|Latin America 2008
|Chief Technical Advisor
Adnan Yaqub is Orga Systems’ Chief Technical Advisor; he has had almost 30 years of experience in the telecommunications sector. At Orga, Mr Yaqub was involved in developing the world’s first GSM Prepaid Billing System. As the company’s CTO, he also led the development and launch of the world’s first convergent billing platform. Prior to Orga, Adnan Yaqub held executive positions with Allen-Bradley Company, Star Gate Technologies, COMMSOFT and Bell Labs. Adnan is widely respected as speaker at various international billing conferences. Mr Yaqub earned his degree in electrical engineering (BSEE) from the University of California and a Masters in Electrical Engineering (MSEE) from Ohio State University.
There are three billion mobile phone users. Most people who live near a mobile network, and can afford it, have a mobile phone. Competition has driven down average revenues per user, as usage and costs rise. To build profits, mobile operators need to build revenues based on mobile screen services by working with content and application providers. They can also profit by cost-effectively serving the remaining three billion people at the bottom of the economic pyramid that do not yet have mobile phones.
An often asked question is, “What are the current challenges faced by the mobile telecoms industry and what opportunities exist in light of these challenges?” In April 2008, the GSM Association (GSMA) announced that total connections to GSM mobile communications networks had passed the three billion mark globally. Based on this number – three billion – I would like to list what I see as the three major challenges and opportunities currently faced by network operators. The fourth screen Three billion connections mean three billion handsets. This is the fourth screen (after cinema, TV and the PC screen) and the platform for the seventh mass media – mobile communications – (after print, recordings, radio, cinema, TV and the Internet). This fourth screen has several unique characteristics. It is personal, always on and within arm’s reach. In addition to consumption, it allows for the creation of content at the source of inspiration. You can track its use to the individual consumer and it has a built-in payment channel. A comparison between the second, third and fourth screen is given in the following table. The big challenge is how to continue to make money on this fourth screen. The opportunity here is not in voice. Voice is becoming a commodity; it is less and less under the network operator’s control. At one industry gathering, it was estimated that in ten years only about 50 per cent of all voice traffic would be under network operator control. The remaining traffic will either be routed through private voice applications like Skype or embedded as an add-on in applications and games. The money is not going to be in voice. Neither is the opportunity in data. At the recent CeBIT show, one large network operator group pointed out that data revenues are being decoupled from traffic volumes in the market. Thus as traffic continues to rise, and with it cost, the revenues are remaining flat or even falling due to the abundance of flat rate plans and competition in the market. The introduction of services like iPlayer in the UK market certainly aggravates the situation. The money is not going to be in ‘piping’ data. The opportunity lies in leveraging key operator assets along with information that only the network operators possess. These key assets are billing, bandwidth, messaging and call/conferencing. The key information network operators have includes who is the customer, who does he/she know, where is he/she, is he/she available and how much can he/she pay. Third parties such as mashup developers, governments, retailers, enterprises, service and repair companies, content owners and brand advertisers are interested in these services and information. The network operators can seize this opportunity by providing these third party partners with identity, authentication, billing, collections, location and presence services along with efficient distribution of voice and data across a wide range of bearers and devices. To do this, interfaces to service delivery platforms offering the required services along with interfaces to distribution platforms need to be deployed by the network operator. However, these third parties own the business relationship with the end user. Here they are asking the network operator not to interfere. The bottom of the pyramid Three billion mobile subscribers also mean that there are three billion people without mobile services. The challenge here is how to reach the bottom of the pyramid. This market is largely rural, agricultural, isolated and illiterate. Income is between US$1 and US$5 per day. Goods are purchased in small amounts, usually just enough to last one or two days. Communication patterns are mostly local; less than one per cent of the calls are international. There is an opportunity in this challenge. This market is large and can be lucrative. For more than a billion people per capita income is less than one USD per day. The 20 biggest emerging economies include more than 700 million such households, with a total annual income estimated at some 1.7 trillion USD. Providing mobile services to this market also helps improve the standard of living. The poor view mobile services as a way to save money. A call to a nearby market to inquire about current crop prices can help a farmer determine the correct time to sell a harvest. To reach the bottom of the pyramid, however, requires special efforts. Network operators can look to fast moving consumer goods manufacturers for guidance on how to do this. These manufacturers have focused on the four ‘A’s – availability, affordability, acceptability and awareness – to reach these markets. A focus on availability considers different distribution technologies and channels as well as the identification of inefficiencies and rejection points. Availability is possibly the most difficult hurdle to overcome due to the rural nature of the market and the poor infrastructure usually found there. An example of how availability can be increased is the introduction of electronic top-up technology, such as virtual voucher systems. To increase affordability, operators should take into account sachets, community purchasing schemes, financing and alternative product configurations. Micro top-ups, for example, are important to have, since in this market consumers are used to buying a little product each day. Payment schemes taking into account agricultural cycles can also be considered. Acceptability can be increased by adapting products to local language, taste and culture. For example, a handset with a radio may be more accepted than one with a camera. Also careful considerations should be made regarding power requirements; many rural communities have no electricity. Finally awareness is achieved by marketing at culturally relevant events and the use of a local direct sales force. For instance, local street performers and wandering entertainers can be hired to build ‘product placement’ – insert live advertising – into their performances. Environment Three billion mobile subscribers mean a lot of energy and a lot of waste. For instance, Intel predicts that around 2016 the energy required to run networks world-wide based on 2004 processor technology will exceed that available on the global power grid. The challenge here is how to make the mobile telecommunications market sustainable. Network operators meeting this challenge have the opportunity to reduce costs, improve the brand image and create a sustainable industry, and this can be done by reducing, reusing and recycling. Reductions can be made in energy consumption (especially electricity) and packaging. Introducing technologies such as electronic top-up can reduce waste due to scratch card production and distribution. Partnering with companies which refurbish mobile handsets can increase reuse. Recycling can be promoted by offering airtime bonuses to customers turning in old equipment such as batteries or handsets. The current size of the mobile telecommunications market presents network operators with new challenges and new opportunities. These challenges include making money on the fourth screen, serving the bottom of the pyramid, and creating an environmentally sustainable industry. Those operators rising to these challenges and seizing the opportunities shall find themselves at the head of the field.