Mobile operators must change tack to claw back revenues

Operators need to find new sources of revenue and use unique skills to tackle the threat of OTT providers, according to Juniper Research report

Operators need to find new sources of revenue and use the unique skills they have to tackle the increasing threat of over the top (OTT) providers.

This was the finding of a new study by Juniper Research, conducted on behalf of Computer Weekly.

The report claimed operators faced a “pressing need to retain a foothold” in what it referred to as the “content value chain,” meaning network providers needed to figure out a way to get their slice of the revenues from the app explosion.

The reason it is so vital to the operators is because their usual revenues are flattening, or in some cases decreasing, due to increased competition coupled with the saturation of many mainstream markets around the world.

Despite the number of subscribers being expected to rise, the average revenue per user (ARPU) is predicted to fall as the biggest growth area will be with budget phones in emerging markets.

Add the siphoning off of revenues by the OTT providers such as Skype and WhatsApp, which allow customers to call and text on their phones while circumventing the operator network entirely, and the higher costs involved for operators to maintain their networks for modern data traffic, there are serious issues to face up to.

Mobile network operators (MNOs) have begun talks with the big app stores, hoping to create their own areas within the likes of the Apple App Store or Google Play and take advantage of the commonly used and well trusted store fronts, but gaining some of their own revenues.

Winning back customers

There are still fears users won’t want to embrace these apps and may continue to ignore them in lieu of others in the store, but it is something they must attempt to try to claw back some of their custom.

The study claimed there was “one critical asset” mobile operators had over competitors to its industry though and that was the billing relationship with the customer.

“The beauty of the direct carrier billing process is that, post the decision to download content, it can be facilitated by a simple one-click (trans)action,” it read. 

“In this regard, it is ideal for impulse purchases, particularly from individuals who have not pre-registered a credit card.

“Furthermore, there is still some residual reluctance to input credit card details into the handset, while there is also the issue that a credit card previously entered may have expired, obliging the end-user to spend time re-entering card details. As content retailers are aware, the greater the time the end-user is required to spend on a transaction, the less likely he or she is to complete it.”

Mobile networks are also able to offer a superior quality of service than some of its OTT rivals as well, as they own the infrastructure and are able to manage the traffic as they see fit.

“MNOs can employ a variety of techniques including prioritisation, traffic management and video optimisation, thereby improving the bandwidth per app and/or customer and thus increasing customer satisfaction and thereby reduce service churn,” read the report.

“This is particularly key within the increasingly competitive video content market, where a raft of players – including Lovefilm, Netflix, Hulu and Google – are offering an array of video on demand (VOD) services. 

"With prices broadly similar across the marketplace, [quality of service] could become a key differentiator, particularly as the tablet becomes the first – rather than second – screen among younger demographics.”

The report concluded that this additional capability could enable operators to charge higher prices for their services, but it will be a cost users are willing to incur for a faster, more reliable connection to their apps.

To download the full report, click here

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