From Network Provider to Mobility Concierge: The Changing Operator Landscape
Since the day that Apple turned the wireless industry on its head, nearly all assumptions about how the industry operates have changed. From a market that was primarily controlled by wireless operators, to a flattened market driven by innovative devices and applications, operators now struggle to maintain differentiation and face significant challenges with customer mindshare and profitability. This industry metamorphosis can be characterized by four key market shifts:
Shift 1: Introduction of the iPhone
In 2007 the iPhone marked the first large-scale success of a fully OEM designed and controlled device. Previously, wireless was a closed ecosystem where carriers controlled networks, handsets, and applications. Apple disrupted this ecosystem, establishing a precedent whereby an OEM could retain control of their handset’s features and build up demand for devices independent of the operator. Android handset makers like Motorola and Samsung soon followed suit, fueling market growth, and a shift in power, through innovative smartphones that excite consumers.
Shift 2: Introduction of App Stores
Along with the iPhone, Apple launched a new mobile applications market with iTunes that allowed app developers to sidestep operators and market their applications directly to end-users. The Android market (now Google Play) took the app store concept even further, creating a wide-open environment in which thousands of new apps could be offered to consumers without operator dependency and with no barriers to entry.
Shift 3: Rollout of 4G Networks
Ironically, the investments that operators have made in 4G networks have paved the way for a new generation of companies to provide high-speed messaging and VoIP services at a fraction of the cost compared to operator services. As popularity grows for over-the-top (OTT) messaging services such as Skype, OoVoo and WhatsApp , operators are faced with sharply decreasing messaging and voice revenues.
Shift 4: Wi-Fi Everywhere
While cellular networks were once protected sources of revenue, Wi-Fi broadband connection now threatens this last stronghold for operators. Price sensitive customers, and those frequently plagued by overage charges, are turning to Wi-Fi as a means to consume data without limitations. The more ubiquitous Wi-Fi becomes, the less value subscribers will place on cellular service.
As such, the market control points once held by operators have eroded over the last seven years. In response, operators have shifted their business models from traditional voice to messaging to data-driven revenue streams seen today. However, typical tiered data plans can be confusing for customers who struggle to understand how much data they use and how to maximize their data dollar while avoiding overage penalties. Rather than encouraging usage of the wireless service, today’s data plans actually discourage subscribers from using cellular service. Further, competition continues to increase as home cable providers like Time Warner and Internet giants like Amazon and Google deploy Wi-Fi networks to capture consumer mindshare with alternative data services.
Operator as Mobility Concierge
In this ever-changing wireless market, operators must take a fresh look at their role with the customer not just as a cellular network provider, but as a mobility concierge that provides the best user experience regardless of device, application, or network used. This strategy requires the operator to leverage the device as an extension of its network, utilizing intelligent client software to monitor and manage network connectivity and user experience over any access point.
Customers generally rely on their mobile devices to automatically connect to a wireless network. When connections fail, it is often the operator who gets blamed, regardless of the fact that it may have been a third-party Wi-Fi network that the phone was trying to access. Depending on the specific circumstance, such as time of day, location, or congestion, the best connection could be through a cellular network, carrier managed Wi-Fi, home or office Wi-Fi, or amenity Wi-Fi provided by a retailer. Regardless of who supplies the access point, operators can use intelligent client software to measure Quality of Service (QoS) on the network prior to connecting the data session. By taking an active role in managing connectivity across disparate networks, operators help ensure that subscribers are utilizing the highest quality network available, or the lowest cost network available, depending on the needs of the subscriber and the service arrangement.
Maintaining Margin for Tiered Data Plans
Most operators build margin into their business models by relying on the fact that subscribers will pay for, but not use, their entire monthly data allocation. This is known as a “breakage model” and it’s a delicate balancing act. When subscribers exceed their data allocation, the overage often results in support calls and unhappy customers, not to mention congested networks. However, if the subscriber doesn’t use enough data, he may drop the data plan to a lower tier, thereby reducing revenues for the operator. Through the use of intelligent client software, operators can protect their margins in two ways: first, they can set device policies to move data traffic between 3G, 4G and Wi-Fi networks according to data plan thresholds, and help avoid both overage and breakage penalties; second, they can use analytics from the device to improve the accuracy of their models based on real connectivity and usage data. Furthermore, subscribers benefit from a connection manager that ensures their cellular usage remains well within their budgets.
The wireless market has undergone tremendous shifts in the past decade, effectively undermining nearly every control point that operators once relied on. Even those core messaging services that were within the exclusive domain of operators have been cannibalized by emerging vendors. We are now starting to see evidence that their final and critical control point – the wireless network service itself – is in jeopardy. For operators to remain relevant and protect both their revenue and margins, they must elevate their role to Quality of Experience Manager across networks, mobile platforms and applications. To do that, operators need intelligent client software on devices that allows them to control connectivity based on business objectives and real-time network conditions. End-users ultimately want reliability, simplicity and value when it comes to wireless service. Operators who can provide a superior Quality of Experience while eliminating complexity and budget overruns for customers will drive higher retention and customer satisfaction rates, and ultimately higher profits.
Sunil Marolia is vice president of product management at Smith Micro Software.