Erik Larsson, Vice President of Marketing, Converged IP Communications, Comverse
Introduction
The telecommunications market is in the midst of a significant paradigm shift, with two major trends reinforcing each other: first, the maturity of new technologies such as Internet protocol (IP) communications and fixed-mobile convergence (FMC) and second, deregulation that leads to unbundling of fixed networks, decreases prices on broadband Internet access, and stimulates growth of IP telephony services.
For mobile network operators (MNOs), this new environment creates some threats but also represents a historic opportunity to expand into fixed services.
Market Trends
The Opportunity
Fixed services represent an opportunity for MNOs to go beyond defensive strategies of fixed-mobile substitution and price discounts and actively capture a greater share of consumer spending on communications and entertainment. This historic opportunity will not recur in the future, since convergence between fixed and mobile services only happens once.
In western Europe, broadband Internet access and VoIP are growing at more than 22 percent per year and still enjoy relatively low market penetration (approximately 26 percent). In countries with a favorable regulatory environment, mobile operators who move into fixed services (e.g., Internet access, fixed telephony, IPTV) can expect to increase subscriber average revenue per user (ARPU) by between €20 and €80 per month.
The Threat
MNOs are facing new competition from wireline players and Internet service providers (ISPs) offering mobile services based on dual-mode wireless fidelity (Wi-Fi)/cellular handsets (e.g. Free, Neuf Cegetel, Arcor). While these services are just beginning, they could potentially cannibalize mobile revenue by shifting traffic to Wi-Fi hot spots in homes and metropolitan areas. Dual-mode handsets can now capture cellular traffic and reroute it over fixed, broadband IP connections diminishing usage on mobile networks. Beyond Wi-Fi, the rise of mobile wireless interoperability for microwave access (WiMAX) is creating additional pressure on MNOs.
Another threat comes from large Web portals (e.g., Skype, Yahoo, MSN, Google) that are now competing against MNOs by expanding their existing community-based instant messaging (IM) into short message service (SMS) from personal computer (PC) clients, PC-based telephony, and video downloads.
The opportunity for mobile operators is clear: go beyond mobile and capture additional sources of consumer ARPU.
Examples of Mobile Operators Expanding into Fixed Services
Several mobile operators in Europe have realized the unique window of opportunity presented to them. The following is a number of examples of mobile operators now targeting the residential market in different countries:
- Italy — Vodafone has partnered with Fastweb to provide bundled services, including mobile and broadband Internet access.
- United Kingdom — O2's parent, Telefonica, has purchased local loop provider Be.
- Germany — O2 has launched its own broadband and residential voice over IP (VoIP) service, and Vodafone has launched a digital subscriber line (DSL) offering.
- France — SFR has introduced triple play based on the "SFR box."
- United States — T-Mobile is launching residential telephony services based on dual-mode phones.
- New Zealand — Vodafone acquired the local ISP iHug.
- Thailand — TrueMove is now offering broadband and cable TV service in addition to mobile services.
Case Study: Western European Mobile Operator Table 1 summarizes the FMC offering of a typical mobile operator and the positive results to date.
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Strategies for Mobile Operators
The Strong Position of Mobile Operators
Mobile operators are in a good position to leverage key assets, including powerful billing systems, large subscriber base, established brand name, and control over the mobile phone.
MNOs can increase ARPU and customer loyalty with new bundles of multi-play services, including broadband Internet access, mobile, residential telephony, PC-based communication, and IPTV.
In addition to these service bundles, MNOs can create additional value and differentiate their offerings with converged telephony, messaging, presence, and IM across fixed and mobile domains.
Three winning strategy approaches for MNOs offering fixed services are strong multi-play propositions, superior telephony, and enhanced PC clients for communication and messaging.
MNO Strategy No. 1: Strong Multi-Play Propositions
Consumers are looking for personalized service combinations across fixed and mobile terminals; therefore, multi-play service bundles are a good way to increase customer loyalty, ARPU, and profitability.
Typical multi-play bundles could include two, three, or four services such as the following:
| Segment | Age group | Examples of multi-play bundles |
| Old retirees | 70+ | Typically no multi-play bundles |
| Young retirees | 60–70 | Mobile, fixed phone, Internet, and IPTV |
| Approaching retirement | 50–60 | Fixed phone and Internet |
| Families with older children | 30–50 | Mobile, fixed phone, Internet, and IPTV |
| Younger families | 18–30 | Mobile, fixed phone, Internet, and IPTV |
| Singles | 25–40 | Mobile, phone, and Internet |
| Students | 18–25 | Mobile + Internet |
This particular segmentation by age group illustrates the importance for MNOs to be able to offer more than just mobile services. Subscribers are increasingly interested in multi-play bundles that include fixed phone, Internet, and IPTV.
Operators with the ability to offer different combinations of fixed and mobile services can most effectively align their offerings to meet consumer demand and create significant differentiation versus their competition. By leveraging their control over the mobile device and its features, displays, and software, MNOs are in a good position to offer the most appropriate bundle for each consumer.
MNO Strategy No. 2: Superior Telephony
With primary line telephony, an MNO can totally replace the incumbent telephony service and generate high ARPU (a €10-15 higher monthly ARPU than a secondary telephony line). In this case, the service includes lawful interception, local number portability, and emergency services. Alternatively, IP telephony can be provided as a secondary line if the subscriber chooses to keep the incumbent subscription. In any case, the centralized call control of residential IP telephony provides quality of service (QoS) benefits versus peer-to-peer VoIP and allows for advanced telephony services such as caller ID, call forward, per-call CLIR, call history, call barring, and voice mail. In addition, users benefit from a Web-based self-care portal for call logs, call management, and preferences.
MNOs are in a unique position to maximize subscriber convenience by providing a single voice mail for fixed and mobile telephony and by routing calls to a wide range of terminals: analog phones connected to a home gateway, IP phones, or PC-based softphones.
MNO Strategy No. 3: Enhanced PC Clients for Communication and Messaging
Compared to fixed-line operators and Web portals, MNOs can offer an enhanced PC client and transform a user's existing mobile number into a single personal number for communication in a fixed PC-based telephony and messaging, or mobile environment. In addition to outgoing SMS offered by competing IM clients, MNOs are also able to provide incoming SMS on PC clients and/or mobile phones. They can also extend capabilities to converged messaging on mobile phones and PCs (e.g., IM, SMS, multimedia messaging service [MMS]).
Another benefit for MNOs is the ability to combine fixed communications fees into the existing mobile bill and/or use the existing mobile billing for prepaid account balance management. To increase customer loyalty, pricing promotions can also be offered across fixed and mobile services (e.g., get a free video on demand on IPTV when you reach 200 SMSs per month). For added convenience, MNOs can offer the use of an existing mobile address book in the fixed environment — PC or fixed phone, address book synchronization between mobile devices and PCs, and even contact backup and restore services. Finally, subscriber identity module (SIM) authentication can be extended from the mobile handset to the PC client.
Conclusion
Thanks to a favorable regulatory environment in many countries and new technology such as IP communications and FMC, mobile operators can now increase ARPU significantly by expanding into fixed services. This is a unique opportunity in history for MNOs-it will not happen again.
Summary of Benefits for MNOs:
- Increased revenues by capturing fixed ARPU through services such as residential telephony and IPTV
- Value and differentiation by providing FMC services and converged messaging
- Increased subscriber loyalty and ARPU with multi-play service bundles and fixed-mobile convergence applications
Benefits for subscribers:
- More convenient communication across favorite devices (fixed phone, mobile phone, TV, and PC)
- Simpler billing and customer care
- Reduced communication costs with single subscription across several fixed-mobile services
- Higher degree of customization and personalization options
Expanding into fixed services is a win-win proposition for operators and for users; this represents a great opportunity for MNOs to become "total communications" providers.
Educational Content Providers
Erik Larsson, Vice President of Marketing, Converged IP Communications, Comverse
Erik Larsson is responsible for driving overall marketing activities for Converged IP Communications within the Comverse group. He joined Comverse through the acquisition of Netcentrex, where he played a significant role in developing the company's image and reputation as a leader in VoIP applications.
Prior to Netcentrex, Erik held senior marketing positions at Nortel and Genuity/Level 3, and he has a track record of managing successful marketing initiatives both for early-stage and established high-tech companies. He has published a number of articles in specialized media and is a frequent speaker at industry events.
Erik Larsson has an M.S. in engineering physics from KTH (Sweden) and an M.B.A. from the Kelley School of Business (USA).
