 | Issue: | India 2012 |
| Article no.: | 2 | |
| Topic: | The world of rising Data heralds an era of network sharing | |
| Author: | Sanjiv Ahuja | |
| Title: | Executive Chairman | |
| Organisation: | Augere | |
| PDF size: | 336KB |
About author
Sanjiv Ahuja is Executive Chairman of Augere. He is also the Chairman of LightSquared board, which aims to be a wholesale-only integrated 4G-LTE wireless broadband and satellite network in the U.S. Mr Ahuja is also the founder and chairman of Augere, which he formed in 2007 with several other telecommunications executives. Augere’s charter is to deliver affordable wireless broadband to developing markets such as India and Bangladesh. The company’s first commercial wireless network was launched in Pakistan in July 2009, and further wireless broadband services were launched in India, Uganda and Rwanda in 2011.
Mr Ahuja is also the founder and chairman of Eaton Telecom, which facilitates universal telecommunications service in twelve African countries through infrastructure sharing. This reduces the cost of network rollout for wireless operators in Africa. Previously, Mr Ahuja was chief executive officer of Orange from 2004 through 2007, during which time he served as a member of the board of Orange SA and of France Telecom’s Group Management Committee. Under his leadership, Orange increased the number of countries in which it operates from 17 to 23 and more than doubled the number of its mobile customers from 48 million to more than 100 million subscribers globally. Mr Ahuja has also served as president of Telcordia Technologies (formerly Bellcore). He was responsible for growing Telcordia into a global entity with more than 40 per cent of its sales coming from outside of North America. Prior to that, he spent fifteen years at IBM in various executive roles, including leading the company’s entry into the telecommunications software industry.
Article abstract
The traditional model of selling Voice minutes and Text messages is collapsing under to ‘weight’ of Data services. The main issue is the clash of charging regimes – with unlimited use of data and free VoIP over broadband. Operators are forced to upgrade their broadband infrastructure but seek to lower costs of delivering data. Therefore, operators are much more willing to consider sharing their own resources or buying in wholesale capacity. Still, there must be a process of educating consumers to pay for perceived value of the consumed resources, just as SMS is charged for the value of the text message, not the cost of transporting it. Such perceived value comes from innovative services generated by MVNOs who rely on 3rd party’s networks for their service delivery.
Full Article
The mobile communications industry is in the midst of a seismic shift. The old business model of selling minutes and text is under threat in the face of smartphone proliferation, open operating systems and downloadable voice and messaging apps. Alongside this, the ever-expanding consumer appetite for data, both in terms of volume and speed, is forcing mobile operators to make difficult decisions about their businesses. Faced with a requirement for huge investment in their networks, many will be considering previously unheard of network sharing and wholesaling models.
Mobile operators globally have built hugely successful businesses based on the simple model of constructing networks and then charging customers to use these closed infrastructures when they want to talk and text. Growth over the last twenty years has been explosive, changing the way we live our lives, and indeed changing the face of society. The impact has been felt even more markedly in emerging markets, where mobile telephony was the first widely available telecommunications medium. Operators have long relied on voice and text for revenues, and while many have attempted to “monetise” data services, this has been largely unsuccessful, with voice and text remaining the key money-spinner.
However in today’s world of Facebook, Twitter, Blackberry Messenger, Skype, Android, Google, App-store, smartphones, tablets etc. etc., this model is rapidly becoming unsustainable. Put simply, with a smartphone or tablet connected to a data connection, all forms of communication (voice, text, video) are available, and usually for free.
The quality of these platforms is improving rapidly, and consumer acceptance is rising. This is not only a phenomenon facing developed markets – the prospect of cheap smartphones and US$60 tablets (as recently announced in India) in budget-conscious emerging markets will have the same effect. We must not underestimate how rapidly this change will take place. Broadband suppliers must make substantial investments in networks in these markets to ensure that they are capable of supporting the latest generation of data driven devices.
In many markets, data has been given away to support voice and text revenue. When O₂ launched the first iPhone in the UK, the device was sold with free unlimited data. This later had to be reversed when the phenomenal impact of the iPhone on data usage was recognised. Mobile operators have consistently undercharged for data, offering network-crippling unlimited packages, and in the process – educating customers to believe that data is cheap, or worse still, free.
The way forward lies in network operators charging “properly” for data, which means charging at a level that reflects the investment made in the network. Unlimited packages are ultimately not sustainable (except perhaps with fair usage restrictions), and pricing has to be differentiated based on speed and quality of service. This process will take time and will involve consumers being educated to make rational economic decisions on the service they are willing to pay for (in short, higher and more reliable speeds, and bigger download volumes will cost more). This will not be an easy process.
Mobile operators also need to offer their customers quality data connections. This can involve heavy investment in new or upgraded networks, but increasingly network operators will have to look at sharing resources via new wholesale business models. When we think of wholesaling in our industry, we tend to think of MNOs (Mobile Network Operators) selling network access to MVNOs (Mobile Virtual Network Operators). MVNOs have traditionally been successful as a customer-acquisition machine, where the MVNO had a strong brand, access to a specific customer base (such as an ethnic group) or strong distribution (or a combination of these). Usually, however, the MVNO business model has relied on discounted minutes and text sold with paper-thin margins.
In future, it looks like the wholesale model will increasingly be used between network operators of all types. With devices able to use multiple network platforms (3G, 4G, WiFi etc.) the mobile operators will seek the best possible data experience which is seamlessly available to their customers, regardless of who operates the network. It is this philosophy that underpins the wholesale-only Lightsquared business model in the US.
Mobile operators need to provide a high quality data service to their customers, either by building up their own networks, or reselling services on 3rd party networks. They also need to charge for these services properly. However, the real value from telecommunications networks will come from the provision of services which add real value to consumers. As we all know, a single SMS requires a tiny amount of data to be transferred, but has been of great value to consumers who have consequently paid for texts at a rate many times the actual cost of transmitting the message. This service was charged in line with the perceived value to the customer, not the cost of transmitting the data.
Mobile operators should put their efforts into developing services that have real value and can be sold to consumers at a premium. However, their track record of innovating at the service level has been weak (beyond basic voice and text and the associated capabilities). Only by opening up their network infrastructures to 3rd parties, can they tap into the huge potential of mobile data services. Only by partnering, can the full potential of healthcare services, financial services, gaming and entertainment services, to name but few, be realised. Partnering with banks, social networks, healthcare providers etc, and providing an open environment for these services is the way forward.
This is indeed a time of major change in our industry. Smart mobile operators will embrace these changes, and transform themselves into smart data businesses. Multiple new commercial models will be put in place to give consumers the experience they demand. Smart operators should not fear this new data-oriented world, but will concentrate on using this new technology eco-system to innovate and grow. The end result should be a model that offers data hungry consumers the very best network offering whilst remaining a competitive and profitable industry for operators. A win-win situation.
