Thursday, 10 May 2012

Data and MVNOs - what are they waiting for?

An interesting piece of research has confirmed something I have suspected and seen from wroking with MNOs and MVNOs over the years: a lot of smartphones don't actually use that much data, in fact 49% of smartphones in the UK use less than 100mb... This is roughly in line with operators' claims that 5% of users are hogging around 80-90% of the data usage, the rest (the difference between the 49% and the 5%) will be closer to the 100mb than the 1gb cap, in general. Over the last 5 years, from Nokia N95 to androids to iphones, I have averaged 176mb per month of mobile network data. The amount offloaded over wi-fi obviously higher, and there are occasional spats, moving house, etc where I have gone over that significantly.

So what does this mean for MVNOs and MNOs? Well, for a starts, MVNOs should stop whining about wholesale data prices and get on with selling data. even at 10p per mb, 49% of UK mobile phone users would be no better or no worse off paying GBP 0.10p per megabyte than the typical £10 per month "unlimited" data bundles they are using nowhere near the Fair usage policy. 

Does this mean everybody should move to an MVNO? No, most people, including myself, are quite happy paying £10 per month for unlimited data, knowing that I will pay the same if I use 85mb because I worked at home most of the month or 500mb because I was on a client site most of the month with no wi-fi to offload to... There were even more frustrating occasions when moving home once and my ISP messed up the installation of cable internet at the new property, I had gone past my 1bg fair use and as such my available bandwidth had been throttled back to a snails pace, however I could not pay my mobile operator another £10 in that same month for another gb of data at the usual high speed - this is nuts!

What does it mean to MNOs? Well, data has been documented by many as 80% of network costs, but its not 80% of network revenues, in fact its not even close, and that is no doubt before factoring in a handset subsidy of a brand new and reliably expensive smartphone. Most of these costs arise from the increased cost of backhaul and the ability of data hoggers to render this expensive backhaul useless, combined with an overwhelming need to satisfy various parties that the investment was necessary and that they have all the data users replacing the decline in voice and SMS revenues, even though the latter is still clearly the bulk of revenues... all very complicated, and unlikely that anybody within the MNOs will break this status quo. 

But my example of 85mb vs 500mb shows that its not just the data hoggers that are the problem, how do you plan to provision data for 10 to 20 million customers whose demand varies so much without huge data network running costs? Well the answer is to a model that matches usage with payment a bit closer. If I wanted to, I could offload most of that 500mb data from a month in an office with "no wifi" onto my laptop or actually define that "no wifi" meant there was wifi in that office, however it may involve me accepting a landing page every so often, or signing into a hotspot a few times per day: I would do that if my tariff matched my usage a bit more closely. As it is it is easier to switch off wifi in that office and let the MNO take that strain... 

When we finally match data a bit more closely to usage, MNOs can plan their network more effectively, they will cost significantly less than 80% of costs, revenues will go up and customers will stop complaining that data does not work, as the data hoggers will be weaned off and people will be using mobile data when they need it. More importantly, MNOs will finally be able to discuss MNO data requirements in earnest.

What we do know, is that the yield on mobile data in MNOs at the moment is much much lower than 10p per mb, at least in the UK and other territories where there is a data "land grab", and this data yield involves a marketing cost, often a very expensive (and complex and fickle one) of subsidising a smartphone, whereas the MVNO can sell a lot off this data at between 5p to 10p per mb very easily, whilst bearing the marketing and other customer costs and most of the general admin costs, while still yielding higher data revenue... And at the same time start breaking the "flat tariff" status quo madness and move to a pricing model that let's MNOs raise their own data yields and plan their network more effectively.

What does the customer gets? mobile data that works when you need it to, no matter what you pay...

And finally, to wrap up, I would advise any MVNO to get out there and sell data, by the mb, not by the bundle, people want data however you have to help them: 
  • you need to have at least the basics of getting them to mobile friendly versions of the data they want to access
  • you may want to let customers know when they have used  a given amount of data
We have done this by enabling data successfully for many MVNOs and once you have done this then you have the knowledge of your user base to be able to plan data marketing over the next few months and have a sensible conversation with the MNO about data pricing and bundles... its not rocket science, its what MVNOs have managed to do with voice (charge per min in a bundle environment) and SMS (charge per SMS in bundle environment) because there is a significant part of the population out there who want to budget their usage across data as well as voice and SMS and already have a shiny smartphone thank you very much...

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