Merling’s call to action for mobile operators is not going un-heeded. It is actually one part of a complicated mix of things mobile carriers are doing to deal with an almost perfect storm. They are facing a world where there is a:
Lack of new spectrum Falling average revenue per user (ARPU) Growth in pure numbers of multimedia capable devices (tablets and smartphones) Insatiable demand of users of such devices for bandwidth hungry applications (interactive video, interactive gaming, streamed video, etc.)
Add to this the marketing challenges of convincing consumers that metered plans are necessary, in essence because a very few heavy users are creating the congestion for the rest of us destroying both the quality of experience as well as the sustainability of unlimited data plans, and the carrier conundrum becomes clear.
Given this environment, the importance of smart revenue models—in the mix of off-loading heavy user traffic to WiFi, expanding one’s own WiFi footprint, and rebalancing usage plans so as to fit most end users’ zones of pricing reasonableness—should not be under-estimated.
Edited by Peter Bernstein
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