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4G: the fine line between innovation and profitability

4G: the fine line between innovation and profitability

Monetizing 4G mobile is a challenge. Operators need to find a strategy based on more than just price: they must exploit 4G through service convergence and differentiation on key segments such as B2B.

4G increases the risk of de-intermediation by OTTs.

Operators face increasing competition notably from new “Over The Top” (OTT) players who are securing a durable place in the market thanks to the explosion of smartphone usage and the migration of cellular networks to IP. 

In a repetition of what we saw with the Internet, applications such as WhatsApp and Viber are making consumers believe they are entitled to “all free and unlimited”. Many smartphone users now consider this to be the norm.  

As high 4G bandwidth is likely to engender more apps like these, operators find themselves obliged to count on data service revenues, to reinvent their business model and to find new growth paths.

Increasing usage does not always mean increasing revenues

Operators inventing new usages are getting the best return on their network investments, not the ones who simply apply premium charges to their “unlimited” bundles.  

Multi-SIM offers allowing the same data bundle to be shared between several devices are one good way of spurring users to consume more data. Operators apply price-bands to monetize this multi-SIM data traffic: usage restrictions kick in once the data allowance has been used up, encouraging users to move up to the next price band. 

This approach appears to be paying off today in terms of ARPU in the most advanced markets, but not necessarily everywhere. Europe’s data consumption trends are similar, but the impact on revenues is much more modest. In France in particular, price competition from low-cost offers has prevented operators from monetizing expanding data usages as they had hoped.

Building durable revenues means making users pay for access

Operators seeking long-term growth strategies must understand that the veritable opportunity of 4G lies in the convergence of wireline and mobile services. They should position as providers of reliable access to an open ecosystem offering users seamless enjoyment of rich content and services. 

The big winners will be operators who have wisely invested in high-quality fixed and cellular networks and developed service partnerships.

Cloud, storage and streaming solutions are examples of ways of making users pay for access; they enable the operator to distinguish himself clearly from low-cost rivals and to build user fidelity.

Exploiting 4G to aid business “digitization”

To date the enterprise market has been the best segment on which to monetize 4G mobile’s advantages. High bandwidth opens the way to many compelling services, including horizontal solutions such as videoconference, online collaboration and digitized workstations and vertical solutions to support new usages such as telemetry, retailing and healthcare.

Helping the development of emerging economies

Finally, 4G launches in regions without landline networks offer great potential for operators.

On the African B2B market for example, the development of fixedmobile substitution solutions around cloud services may revolutionize working modes in the coming years.

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