|Topic:||Becoming a better digital lifestyle provider|
|Title:||President & CEO|
Rami Hadar is the President and CEO of Allot Communications. Previously Mr Hadar founded CTP Systems, co-founded Ensemble Communications and served as CEO of Native Networks.
Rami Hadar holds a B.Sc. in Electrical Engineering from the Technion, Israel’s Institute of Technology.
Communications service providers must decide how they are going to respond and adapt to the challenges of the digital lifestyle; a concept introduced by the over-the-top players to describe the daily activity of a contemporary mobile user. Using analytics to create subscriber segmentation, communications service providers can personalize their offerings to suit the needs of their customers and concurrently maximize the usefulness and value of their network services.
Approximately two hundred years ago, the scholar Thomas Robert Malthus coined the term ‘carrying capacity’ to describe the widening gap between the growth of the population and the growth of food production capabilities. Malthus said: “The power of population is indefinitely greater than the power in the earth to produce subsistence for man.” He argued that while our population grows geometrically, our means of food production grows arithmetically – a discordant concept that insinuates inaction will lead to a bleak future. Although Malthus’ argument focuses on issues of food production, it can also successfully delineate the modern-day phenomenon of worldwide mobile data usage.
Currently a large gap exists between the growth of data delivery services offered by service providers and the increase of data usage. In just one year – 2011 – global mobile data traffic grew 2.3 fold, more than doubling for the fourth year in a row. Furthermore, researchers expect mobile data traffic to grow at a year-over-year rate of 78 percent from 2011 to 2016 (Cisco, 2012). Although the prospect may sound intimidating, this ‘data explosion’ presents a unique opportunity for Communications Service Providers (CSPs) to both increase the value they bring to their subscribers by providing numerous additional services, and to efficiently and effectively solve critical data delivery issues.
The shifting role of the CSP
CSPs around the globe are feeling the effects of the seismic shift that has taken place in the mobile industry over the last few years. Mobile operators face an uncertain future; one in which they are viewed as – at worst – a bland utility, or – at best – a communications ‘enabler.’
It was not that long ago that mobile operators wielded absolute power with the delivery of voice and SMS services. However, today the innovative over-the-top (OTT) providers and device manufacturers are challenging these ‘Titans of old.’ They are shaking the very foundation laid by mobile operators and are threatening to dethrone mobile operators as the new Titans in town.
These challengers are not isolated to just the OTT providers; there are challenges in other unexpected areas as well. In this new paradigm, subscribers – who are no longer forced into operator contracts – are now referred to as ‘customers.’ The concept of brand loyalty is dead, and customer experience now reigns in its place. Operators can no longer stick to the mantra ‘build it and they will come.’ In today’s new environment, customers have the ability to judge a service provider based on a single transaction – a single slip-up can drive them away. Operators have consequently been charged with the grueling task of regaining control over customer interactions with company services.
CSPs must decide how they are going to respond and adapt to the challenges of the Digital Lifestyle; a concept introduced by the OTT players to describe the daily activity of a contemporary mobile user.
Bit pipe or digital lifestyle provider?
The Digital Lifestyle is transpiring all around us. Even though the CSP’s pipes are essential to enabling this new model, many are reacting too slowly and not adamantly enough to transform the way they respond to the aggressive OTT development; they are failing to capitalize on the opportunity before them. CSPs face a crucial fork in the road, and in choosing the appropriate path, they ask themselves the following question: Do we want to be a bland utility, or can we become a more meaningful part of the value chain and become a Digital Lifestyle provider?
CSPs that choose to lead or follow (but definitely not just get out of the way) must first make a conscious decision about their own futures. They are primarily responsible for understanding their own value, and subsequently communicating this value to both their customers as well as the OTT providers – who can eventually become customers. To gain an understanding of company self-worth, CSPs need insight into both how their network is performing (from the cables to the applications) as well as their customers’ experiences (be it voice, video, browsing, billing, etc.). Armed with this information, CSPs can identify a handful of use cases that will enable them to begin the process of transformation.
Creating actionable segmentation as a first step
Marketing managers are aware that there is no average digital user and no single homogeneous digital lifestyle. Thus, there is a need to identify the differences among subscribers and group them in a way that will better reflect their lifestyles. Actionable segmentation of the digital lifestyles of mobile subscribers can lead to successful operator marketing, customer retention and increased revenues. Instead of defining subscribers based on the usual terms of gigabytes consumed, it is possible to consider an innovative approach: segment the mobile digital lifestyle from the network operator perspective in order to provide a richer definition of mobile subscribers and then offer them services based on the value the network brings to them.
Many service providers perform data explosion analyses by categorizing consumption patterns of ‘average digital users’ i.e., light, middle or heavy data users. They base this classification on the volume of traffic each user creates. However, such an approach does not reflect the heterogeneity, complexity and flexibility of digital lifestyles. CSPs need to identify the differences among subscribers and group them in such a way that will provide a better understanding of digital users. Instead of defining users based on gigabytes consumed, an innovative approach to digital lifestyle segmentation can demonstrate the diversity of digital consumption such as:
• Personal vs. social online activities;
• Place (web content) and time of the online activities (where and when online usage occurs).
CSP’s can create pricing schemes based on these subscriber data use characteristics and not just plain data volume predictions.
A subscriber using a mobile device utilizes many different categories of data traffic, including general browsing, social networks, video streaming, online storage, and instant messaging. Additionally, there are three types of subscriber activity online: personally active, socially active, and mixed personally/socially active. It is expected that the proportion of users should correlate with the volume of network traffic (for example, 35 percent of the subscribers should generate 35 percent of the traffic). However the reality is that, based on the nature and frequency of data used, subscriber activity can affect traffic volume on the network far below or above the number of subscribers generating it based on the subscriber characteristics.
Consider, for example, that the segmentation analyses lead to five distinct digital lifestyle profiles; Info Seeker, Info Guzzler, Social Monitor, Social Mingler and Digital Mover & Shaker. The last is the most important segment since the subscribers in this category in many ways drive the digital lifestyle. They alternate between personal and social activities online, create and upload content, and react to the content of others.
The more mobile operators know and understand about the digital activities of their customers, the more effectively and efficiently they can fulfill their role as digital lifestyle provider. As such, these operators increase the value of their network service in the eyes of customers.
Use cases to optimize and monetize
With insight into who their subscribers are and how they use the network, CSPs can now identify a handful of use cases that will enable them to become digital lifestyle providers. These use cases must simultaneously address underlying technology issues in order to optimize content delivery, and address business issues like monetization. Here are some examples:
OTT video optimization
By using analytics to identify heavy video real time users (sports, news, entertainment), operators can offer customers an optimized video service as a paid add-on to their current data plan. Key benefits:
• Contain infrastructure costs by minimizing the impact of high bandwidth traffic;
• Meet or exceed customer experience expectations for video streaming;
• Increase the average revenue per user (ARPU) for the CSP by selling a true value added service.
Access to inappropriate content and websites on the Internet is a very real issue and has led to consumer demand for effective and easily-deployed solutions for safe browsing. A smart flexible service allows creating subscriber level parental control:
• Parents use self-care portal to set up their safe browsing profiles;
• Traffic from subscribed devices is automatically identified, and web traffic is filtered;
• Filtered traffic is analyzed and the relevant safe-browsing profile is applied in real-time as needed;
• Notification and usage reports are sent to parents.
Digital lifestyle providers recognize the security challenge to protect children accessing the Internet on smartphones and tablets as well as the opportunity to provide a chargeable value added service.
OTT premium content
While most over-the-top content is free, most content providers also offer premium content and services for a fee. Digital lifestyle providers can capitalize on this growing phenomenon by helping content providers expand their base of premium customers. Working with the OTT content providers allows creating subscriber level value:
• Create tiered packages for delivery and charging of premium OTT content/services;
• Share revenue with OTT providers from new customer acquisitions;
• Track and share usage statistics for targeted advertising;
• Provide unified billing for all services.
For example, service providers can help popular music-, video-, or TV-on demand providers to expand their pay-for-use business by bundling the OTT service together with smartphone acquisition, high-speed access, guaranteed QoE, and unified billing in a premium service package. The premium-content relationship may also offer options for targeted advertising based on analysis of subscriber behavior and application usage. Through premium content packages, service providers can tailor their services to the digital lifestyle of their customers, and share the revenues from the premium subscriptions they sell.
In order to lead and be profitable in the communications arena, service providers must do all in their power to migrate away from the title of the bland utility and transform to become digital lifestyle providers. Using analytics to create subscriber segmentation, CSPs can personalize their offerings to suit the needs of their customers and concurrently maximize the usefulness and value of their network services. Additionally, CSPs now have the ability to create new business models with OTT providers, and to identify and implement numerous use cases in order to both optimize and monetize their networks – a quintessential part of becoming digital service providers and consequently retaining subscribers.