Mobile broadband profitability: a shared responsibility
Vendors are continuing to use the ‘scissor-effect’ diagram in their marketing to highlight the threat of rapid data traffic growth in developed markets and the risk it brings to operator margins. However, marketing based on this diagram today is increasingly irrelevant because the industry has moved on. There will be ample opportunities over the coming five years for operators to avoid the cataclysm. Nevertheless, the industry as a whole needs to work together to stop the ‘scissor-effect’ becoming a self-fulfilling prophecy.
Executive summary
In a nutshell
Ovum view
Please, enough about the ‘scissor-effect’
Unrepresentative of today’s reality and ignores mitigating factors in the future
Operators need to focus on the network and tariff innovation
Infrastructure vendors need to build trust and not just networks
Wholesalers risk being cut out of the market
Regulators have a supporting role
Key messages
Deconstructing the scissor-effect
Vendor scare tactics are undermining the response to a valid threat
Mobile broadband is not voice
Cost allocation is critical
Not all operators are created equal
Network congestion today is a focused issue
Power-users hogging a shared resource
Device penetration is a key factor
Peer-to-peer is not just an issue to content providers
Very few cells affected
Traffic is a future threat only if nothing is done
Even flat-rate tariffs can be tenable
Vested interests pose the greatest threat to profitability
Vendors are making too much noise
Operators are guilty too
Protecting future profitability is a shared responsibility
Time for a cocktail
The network remains key for operators for the next five years
Short-term gains must support long-term goals
Traffic management is a short-term win, but also viable for the longer term
Backhaul upgrade is inescapable
Offloading traffic is gaining prominence
Infrastructure upgrades bring efficiencies today and tomorrow
Tariff innovation is necessary, but difficult for operators to achieve
A move towards packages tiered by speed
Time-based access makes a comeback
Gold, silver and bronze: a lot of talk, but an insurmountable challenge
Potential for dynamic pricing to reduce busy hour peaks
Fair usage policies may be dull and clumsy, but they must be enforced
Infrastructure vendors must build trust and not just sell boxes
Wholesalers need to revise their business models
Regulators need to support industry development
In a nutshell
Ovum view
Please, enough about the ‘scissor-effect’
Unrepresentative of today’s reality and ignores mitigating factors in the future
Operators need to focus on the network and tariff innovation
Infrastructure vendors need to build trust and not just networks
Wholesalers risk being cut out of the market
Regulators have a supporting role
Key messages
Deconstructing the scissor-effect
Vendor scare tactics are undermining the response to a valid threat
Mobile broadband is not voice
Cost allocation is critical
Not all operators are created equal
Network congestion today is a focused issue
Power-users hogging a shared resource
Device penetration is a key factor
Peer-to-peer is not just an issue to content providers
Very few cells affected
Traffic is a future threat only if nothing is done
Even flat-rate tariffs can be tenable
Vested interests pose the greatest threat to profitability
Vendors are making too much noise
Operators are guilty too
Protecting future profitability is a shared responsibility
Time for a cocktail
The network remains key for operators for the next five years
Short-term gains must support long-term goals
Traffic management is a short-term win, but also viable for the longer term
Backhaul upgrade is inescapable
Offloading traffic is gaining prominence
Infrastructure upgrades bring efficiencies today and tomorrow
Tariff innovation is necessary, but difficult for operators to achieve
A move towards packages tiered by speed
Time-based access makes a comeback
Gold, silver and bronze: a lot of talk, but an insurmountable challenge
Potential for dynamic pricing to reduce busy hour peaks
Fair usage policies may be dull and clumsy, but they must be enforced
Infrastructure vendors must build trust and not just sell boxes
Wholesalers need to revise their business models
Regulators need to support industry development
LIST OF TABLES
Table 1: Tele2 mobile broadband tariffs segmented by maximum speed
Table 2: Telecom Italia Mobile time-based mobile broadband tariffs
Table 3: Elisa standard and ‘corporate premium’ mobile broadband tariffs
Table 1: Tele2 mobile broadband tariffs segmented by maximum speed
Table 2: Telecom Italia Mobile time-based mobile broadband tariffs
Table 3: Elisa standard and ‘corporate premium’ mobile broadband tariffs
LIST OF FIGURES
Figure 1: The standard scissor-effect diagram
Figure 2: EBITDA margin and capital intensity: 1Q08 to 1Q09
Figure 3: Telecom Italia Mobile traffic volumes by service plan
Figure 4: Traffic volume share by application
Figure 5: Timing and impact of network infrastructure efficiency solutions
Figure 1: The standard scissor-effect diagram
Figure 2: EBITDA margin and capital intensity: 1Q08 to 1Q09
Figure 3: Telecom Italia Mobile traffic volumes by service plan
Figure 4: Traffic volume share by application
Figure 5: Timing and impact of network infrastructure efficiency solutions
