Customers will pay for a better mobile experience

By Jim Barthold

Pressure from two opposite ends—the desire to conserve resources and slim expenditures in a slumping economy vs. the need to develop more revenue streams to continue to grow networks—are actually strengthening the middle ground for mobile subscribers.

A bad economy is never a good thing, but Alcatel Lucent research indicates that the economy will not prevent mobile subscribers from paying more for service if there’s a carrot attached to that service such as being able to play a multiplayer game without network delay or, in the case of enterprise users, receiving time-sensitive messages via priority e-mail. Future applications such as eHealth and eGovernment will also play a part in driving subscriber revenue.

Balancing off these new revenues streams, and pulling from the other side, are the increasing demands data is putting on the network.

“The bandwidth that the new mobile phones are consuming is just crushing,” said Maribel Lopez, principal analyst and founder of Lopez Research. “If I have a cell phone now the likelihood is that it’s going to have data capabilities.”

Those data capabilities typically come from third party application and content providers (ACPs) that may or may not be allied with the network providers. Building alliances with ACPs will benefit both the apps providers and network providers, said Carrie Hydro, senior director, solutions marketing at Alcatel-Lucent.

“Network providers need to engage ACPs to explore partnership options and assess how they can best leverage their network capabilities,” Hydro said. “Bandwidth availability is critical to ACPs’ ability to support social networking and manage capacity demands that are driven by multimedia and video usage.”

ACPs, Hydro said, need dynamic bandwidth to enable “flawless content delivery.” They also need enhanced QoS and a method of subscriber data profiling to deliver location-based services such as interactive advertising and social networking. Finally, ACPs need “effective user profile policy management, improved authentication processes and automated rule-based permissions” to fully serve the new subscriber base.

Consumers will pay for truly innovative services and applications that evolve from partnerships with ACPs making this the most logical model for a network provider to follow, said Phil Marshall, senior research fellow and technology strategist with The Yankee Group.

“If you go to a consumer and say you’re going to charge an extra 10 bucks for delivering a service a little more reliably, I think they’re going to tell you to pound sand,” said Marshall. “Our surveys demonstrate that people won’t pay a premium for just the quality per se.”

Quality is the cart. A service or application is the cargo that fills the cart with something worth buying. The network provider is—or should be—the horse that takes the cart to market.

“If you offered a service and demonstrated superior performance in the market … high availability, reliable infrastructure, then it will capture a greater proportion of the market share and you’re actually selling a tangible solution as opposed to an intangible promise,” Marshall said. “There has to be an application that needs that capability and it’s the application you sell as opposed to the capability.”

That echoes the Alcatel-Lucent belief that “network providers can leverage their assets … to become participants in the higher value applications market. For ACPs, access to these capabilities will enhance their products and services in terms of functionality, usage and interaction and promote customer stickiness by creating a better experience for end users,” Hydro said.

All of this, of course, is predicated on the thought that the end users will be consumers seeking new and better ways to use their cell phones. One way to do that is to leverage the incumbent IP facets of the new phones and offload some traffic onto wireline networks via either femtocells or by moving directly to WiFi. This produces the end result of improving the consumer wireless experience by broadening the pipe and removing some high bandwidth traffic from the mobile network.

“It absolutely makes sense to try to offload onto the wired infrastructure that you’ve already invested in,” Lopez said. “Wireless is a finite resource; it’s a physics thing. Wired is not. You can have the perception of having better cell quality when you’re using your broadband infrastructure … and that’s the one thing that helps you get to better quality.”

From the other side, the network provider can also encourage ACPs to step beyond PCs and let mobile network providers move their content to “multiple screens,” concurrently addressing end users’ demand for higher quality, and flexibility, which “may require transcoding content to work on different size and resolution screens to ensure and optimal end user experience,” Hydro said.

The final piece of the equation is the users themselves. It might be--as with many application-oriented services--that the first paying customers will come from the business side rather than the general consumer. In this case, it’s likely that applications designed for enterprise users such as healthcare facilities and doctors’ offices, schools and universities and even internal enterprise communications, will slide into the consumer space bringing with them the quality that enterprises demand.

“You could do premium in an enterprise world based on a private two-tiered network … to get a better level of performance,” Lopez said. “More commercially-oriented apps that haven’t existed in the past (like) healthcare and diagnostics could be prioritized over those networks.”

The applications would then move over to consumers with “things like video sessions with your doctor or blood glucose monitoring,” Lopez continued. “At the end of the day, consumers don’t want to pay more for anything but businesses will be willing to pay a little extra to make sure things work.”

At the end of the day, too, network providers must find a way to monetize new applications to drive increased revenues to ensure network quality without offending consumers, and, it must always be remembered, without stirring the net neutrality nest. One thing’s clear, quality is not a commodity.

“I don’t think you can charge a premium for quality and delivering quality service,” Marshall said. “If it is aligned with a service that needs that quality, say a gaming application and a guarantee of low latency connection--then you can see the possibility of a service provider gaining greater market share and greater revenue from transactions associated with that particular game.”