 | Issue: | Europe I 2013 |
| Article no.: | 3 | |
| Topic: | The intelligent pipe | |
| Author: | Chris Koopmans | |
| Title: | VP & General Manager of Service Provider Platforms | |
| Organisation: | Citrix | |
| PDF size: | 286KB |
About author
Chris Koopmans is VP and General Manager of Service Provider Platforms at Citrix. Mr Koopmans was previously chief operating officer of Bytemobile.
Article abstract
The volume of mobile data is exploding but a minority of users are responsible for the majority of the data traffic. Rather than capping usage more sophisticated ways of capitalising on heavy use are needed. Mobile operators need to work with OTT players to support improved levels of services across the network and help keep down the costs of access. Traffic management can help: it not only allows carriers and content providers to deliver services in a bandwidth efficient way but also enables insight into what data is travelling over the network.
Full Article
Much has been written about dumb pipes; they represent a dystopian future as far as mobile network carriers are concerned, where content and services use the highways and byways of connectivity, delivering richer and more varied user experiences, while the network owners are reduced to the position of utility.
For some, that the carriers should become pipes is inevitable. On the devices side, Apple smashed down the operator walled gardens creating a massive market for apps. Intruding from the web services side meanwhile is Google – a firm that has revolutionised content delivery supported by advertising.
The carriers see their role shaping out a little differently. They build sophisticated networks designed to regulate and control the expensive spectrum they license from the government. It is this sophisticated infrastructure that allows them to provide a level of service impossible with unlicensed alternatives such as Wi-Fi hot spots. When it comes to voice services, users are clearly willing to pay for this service level given that we are approaching 100 per cent penetration in most developed markets. But with voice services, each user uses the same amount of data for every minute they are online – no matter who they are talking to. Whereas with data services, one user may consume a thousand times more data per minute depending on what content they are accessing. Clearly, with Internet content delivery there has to be work on both sides rather than an ‘us and them’ mentality for this business to succeed long term.
Mobile data traffic
This summer witnessed a massive boost in mobile data traffic as a result of the Olympic Games in London. ByteMobile and Amethon Solutions published a report ahead of the games on the expected impact of the 2012 Summer Olympics on operators’ networks. The report was based on collaborative analysis of mobile data trends during major sporting events of the past 12 months. ByteMobile and Amethon predicted that operators would see a 211 per cent increase in traffic worldwide during the Olympic Games in London.
By and large, those forecasts came true with traffic in the host country being higher than elsewhere and the carriers certainly benefitted, mobile advertising volume increased by over 100 per cent, and that is just one area where carriers and over-the-top (OTT) content providers can bring intelligence. Since content can be viewed as a mechanism for segmentation, you can monetize content with advertising. Print, radio and television represent the old guard. Content with mass appeal is inefficient unless you’re selling a product that everyone wants or needs, and can afford. The Internet’s arrival has had a profound effect on content delivery and advertising since segmentation is driven by a user’s online activities and profile.
Mobile marketing is not a new concept, but like the early days of Internet marketing, its first forays have been uninspiring, ranging from various SMS or MMS type campaigns, mostly viewed as unsolicited spam by the subscribers, to slightly more sophisticated offers such as the model used by the now defunct mobile virtual network operator (MVNO) Blyk that granted free airtime in return for watching adverts.
As things lie, OTT players stand to make the most from online advertising, since smartphones are gateways to an open Internet. But all is not lost for the cellular carriers. Unlike ISPs who are never going to see any of Google’s or Facebook’s advertising revenue, mobile carriers own spectrum licence agreements.
Mobile operators build and maintain sophisticated communications networks and need to be adequately remunerated in return in order to maintain and support their services. But extremely healthy competition among the carriers continues to squeeze margins, while increasing smartphone ownership and booming data consumption via content services such as Google’s YouTube will place greater demands on the networks.
The truth of the matter is that a minority of users are responsible for a disproportionate amount of the data created. Meaning high value business customers are getting the same level of network provision as smartphone owning YouTube viewers. The carriers’ hands are far from tied on capping heavy usage, indeed, caps are commonplace. But rather than capping usage, perhaps more sophisticated ways of capitalising on heavy use could be found.
Capacity constraints
Almost without exception, mobile operators are taking measures to ease capacity constraints on their networks, including adding bandwidth, offloading traffic and employing network optimization tools. But capacity issues persist: according to Citrix ByteMobile’s customer log files from carriers such as Telefonica in Spain and the UK, SFR in France and T-Mobile across Northern Europe, OTT video accounts for over 50 per cent of mobile network traffic as smartphone users download more and more multimedia content causing significant downlink, RAN and core capacity issues.
This, in turn, is bad news for the OTT players. The strength of the argument for mobile marketing is that advertisers can reach their targets wherever they may roam. On one level this is true, they can be reached, but they can only be reached when they use their phones to go online. If congestion exists, people will not surf and OTT players will not maximise their earning potential via mobile.
If consumers, regulators and brands want net neutrality over the mobile channel, then accessing the net will become prohibitively expensive – this is a neutrality scenario in which only the very wealthy will be able to afford to go online and runs contrary to the ‘free Internet for all’ argument put forward by proponents of net neutrality.
A two-sided business model with the advertisers and carriers working together is in the best interest of the OTT players. Operators will be profitable, or they will go out of business, taking OTT content providers with them.
OTT players need to work with mobile operators to support improved levels of services across the network and help keep down the costs of accessing the network, so that more people will surf, and the OTT players make more from targeted ads. In turn, more revenue will be raised and the whole virtuous circle will continue spiralling upwards to the benefit of all.
Two-sided business models
Enabling two-sided business models is where things become challenging. Altering a business model is one thing, but replacing an entire billing, rating and charging architecture is another. Carriers are not going to replace their existing operations and business support systems (O/BSS) to accommodate the brave new world of harmonious business models. OTT players meanwhile aren’t going to agree to sign over a certain percentage of their takings.
Traffic management not only allows carriers and content providers to deliver services in the most bandwidth efficient way as possible, but it also enables deep insight into exactly what data is travelling over the network at any one time. This intelligence means carriers do not need to re-architect their existing O/BSS to accommodate a new business models and OTT players can see exactly who is viewing what content, further enhancing their own business and sales story by enabling ever greater levels of segmentation.
Recently, Google reported revenues that were 20 per cent lower than analyst expectations, largely as a result of new habits of content consumption that sees users accessing services via smaller form factor mobile devices. Slightly less recently, Facebook’s market valuation crashed when it became apparent that the firm’s mobile advertising strategy was weak. Would either of these situations have come to pass if Google and/or Facebook was working in tandem with the mobile operators rather than going fully OTT?
Two-sided business models support the carriers and the OTT players; traffic management enhances things for everyone in the value chain – including, crucially, the end user.
