NETWORK MONETIZATION STRATEGIES

A Phased Evolution Approach for Communication Service Providers

Vyas Varma
Surbhi Sinha
Dipankar Saha
Avinav Trigunait
Table of Contents
Abstract ...................................................................................................................................................................... 3
1. Introduction ......................................................................................................................................................... 3
2. Key Monetization Challenges .......................................................................................................................... 3
2.1 Popularity of unlimited data plans ........................................................................................................... 3
2.2 Rapid deterioration of quality of experience ....................................................................................... 4
2.3 Lack of differentiation ................................................................................................................................ 4
2.4 The current 2-sided business models .................................................................................................... 4
3. The 3-Sided Business Model ............................................................................................................................ 4
4. Levers for Network Monetization ................................................................................................................. 6
5. Next Steps For CSPs: A Phased Evolution Approach ................................................................................. 7
5.1 Near term focus ......................................................................................................................................... 7
5.2 Medium term focus..................................................................................................................................... 7
5.3 Long term focus .......................................................................................................................................... 7
6. Conclusion ........................................................................................................................................................... 8
3
2. Key Monetization Challenges
Many CSPs have already launched video streaming services, App Stores,
music and other value added services but they are still struggling to
appropriately monetize data traffic on their networks. The key challenges
faced by CSPs in monetizing these services include the popularity of
unlimited data plans, rapid deterioration of quality of experience, lack of
differentiation and a 2-sided business model. Each of these challenges is
explored in detail in this section.
2.1 Popularity of unlimited data plans
Consumers have become accustomed to unlimited data plans which were
offered by CSPs to encourage early adoption of mobile internet services.
This was a good strategy prior to the popularity of smart devices and data
guzzling applications. However, today CSPs are struggling to manage data
traffic on their networks. To accommodate the surge in demand, CSPs
are required to invest heavily on infrastructure upgrades to boost capacity,
while the popularity of unlimited data plans results in poor ROI.
Introduction
Mobile data traffic has skyrocketed in the past few years due to the
proliferation of connected devices and popularity of high-bandwidth
consuming applications. In addition, the availability of high-speed mobile
broadband has led to a dramatic shift in consumer behavior, accelerating
the demand for media on-the-go. Many consumers already own multiple
devices such as smartphones, tablets, e-readers and gaming devices. In
addition, the rise of user-generated content, collaborative platforms and
advance of video encoding and delivery techniques has fuelled tremendous
video traffic growth.
While data traffic growth has been exponential, revenue growth has not
kept pace. The spike in data demand has forced Communication Service
Providers (CSPs) to concentrate their efforts on network and capacity
upgrades. Although, this approach has improved network performance,
the prevalence of unlimited data plans and lack of service innovation has
slowed the monetization of these investments. Conversely, OTT players
have created an ecosystem of innovative services and applications that
thrive on the availability of high speed data connectivity. Companies such
as Google, Amazon, Facebook and Apple have succeeded in gaining
consumer acceptance and monetizing their services, whereas CSPs are
struggling to move up the value chain and stay relevant in the ecosystem.
Over the past few years, the use of smartphones and tablets has grown dramatically. In parallel, the adoption of high
bandwidth applications such as video streaming, social networking and interactive gaming has accelerated. The result
is that we have more connected devices than ever before, consuming an unprecedented amount of data.
However, the growth in carrier revenue has not kept pace with the growth in network data traffic resulting in a
phenomenon that Wipro refers to as the data monetization gap. The data monetization gap is the consequence
of an incoherent carrier network monetization strategy. The data monetization gap, combined with a steady loss
of traditional voice and SMS revenues, has placed tremendous business pressures upon the telecommunications
industry as a whole.
This paper discusses the monetization challenges faced by mobile service providers, emerging business models and
the role intelligent policy and charging solutions can play to create new revenue opportunities. It also explores the
potential for use case libraries to help service providers enhance revenue streams and reduce customer churn.
4
2.2 Rapid deterioration of quality of
experience
Mobile network infrastructure for most CSPs is capable of delivering best
effort service. On top of best effort service, CSPs deploy Fair Usage Policy
to restrict the errant users. Service providers have invested heavily in 3G and
4G networks which offer higher speed and capacity. However, consumer
demand for bandwidth has outpaced the incremental data capacity added
due to network upgrades. Video consumption is the primary driver of this
traffic which has increased exponentially in the past few years. And with
high speed networks this trend is expected to continue as more users
will watch superior quality HD videos. Since, the data consumption for a
HD video is significantly higher than 240p streaming video; this shift
in consumer behavior will result in heavy network congestion and
deterioration in the end-user viewing experience.
2.3 Lack of differentiation
CSPs rarely differentiate their quality of services or provide special offers
or discounts for customers based on their revenue potential or based
on their billing history. Most often, network policies are based upon best
effort service and each customer or service on the network is treated
equally, receiving shared bandwidth and facing the same network latency
and speed issues. The lack of differentiation for data heavy and latency
sensitive services such as videos leads to a dip in QoS and subsequently
poor customer experience.
In addition, the best effort delivery mechanism limits the ability of CSPs
to offer personalized services to premium customers. This is a huge
opportunity loss as CSPs miss out on upselling and bundling opportunities.
Undifferentiated quality-of-experience (QoE) also creates dissatisfaction
amongst premium customers, as they are accustomed to preferred service
delivery and personalization in other sectors such as banking and retail.
Poor experience also discourages consumers from spending more time on
content websites, which reduces the revenue potential for all participants
in the Telco-Media industry.
2.4 The current 2-sided business
models
OTT players such as Apple, Netflix and Hulu have created services
that are delivered directly to consumers, reducing the role of CSPs to
mere connectivity providers. We refer to this as a 2-sided business
model (see figure 1). Note that the value-added business relationship
is limited to only to the subscribers and the OTT providers. Consumers
subscribing to content and video services pay for content directly to OTT
providers. CSPs are only paid for the data services, dramatically limiting
their monetization potential.
These challenges to the CSP are further compounded due to the growth
in device diversity on networks and the need to optimize content for
screen sizes of various form factors. In addition, legacy networks and IT
systems are another key challenge limiting CSPs ability to quickly offer
new services and pricing plans.
3. The 3-Sided Business Model
To address these challenges, service providers need to create smart, gated
networks that will enable them to prioritize, control and customize services
based on service type or customer preferences. Intelligent policy and
charging capabilities along with subscriber intelligence, network intelligence
and partnerships with content players will allow CSPs to create innovative
new pricing plans and product bundles.
These capabilities will keep CSPs relevant in the value chain by allowing them
to create 3-sided business models (see figure 2). In this model, customers
will pay directly to content providers, while content players will have
revenue sharing agreements with service providers to offer differentiated
service based on the type of services or consumer preferences. Consumers
may also separately pay a CSP for a premium QoS. The 3-sided business
model will improve CSP network monetization by:
Figure 1: The 2-Sided Business Model, Source: Wipro Technologies
Fat Unintelligent Pipe
Direct Business Relationship
Subscribers OTT Players
Service Provider Network
5
Figure 2: 3-Sided Business Model, Source: Wipro Technologies
a. Providing an un-matched customer experience. Customers
will be empowered with options to select the desired service levels and
control network speed by service type or other preferences.
b. Offering innovative new products and billing models.
Differentiated charging and service personalization based on consumer
preferences
c. Creating a network of content partnerships. CSPs will build
innovative business models by collaborating with 3rd party OTT
providers and offer premium services by exposing network application
programming interfaces (API) to the content specialists.
d. Optimizing network resource management. In co-ordination
with network intelligence based on real time utilization data, policy
controllers will help optimize network resources.
The next section provides an overview of some of the
network monetization use cases which can be implemented by
service providers.
Gated Smart Pipe
Rule Based
Intelligence
a) CSP provides intelligent pipe and fexible billing mechanism
b) 2-Sided business model replaced by 3-sided Win-Win-Win model where
customer experience takes central role
N
e
tw
o
rk
A
P
I
Subscribers
3-Sided Business Model (B2B2C)
OTT Players
Service Provider Network
6
4. Levers for Network Monetization
The key advantage of a 3-sided business model is that it provides CSPs with the flexibility to experiment with different price plans, product bundles and even
different business models. Some of the use cases and the benefits associated with each of these are described below.
Lever Use Case Use Case Description Benefts for CSPs
Service quality High quality video on demand On-demand video service is deliv-
ered with guaranteed QoS levels
Incremental revenue is generated
by offering on-demand high quality
services that supplement base plans
Mobile TV live streaming Mobile TV services offered with
guaranteed service quality
HD quality content HD quality content offered with
guaranteed service quality and
differentiated billing plans
Turbo boosting for a specific ser-
vice or session
User specific session bandwidth
is boosted on demand based on
subscriber preference or service
Time and location Time and location based service
plan
The quality of service and pricing
will vary based on time of the day
and user location
Customers are attracted by
innovative service discounts.
Location based plans are utilized
for targeted advertisement
Shared wallet and tiered service Tiered service Services from OTT providers are
offered at differential quality and
pricing models
Average revenue per
account(ARPA) is increased
by attracting more devices per
account and allowing them to share
the data/services across the devices
Multi device shared data plan Multiple devices from the same
subscriber share the common
data limit based on the users
subscription
Family plan Multiple members of the same
family share the common data limit
based on the users subscription
Prepaid and postpaid based hybrid
plan
Hybrid data plan where additional
product and services are charged
and billed using an online charging
system; traditional data volume
based services are offered on a
postpaid basis
Bundling OTT content partner bundling Service provider and OTT vendors
form a definitive agreement for
revenue sharing where CSPs pro-
vide differentiated services to the
content providers application
Net new revenue source is gener-
ated from OTT partners
Personalization Parental control Individual applications, services and
websites are blocked or filtered
based on the time of the day, day
of the week and location of kids.
Parents can dynamically control the
configuration.
Each customer can be offered per-
sonalized services based on their
requirements. Service providers will
be able to charge a premium for
these services.
Service personalization Consumers are offered person-
alized services based on their
preferences. Subscriber analytics
will help create personalized service
offerings
Network API driven application Network resources are offered as
a service to the OTT application
developers through an open API
Figure 3: Analysis of Various Levers for Network Monetization, Source: Wipro Technologies
7
5. Next Steps for CSPs:
A Phased Evolution Approach
To effectively monetize their networks and deliver a superior customer
experience, CSPs need to ensure their network, IT and B/OSS systems
operate in harmony. CSPs also need to continuously monitor customer
behavior and modify products and services accordingly. Considering the
speed at which customer preferences are changing and technology is
evolving, this is not an easy task. As a result, CSPs must carefully consider
their business objectives and craft a phased transformation approach that
results in a sustainable business model.
Wipro proposes a three-phased approach for CSPs to transform
their businesses from the current 2-sided business model to a 3-sided
business model.
These three stages of evolution are described in further detail below
(see figure 4):
5.1 Near term focus
In the near-term, CSPs should develop the infrastructure and systems
such as intelligent policy and charging, self-care and multi-device delivery
capabilities that will begin their digital transformation journey.
a) Develop a robust self-care portal
The Internet has become an ideal channel for companies to communicate
Figure 4:Three-phased Evolution Approach, Source: Wipro Technologies
directly with their customers. Wipro expects that in the near-term future,
CSPs will behave like online retailers directly selling a host of data, voice
and value added services. Hence, providing a fast and easy to use self-care
portal where customers can buy, configure, modify and activate services is
a crucial first step.
b) Invest in intelligent policy control, DPI and online charging capabilities
Policy Charging Rules Function (PCRF), Deep Packet Inspection (DPI)
and Online Charging Systems (OCS)will play a pivotal role in enabling the
provision of dynamic product offerings, differentiated pricing models and
QoS-based offerings. At this stage,CSPs should invest in these capabilities
and begin developing some of the monetization use cases described in
Figure 3 above.
c) Multi-screen delivery and session mobility
Anytime anywhere rich-media access has become a hallmark of the digital
world we live in today. Content must be delivered over a variety of mobile
devices, running different operating platforms across heterogeneous
networks. In response, CSPs should develop seamless session mobility and
content delivery capabilities.
5.2 Medium term focus
Once the infrastructure is ready, CSPs should create partnerships with
content players and open their network APIs to OTT players for greater
collaboration and service integration.
a) Partnership with content providers
OTT content providers will play a critical role in the 3-sided ecosystem.
CSPs must recognize that each OTT vendor is unique and specialized in
terms of their services and market approach. Instead of taking a walled
garden approach or competing directly, CSPs should embrace OTT players
by offering complimentary network features and creating business models
that provide fair monetization opportunities to both parties.
b) Opening network APIs
Opening network APIs will allow CSPs to offer their network as a service
to third parties. Application developers and OTT providers can utilize this
opportunity to offer differentiated services per subscriber or per session.
CSPs should experiment with different pricing models such as data volume
or transactional based charges based on the utilization of the API.
5.3 Long term focus
With the infrastructure and partnership ecosystem in place, CSPs should
shift their focus to the development of subscriber intelligence and network
analytics capabilities to deliver personalized experiences. For sustainable
success, CSPs need to invest in technologies and infrastructure that will
provide them with advanced analytics capabilities. CSPs have access to an
enormous amount of subscriber and network data lying in systems such
as CRM, billing, self-care portals, networkactivity andcall data records.
With advanced analytical capabilities CSPs can utilize this datato deliver
personalized services, predict failures and improve customer experience.
Near Term Focus
Medium Term Focus
Long Term Focus
Develop a robust self-
care portal
Intelligent policy control,
DPI and online charging
capabilities
Multi-screen delivery
and session mobility
Partnership with
content providers
Opening network APIs
Develop subscriber
intelligence and network
analytics capabilities to
deliver personalized
experiences
8
6. Conclusion
Most CSPs are struggling to monetize the explosion of data traffic on their networks due to a lack of service innovation. OTT players leveraged the opportunity
to develop innovative apps and services, and are successfully monetizing these services with a direct-to-consumer business model. As a result, CSPs have been
largely marginalized as a connectivity provider - often cut out of value-added and direct consumer engagement.
To move up the value chain and become a highly profitable digital services provider, CSPs need to develop innovative products and services that will not only
help them retain and attract new customers, but also better monetize their networks. Wipros three-phased approach is intended to guide CSPs from investing
in the enabling technology infrastructure, to developing the required partner ecosystem and finally create the network intelligence and analytics capabilities that
will deliver a next-generation of network monetization opportunities we can only begin to dream of today.
9
About the Authors
Vyas Varma is VP and Global Telecoms IT Practice Head for Communication & Media vertical at Wipro. He has over 2 decades of leadership
experience in nurturing Telecom practices, delivering complex programs and solution-led business development. In his current role, his main charter is to
drive high value business growth with focus on creating in-depth value propositions & solutions for our customers, to address their key business challenges.
He is also part of the leadership team which creates & executes overall investment & solution strategy for Communication & Media Business Unit.
Surbhi Sinha is Principal Architect in the Communications and Media vertical at Wipro. She has over 20 years of experience in telecom, B/OSS and
networking technologies. In her current role she is responsible for developing solutions for CSPs that address some of their key business challenges. In the
past, she has led multiple end-to-end B/OSS rollouts for greenfield Operators as well as transformation programs spanning L2C, T2R, network inventory
and other B/OSS areas.
Dipankar Saha is a principal consultant in Communication and Media vertical in Wipro. He has more than 16 years of experience in telecom domain
as solution architect working across all the wireless technologies. In his current role, he is responsible for evangelizing network monetization solution aiming
at improving CSPs revenue share by creating next generation services using policy, real time charging, billing, subscriber data, network analytics, network
API and OTT integration.
Avinav Trigunait is assistant manager in Wipros Global Media and Telecom business unit, leading thought leadership initiatives for the SBU. His
research interests and project experiences span diverse areas such as MVAS, fixed and wireless networks and digital media. Prior to this, he was working
as a consultant, strategy labs for Capgemini Consultings Telecom, Media and Entertainment practice. In the past he has also worked for IDC as a telecom
sector analyst.
Winning in a Digital World
Wipros comprehensive suite of converged services and solutions addresses the entire digital value chain from the network core to device applications.
Our vertically aligned business model ensures that we understand the business and technology imperatives of specific industries, while our technology
service lines allow us to architect integrated technology solutions. In an era of digital disruption, Wipro is uniquely positioned to partner with Telco-Media
organizations to deliver the business and technology expertise that enables them to Do Business Better and Win in the Digital World.
About Wipro Council for Industry Research
The Wipro Council for Industry Research, comprised of domain and technology experts from the organization, aims to address the needs of customers
by specifically looking at innovative strategies that will help them gain competitive advantage in the market. The Council, in collaboration with leading
academic institutions and industry bodies, studies market trends to equip organizations with insights that facilitate their IT and business strategies. For more
information please visit www.wipro.com/insights/business-research
About Wipro Technologies
Wipro Technologies, the global IT business of Wipro Limited (NYSE:WIT) is a leading Information Technology, Consulting and Outsourcing company, that
delivers solutions to enable its clients do business better. Wipro Technologies delivers winning business outcomes through its deep industry experience
and a 360 degree view of Business through Technology helping clients create successful and adaptive businesses. A company recognized globally for
its comprehensive portfolio of services, a practitioners approach to delivering innovation and an organization wide commitment to sustainability, Wipro
Technologies has over 135,000 employees and clients across 54 countries.
For more information, please visit www.wipro.com or contact us at info@wipro.com
North America South America Canada United Kingdom Germany France Switzerland Poland Austria Sweden Finland Benelux Portugal Romania Japan Philippines Singapore Malaysia Australia
Copyright 2012. Wipro Technologies. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise, without express written permission from Wipro Technologies. All other trademarks mentioned herein are the property of their respective
owners. Specifcations subject to change without notice.
DO BUSINESS BETTER
WWW.WIPRO.COM NYSE:WIT | OVER 135, 000 EMPLOYEES | 54 COUNTRIES | CONSULTING | SYSTEM INTEGRATION | OUTSOURCING
WIPRO TECHNOLOGIES, DODDAKANNELLI, SARJAPUR ROAD, BANGALORE - 560 035, INDIA TEL: +91 (80) 2844 0011, FAX: +91 (80) 2844 0256