In my last blog, I talked about how monetizing mobile networks is a complex process that involves quite a few different strategies. In this blog, I’m going explain more what I mean by:
- Increasing Usage, and revenue from the usage, of the mobile network
- Tiered Pricing so that heavy users pay for their usage
- Optimization of the existing network
As we all know, more and more subscribers worldwide are coming to the mobile networks, and they are using the mobile networks with increasing frequency. According to the Cisco Virtual Network published this past February, mobile traffic is expected to grow at almost 100% CAGR through 2015.
People are clearly going to be using their mobile devices, and using them a lot. Did you know that video is expected to contribute up to 66% of the mobile traffic by 2015?
Video and other streaming services take a lot of bandwidth and this has impacted service, via bottleneck issues, for all subscribers and for all services, even those that don’t take a lot of relative bandwidth. This even generated a lot of media attention in 2010 – for instance, Business Week coined the term “iHog” for those iPhone users who were “hogging” the mobile network and causing problems for all subscribers.
In order to try to alleviate the strain on the network, service providers attempted to deal with this by introducing tiered pricing, with the high end users paying more for consumption. While this hasn’t really helped monetize the 3G network investment per se, it has helped get the most bandwidth hungry subscribers off the mobile networks, thus insuring quality of service for all subscribers and therefore helping to keep subscribers happy and paying.
Another possible way to increase revenue from the networks is to pay for speed of connection. As the networks increase in functionality, there would likely be high end customers who would be willing to pay for more increased access speed.
On the other end of the scale, there are subscribers who don’t use the networks that much. Tiered pricing for them would be more to “encourage” them to use the network more, which would increase their monthly ARPU. Perhaps this would take the form of special deals to get on the internet for 10 minutes, or deals to utilize the networks when they are least congested.
Another way to monetize the network is to optimize the network that exists so that more capacity can be put onto the network. Network congestion has many causes, but two frequent ones include spectrum limitation and backhaul congestion from the tower to the RNC/BSC. There are a lot of ways to optimize spectrum, including antennae optimization and ultimately getting more spectrum (hence the 4G/LTE license auctions). There are also a lot of ways to increase the backhaul capability, including installing fiber or microwave, or purchasing more bandwidth capability from a network supplier.
Backhaul optimization, however, is the quickest way to “add” capacity by utilizing the same bandwidth. In many cases, backhaul from the tower to the RNC/BSC is via T1/E1 or leased lines, not fiber. In these non-fiber cases, by putting in some packet optimization infrastructure on either side of the backhaul network, you are able to “squeeze” more data through the same pipe via a multitude of optimization techniques. This allows the service provider to add capacity, while controlling CAPEX and OPEX. This means there’s more bandwidth available per subscriber, as well as the ability to add more subscribers, all for the same monthly bandwidth costs. Sounds like a good solution to me!
Stay tuned – next week I’ll talk about a few more network monetization techniques.