More and more operators are embracing partnerships with over-the-top application providers and are seeing their revenue increase and churn fall as a result, according to a new report from mobile service optimization and charging company Allot Communications.
The percentage of operators using "value-based plans," or data plans that offer more than just simple connectivity, continued to grow, according to the Allot survey, which covered the first half of 2014. Now 85 percent of operators surveyed are using some kind of value-based plan, according to Allot, up from 59 percent in 2012, when it last conducted such a survey, and up from 35 percent in 2011.
The most popular form of value-based plans are application-centric plans, in which carriers do not charge for access to a specific application or charge more for premium experience of certain apps. Allot said 55 percent of carriers are now offering app-centric plans, up from 27 percent in 2012.
Allot said that 40 percent of application-centric charging plans focus on "zero-rating" data, but that 60 percent of these are premium plans that cost more. "Our findings reveal that operators are segmenting the digital lifestyle of their subscribers and offering premium plans based on customer preferences," Allot said. Application-centric plans include promotional plans for TV streaming, on-demand video streaming, music streaming and music storage, GPS location services, parental control, tracking and others.
In the United States, wireless carriers have made some tentative steps in this area. T-Mobile recently announced a streaming music promotion in which it won't count the data generated by streaming music services against users' data buckets. And AT&T Mobility has embarked on a Sponsored Data program that allows advertising companies and others to subsidize the cost of users who access their services, thus making that connection free to the user. And T-Mobile's GoSmart Mobile subsidiary last year made access to Facebook free for its customers.
According to Allot, social networking giant Facebook (NASDAQ: FB) is mobile operators' top choice in terms of zero-rated apps, and the firm found that 45 percent of operators offer at least one zero-rated app, and 65 percent of those zero-rate Facebook.
The financial benefits of such plans to carriers are clear, Allot said. Carriers with app-centric plans have average revenue per user of $16.71, compared to $15.25 for carriers without such plans, and carriers with app-centric plans had average churn of 3.21 percent, compared to 3.71 percent for those without. Those trends are more pronounced in developing markets, Allot found.
The report found that 52 percent of North American operators offered app-centric plans, while Europe led the way with 63 percent of operators there offering such plans and 59 percent of operators in Latin America doing so.
However, it's not just Facebook that carriers are embracing. More mobile operators are choosing to collaborate with OTT app and content providers directly, and 37 percent of operators had at least one OTT partnership, up from 26 percent in 2012. Music applications are popular targets for partnerships, especially in Europe, according to Yaniv Sulkes, associate vice president of marketing at Allot.
Sulkes said because Europe is basically a collection of small markets and large markets with different languages there are more opportunities for localized content and OTT partnerships. Such plans have high adoption rates there, he said. Such plans are also easy to replicate in Latin America because different countries with similar cultures can be grouped together and targeted. He said subscribers in Africa and Asia Pacific aren't as willing to adopt such plans. He also said that zero-rating an app like Facebook is less appealing in a market like North America.
Many operators are zero-rating data in a way that lets them "capture the value created" by the application, Sulkes said. The only true way to do that is through cooperation, he said, which means collaborating on marketing and revenue sharing. "The primary reason is that operators are taking a more strategic approach in trying to monetize the experience and not just the connectivity," he said.
The report surveyed 177 mobile operators around the world, covering 2.4 billion subscribers. In terms of the composition of the operators that were surveyed, 9 percent were from North America, 31 percent were from Europe, 24 percent were in Africa, 17 percent were in the Asia-Pacific region, 10 percent were in Latin America and 9 percent were in the Middle East.
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