Mobile Data Pricing, Packaging is Key to Profitability

Vodafone's recent experience with mobile data traffic has lessons for other global operators.


Among other key trends is the growing role played by smart phone users and the ways traffic shaping can improve experience.


Also, smart phones are proving to be a key revenue driver, so plans tailored for the different behaviors various consumers have, can lift mobile Internet access demand. 


The focus for Vodafone’s price innovation is squarely on smart phones because this is the category of device that is driving data revenue growth. 


In fact, it now is possible to clearly delineate usage of PC dongles, long the main driver of mobile broadband use, and mobile Internet revenue growth driven mainly by smart phones.


Comparing the financial year 2010 to 2011 with the prior year, Vodafone’s mobile Internet revenues increased by 56 percent. This compares with growth of only 14 percent in mobile broadband. 


That's a significant change, as 10 years ago most "data revenue" was contributed by use of text messaging. 


Tiered pricing is also a prominent feature of Vodafone’s current mobile data pricing strategy. The company is introducing price plans tailored specifically to the needs of low and medium data users. 

Careful traffic management will continue to be an essential piece of the data profit puzzle. 

Vodafone has implemented Web and video optimization in nine of its European markets. 

That is one reason why many argue that network neutrality rules are harmful in the wireless domain. Wireless networks are much more susceptible to congestion than fixed networks, in part because demand varies much more than on fixed networks.

It is far easier to engineer a fixed network in part because usage patterns tend to be stable over time. Mobile users can, from time to time, dramatically change demand at specific cell sites.

The company claims optimization has helped it achieve data volume reductions ranging from 15 percent to 30 percent. Vodafone has also seen a reduction of 20 percent to 30 percent in peer-to-peer traffic in some of its European markets.

Offload of traffic to Wi-Fi networks also will play a part in  managing consumption. 

Windows Phone 8 to Support microSD?

Microsoft appears to be readying microSD support for its Windows Phone 8 operating system, a fact of some importance for mobile payments systems that would prefer to use microSD as a way of loading credentials onto mobile devices.

According to Windows Phone manager Joe Belfiore, “Apollo” will add support for removable microSD card storage.

NFC radios will also be supported, with Belfiore placing specific emphasis on 8's push into contactless payments. The "wallet experience" ] will have the capability to be carrier-branded and controlled, either by a secure element on the SIM card or using hardware in the phone itself.

As you might guess, mobile service providers are going to opt for credentials loading using the SIM, an element they control.

The microSD might therefore  be seen as a “content sharing” innovation, allowing desktops, laptops, tablets, and phones to all share content.

But microSD will offer one more option for over the top wallet or payment systems to use.

France Telecom to Step Up Fiber to Home Investment

France Telecom will double its investment in fiber to home networks in 2012 to 300 million to 350 million euros, Reuters reports. There’s both good and bad news in that announcement.

The good news is that the heavy spending is likely crucial for the survival of France Telecom’s fixed network business. The bad news is the huge risk.

France Telecom CEO Stephane Richard said fiber to home investments were key to the firm’s future competitiveness as a fixed line provider.

France Telecom has pledged to spend two billion euros by 2015 on rolling out a national fiber network.

Keep in mind that France Telecom expects a payback time of 30 years to 40 years, far exceeding the three-year to five-year payback expected of application investments. 


Analysts at the Yankee Group have argued that penetration rather than average revenue per user has the strongest effect on the FTTH business case. 


A business plan with a payback of five years or less has to assume retail penetration of at least 30 percent, and ih many cases also with triple-play service offerings. 


Any payback analysis is of course highly dependent on the assumptions, ranging from capital cost per location passed, as well as service revenue per location, among other things. 

That indicates the risk France Telecom and other providers are facing. Those time frames are so long they typically only can be considered by very capital intensive utility firms that operate in monopoly style markets, as fixed network providers used to assume was the case.

These days, the fixed network business faces competition from other facilities-based suppliers, mobile and satellite networks.

Globally, there already are more mobile broadband subscribers than fixed network subscribers. Mobile broadband subscribers surpassed wireline broadband subscribers in 2010 (558 million compared to 500 million).

Infonetics forecasts the number of mobile phone subscribers to grow to 6.4 billion in 2015 (the current global population is 6.9 billion).

While that is a big help for large service providers owning both mobile and fixed assets, the strategic context is different for fixed network operators who do not own mobile assets, and cannot acquire the scale to compete in what clearly has become a national scale business.

In such cases, though the classic investment case might not suggest spending on fiber to the home will generate as great a financial return as some alternative investments, that isn’t the issue.

Unless many smaller networks can upgrade to the fastest-possible fixed network, the entire business arguably is at risk. The investment, in other words, is strategic, rather than based on classic return on investment considerations.

But the decision to invest might also require a very long payback period that is beyond the working life of any single CEO.

Facebook is Mobile First, Revenue Isn't, Yet

From the Facebook S1 document: "Although the substantial majority of our mobile users also access and engage with Facebook on personal computers where we display advertising, our users could decide to increasingly access our products primarily through mobile devices."

"We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven." 


The problem is that Facebook, though now a leader in display advertising, cannot show those ads on mobile devices. 

Facebook wants to be "mobile first." Right now, though, mobile right now is "revenue last." 

Samsung, Apple Grow Device Sales Globally, Nokia Drops

On a global basis, Nokia and Samsung ship the volume of devices. But Samsung and Apple are growing, Nokia declining. Everything else seems to be noise, according to this IDC data. Global handset sales


 

Android has 47% Smart Phone Share

Some 97.9 million people in the U.S. owned smartphones during the three months ending in December, representing 40 percent of all mobile subscribers.

Google Android ranked as the top smartphone platform with 47.3 percent market share, up 0.5 percentage points from September 2011.

Apple maintained its number-two position, growing 2.2 percentage points to 29.6 percent of the smartphone market. RIM ranked third with 16 percent share, followed by Microsoft (4.7 percent) and Symbian (1.4 percent). U.S. smart phone share


Globally, smart phone ownership is even higher, at perhaps 55 percent of users. 

"Less is More" Where it Comes to Smart Phones

Some might argue there are "too many" phones being made available by device manufacturers, to the extent that what people might want are a couple of "hero" devices from each leading supplier. In other words, people might prefer to choose from a smaller number of "hero" devices that have lots of features a single consumer might want, but the few that a consumer really values.

Think of that as the "cable TV" model, where lots of channels are available, most of which any single viewer never watches. But there are a relative handful of channels, perhaps seven or so, that get watched frequently.

You might argue that is precisely what Apple has been doing.

Compete’s second quarter 2011 survey of consumers suggested that "a phone with more features" was the most popular primary reason to begin the shopping process. Perhaps more significantly, for an average consumer, the “must have” list of features included 10 features beyond the obvious ability to make calls and send text messages.

About 70 percent of shoppers only considered one or two phone models during their entire research process, suggesting that consumers want more features in one phone rather than model variety. “Less” is “more”