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Raising ARPU: There’s Value in Fixed Voice

Tue, 04/28/2009 - 8:15am
Steve Shaw

Mobile operators are looking for ways to increase the average revenue per user (ARPU) from their subscriber base. Even on mobile phones, operators continue to commoditize voice minutes, offering larger buckets of minutes for the same flat rates. Mobile operators thus need new areas in which to become competitive.

Steve Shaw
Shaw

It’s natural for operators to turn to data services to drive increased consumer spending. So-called “hero” devices, like the Apple iPhone or T-Mobile USA’s G1, are proving successful in driving increased ARPU, primarily due to operator requirements that users subscribe to flat-rate data plans. 

However, operators today have found a way to increase ARPU without subsidizing a new handset or changing the subscriber’s interaction with its service at all. T-Mobile USA has created @Home, a complementary service offer ideal for T-Mobile’s entire mobile subscriber base. 

@Home is a fixed-line home phone service delivered from T-Mobile’s existing mobile core network. The product is sold as a second line added to a standard mobile service plan. In the same way they can add a second mobile phone to a family plan, T-Mobile subscribers can now add a home phone line as well.

Services like these are able to capitalize on two key market trends. First, many consumers are looking to lower costs in today’s economy, and a monthly fixed-line phone from an incumbent operator is typically expensive. Second, while many consumers are ditching their home phone lines completely, a large segment of the population requires a home phone for a variety of reasons.  

T-Mobile’s @Home service is proving to be the right product at the right time. For an additional $10 a month, subscribers can have the comfort and security of a home phone for a fraction of the cost of competitive plans. 

@Home is actually a perfect complement to T-Mobile’s standard mobile fare.  Subscribers coming into a T-Mobile store can easily add home phone service to an existing mobile package. And all operators know that subscribers who purchase two or more services are far less likely to churn than subscribers with a single service. For the operator, there is an added benefit to the service. While the basic monthly fee is $10, subscribers are using the phone for all types of fixed-line calling, often generating ARPUs well above the basic monthly rate. 

Mobile operators have long targeted a strategy of fixed-mobile substitution (FMS), encouraging consumers to use their mobile phones as their only phones. With @Home, T-Mobile can now capture those in-home voice minutes, and consumers don’t need to change their fixed-line usage habits. Calls are simply routed through T-Mobile’s core network. 

Early fixed-line offers from mobile providers required a rather large investment in new equipment and systems. Mobile operators needed to invest in new SIP-based voice switches to deliver a VoIP service. The switches were independent of the existing mobile voice service network, and therefore required new systems and management processes to handle maintenance, billing and control. These requirements and associated investment often turned mobile operators away from delivering a rather straightforward, high-value service. 

T-Mobile leveraged UMA technology to provide its VoIP service based on its existing mobile core network. This offered the company significant advantages. Clearly, no new voice-switching infrastructure was required. T-Mobile uses a simple UMA Network Controller (UNC) to provide service from the existing mobile switching centers (MSCs) all operators use for service delivery today. 

Billing for the service is also an easy transition. Because @Home is a second line, akin to another mobile line in a family plan, the billing system is already in place. There’s no need to reconcile call detail records from a new SIP voice switch into the existing mobile billing system.

In addition, the system relies on the same SIM-based access and authentication system as mobile phones, so in-store customer service agents already know how to provision and enable SIM-based service. Certainly there are some minor procedural differences, but the system is quite familiar. 

To deliver the service in the home, T-Mobile provides each customer with a UMA-enabled terminal adaptor (TA). The TA sits in the subscriber’s home, just like a wireless router, and has two ports - an Ethernet connection back to the mobile core network and an RJ-11 phone port to connect the home phone line. Home-line calls are carried over the consumer’s existing broadband connection. 

Any customer service agent at a retail store can provision the second line, assign it to a SIM card and put the SIM card into the TA at the store, sending the subscriber home with a ready-to-use product. The subscriber simply connects the terminal adaptor into her broadband network and plugs in the home phone. Dial tone delivered.  

If this sounds a lot like a Vonage service, that’s because it’s nearly identical. Except now mobile operators can cost-effectively compete for service, and consumers pay a lot less. 

With the success T-Mobile is experiencing, expect mobile operators around the world to embrace this low-cost, low-impact approach to increasing ARPU, reducing churn and providing services that consumers demand.  

Shaw is vice president of market development at FMC solutions provider Kineto Wireless.

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