 | Issue: | Asia-Pacific III 2012 |
| Article no.: | 2 | |
| Topic: | Overcoming the mobile data traffic challenge | |
| Author: | Dave Labuda | |
| Title: | Founder, CEO & CTO | |
| Organisation: | MATRIXX Software | |
| PDF size: | 239KB |
About author
Dave Labuda has co-founded Portal Software in 1994, creating the first real-time billing and revenue management solution for Internet and communications service providers. As CTO, he led the architectural design and product strategy of the company. After stepping into the CEO role in 2004, he successfully sold the company to Oracle in 2006. Dave then served as CTO of Oracle’s Communications Global Business Unit until February 2008, providing architectural vision for the new organization and acting as a key advisor on several strategic acquisitions.
He started his career at Sun Microsystems working for eight years in the UNIX Operating Systems group. Dave also served as a board member for Aria Systems.
Dave Labuda holds Bachelors and Masters Degrees in Computer Engineering from Case Western Reserve University and has 11 patents issued with several more pending.
Article abstract
Billing systems need great overhauling. Legacy billing cannot cope with new requirements. The developed countries in APAC lead the world in broadband services and they require smart billing solutions and higher sophistication. The developing economies (such as India and Indonesia) are facing massive increase of smart device penetration with low ARPU, thus needing fundamental scaling up of real-time billing systems. This new breed of billing systems must also cater for ecosystems and varied business models to accommodate OTT as well as Telcos. Trying to build all that into old Billing will not work – a new approach is required, including analytics for real-time customer insights.
Full Article
APAC is at the forefront of 4G networks and smart devices – but do they need a billing system ‘reboot’ to be successful?
The Asia-Pacific (APAC) market is viewed as a bellwether in terms of the adoption of new technologies, new mobile services and new patterns of consumer behaviour. Places such as Singapore and Hong Kong are driving the uptake of mobile broadband faster than anywhere else. As geographically dispersed as the APAC region is, it shares at least one thing in common with all other global markets: a spike in the uptake of new devices. Businesses and consumers are embracing Smartphones and tablets at a voracious pace. This has created a ‘Supermobile’ generation of users who use their devices as a ‘must-have’ companion to their lifestyles. Like everything else in their life, they want their mobile services to deliver instant interaction and gratification whatever they are doing, wherever they are.
This trend has led to an explosion in the amount of mobile broadband data traffic that Communications Service Providers (CSPs) must handle. Most people now own more than one device, use services such as mobile video and apps which require higher bandwidth, and rely on the devices as ‘constant companions’ during their everyday life. At work, shopping, at play or at rest, the ‘thumb tribes’ of Hong Kong’s Mass Transit system have widened out into popular culture: wherever you look, everyone’s using their mobile device for something.
It follows that APAC has the highest growth forecast for data traffic in the world, making it a global focus for innovative approaches to monetizing data traffic. Of the 7,000 annual Petabytes of mobile traffic that Cisco Systems predicts in recent research – by 2015, about 40% of it will be generated in APAC.
High device penetration, high subscriber numbers
In developed APAC markets, such as Singapore, Hong Kong and Japan, 3G and other mobile broadband technologies are commonplace. Here, there are very high penetration rates of Smartphones and tablets, relatively high Average Revenue Per User (ARPU) and a highly competitive market. The result is a staggering increase in network traffic without a corresponding increase in revenue – a trend that cannot be sustained. CSPs need to move beyond flat-rate, or unlimited data usage plans, as they are becoming less profitable.
In developed APAC markets, the solution to this needs to include creative ways to break out of the flat-rate tariff model while creating mobile plans that make sense to the subscriber. CSPs could create more targeted packages around services such as video content, social networking and shopping and pair them with the right access speeds, to create a better customer experience. For example, offering Quality of Service (QoS) pricing for business and power users or for specific services, such as HD video. Packages should be sharable across multiple devices and not necessarily byte-based. This would provide a path to driving stable revenue growth, and in areas such as Hong Kong, these types of plans are already starting to take hold.
By contrast, developing markets such as Indonesia and India have very large populations and lower ARPU. Here, the rapid increase in Smartphone penetration, not higher usage, is what driving data traffic volumes on 3G networks. Innovative pricing and packaging is not top priority – their challenges are based on pure scalability, efficiency and operational cost structures. India is just introducing 3G, but has hundreds of millions of subscribers are upgrading to 3G devices.
The move from 2G to 3G results in a 10-30 times increase in data traffic per device. Pricing is also much more granular, and primarily prepaid, due to the cost sensitivity of most consumers. This adds pressure on CSPs to make their existing billing and charging systems scale to meet the increase in billing records and ensure consumption is tightly tracked and charged for in real-time. The cost of scaling existing systems is unaffordable in an environment with razor-thin margins.
The effect of LTE on the market
Rollout of Long Term Evolution (LTE) across APAC in developed markets will magnify the growth in data traffic volumes and place further pressure on CSPs to find a solution to the ‘data crunch’. LTE has the power to bring mobile multimedia services to life, but CSPs risk unsatisfied customers unless new business models are developed, and new mobile plans created for subscribers.
Imagine a subscriber who is limited to 2GB of data for a fixed price per month. Using a 3G network to stream video to the subscriber would offer them a choice of watching several movies, whereas with LTE, their allowance could literally be sapped in minutes. This kind of bad consumer experience is the antithesis of what CSPs want to provide with LTE.
Stuck in a systems rut
So why do CSPs find themselves in this position? It’s largely because their current billing systems have failed to keep up with the market. CSPs have not had cost-effective options to upgrade their billing systems to handle the new business models that come with faster networks and new devices. Legacy systems were designed for Voice, but can’t track or charge effectively for data usage in real-time, especially under high traffic volumes. Even prepaid systems that handle relatively simple pricing models, are not capable of keeping up with growing data traffic – nor can they handle the more sophisticated pricing and charging models that come with 3G and 4G services.
Trying to build new functionality and scalability into legacy systems is akin to increasing the size of a car’s fuel tank and expecting greater fuel economy – it’s costly and based on a false premise.
Evolving the back office for success
So what does the ideal solution look like?
First, it must deliver a whole new level of scalability. Consider that there are often tens of millions of subscribers on a network, and that a billable event can be something as small as beginning to type a word into Google search, and it’s clear that CSPs need to be able to process a vast number of events in parallel. Current systems can only process hundreds or a thousand transactions per second, and yet the requirement is for up to 100 times that. This must be accomplished on a small, efficient set of low cost hardware that is ‘off the shelf’ and easy to maintain.
Next, it has to be real-time. Whether providing charging for prepaid or post-paid accounts, the ideal solution must offer visibility and control over consumption to both the CSP and the mobile subscriber. With more businesses and families sharing plans, allowances and devices, this type of functionality is central to providing an outstanding and compelling experience. Providing accurate balance information and spending controls also cuts the number of calls to customer support-centres that originate through billing inquiries, bill shock and service reconnection calls.
Additionally, by providing internal visibility and control, the relationship with Over The Top (OTT) providers of content could be better monetized. By tracking subscriber trends in real-time, CSPs can build insight around data consumption patterns, and put a price on it. That way, instead of OTT players ‘riding the network for free’ and relegating the CSP to a ‘dumb pipe,’ the CSP could gain additional revenue from common applications such as YouTube, Spotify or Facebook browsing.
Finally – it must provide both functional agility and reliable performance. New services, applications, third party providers, and advertisers bring new business models and marketing strategies. CSPs need a charging solution that easily fits into their existing systems while supporting these business models. The system must not experience any degradation in performance and latency or require additional capacity as charging and billing models become more sophisticated.
Building strategies for the new mobile era
Research shows that subscribers who are more informed about what they are purchasing beforehand are more likely to trust their CSP and make purchases in additional to their usual spend – about 15% more. This can be accelerated if CSPs build more creative, personalized pricing and bundling of data services based on real-time information from the charging system. Information about the average spend of the subscriber, their credit worthiness and historical services usage, for example, help build a picture for CSPs to offer unique offers to their subscribers.
If sophisticated analytics are introduced, CSPs can better develop and target personalized offers and discounts. Subscribers can also set their own account preferences through integrated charging and policy management capabilities.
So, although APAC has many markets which are developing at different rates, the underlying trend is the same. CSPs can overcome data volume challenges by monetizing their networks through creative pricing, personalization and real-time insight and by looking for solutions that are designed to efficiently scale for 4G networks and beyond. Combining high-performance, cost effective charging with new pricing strategies and business models will enable CSPs to meet the challenges of the new mobile broadband era.
