Recently, Ovum spoke to the network and product innovation management team at French operator SFR. Our discussion focused on the increased requirement for network and service innovation in light of the shift to data and IP networks. A major theme from this discussion was that operators need to better utilize wireless technologies, and acknowledge the important supporting role of fiber.
Stronger and more effective links between 3G, Wi-Fi, and femtocells could reap rewards for operators in terms of better customer experience and reduced opex. Using FTTH rollouts for backhaul will also be crucial. SFR’s initiatives in this area highlight that integrated operators must take a more strategic approach to managing mobile data across their businesses.
SFR has evolved into an aggressive, fully-integrated operator. It has a mobile market share of approximately 30% and a DSL market share of 25%, and it is maintaining its position as the second-largest player in France behind the incumbent Orange. However, SFR faces significant competition from Free, Bouygues, and cable operator Numericable, all of which are pursuing aggressive multi-play strategies.
France’s fixed access market is unusual in Europe in that triple-play (voice, broadband, and TV) bundles are locked into a price of €30 per month. This bundle has become the norm for French consumers, and no operator has been willing to break the mould by offering an alternative. This places considerable pressure on mobile broadband services to deliver the pricing premiums and package differentiation required to drive revenue growth.
Smartphone and mobile data usage growth has been strong in France following the rapid adoption of the iPhone from 2009. In the first nine months of 2011, 70% of SFR’s mobile postpaid gross additions were smartphone users, and mobile data revenues increased by 23% year-on-year.
SFR plans to invest an average of €200m per year on FTTH deployments over the next ten years. If the direct retail opportunity provided by FTTH services proves to be limited, FTTH can still play a key role from a wider network and cost perspective. FTTH will eliminate the €11 per month line rental cost that SFR currently pays to Orange for every fixed broadband connection. The use of fiber to provide mobile backhaul will also fulfill an important secondary role for SFR.
Using Wi-Fi and femtocells
In order to win and retain customers, telcos need to develop better mobile data delivery, a smoother network handover, and attractive packages. The rapid growth of mobile data traffic – especially video, which now accounts for 50% of SFR’s smartphone traffic – is increasing the pressure on operators to reduce their opex.
While optimizing 3G network performance is one method that operators can use to reduce opex (SFR is currently adding 15 sites a day to catch up with Orange), Wi-Fi and femtocells are two other important tools that operators can adopt. Many consumers have already embraced Wi-Fi as a way of reducing their monthly spend and improving their data coverage, while much has been made of the opportunity provided by femtocells.
So far, the performance and uptake of Wi-Fi and femtocells has been sporadic and unpredictable. Operators must overcome a number of technical, usage, and marketing challenges before they can fully realize the advantages provided by these tools. In August 2011, SFR released a second-generation femtocell in an effort to deliver a more seamless approach to its mobile data offerings. SFR provides the femtocell for free to its mobile customers. While SFR is currently only marketing its femtocell as a way for customers to improve coverage, a future offload strategy would not come as a surprise. SFR has stated that it has shipped “tens of thousands” of the second-generation access points, but this is not yet enough to make the device a key differentiator from its rivals.
Access to SFR’s four million Wi-Fi hotspots for smartphones, PCs, and tablets is a more high-profile component of SFR’s data bundles. However, the vast majority of its hotspots are open home-hubs, with the operator owning just a “few thousand” public hotspots. That means that SFR’s coverage is patchy, unpredictable, and skewed towards residential areas rather than the urban centers in which it is most needed.
The major challenge for SFR is to avoid confusing customers across these three network touch points. Many users are unable or reluctant to manually log into free hotspots. A significant step that will be crucial to the true mass-market adoption of SFR’s Wi-Fi services will be seamless connection. AT&T is the best example of the success of this strategy, with the US operator witnessing dramatic increases in Wi-Fi connections once automated login was enabled.
SFR is currently piloting Wi-Fi auto-connect based on EAP-SIM technology. If this pilot is a success, it will provide a significant boost to its Wi-Fi offerings.
The operator is not concerned that increased Wi-Fi usage will have a negative impact on its revenues as it has found that when Wi-Fi is bundled with mobile data tariffs, 3G network usage has also increased. While the increasing adoption of femtocells could increase the risk of network interference, SFR argues that it has enough control over the home network to manage this.
Original article: SFR aims for a seamless broadband experience