Showing posts with label Telcordia. Show all posts
Showing posts with label Telcordia. Show all posts

Thursday, April 8, 2010

Telcordia Warns of Mobile Operator Marginalization

Broadband access is becoming a commodity, even for mobile service providers, who must figure out what else they can offer consumers once basic mobile broadband connections have become a feature purchased by the majority of mobile phone users.

The good news for mobile operators in many regions around the globe, data average revenue per user (ARPU) has quadrupled over the past six years and now is nearly half of voice ARPU.

But that product will saturate, as has fixed broadband, leaving mobile providers to look for the next wave of services and applications to sell.

"The popularity of video and other third-party over-the-top services are breaking mobile broadband networks and business models because they siphon off revenue while adding to the network's workload," says Pat McCarthy, Telcordia VP.

Since Telcordia believes that effort must include measures to differentiate3 access services, it is obvious why extending "strong" versions of network neutrality to wireless networks is so dangerous: it would close off most of the ways such differentiated service can be provided.

McCarthy says operators must distinguish between different types of traffic and prioritize them. For example, personalized end user services that generate revenue for an operator and its business partners should enjoy priority access to network resources, while zero-revenue OTT content should be managed with a tiered bandwidth management solution, he says.

Most-if not all-service providers undoubtedly would agree, a fact that illustrates why network neutrality rules or even reregulating broadband access as a common carrier service would be so devastating.

"An operator's need to manage bandwidth is the first step toward realizing a profitable business, and they must build on that capability, forming active partnerships with end users and their choice of content providers, to get their fair share of the profits," says McCarthy.

Already, mobile broadband traffic continues to grow, but revenues aren’t keeping pace, McCarthy says.

Perhaps the biggest threat of all comes from over-the-top players, McCarthy notes.  Operators will be required to make all the investments in infrastructure and provide a reliable customer experience. And yet, if they aren’t careful, they will absorb the bulk of the costs, while allowing third-party content
providers to reap the biggest profits.

Print content and video content providers say they have learned the same lesson from the music industry's experience with online music. Telecom industry executives probably have to learn their own lessons from the experiences of the fixed-line broadband experience.

None of that will be easy, as application providers largely will resist. But revenue sharing across the ecosystem is the only stable way forward, where maximum innovation and network investment can occur.

"For a time, while the priority is building out the mobile broadband infrastructure, there may be a
competitive advantage in offering a better network," McCarthy says. "But soon enough, the pipe will become a commodity, and the long-term potential revenues will be in the delivery of services, applications, and other user-demanded content."

Ecosystem conflict is inevitable as the new value chains are constructed. But service providers can help themselves by figuring out ways to leverage assets they already have, and offerng them to business partners, for example. It won't be easy, but it is necessary.

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