Telco Deep Dive: Operators just scratching the surface with 4G
By Karamjit Singh June 9, 2015
- Operators still figuring out opportunities presented by LTE
- Move to become digital lifestyle providers a hard transition
IT’S a good thing that Elon Musk of Tesla and SpaceX has his interest in green cars and space, because who knows how the race to connect every citizen on planet Earth would have shaped up with him in the picture.
The current scenario is already crazy, says Dimitris Mavrakis, principal analyst, Intelligent Networks, at UK consulting firm Ovum.
“Next year, we are probably going to see drones that can stay up for five years, due to them being solar-powered,” he says.
The drones, by both Google and Facebook, will join Project Loon, Google’s high altitude (at 60,000 feet) balloons in the race to provide high speed Internet to the unconnected in the world.
“It’s definitely uncharted territory, with the driver for this being the introduction of the LTE or Long-Term Evolution mobile network,” says the London-based Mavrakis, speaking to Digital News Asia (DNA) in Kuala Lumpur where he was attending a recent customer event.
With LTE being the first true mobile network for data and mobile broadband, he believes we are just scratching the surface of what is possible in terms of services and business models.
Services like Meerkat and Periscope, which enable a single user to become a live streaming provider, are just the latest examples of what can be enabled by LTE, or 4G (Fourth Generation), networks. Operators will have huge challenges if such services find a mass market.
“Does the concert organiser, besides selling tickets and broadcast rights to their event, also charge users for the right to live stream from their mobile devices?” Mavrakis asks.
Which is why he says operators “are still trying to figure out 4G,” where traffic and usage patterns are very different from the 2G and 3G era.
For instance, with 4G, a single user watching a high definition video on his or her mobile device can theoretically congest an entire cell site – a scenario that was never possible in the past.
Fortunately, operators have time to come to grips with the challenges. With less than half of operators in the world offering 4G and with just a fraction of total users on 4G services, “there is a lot of room for organic growth,” Mavrakis says.
There is also room for revenue growth, he believes. “While telcos generally have been used to 35% to 40% profit margins, those margins are now under threat.”
He points out that the response from some operators is to evolve into ‘digital lifestyle providers’ by acquiring Internet companies. The results so far have been mixed because it is very difficult to achieve this transformation with very different business models than the telcos are used to.
Within Asia, Mavrakis flags Axiata Group, Telenor and Singtel as being “very advanced and aggressive” with their transformations. Others, however, are struggling.
“Deutsche Telekom, China Mobile and Vodafone are struggling to provide digital services consistently across their footprint,” he says, while pointing out that Spain’s largest mobile player, Telefonica, had had a rougher journey trying to increase its revenue from digital services.
“It has tried but has not succeeded,” he says, highlighting that Telefonica tried to force itself into this digital lifestyle mode.
For instance, it was doing interesting things around big data and was running analytics on its subscribers, even selling this data to third parties.
“Perhaps it was too ahead of its time,” Mavrakis surmises.
The trick, he feels, is not to force things. For instance, if telcos were to make acquisitions of digital companies: “Don’t try to assimilate them forcibly. You have to remember that telcos are very large companies and there is a lot of inertia in them.”
At the same time, he sees no disruptions to telco business models because of 4G. “If anything, LTE has helped operators as it gives consumers who do not have smartphones a strong incentive to acquire one, and for those who do have smartphones, operators are able to push higher-tier subscription plans to them.”
He has also seen operators attach content bundling and fixed subscriptions, and offer data storage and enter new segments through partnerships.
This can be seen in Malaysia as well where all three main players, Celcom Axiata, Digi and Maxis, have been forming various partnerships.
Watch for WiFi Calling, thanks to Apple
When asked if he sees anything exciting on the horizon for LTE this year, Mavrakis (pic) flags out WiFi Calling as being interesting.
While the technology has been around for years and used to be called UMA (Unlicensed Mobile Calling), there were not enough handsets. But it has come to the fore now that Apple has included it in its iPhone 6 and Samsung has the feature in its Galaxy S6.
For those not familiar, WiFi Calling allows you to use a WiFi network to make and receive phone calls, rather than using the traditional mobile network. This is especially useful when one is experiencing poor coverage.
It works exactly the same as the mobile network, meaning you may not even notice you’re actually using a WiFi network rather than the mobile one.
As a result, your text conversations remain uninterrupted and your call log stays complete – without the need to switch to a different application when using a WiFi network to connect.
“For operators who are introducing voice-over-LTE or VoLTE, the value proposition is even better as there is minimal capital expenditure to add on WiFi Calling once you have VoLTE in place,” Mavrakis says.
“Apart from this, I do not think you will see a lot of action from operators [rolling out anything interesting] – they will just be focused on growing their business,” he adds.
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