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From King to King Maker
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From King to King Maker

Mobile service strategies for the telecom operators

Facebook could very well turn out to be the next global communications powerhouse! This new reality stares right in the face of the mobile operators. Having offered their own communication services with voice still as cash cow, the kings of the mobile networks have mainly adopted countermeasures to protect their profitable business model. However, with protectionism under pressure, smart service strategies are required in order to secure a viable business in the future.

After investing heavily in the deployment of mobile broadband networks, operators had to wait almost 6 years to experience an uptake in data traffic and as a consequence, the beginning of the long awaited transition from a voice to a data centric business. Surprisingly, it was not any of the killer applications hyped in the early days of the first 3G networks that stimulated data demand, but devices like the “iPhone”. By building up an entire ecosystem around a user friendly product, Apple allowed subscribers to access mobile internet services like never before. The success of the smartphone was backed by the introduction of mobile flat-rates “all you can eat” plans that promised a wallet-friendly browsing experience. More importantly, users were even able to customize their smartphone by installing 3rd party application programs – so-called “apps” – which led to a richer, more engaging experience.

Unfortunately, operator hopes of a similar manifold increase in revenues did not materialize. They were simply caught on the wrong foot to deal with an exponential increase in data traffic which has now forced them to invest heavily into large capacity expansion efforts.

In addition, rather than stick to the operator portal, users ­simply transferred their fixed internet browsing habits to the mobile world. The internet majors led the way, creating apps, web sites and content around the handset capabilities. Mobile internet usage continues to increase even today, and in 2009 accounted for almost 30% of all mobile data service revenues worldwide (Mobile Internet 2.0 – New Strategies for Monetizing the Mobile Web”; Jamie Moss; Informa 2010). In a majority of these cases the operator’s role was in simply providing the basic data services through which these 3rd party applications could be delivered.

Some of the popular internet applications provided services that overlapped with operator offerings and now appear to threaten the mobile operator. Skype is the most prominent example offering “free” calls within the Skype community piggybacking on the operator’s public IP service. Operators have typically adopted a defensive position and reactions have ranged from a complete ban of such applications from mobile devices to charging a premium to allow the service.  In taking such a position the operators are seeking to protect voice as one of the few revenue streams where they still regain a modicum of control.

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