Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
Whoever said “bandwidth is free” wasn’t speaking for operators trying to meet exploding user demands for video and multimedia content and communications, all while retaining customers and generating bottom line profits for shareholders.
Of course, the freebie crowd has never laid a mile of fiber, never paid to hoist a microwave transponder up a backhaul tower, and never thought about the size of utility bills needed to deliver their Netflix, YouTube and Skype without jitter or buffering.
Bandwidth hogs aside (one study found that Netflix drove nearly 30% of Internet downstream traffic during peak times), the fast-growth of smartphones has further taxed operator resources, especially their expensive broadband wireless networks.
This has been accelerated by the boom of heavy users of advanced services. According to Nokia Siemens Networks’ 2012 survey of 8,700 mobile users across nine nations, two out of three users in mature markets like the United States are heavy users of advanced mobile services. This means they regularly make use of apps, browse the Web, use their smartphones for GPS navigation, etc.
Blunt-force trauma. Throwing bandwidth at network capacity limitations is one solution, although it’s a sledgehammer approach — and a costly one at that. Instead, today’s operators need a smarter approach, one that leverages the wide range of data that already exist in their networks, including LTE, but just needs to be tapped.
Fortunately for their customers and shareholders alike, more and more operators are deploying advanced service quality management and customer experience management tools. These give them not only better visibility into the performance of their networks, but also a clear and precise view of their customers, even down to individual user and device levels.
How? They do this by correlating network, device, subscriber and over-the-top data in real time. It’s a lighter, leaner — more surgical — approach, especially compared with heavy-handed big data analytic techniques that may just as well apply to mining data on “have-it-your-way” customer preferences at Burger King.
Quality upside. For customers, SQM and CEM tools enable their service provider to become aware of delivery issues even before they happen, heading off any glitches like the breakdown of voice or video quality during a critically important business conversation.
Should a customer’s voice or video session start degrading in a certain location, for example, the operator can solve the issue causing the problem even before the customer notices. In cases of healthcare and public safety, such breakdowns could be matters of life and death. In less vital situations, poor quality service leads to customer dissatisfaction and, ultimately, to churn.
As another example, a problem could reside in the end-user’s device configuration without the user knowing it. Lacking SQM and CEM tools to correlate all the real-time data from all the sources just mentioned, neither the user nor the operator would know it.
What the user would know is that their service was lousy; and what the operator would eventually know is that the customer left for a competitor—despite the operator’s investment in customer acquisition costs and the problem being with the device, not the operator.
But given advanced SQM and CEM tools, however, the “smarter telco” network would recognize the inconsistency in the end-user’s device configuration and trigger an alarm. This in turn prompts the device management system to access the configuration data and identify the incorrect setting, then send the right data to the device in real time to remedy the situation.
Profitability upside. For shareholders, the smarter telco concept means their investments in a service provider remain solid, thanks to optimizing sales of attractive and competitive value-added packages while minimizing customer churn and reducing costs. Based on customer data from operators using Nokia Siemens Networks CEM tools, better service quality management can improve revenue by up to 3%, boost retention by up to 20% and up to 10% savings in operating expenses.
In terms of revenue upside, operators can use SQM and CEM tools to develop premium service packages for which discerning, heavy bandwidth users will pay extra — as much as 20% more.
At the same time, with the detailed, real-time insights of their networks, service delivery and customer experience, operators can ensure they deliver exactly the services and bandwidth that customers are paying for. This lets them effectively optimize overall network performance and utilization down to the cost-per-bit.
What’s more, with these tools providing precise knowledge of their customers’ devices and usage patterns, operators can promote upgrade offers, such as LTE packages for 3G subscribers using LTE-capable smartphones, which can boost revenues even more. In fact, one service provider in India, battling a number of competitors, used these tools to send out targeted upgrade promotions to 2G and 3G users and gained $83 million in new revenues after just one week.
On the retention side, even small increases can result in dramatic profit gains. The analysis of one U.K. service provider’s retention revealed that by cutting churn rates by 7%, it would cumulatively boost gross profit over four years by more than $325 million.
To be sure, service providers are subject to the downside of churn, too, for better or worse, depending on whether they’re on gaining or losing dissatisfied customers. The Nokia Siemens Networks survey showed that the likelihood of churn in the United States increased by 10% in 2012, with two out of five subscribers considering a change in their service provider.
Competitive edge. As more LTE markets roll out, the competitive edge that SQM and CEM tools provide by delivering greater real-time monitoring of service quality and optimization of the customer experience will be critical to operators’ market success. These tools can also be configured to monitor the service performance of competitors’ networks.
With this capability, operators can gain marketing insights they can use to create targeted promotions and deliver them in near-real time to win new customers at their competitors’ expense.
Technology advancements like LTE will make the smarter telco concept a reality, but providers need to enable themselves to benefit from it. Otherwise they face a serious risk of falling behind the pack and watching both their markets and their market capitalizations shrink.
