Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
When mobile services were launched, voice was the primary service offered. Per-user metrics, such as average revenue per user, churn rates and net additions, have existed since the beginning. A per-user view of an operator’s customer base was relevant when voice was the main service and when each customer owned a single mobile device. Mobile services have been evolving, and now customers own multiple types of smart devices and use a variety of services. Without the full picture of how their customers use their devices and services, operators can’t rely on per-user metrics as a measure of their success in meeting business goals.
As new industry trends emerge — such as enterprise mobility, machine-to-machine communication, vertical applications, etc. — operators must consider new business and operational metrics. They need to capture critical information about what their customers value so they can decide strategically how to invest their capital. And operators must monitor the relevant business metrics if they want to keep up with their customers’ changing demands.
The case for new metrics
Though customers’ behavior has shifted, metrics used to measure business profitability and service quality have not changed. Today, operators should focus on three areas of their business: customer acquisition, service delivery and business results.
Customer acquisition: As demand for data continues to rise, what consumers expect will vary based on the services offered. Metrics focused on a per-usage perspective will help operators determine customer demand and identify other services they potentially can sell to customers.
Service delivery: Voice quality, data throughput or dropped-call rates were relevant metrics when the number and types of services being offered were limited and the service quality customers wanted was comparable. Today, as customers access multiple applications with varying quality-of-service demands, there is a need to measure QoS by the application and type of service.
Business results: Operators’ profitability has typically been measured by ARPU. The emergence of prepaid and shared data plans has altered the relationship between the user and the operator. Shared data plans including multiple devices make subscriber growth challenging to track as each device may have its own data plan and pricing model. In response to this, some operators are beginning to measure revenues by “average revenue per account.”
Measuring success in a data-driven world
In a world driven by data and devices, operators should focus on understanding their customers’ usage patterns and user experience expectations for different applications, looking beyond the network and user level for a reliable means of measuring success.
Customer acquisition
When a single user owns multiple devices and accesses multiple services, loyalty must be measured across all those devices. Offerings should be based on each device type and the user’s experience needs to be consistent across all devices. Metrics such as content per device and M2M connections per user can give information about what type of content users are accessing on their devices and whether there’s an opportunity to sell them more services.
Overall, operators would benefit from developing a segmentation model that characterizes customers on usage-specific factors such as the location, age group, price sensitivity and the applications used frequently.
Service delivery
Strategies based on price and value are continuing to be less effective and quality of service is emerging as a differentiating factor for operators. Historically, operators have measured the health of their networks at an aggregate level, with indicators like users’ dropped-call rates. This worked well in the past, but now operators need to establish a link between performance from network elements to performance at the application level. Key indicators include:
1. Network-performance indicators will give a solid understanding of the network’s health from a technology point of view, such as service availability, available bandwidth and reliability.
2. Quality-of-application indicators will give an understanding of health at the application level, such as the rate of success for users accessing the Internet, streaming throughput (bits per second) and peer-to-peer bit rate.
3. Quality of overall experience will measure the total end-user perception of the network by linking the network’s performance with application-level quality.
Understanding which indicators of network performance directly influence the quality of applications and the overall experience for customers is crucial. Otherwise, operators spend unnecessary time and effort on troubleshooting problems and have minimal impact on the quality of service they give customers.
Business results
Heavy price competition, growth of the prepaid segment and varied customer consumption patterns are placing intense pressure on an operator’s profitability. As ARPU is becoming irrelevant, operators can track cost per bit and revenue per application to measure the profitability of their offerings. Cost per bit can help in comparing costs across various technologies or the operation itself and in understanding the implications of spending on base stations, backhaul and access technologies.
Once operators narrow down the cost per bit per application, they can focus on how to deliver services based on customers’ profiles and tolerance for service quality. Ultimately, they’ll need to make sure they get the most revenue per application or per use while they keep costs low.
Redesigning the business model
Globally, mobile operators are investing heavily in their networks to bring the latest technologies to their customers. They’re viewing their networks as a platform that can support many applications and can foster innovation. Developing and implementing new metrics are not, however, simple to substantiate and will require operators to redesign their existing operating model. To do so, they need to have the right information to make informed decisions, to develop a road map for data and reporting by deploying the right set of support systems and to track the relevant performance indicators.
Pierre-Alain Sur is PwC’s Global Communications Industry Leader and a Partner in the Assurance and Business Advisory Services practice with a primary focus on Technology, Information and Communications companies. In addition, he currently serves as the U.S. Cross-line of service leader for Technology, Communications, Entertainment and Media Industries. Sur is the subject matter expert for the firm on the wireless industry and often participates in the design and development of training programs dedicated to improving the knowledge base of PwC’s telecommunications professionals. From 2006 – 2012, Sur led the internal team that designed and wrote the PwC’s Wireless Industry Survey, which has become the industry reference tool on accounting trends and practices among wireless carriers.
Dan Hays’ expertise in strategy, regulation, innovation, complex program management, and operations builds on more than 20 years of experience in the telecommunications and high-tech industries. Hays has consulted with major telecom operators and OEMs for more than 15 years at PwC and PRTM Management Consultants, which was acquired by PwC in 2011. A prolific author and thought leader, Hays has published groundbreaking thinking on the development of new business models, management of spectrum and communications networks, adoption of new technologies, and commercialization of products and services. He was one of the early contributors to the development of wireless smartphones, a key driver of the adoption of the USB connectivity standard, and has worked across the communications and electronics industry.
