Bridging the bandwidth-value gap
Date: Thu, 10/21/2010 - 18:36 Source: By Susie Kim Riley, CMO, Tekelec
According to analyst firm Heavy Reading, bandwidth on 3G mobile networks is growing by about 400% annually while associated revenue from data services is only increasing by about 40% per year. Simply put, operators will be carrying more data per user for less revenue
Unlike voice and messaging traffic, where bandwidth cost per subscriber is well understood and relatively constant, the amount of bandwidth consumed by different applications and devices can vary dramatically. For example, a text e-mail sent from a smartphone may use only one or two kilobytes (KB) of data, but downloading a Web page can consume 500 KB or more. Other high bandwidth services such as video that can easily devour megabytes, if not gigabytes of data, do not actually generate any revenue for the operators.
A minority of subscribers (only a few percentage points) generate the majority of Internet traffic. Unfortunately, this small set of users can cause congestion choke points during different times of the day, and the bulk of the expenses incurred by the operators are a direct result of having to allocate enough capacity to meet their data-hungry demands.
How can operators continue to manage this traffic? By utilizing real-time network feedback and policy controls, operators can capitalize on real-time intelligence to provide reliable resource management. This ensures that the required bandwidth is available at a certain time and location, reducing the need for expensive network upgrades.
Tiered pricing can also help by linking usage with cost, while ensuring that subscriber relationships are not damaged. This approach enables operators to open up mobile data plans to a wider range of customers and get more revenue from the heaviest users, while offering more reasonable plans to others who may not be as demanding of users. Tiered plans are a win not only for operators, but more importantly, for subscribers.
Consumers will benefit because they will have more options to choose from and will be less likely to incur “surprise” surcharges at the end of the month. Instead of a one-size-fits-all model, tiered pricing lets subscribers pick plans that best suit their needs. This new set of users could upgrade from basic or feature phones to advanced smart phones, or will choose from a myriad of devices such as a tablet or netbook, driving new device sales.
At the same time, operators can offer higher bandwidth and usage tiers for those who use more data. The need to enhance the mobile broadband experience and make it more personal for the end-user is inevitable due to the growth of a more sophisticated subscriber base, with varied needs and demands for customization of services and applications (e.g. Facebook or iTunes) on their devices. By providing different tiers of service, operators can actively “manage” the subscribers and move them between tiers by engaging with them and providing them with choices, in real time.
Finally, tiered pricing opens the door to some innovative new types of on-demand services such as a “turbo boost” service, a capability that would enable a subscriber to accelerate downloads or uploads of content, or a premium video service, which would allow the subscriber to view content in high definition. These types of sophisticated offerings would also help drive the sales of devices, if subscribers could, for example, pay a small amount for a rapid movie download to a tablet supporting high-definition before boarding a flight.
Certainly challenges remain. Subscribers will need to understand their service choices and the impact on their bills. Operators will need to properly message the changes, as often there is a knee jerk reaction to change.
Susie Kim Riley is Chief Marketing Officer of Tekelec. She joined the company from Tekelec’s May 2010 acquisition of Camiant, where she was founder and Chief Technology Officer.