Monday, August 5, 2013

Secret of Telco Success - A Perfect DNA Will Drive the Whole Mobile Ecosystem


In the early days of mobile Internet when GPRS and 3G was introduced, all mobile service providers was so excited to get their spectrum to be fully utilise. However, many operators didn't realise the extend of the after-effects when provide Internet access to the users. Initially, operators offered Unlimited Data or Pay-Per-Use Packages just to entice new users to have a feel of mobile Internet. Its either a very high-end user or just a low-end user. But as the traffic grows and the pipe becoming smaller, the operators started to introduce data quotas or throttling mechanisms to provide a fair usage policy.
However, the growth of mobile is so fast that the network is unable to cope with the demand of data-thristy users. GPRS speed is simply insufficient and thus operators have to introduce EDGE and later to 3G and beyond. Furthermore, many other operators are also introducing new and attractive packages. With the problems of customers churning, the operators need to find better ways to ensure the users stay longer or loyal to them. This includes subsidising handphones methods.
The tremendous surge of mobile traffic and subsidising handphones doesn't help in the long run. Its no longer a "big pipe" provider game. The operators need to find new ways and move to the next value chain by monetizing the traffic further.
However, many Internet players like Skype, Google and Facebook seems to be able to leverage on the Mobile Internet and monetize their services - much to their advantage.  In addition, phone manufacturers are became stronger in their negotiation power compared to the network operators. For example, Apple with their iPhones is at the "strong" and winning side of the negotiation table dictating how and when they wanted to price and launch their services.
What really drives the whole mobile industry and the ecosystem in each country? previously, many countries try to emulate the success of NTT DoCoMo's i-Mode but failed. Somehow, the business model doesn't work simply because the who ecosystem is not ready. The formula for success is actually to find the right combination of DNA (Device, Network and Application).
  • Devices - In the early days of GPRS and EDGE, there are many phone manufacturers attempted to find a better mobile Internet phone or so-called smartphones  (that days we called feature phones) and PDAs (Personal Digital Assistants) but many failed in their attempts to topple the "king of mobile data" i.e. SMS and MMS. When Apple iPhone was introduced, it suddenly transformed the way we look at the phones - it actually make the owners smarter. The combined usage of PDA integrated to a smartphone coupled with the ease of use totally change the telecommunications and Internet world. And nowadays bigger devices (called Tablets) are introduced to the market with varying sizes. Imagine a single smartphone can carry 24 times the traffic of a normal phone. And a tablet can carry as high as 122 times the traffic of a phone. And we are expecting the worldwide traffic will grow 1000 times within the next 10 years!
  • Networks - The lifetime of each mobile technology is about 10 years. First generation mobile is around 1985-1995, 2G is 1995-2005, 3G is 2005 - 2015 and 4G most probably 2015-2025? In my personal opinion a "true" 4G is when we launched 3GPP Release 10. The current so-called 4G LTE is actually considered as 3.9G (3GPP Release 8/9). But, in more advanced countries, the operators adopted and deployed the new generation mobile much earlier compared to the rest of the world. Whilst European countries have been at the forefront of 3G deployment, it seems US operators are more successful with the their latest LTE networks. Speed is the name of the game. Users will never go back to a lower speed Internet once they have already experience a high-speed Internet. A smartphone works best with 3G speed and never good in EDGE.
  • Applications - What makes NTT DCoMo i-Mode ecosystem a success is because they have a very good applications ecosystem that not only covers the smartphone applications but also the whole developer and support chain. To make this successful, there must be tons of applications and thus good incentives and business model must be developed to entice innovative and creative application developers. Applications must be monetized, and thus payment system must be deployed together to ensure the smoothness of revenue sharing model between operators, developers, content providers. In today's example, we can see how Apple App Store managed to attract thousands of developers. 
However, the adoption of the above DNA varies from one country to another. A right mix of regulatory framework, policies, incentives and culture will determine the DNA healthiness. The question remains - how is your DNA in your country?
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You can contact the author, Dr. Mazlan Abbas via the below Social Media links:
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