The global traffic in data is going to exceed the one zettabyte (1000 exabytes) threshold by the end of 2016, according to Cisco’s VNI Forecast 2014 -2019. This growth is due to new and faster networks, a decrease in the price of 3G/4G smartphones and increase in the demand for new data-intensive services like mobile video.
However, the growth in data traffic has not corresponded with the growth in revenues for operators due to the data monetization challenge. This is a major cause of concern for operators who have invested their time and money in building the network pipes that are enabling data traffic today.
One of the prime reasons behind this uncoupling of data and revenue growth is the emergence of OTT platforms cannibalizing traditional revenue streams of operators like P2P and SMS.
The GSMA Intelligence report forecasts that OTT service providers will continue to eat into the operator’s share of the revenue in the mobile ecosystem. According to this report, in 2013, the total revenue of the mobile ecosystem was $1,996 billion, of which the operator’s share was 1,186 billion (a shade below 60 percent). GSMA forecasts, that by 2020, the total revenue would grow to $2,897 billion with the operator’s share around 1,445 billion (49 percent). In contrast, the report indicates that revenue from applications, content and advertising would grow from 205 billion to 576 billion (an almost 3-fold increase).
This is in line with Gartner’s industry perspective that although network speed and reliability are priorities for customers, it is really apps and content that is driving data traffic as people increasingly chat to friends and family, watch videos on demand, and listen to streamed music on their mobile devices.
In the end user’s market driven by service differentiation and quality of experience, OTT service providers have stolen the march over traditional telecom companies by delivering highly contextual and personalized service offerings to their customers leveraging data analytics.
Ideally, telecom companies should have been the ones monetizing the data flowing through the network pipes because they have control over it. However, as a number research shows, operators are lagging behind Large Internet Player (LIPs) as well as OTT service providers when it comes to applying data analytics to large reservoirs of big data under their control.
Research by Analysys Mason highlights the gap between Large Internet Players like Google, Amazon, Facebook, and Apple (GAFA). According to the research, two-thirds of the operators, while acknowledging the importance of contextual marketing based on analytics for monetization data, admitted that they were two years behind the GAFA group.
The research also pointed out that while operators want to make the most of the abundant data they have, but in technical terms they still have a long way to go.
Also, the flat data rates used by operators is open to abuse and leads to traffic congestion affecting end users Quality of Service (QoS) as well as the quality of experience (QoE) which exacerbates the data monetization problem even further.
With internet usage expected to rise even further in the future due to the rapid proliferation of mobile devices and the coming of age of 3G/4G services, CSPs will have to create a differentiated service experience through real-time recharge,tiered pricing, differentiated product catalogue, extensive reporting based on analytics, and convergent billing experience across different networks and services.
A multi-tiered pricing regime will not only prevent data abuse and traffic congestion but also generate more revenues for the operator by providing uniform bandwidth after the cap. Similarly, by provisioning bandwidth on demand, like for example, a single flat fee, say $ 5 for increasing bandwidth for the next five hours for watching a movie, operators not only garner additional revenues but also improve customer experience significantly.
Other monetization opportunities include providing access to social media apps for a flat fee per month. Operators must realize that every customer is different and there is no one size fit all marketing strategy for customers. In order to maximise data monetization opportunities, they will have to cater to every individual with highly differentiated offerings catering to video, gaming, social media, VoIP, individuals, groups etc. For example, with Gartner forecasting mobile video to account for 60 percent of the data traffic in 2018, operators could improve Quality of Experience (QoE) with video optimization for saving bandwidth and costs.
The future will be tough for operators who fail to adapt to the changing telecom environment. The winners will be those who are able to overcome the data monetization challenges that are mentioned above with a more customer-centric analytics-driven approach keeping an eye on margins all the time.