Network MoNetizatioN StrategieS

a Phased evolution approach for Communication Service Providers

Vyas VarmaSurbhi Sinha

Dipankar SahaAvinav Trigunait

Table of Contents

abstract ...................................................................................................................................................................... 3

1. introduction ......................................................................................................................................................... 3

2. key Monetization Challenges .......................................................................................................................... 3

2.1 Popularity of unlimited data plans ........................................................................................................... 3

2.2 rapid deterioration of quality of experience ....................................................................................... 4

2.3 Lack of differentiation ................................................................................................................................ 4

2.4 the current 2-sided business models .................................................................................................... 4

3. the 3-Sided Business Model ............................................................................................................................ 4

4. Levers for Network Monetization ................................................................................................................. 6

5. Next Steps For CSPs: a Phased evolution approach ................................................................................. 7

5.1 Near term focus ......................................................................................................................................... 7

5.2 Medium term focus..................................................................................................................................... 7

5.3 Long term focus .......................................................................................................................................... 7

6. Conclusion ........................................................................................................................................................... 8

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2. Key Monetization Challenges

Many CSPs have already launched video streaming services, App Stores, music and other value added services – but they are still struggling to appropriately monetize data traffic on their networks. The key challenges faced by CSPs in monetizing these services include the popularity of unlimited data plans, rapid deterioration of quality of experience, lack of differentiation and a 2-sided business model. Each of these challenges is explored in detail in this section.

2.1 Popularity of unlimited data plansConsumers have become accustomed to unlimited data plans which were offered by CSPs to encourage early adoption of mobile internet services. This was a good strategy prior to the popularity of smart devices and data guzzling applications. However, today CSPs are struggling to manage data traffic on their networks. To accommodate the surge in demand, CSPs are required to invest heavily on infrastructure upgrades to boost capacity, while the popularity of unlimited data plans results in poor ROI.

Introduction

Mobile data traffic has skyrocketed in the past few years due to the proliferation of connected devices and popularity of high-bandwidth consuming applications. In addition, the availability of high-speed mobile broadband has led to a dramatic shift in consumer behavior, accelerating the demand for media on-the-go. Many consumers already own multiple devices such as smartphones, tablets, e-readers and gaming devices. In addition, the rise of user-generated content, collaborative platforms and advance of video encoding and delivery techniques has fuelled tremendous video traffic growth.

While data traffic growth has been exponential, revenue growth has not kept pace. The spike in data demand has forced Communication Service Providers (CSPs) to concentrate their efforts on network and capacity upgrades. Although, this approach has improved network performance, the prevalence of unlimited data plans and lack of service innovation has slowed the monetization of these investments. Conversely, OTT players have created an ecosystem of innovative services and applications that thrive on the availability of high speed data connectivity. Companies such as Google, Amazon, Facebook and Apple have succeeded in gaining consumer acceptance and monetizing their services, whereas CSPs are struggling to move up the value chain and stay relevant in the ecosystem.

Over the past few years, the use of smartphones and tablets has grown dramatically. In parallel, the adoption of high bandwidth applications such as video streaming, social networking and interactive gaming has accelerated. The result is that we have more connected devices than ever before, consuming an unprecedented amount of data.

However, the growth in carrier revenue has not kept pace with the growth in network data traffic resulting in a phenomenon that Wipro refers to as the ‘data monetization gap.’ The data monetization gap is the consequence of an incoherent carrier network monetization strategy. The data monetization gap, combined with a steady loss of traditional voice and SMS revenues, has placed tremendous business pressures upon the telecommunications industry as a whole.

This paper discusses the monetization challenges faced by mobile service providers, emerging business models and the role intelligent policy and charging solutions can play to create new revenue opportunities. It also explores the potential for use case libraries to help service providers enhance revenue streams and reduce customer churn.

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2.2 rapid deterioration of quality of experienceMobile network infrastructure for most CSPs is capable of delivering best effort service. On top of best effort service, CSPs deploy “Fair Usage Policy” to restrict the errant users. Service providers have invested heavily in 3G and 4G networks which offer higher speed and capacity. However, consumer demand for bandwidth has outpaced the incremental data capacity added due to network upgrades. Video consumption is the primary driver of this traffic which has increased exponentially in the past few years. And with high speed networks this trend is expected to continue as more users will watch superior quality HD videos. Since, the data consumption for a HD video is significantly higher than 240p streaming video; this shift in consumer behavior will result in heavy network congestion and deterioration in the end-user viewing experience.

2.3 Lack of differentiationCSPs rarely differentiate their quality of services or provide special offers or discounts for customers based on their revenue potential or based on their billing history. Most often, network policies are based upon best effort service and each customer or service on the network is treated equally, receiving shared bandwidth and facing the same network latency and speed issues. The lack of differentiation for data heavy and latency sensitive services such as videos leads to a dip in QoS and subsequently poor customer experience.

In addition, the best effort delivery mechanism limits the ability of CSPs to offer personalized services to premium customers. This is a huge opportunity loss as CSPs miss out on upselling and bundling opportunities. Undifferentiated quality-of-experience (QoE) also creates dissatisfaction amongst premium customers, as they are accustomed to preferred service delivery and personalization in other sectors such as banking and retail.Poor experience also discourages consumers from spending more time on content websites, which reduces the revenue potential for all participants in the Telco-Media industry.

2.4 the current 2-sided business modelsOTT players such as Apple, Netflix and Hulu have created services that are delivered directly to consumers, reducing the role of CSPs to mere connectivity providers. We refer to this as a “2-sided business model” (see figure 1). Note that the value-added business relationship is limited to only to the subscribers and the OTT providers. Consumers subscribing to content and video services pay for content directly to OTT providers. CSPs are only paid for the data services, dramatically limiting their monetization potential.

These challenges to the CSP are further compounded due to the growth in device diversity on networks and the need to optimize content for screen sizes of various form factors. In addition, legacy networks and IT systems are another key challenge limiting CSPs ability to quickly offer new services and pricing plans.

3. The 3-Sided Business Model

To address these challenges, service providers need to create smart, gated networks that will enable them to prioritize, control and customize services based on service type or customer preferences. Intelligent policy and charging capabilities along with subscriber intelligence, network intelligence and partnerships with content players will allow CSPs to create innovative new pricing plans and product bundles.

These capabilities will keep CSPs relevant in the value chain by allowing them to create 3-sided business models (see figure 2). In this model, customers will pay directly to content providers, while content players will have revenue sharing agreements with service providers to offer differentiated service based on the type of services or consumer preferences. Consumers may also separately pay a CSP for a premium QoS. The ‘3-sided business model’ will improve CSP network monetization by:

Figure 1: The 2-Sided Business Model, Source: Wipro Technologies

Fat Unintelligent Pipe

Direct Business relationship

Subscribers ott Players

Service Provider Network

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Figure 2: 3-Sided Business Model, Source: Wipro Technologies

a. Providing an un-matched customer experience. Customers will be empowered with options to select the desired service levels and control network speed by service type or other preferences.

b. Offering innovative new products and billing models. Differentiated charging and service personalization based on consumer preferences

c. Creating a network of content partnerships. CSPs will build innovative business models by collaborating with 3rd party OTT

providers and offer premium services by exposing network application programming interfaces (API) to the content specialists.

d. Optimizing network resource management. In co-ordination with network intelligence based on real time utilization data, policy controllers will help optimize network resources.

The next section provides an overview of some of the network monetization use cases which can be implemented by service providers.

gated Smart Pipe

rule Based intelligence

a) CSPprovidesintelligentpipeandflexiblebillingmechanism

b) 2-Sided business model replaced by 3-sided win-win-win model where customer experience takes central role

Network aPi

Subscribers

3-Sided Business Model (B2B2C)

ott Players

Service Provider Network

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4. Levers for Network Monetization

The key advantage of a 3-sided business model is that it provides CSPs with the flexibility to experiment with different price plans, product bundles and even different business models. Some of the use cases and the benefits associated with each of these are described below.

Lever Use Case Use Case Description Benefits for CSPsService quality High quality video on demand On-demand video service is deliv-

ered with guaranteed QoS levelsIncremental revenue is generated by offering on-demand high quality services that supplement base plansMobile TV live streaming Mobile TV services offered with

guaranteed service quality

HD quality content HD quality content offered with guaranteed service quality and differentiated billing plans

Turbo boosting for a specific ser-vice or session

User specific session bandwidth is boosted on demand based on subscriber preference or service

Time and location Time and location based service plan

The quality of service and pricing will vary based on time of the day and user location

Customers are attracted by innovative service discounts. Location based plans are utilized for targeted advertisement

Shared wallet and tiered service Tiered service Services from OTT providers are offered at differential quality and pricing models

Average revenue per account(ARPA) is increased by attracting more devices per account and allowing them to share the data/services across the devices

Multi device shared data plan Multiple devices from the same subscriber share the common data limit based on the user’s subscription

Family plan Multiple members of the same family share the common data limit based on the user’s subscription

Prepaid and postpaid based hybrid plan

Hybrid data plan where additional product and services are charged and billed using an online charging system; traditional data volume based services are offered on a postpaid basis

Bundling OTT content partner bundling Service provider and OTT vendors form a definitive agreement for revenue sharing where CSP’s pro-vide differentiated services to the content provider’s application

Net new revenue source is gener-ated from OTT partners

Personalization Parental control Individual applications, services and websites are blocked or filtered based on the time of the day, day of the week and location of kids. Parents can dynamically control the configuration.

Each customer can be offered per-sonalized services based on their requirements. Service providers will be able to charge a premium for these services.

Service personalization Consumers are offered person-alized services based on their preferences. Subscriber analytics will help create personalized service offerings

Network API driven application Network resources are offered as a service to the OTT application developers through an open API

Figure 3: Analysis of Various Levers for Network Monetization, Source: Wipro Technologies

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5. Next Steps for CSPs: A Phased Evolution Approach

To effectively monetize their networks and deliver a superior customer experience, CSPs need to ensure their network, IT and B/OSS systems operate in harmony. CSPs also need to continuously monitor customer behavior and modify products and services accordingly. Considering the speed at which customer preferences are changing and technology is evolving, this is not an easy task. As a result, CSPs must carefully consider their business objectives and craft a phased transformation approach that results in a sustainable business model.

Wipro proposes a three-phased approach for CSPs to transform their businesses from the current 2-sided business model to a 3-sided business model.

These three stages of evolution are described in further detail below (see figure 4):

5.1 Near term focusIn the near-term, CSPs should develop the infrastructure and systems such as intelligent policy and charging, self-care and multi-device delivery capabilities that will begin their digital transformation journey.

a) Develop a robust self-care portal

The Internet has become an ideal channel for companies to communicate

Figure 4:Three-phased Evolution Approach, Source: Wipro Technologies

directly with their customers. Wipro expects that in the near-term future, CSPs will behave like online retailers directly selling a host of data, voice and value added services. Hence, providing a fast and easy to use self-care portal where customers can buy, configure, modify and activate services is a crucial first step.

b) invest in intelligent policy control, DPi and online charging capabilities

Policy Charging Rules Function (PCRF), Deep Packet Inspection (DPI) and Online Charging Systems (OCS)will play a pivotal role in enabling the provision of dynamic product offerings, differentiated pricing models and QoS-based offerings. At this stage,CSPs should invest in these capabilities and begin developing some of the monetization use cases described in Figure 3 above.

c) Multi-screen delivery and session mobility

‘Anytime anywhere’ rich-media access has become a hallmark of the digital world we live in today. Content must be delivered over a variety of mobile devices, running different operating platforms across heterogeneous networks. In response, CSPs should develop seamless session mobility and content delivery capabilities.

5.2 Medium term focusOnce the infrastructure is ready, CSPs should create partnerships with content players and open their network APIs to OTT players for greater collaboration and service integration.

a) Partnership with content providers

OTT content providers will play a critical role in the 3-sided ecosystem. CSPs must recognize that each OTT vendor is unique and specialized in terms of their services and market approach. Instead of taking a walled garden approach or competing directly, CSPs should embrace OTT players by offering complimentary network features and creating business models that provide fair monetization opportunities to both parties.

b) opening network aPi’s

Opening network APIs will allow CSPs to offer their network as a service to third parties. Application developers and OTT providers can utilize this opportunity to offer differentiated services per subscriber or per session. CSPs should experiment with different pricing models such as data volume or transactional based charges based on the utilization of the API.

5.3 Long term focusWith the infrastructure and partnership ecosystem in place, CSPs should shift their focus to the development of subscriber intelligence and network analytics capabilities to deliver personalized experiences. For sustainable success, CSPs need to invest in technologies and infrastructure that will provide them with advanced analytics capabilities. CSPs have access to an enormous amount of subscriber and network data lying in systems such as CRM, billing, self-care portals, networkactivity andcall data records. With advanced analytical capabilities CSPs can utilize this datato deliver personalized services, predict failures and improve customer experience.

Near Term Focus

Medium Term Focus

Long Term Focus• Develop a robust self-

care portal

• Intelligent policy control, DPI and online charging capabilities

• Multi-screen delivery and session mobility

• Partnership with content providers

• Opening network API’s• Develop subscriber

intelligence and network analytics capabilities to deliver personalized experiences

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6. Conclusion

Most CSPs are struggling to monetize the explosion of data traffic on their networks due to a lack of service innovation. OTT players leveraged the opportunity to develop innovative apps and services, and are successfully monetizing these services with a direct-to-consumer business model. As a result, CSPs have been largely marginalized as a connectivity provider - often cut out of value-added and direct consumer engagement.

To move up the value chain and become a highly profitable digital services provider, CSPs need to develop innovative products and services that will not only help them retain and attract new customers, but also better monetize their networks. Wipro’s three-phased approach is intended to guide CSPs from investing in the enabling technology infrastructure, to developing the required partner ecosystem and finally create the network intelligence and analytics capabilities that will deliver a next-generation of network monetization opportunities we can only begin to dream of today.

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About the Authors

Vyas Varma is VP and Global Telecoms IT Practice Head for Communication & Media vertical at Wipro. He has over 2 decades of leadership experience in nurturing Telecom practices, delivering complex programs and solution-led business development. In his current role, his main charter is to drive high value business growth with focus on creating in-depth value propositions & solutions for our customers, to address their key business challenges. He is also part of the leadership team which creates & executes overall investment & solution strategy for Communication & Media Business Unit.

Surbhi Sinha is Principal Architect in the Communications and Media vertical at Wipro. She has over 20 years of experience in telecom, B/OSS and networking technologies. In her current role she is responsible for developing solutions for CSPs that address some of their key business challenges. In the past, she has led multiple end-to-end B/OSS rollouts for greenfield Operators as well as transformation programs spanning L2C, T2R, network inventory and other B/OSS areas.

Dipankar Saha is a principal consultant in Communication and Media vertical in Wipro. He has more than 16 years of experience in telecom domain as solution architect working across all the wireless technologies. In his current role, he is responsible for evangelizing network monetization solution aiming at improving CSPs revenue share by creating next generation services using policy, real time charging, billing, subscriber data, network analytics, network API and OTT integration.

Avinav Trigunait is assistant manager in Wipro’s Global Media and Telecom business unit, leading thought leadership initiatives for the SBU. His research interests and project experiences span diverse areas such as MVAS, fixed and wireless networks and digital media. Prior to this, he was working as a consultant, strategy labs for Capgemini Consulting’s Telecom, Media and Entertainment practice. In the past he has also worked for IDC as a telecom sector analyst.

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