At this year’s Mobile World Congress Tele2’s CEO Mats Granryd announced his company’s move to all-data, bucket mobile plans for its consumers. Under this model Tele2 will give away all of the voice minutes and text messages consumers use and charge only for data. Tele2 has already started implementing the new plans in some of the countries it operates “gearing the company up to be solely dependent on data”. In other words, establishing data as a core business for Tele2.
The strategic and business case considerations behind this move can seem dazzling. For a long time, and still today, many mobile operators have regarded the introduction of all-data mobile plans as the acknowledgment of being a bit-pipe. The latter comes with the associated fear of extinction of the high-profitability revenue sources: voice minutes and texts.
To illustrate the theoretical impact on profitability an all-data model can have on a mobile operator’s business, we will use the Pay-As-You-Go (PAYG) mobile plan from Three UK as a reference. Three UK charges PAYG customers 3p/min, 2p/text, 1p/MB, where p stands for pence, currency is Pound Sterling and £1 = 100p. Transforming that pricing structure simplistically to an all-data model means the user pays only for data (at 1p / MB) with voice minutes and text messages being deducted from the available data volume like Internet browsing traffic.
Let us look at the theoretical impact, noting that 1MB equals to 1024*1024 = 1,048,576 bytes:
It is worth highlighting that operators implementing bucket plans often increase the price of bucket data to recover the loss of voice minutes and messaging texts. Therefore the actual impact might not be as dramatic as shown in the short-term.
Over the long-term, all-data mobile plans invalidate the existing messaging pricing models and put enormous pressure on the existing voice pricing models. So where is the opportunity in this context? What insights could be possibly driving a mobile operator’s decision (e.g. Tele2) towards all-data mobile plans and data as a core business?
User behaviour is changingTele2 hints at consumers moving away from PAYG plans towards bucket plans. In such plans, a bucket allowance is provided which can be used across many devices, reflecting the new usage pattern that has emerged because users either own multiple devices and/or share data with family members. The pattern has been successfully validated in the US since 2012 by AT&T and Verizon.
Internet and mobile video usage increases faster than many anticipatedConsumer communications and brand engagements are more and more taking place over the Internet. The traffic generated by Facebook, YouTube, Instagram, Vine, WhatsApp, Viber, WeChat, ... and other existing or yet-to-be-invented OTT applications increases continuously, and often in an exponential manner. Such increased data usage is monetisable traffic in an all-data model. Granryd hints “the trick is to realise how much data consumers use and to move them up the bucket chain”.
The cost of implementing all-data plans is reasonably predictableWith consumer communications are more and more taking place over the Internet and new traffic generated being “data” rather than legacy voice and messaging, it is reasonable to assume that existing, already amortised investments in voice and messaging infrastructure do not need to be expanded to cover increased person-to-person usage. Therefore, the legacy cost side when moving to all-data mobile plans is reasonably predictable.
A data-centric approach to mobile plans can enable a better user experienceAll-data mobile plans have the potential for simplicity, if implemented consistently. For example, one counter is enough to show a user how much data allowance remains, and one simple click is enough to buy more data when needed. Bucket data plans are also ideal for small enterprises, offering cost predictability and simplicity.
Even with those insights moving towards a “data as a core business” future represents a major transformation for any operator. We believe that such a future is full of opportunities, and luckily a number of inspiring examples exist that show where these opportunities can be found:
E-Commerce Sponsored AccessAmazon Kindle provides (beside heavily subsidised hardware) also free mobile access to its content (in the UK via a Data MVNO agreement with Vodafone). With more and more vertically integrated ecosystems, this could be the first of many examples to come.
Brand / Advertising Sponsored DataNetzclub is an advertising-financed mobile phone tariff run by Telefonica Germany. In addition, the Spain-based operator is trialling a “sponsored calls” service in Brazil, which allows Vivo pre-pay customers to make a free phone call after listening to a short audio advert. We can reasonably expect to continue to grow, with Big Data and Analytics providing the intelligence for more targeted offers.
Hardware Bundled DataDatawind (UbiSlate) (via Vodafone) and HP DataPass (via Fogg Mobile) are MVNOs with bundled offerings of free mobile broadband together with their hardware offering. Car manufacturers like Audi and Volkswagen embed high-speed mobile access in their new models to offer on-board infotainment. In the Internet of Things (IoT) / Machine-To-Machine (M2M) context we expect to see innumerable use cases that drive data growth.
OTT Driven Data TrafficWhatsApp became recently an MVNO on E-Plus in Germany. With a global user base of 450m subscribers (30m of those in Germany) WhatsApp is bigger than E-Plus, thus creating monetisable data traffic for E-Plus. MTV Mobile in Switzerland offers WhatsApp in its tariffs , zero-rates all WhatsApp traffic within the country but charges data traffic while roaming. More critically though, partnering with OTTs represents a unique and strategic growth opportunity for any operator to benefit from increased data usage and access to new users beyond their own subscriber base.
Embedded Voice over IP and Messaging over IPIn an all-data world and with the broad deployment of technologies like Web Real-Time Communications (WebRTC) voice and messaging rapidly become building blocks of the Web. Companies like Tropo and Twilio show already how voice over IP and messaging over IP can be embedded into enterprise workflows and everyday consumer scenarios as programmable software components.