Enhanced services deliver greater convenience, mobility and security to cellular customers, but how much value these “value-adds” provide carriers is uncertain.
Depending on the sophistication and expandability of the platform, enhanced services can be expensive for carriers to implement in their networks. But customers who use the services use additional airtime, generating more revenue for carriers.
Just what are enhanced services?
“Anything and everything that adds value to a basic dial-up mobile call,” said Mirva Anttila, analyst for North Business Information, New York.
Call waiting, call forwarding and voice mail are among the most common enhanced services. To many, these services are so familiar it’s easy to forget they are add-ons. A more complex and expensive enhancement is one-number service, the ideal option for cellular customers who travel between their desk, car and kitchen with great frequency. One-number service allows outside callers to dial one number, and the call is directed to the user’s current location, be it a landline or cellular phone, fax or pager. One-number services operate from a network user profile, which the user can call in and update. Using a follow-me service, the network “knows” where the user is based on profiles and by reading the cellular phone’s signal.
Wireless data, various billing options, corporate private networks and information services also fall into the realm of enhanced services, said Anttila.
For carriers, the value in offering such add-ons is difficult to determine. Carriers must provide certain enhanced services to stay competitive, yet these services can be costly to install-on average a couple thousand dollars per port or a few hundred dollars per customer, said one third-party vendor. Anttila said carriers that invest more for an expandable and upgradeable platform may derive a better long-term return. Smaller carriers may opt to access enhanced services through a service bureau, a new approach for the enhanced services market. The upfront cost is lower, so carriers with fewer resources still can offer their customers enhanced services. However, the cost to lease services is greater over the long-term.
These add-on decisions take place in a wireless world where the per-subscriber acquisition cost is about $400, new customers use less airtime and between 25 percent and 35 percent of a carrier’s customer base drops or switches service each year, according to Tom Ross of Economic and Management Consultants International Inc., Washington, D.C.
Carriers “want to increase network usage, especially when growth rates level off, and the tariffs decrease. They need to find new ways of making money,” Anttila said.
Carriers encourage network use by offering enhanced services, said Anttila. Call waiting means a second caller will get through, prompting the user to return a call to one of the parties from their cellular phone. A customer with follow-me service may receive a call on their car phone that would have been directed to an office line without the service. Navigating through voice mail can result in a significant increase in airtime used.
Carriers also make money on monthly service charges for enhanced services. Voice mail is a sure crowd pleaser for customers and carriers alike. Popular in the wired world, consumers understand and are familiar with the service. Priced comparably to wireline voice mail, around $7 per month, many consumers won’t think twice about ordering it for their cellular number.
A number of other add-on services range between $2 and $10 a month. At that rate, each feature on its own is an easy buy and collectively a significant source of revenue for the carrier.
In addition to revenue generated from monthly and airtime fees, carriers indirectly can increase revenue margins by creating customer satisfaction and loyalty through customer service and the right mix of enhanced services, which in turn reduces churn, said Anttila.
The type of enhanced services, how they are packaged and delivered can distinguish a carrier’s service beyond factors of coverage and price, said Janet Constantin of the Yankee Group, Boston.
Outlook
Over time, “the percentage of total revenue that is attributed to value-added services is going to remain relatively the same,” said Anttila.
Today, cellular service bills average $52 per month, said Anttila, which she predicts will drop to between $25 and $30, as personal communications services enter the market. As growth rates in wireless level off, carriers will include more enhanced services in their basic packages instead of dropping basic service prices.
More and more, carriers will bundle enhanced services, said Anttila. Some carriers currently offer packages of enhanced services while others market and bill services individually.
Here to stay
The market for enhanced services is still young, but several call-handling and messaging options already have proven successful among cellular users. Call-handling services include call forwarding, call waiting, personal one-number services and voice-activated dialing. Of the more advanced features, Anttila expects one-number services, voice-activated dialing and other services using interactive voice response technology will fare well among consumers. One-number services will become more attractive as wireline and wireless networks become more integrated, and IVR capabilities will be useful for users to navigate around their particular enhanced services package, added Anttila.
Constantin also is positive about the success of voice-activated dialing. She believes it soon will be an option for all-wireline and wireless-users, but will not replace calling by dial.
Constantin expects follow-me services to be popular among highly mobile users. The follow-me capability is inherent in Time Division Multiple Access networks, said Constantin.
Messaging services include voice mail, short message service and e-mail. Voice mail is the highest revenue generator of all enhanced services, said Anttila. Some voice mail options allow callers to leave a message or enter their phone number, which is forwarded to the user as a page.
Anttila said a need exists to send brief messages and expects short message service, sending brief text messages to pager-equipped cellular phones, to increase in popularity.
Billing options, including pre-paid service, calling party pays and itemized billing, are becoming popular, said Anttila. These services are attractive to users because they help keep monthly expenses to a minimum and alleviate billing confusion.
Future performers
Wireless data technologies are not yet fully developed, but the potential applications are numerous and the revenue opportunities are great. Anttila considers wireless data an enhanced service today, but once application developers are comfortable enough with the capabilities and reliability of technologies to write associated software, and as interoperability between networks increases-which only is matter of time-the scope of wireless data will broaden and it will be treated as a separate field.
Corporate communications networks, formally called mobile virtual private networks, are custom-made and as such provide a significant revenue outlet for carriers. A company may want billing, call-handling and other services tailored to its specific needs, said Anttila.
She expects information services-including news, sports and stock quote feeds-will proliferate. More specialized information services will evolve such that customers can dial into a particular database, such as an airline’s arrival and departure information.
Constantin forecasts the Internet will play an active role as a strong interface for wireless users to send and receive messages or update their profiles for one-number services.
Anttila said it
will take some time before services like in-vehicle navigation systems and car theft deterrents, which use global position
ing system technology, take off.
Niche services
As the market grows and becomes more segmented, it will be more important for carriers to be able to offer customized service packages and market different service packages to various sectors, Anttila said. Again, meeting individual users’ specific needs will increase customer satisfaction, which means less churn.
Anttila expects the do-everything network secretaries, like Wildfire Inc.’s Electronic Assistant and Atlas by Precision Systems Inc., are too expensive for mass market deployment. However, she said business customers are more likely attracted to the user interfaces and integrated services offered by the network secretaries. Constantin noted a subset of these services may be more successful among consumers.
Customer service
Many of the call-handling, messaging and billing features offered by carriers are distributed by third-party vendors. However, carriers provide a host of other services, unrelated to telecommunications.
Several carriers offer phone insurance, which for a small deductible and about $5 a month, replaces the phone in the event of loss, theft or damage beyond repair.
Roadside assistance services are available in many carriers’ offerings, either at no charge or for a few dollars a month. AirTouch Cellular, GTE Mobilnet Inc. and others provide customers Mr. Rescue, a roadside service that includes up to $75 coverage on a tow. The service is contracted by on a market-by-market basis. In a number of markets, carriers offer wide-area calling, between area codes, toll-free. The service averages about $7 per month and is ideal for cellular customers who consistently travel by car in certain towns across certain area codes.
