As customers shift their loyalty from their wireless carriers to the makers of their smartphones and companies that provide over-the-top services, network providers are finding themselves in an unsteady situation.
If you are a mobile operator, how do you drive growth in the middle of this trend that threatens to gradually eat away at your revenue?
According to International Data Corporation (IDC), Asia Pacific wireless carriers in particular need to shift their strategy to stem revenue loss through over-the-top (OTT) services and loss of customer loyalty.
The solution, as IDC suggests, is for carriers to develop, provide and support ecosystems that provide solutions that integrate the various mobile platforms and services that are currently out there for either personal or enterprise use.
Furthermore, carriers also need to look at different revenue streams like mobile advertising and providing services to desktop virtualization vendors for them to beat the competition.
In addition, carriers must also leverage the growing tablet market that is evolving into an industry that is being used more and more in the enterprise.
IDC also says that carriers will have to invest in companies in adjacent industries – either through acquisitions or partnerships – that offer solutions that target the same customer market and add value to their existing or planned services.
Carriers will also have to make cost-cutting drives and experiment with their current business offerings which may include partnering with OTT service providers.
OTT services are services that provide an alternative to revenue-generating services offered by network operators.
Examples of OTT services are messaging and Voice-Over-Internet Protocol (VoIP) services that popular applications like Skype and Viber give customers access to.
The problem carriers have with OTT services is that they decrease carrier revenue. Why would you pay a carrier to message a friend overseas when you can do so for free using Skype over a Wi-Fi network?
“Operators used to own the mobile customer’s loyalty, but in recent years the customer has switched their loyalty to either a device manufacturer or to the over-the-top services they use,” says IDC’s Charles Reed Anderson.
“Unfortunately for the operator, today’s consumer cares more about the brand of phone they are using than the network they are on. For them, the network is just the tool that lets them enjoy the features and functionalities of their phones, and the applications they download through that phone’s application store,” the head of Telecoms Research, Mobility Lead, IDC Asia/ Pacific adds.
Because of this, IDC says that carriers have “missed out on the revenues generated in the lucrative mobile services marketplace” while seeing an increase in their customer acquisition and retention costs.
“As it stands, the operators are in a situation where they fund the network while the device manufacturers and over the top providers (OTTPs) make all the money. It’s similar to someone building a shopping mall, paying for all the operating expenses, and then let all the retailers use the space for free,” Anderson says.
This problem is more pronounced in the Asia Pacific region, IDC implies.
Compounding this problem is the Bring Your Own Device (BYOD) trend which is also picking up in the Asia Pacific region.
This trend is spurred by the growth of mobile operating platforms such as Android and iOS which have eaten away at the dominance of BlackBerry in the enterprise.
However, the research firm suggests that mobile carriers, particularly in the Asia Pacific, still have not tapped a very lucrative space in the mobile solutions ecosystem.
According to IDC, “customers are seeking someone to guide them” in the enterprise mobility solutions space.
IDC says that mobile carriers best fit the role of being providers of integrative solutions for their subscribers and for the enterprise community.
As carriers race to fill this role, IDC offers the following predictions for next year:
Prediction 1 – Making of the next big practice – Winning language of mobility
The Asian market currently lacks solution providers that can advise on mobility strategy, bring together multiple vendor products into a single solution, and deliver the systems integration and support that are required to ensure success. To address this massive opportunity, IDC believes that almost every service provider will have a dedicated enterprise mobility practice in the next 12 to 24 months.
Prediction 2 – Inflection point in business tablets
Tablets have reached an inflexion point where they have become a business productivity tool for many. Video, business applications and social networking are widely used applications on tablets for various purposes including research, collaboration or to enable a mobile workforce. The launch of Windows 8 tablets is one factor contributing to this; it has the potential to be the de facto enterprise tablet. In addition, the emergence of 7-inch tablets will spur demand in emerging markets.
Prediction 3 – Business model experimentation
In 2013, IDC believes operators will start to deliver fee-based OTTP solutions, similar to the Telkomsel/Skype offering in Indonesia, that risk further decreasing voice and SMS revenues, but can create an opportunities for operators to gain some traction and revenue in this competitive market space while strengthening their customer acquisition and retention capabilities.
Prediction 4 – Smartphone battle goes high end
In 2013, IDC expects the handset battle to move to the high-end smartphone market, in particular due to the ramp-up of new 4G/LTE phones being delivered to the market. The first high-end phone out of the gate is the Windows 8 phone. BlackBerry will follow suit in January with the launch of the much-anticipated BB10 device. As Samsung and others launch their new devices, the market will become increasingly competitive for the manufacturers, and increasingly attractive for the customers who will be spoilt for choice.
Prediction 5 – Desktop virtualization vendors to enter enterprise mobility
In 2013, key desktop virtualization vendors will introduce, or acquire, solutions aimed at strengthening their enterprise mobility portfolio in areas of device management, security and content delivery. At the same time, it is likely that partnerships between desktop virtualization vendors and Mobile Device Management (MDM) vendors will be forged in 2013. PC desktops will remain relevant in most enterprises in 2013 and onwards, and vendors like Citrix and VMware will be repositioning their solutions to appeal to wider enterprise buying audiences.
Prediction 6 – M2M – Leading the way to the Internet of Things
In 2013, M2M will play a larger role for the operators in both their enterprise and consumer customer bases. In the former, IDC expects operators to forge new partnerships with ISVs and systems integrators that will address the challenge of developing, deploying and supporting industry-specific M2M solutions. On the consumer front, operators must get involved in the growing trend of connected devices, including TVs, refrigerators, cameras and automobiles, that becoming readily available.
Prediction 7 – Retirement plan for mobile operators – Investing in adjacencies
As operators seek new revenue streams to counteract the decline in prices for voice and data, they are increasingly creating their own Corporate Venture Capital divisions. IDC believes that operators will seek acquisitions in adjacent industries that share the same target customer market to build their brand and increase customer stickiness through diversified and differentiated offerings.
Prediction 8 – Mobile advertizing – The next great growth opportunity for those operators that can capitalize on it
Operators benefit from a wealth of information about the customer, including, most importantly, their current location. Retailers and Over the Top Providers (OTTPs) also capture considerable customer data, but their data is more behavioral based and includes purchase history and browsing trends. The operators must either partner or acquire mobile advertising firms that can leverage both data sets and deliver tailored and relevant marketing message to their consumers.
Prediction 9 – Befriending OTTPs – Friend, not foe, to mobile operators
IDC believes that in 2013, OTT players will want to partner with mobile operators for a variety of reasons including joint solution creation, go-to-market and platform provisioning. At this point, OTTPs are struggling to replicate the success on mobile devices they enjoyed on the desktop. Similarly, mobile operators are fearful of being reduced to mere “dumb pipe providers” and have been exploring measures whereby they could either capture the market by becoming content providers in their own right or somehow manage the use of their access services by third-party content and service providers of online video, VoIP services via bandwidth throttling.
Prediction 10 – Refarming GSM spectrum – The cost savings initiative that will drive future revenue growth
For operators facing the daunting challenge of funding an LTE deployment, the cheapest and quickest way to deploy is via re-farming of the over-abundant 1800 Mhz GSM spectrum band. However, to manage the network requirements of the increasingly data hungry services, operators also need to leverage Wi-Fi to offload the LTE traffic under a heterogeneous network architecture design for seamless handover between the two networks. This will be the foundation for enabling the next generation of mobile solutions for the operator.
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