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Mobile operators must adapt data plans to address video boom

Over 52 million terabytes of data traffic will transit worldwide mobile networks this year alone, up by more than 50% on 2014, according to statistics from Gartner

Mobile network operators (MNOs) should consider implementing higher mobile data caps on their price plans if they want to retain customers for the long term, as data volumes crossing the network continue to rise rapidly, according to Gartner.

The analyst house has released statistics showing that video-hungry consumers and enterprises will be responsible for a year-on-year traffic volume increase of 59% in 2015, up to 52 million terabytes (TB).

There is no sign of any let-up, either, said Gartner, which predicted mobile data levels would reach 173 million terabytes by 2018.

"Mobile data traffic is soaring worldwide, more than tripling by 2018," said Jessica Ekhol , research director at Gartner. "New, fast mobile data connections (3G and 4G) will grow more slowly, from 3.8 billion in 2015 to 5.1 billion in 2018, as users switch from slower 2G connections and consume more mobile data."

Gartner’s researchers picked on consumers in two mature markets, Germany and the US, to demonstrate how MNOs will need to adapt their strategies.

In Germany, it found that more restrictive data plans – around 500MB per month in about 40% of cases – meant users were less likely to consume video content or download large amounts of data over 3G and 4G connections than in the US, meaning average revenue per user (ARPU) was lower in Germany than the US.

Gartner asked if users would wait until they had established a Wi-Fi connection to download an app or stream video content, to which 54% of Germans said they would, compared with only 36% of Americans. Over 40% of US respondents said they did not feel constrained by their data plans, while only 20% of Germans felt the same.

On average, Germans streamed 10.6 minutes per cellular video session, compared with 17.4 minutes for Americans.

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"With video usage as a percentage of total data usage set to rise from 50% now to 60% by 2018, we should expect communications service providers (CSPs) to offer the best-of-breed video experience to consumers," said Ekholm.

"This involves using video optimisation technologies and caching content closer to the consumer. Contract plans that single out video traffic to allow users to reach a certain cap without touching their contract data cap, will increase usage and revenue for CSPs and meet consumer demand for more mobile video."

Generation gap

Gartner’s research found that families with young children were chiefly responsible for driving mobile video use. On the whole, parents were not particularly concerned about burning through their data allowance to stream video, and interestingly, Gartner found no correlation with family income. It suggested this was being encouraged by MNOs enabling plans with data sharing available across multiple devices.

However, video streaming was not confined to the younger generation. In the US, Gartner found that 46% of 45-54-year-old respondents streamed 15 minutes or more video content per session, compared with 40% of 18-24-year-olds, usually considered the target audience for such content.

"The results also showed that YouTube is increasingly being used to stream video for longer periods of time, rather than just for 'snacking'," added Ekholm. There is a very small difference between the percentage of smartphone users who use YouTube for "less than five minutes" and "30 minutes or more" in the US. However, Germans were less inclined to stream videos for a longer period of time (in keeping with the trend of less usage) compared with the US, in line with more restrictive data caps.

Ekholm suggested that for MNOs, obtaining long-term revenue growth would come down to how effectively they could market the perceived value of more expensive unlimited data plans to users.

"The evidence is that once customers commit to a larger plan, their usage habits change significantly, resulting in longer-term revenue benefits for CSPs. This shows evidence of pent-up demand and an opportunity for those CSPs able to create the right package,” she said.

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