Editor’s Note: In an attempt to broaden our interaction with our readers we have created this Reader Forum for those with something meaningful to say to the wireless industry. We want to keep this as open as possible, but we maintain some editorial control to keep it free of commercials or attacks. Please send along submissions for this section to our editors at: dmeyer@rcrwireless.com.
Mobile service providers need to determine ways to increase their revenue from roaming subscribers. Revenue from roaming is predicted to reach almost $90 billion by 2018 and 47% of this total revenue will be from data roaming services. Overall, roaming services can represent 8% or more of the service provider’s revenue. Yet, while LTE networks are becoming established in most regions, many subscribers are still unable to roam using LTE service.
In addition, government regulations are changing how revenue will be generated from roaming services in the future. Recent regulations are already providing clues as to the potential changing landscape. The European Union, for example, passed a resolution in early 2014 that will eliminate all roaming charges within the EU by the end of 2015. In Brazil, a proposal is in place to reduce operator interconnection fees by 90% through 2019, which should be passed on to the consumer.
The intent of these regulations is to help service providers generate revenue by encouraging subscribers to increase their use of wireless voice and data plans while roaming. Service providers, on the other hand, argue that these regulations significantly impact a quantifiable portion of their current revenues.
To encourage subscribers to use wireless voice and data services when roaming, service providers need to deliver value at a perceived fair price. And although it’s expected that the reduction and elimination of roaming tariffs will encourage more subscribers to enable their roaming services, there is no certainty that this added usage will compensate for the potential loss of 8% of the service provider’s overall revenue from roaming services.
The problem is not only the inter-region roamers within the EU or the intra-country roamers in Brazil, it’s the fact that many international roamers who can still be charged roaming fees generate little to no revenue for service providers.
Silence is not golden
These subscribers are classified as “silent roamers” because they turn off their voice and/or data services when roaming. It is estimated that 50% of subscribers do not use voice services and 70% do not use data services while roaming. This presents a prime opportunity for service providers to target this group of subscribers with special promotions to encourage their use of roaming services at a price they are willing to pay.
Such subscribers can be identified by the detection of their roaming connection to the visiting network and by the absence of voice services utilized or an established data connection. All of this information can be retrieved from the subscriber’s profile within the service provider’s policy and charging infrastructure.
A penny per byte makes a service provider healthy and wealthy
To encourage these silent roamers to use their wireless devices, the service provider can push messages to the subscriber, offering short-term services for a small fee. Examples include unlimited access to the data network for a specified period of time such as two hours, an introductory quota package of 25 megabytes to get the subscriber started, or 10 minutes of reduced-rate calling time so the subscriber can make quick calls upon arrival in the new location.
When that offer is used up or expired, a new offer can be delivered to the subscriber’s device, extending that service or offering a new service plan. This micropayment structure has the advantage of looking inexpensive since $2 for 25 MB seems attractive. But, it actually translates to $79.60 per gigabyte of data, which is several times more expensive than the typical service plan rate. This micropayment system has been shown to be successful with the online gaming industry. In this model, the games are free to play, but additional payments must be made for premium value or content.
A similar model could be used in which roaming data services are free but are throttled down to a sluggish rate like 128 kilobits per second. Upon the subscriber paying a small fee, this throttle is eliminated for a limited time and the subscriber can then access the full 10-gigabit-per-second LTE download speeds. The idea is that throughout the course of the subscriber’s roaming experience, he or she is likely to make enough small conscious payments to actually overspend what his or her conventional roaming charges would have been otherwise.
Working today to solve problems of the future
Service providers are just starting to enable LTE roaming among their networks, and some regulators are phasing out the roaming service fees over one to five years. This means that there is not a problem today, but if service providers want to maintain a steady revenue stream they need to develop premium services and functions to offer their subscribers today. More importantly, these offerings need to be tested and validated before regulations are put in place that will eliminate a significant portion of their revenue streams.
