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Operating Profitable 3G and 4G Networks

Operator Business Model Transformation

I sat on a panel at the RCR Local Boston event earlier this month. I thought the panel and audience interaction were quite stimulating and informative. The informal networking was also fruitful. I recommend attending an RCR Local event in your area, if you have the opportunity.

Wanting to sound somewhat intelligible, I had prepared in advance some answers to our panel’s seed questions, some of which I’m converting into a blog entry here for comment and feedback. Here are the operator business model transformation set of questions. I’ll post a 2nd blog with the network transformation oriented questions

What are some of the biggest challenges facing carriers today as they look to deploy 3G and 4G networks?

Operator Profitability – as achieved through the duality of Optimization and Monetization, those complementary forces at play in Mobile broadband networks. A particular challenge is the enthusiastic behavior of mobile broadband users, especially users of iPhones and similar nextgen devices. For example, Morgan Stanley’s research shows that 58% of iPhone users access social networking applications versus 14% of average mobile users. This differential occurs across all mobile internet application usage, e.g., online gaming (61% vs. 21%), video (23% vs. 3%), etc. Current all-you-can-eat Flat Rate and simple tiered data plans are not effectively monetizing – or optimizing – mobile usage.

How much change is being required in plans for carriers to compensate for the significant increase in mobile data usage?

Operators need to move from Flat Rate Pricing models by:

  • Deploying intelligent IP networking capabilities like policy control, high Quality of Service for premium applications, monthly usage allowances or caps for mobile data, offering dynamic upselling in real-time
  • Leveraging the unique customer Information the operator has to better target and market services, info like location, roaming status, device type, usage patterns by application/time of day/P2P protocols/etc.

Can current business models based on limited demand for 3G services be scaled to handle 4G technologies & consumer demand?

3G demand is growing! AT&T added almost 3 million iPhone users in Q1 as one example. Similar growth in 3G smartphone subscribers is occurring elsewhere. Morgan Stanley pegs 2010 as an inflection point, when 3G penetration has exceeded 20% of all mobile user globally, and forecasts global 3G penetration to reach 43% by 2014. Europe and North America already currently exceed 40% 3G penetration, while Japan is at 90% 3G penetration.

Concerning business models, operators need to adopt Business-to-Business-to-Customer (B2B2C) models to transform their revenue approach. The aforementioned need for operators to deploy intelligent IP networking and to leverage customer knowledge and intimacy will enable operators to grow revenues by:

  • Increasing customer transactions with real-time charging and policy control
  • Satisfying user desire for Personalization wrt quality, price, preferences, etc.
  • Providing real-time pricing information to users at time of usage decision
  • Monetizing by various user type, e.g., users with credit issues, roaming users, different device types (e.g., a gaming device user price, an iPad user price)
  • Improving targeting and segmenting of customer base
  • Optimizing network resource management with better alignment to revenues

Read the original blog entry...

More Stories By Deborah Strickland

The articles presented here are blog posts from members of our Service Provider Mobility community. Deborah Strickland is a Web and Social Media Program Manager at Cisco. Follow us on Twitter @CiscoSPMobility.