Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
Facebook’s latest acquisition hints at the future of app-based data plans
At the beginning of June, Facebook purchased Finnish startup Pryte, demonstrating the social network company’s continued interest in working in the telecommunications sector. Pryte’s technology helps communications service providers charge on a per-app, short-term basis through a metered system covering many different apps. This kind of technology – and the commercial agreements behind it – provides an alternative to data-capped bundles, allowing customers, for example, to affordably use extra data when they reach their monthly limit rather than buying another gigabyte they’ll barely consume.
This offers a significant opportunity for CSPs to diversify their revenue streams and build new, personalized service packages. Here are three, innovative approaches that mobile operators could similarly take to fine-tune their volume-based data monetization models, support mobile data adoption, and secure a competitive advantage and future business growth.
Personalized apps
Last fall, Apple announced that there were more than 1 million apps available in its App Store. There’s really no telling which will be popular and for how long. Consumers all use their phones differently. One person may have an interface cluttered with different apps – finance, fitness, weather, Yelp, Google Maps – while another may only have the apps that came with the phone. There are near-limitless variations.
But what if there was a way that CSPs could monetize the demand for certain apps? Or a set of apps? Some mobile operators are starting to go that route.
KDDI, the second-largest mobile operator in Japan, provides app access for a flat monthly fee through a “Smart Pass” program. For 372 JPY ($3.72) per month, Smart Pass members are offered unlimited access to a set of apps, along with discounts and other perks, such as a photo storage service. Smart Pass was launched in March 2012, and two years later had passed 10 million members.
A set of the most common apps doesn’t just meet the needs of a large audience of customers. It helps streamline app-driven revenue and makes network data demands more predictable. CSPs can decide which apps are included in the set of flat-fee apps according to popularity, data usage and overall app usage.
It’s possible to take this kind of service package a step further. For instance, if CSPs applied predictive analytics to the data on the apps being used, they could fashion more personalized app packages for individual customers.
Apps, free of charge
Another new kind of package that has been pushed by Facebook, among others, is to offer subscribers one app for free. Some CSPs are offering this kind of service package to increase customer loyalty and adoption. For example, GoSmart Mobile, a T-Mobile US sub-brand in the U.S., offers access to Facebook via an app even if customers have run out of their monthly data allotment. In Germany, operator E-plus offers WhatsApp access at all times through its WhatsApp SIM.
The commercial agreements between CSPs and over-the-top providers can prove to be a significant competitive advantage for those that form partnerships first. However, some telcos balk at the prospect of offering any network bandwidth for free. Earlier this year, Vodafone turned down a proposition by Facebook to zero-rate Facebook app access in emerging markets.
The complication, of course, is who should pay for access if customers can use an app for free. Previously, CSPs subsidized that access, but now more models are developing – whether that means sponsored data, OTT payments or exclusivity agreements.
Either way, if operators zero-rate an app, the first step is to implement a policy and charging system that allows apps to be categorized as “free” in the offer catalogue. So making an app free for users doesn’t just require a business conversation, it requires a technical one as well.
Apps on a timer
In March, Indian telecom operator Uninor decided to shift from volume-based (megabytes and gigabytes) to service-based Internet offerings (Facebook and WhatsApp). What that model looks like today is very easy for consumers to understand: for one rupee, you can access Facebook – as much as you want – for one day. For 15 rupees (24 cents), you can access it for a month.
This model scales all the way down to an hourly rate, which can be ideal for customers in emerging economies who may not have much to spend on broader data plans.
Uninor can expect this plan to help increase monthly average revenue per user significantly, because most of the operator’s service revenue is voice-based. By offering users flexible packages that can be used at nearly any price point, the CSP practically guarantees increased revenue.
App time-based charging is effective in mature markets, too. When users hit a data cap, they’re likely to wait out the rest of the month rather than opt for an additional GB of data at a premium price. By monitoring app usage and behavior patterns, CSPs can offer users smaller packages that allow them a day or a week of access to their favorite app, instead.
CSPs could effectively set automated triggers for these kinds of user targets. An avid Pandora listener, for example, could be granted a week-long extension to access the app through the end of the month. But CSPs would have to have a policy and charging solution in place that can distinguish Pandora from other apps when it comes to pricing, and work out any commercial agreements with OTT providers that may be required for this model.
Pride and progress in the personalization age
Nearly every CSP is concerned with declining revenue from traditional sources such as text message and voice. As OTT providers continue to chip away at established revenue streams, business models need to be turned on their heads. It has been difficult for companies to keep up with consumer habits, especially as data consumption grows exponentially, but one thing is for sure: The future is trending toward personalization.
Phones have become much more than just devices for communication. They’ve become personal assistants. Each one has a unique ecosystem that is built from a unique set of user behavior. CSPs need to accommodate those behaviors, and invest in the technology that will allow them to deliver, optimize and price new service packages in real time. Not only that, but by using predictive analytics, operators will be able to monitor the customer experience and, through flexible and agile policy control and charging, create new offerings before a customer reaches “a plan’s limit.”
The good news is that the resources are already there. CSPs have near-infinite amounts of user data that can help determine which packages work best. Maybe it’s based on apps, maybe it’s based on sponsored data or shared data. We are rapidly entering an age where CSPs will continually have to keep innovating to keep up with consumers. And there’s no better time to start than the present.
An industry analysis covering “10 more methods to monetize mobile data” was conducted by international telecoms efficiency specialist Tefficient and sponsored by telecom software specialist Comptel.
