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Telcordia Warns of Mobile Operator Marginalization

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For mobile operators in many regions around the globe, data average revenue per user (ARPU) has quadrupled over the past six years and now is nearly half of voice ARPU. But, as Telcordia warns, this trend distracts from serious, long term challenges that those operators now face, including unsustainable all you can eat pricing, dwindling profit margins, and the threat of "over the top" (OTT) video and content services from third parties.

The latest white paper from Telcordia identifies the major reasons why mobile broadband's popularity is both an opportunity and challenge for operators. Although data ARPU has increased steadily over the past several years, the burden on the network has grown at an even faster rate. The latter trend highlights why so many mobile operators are struggling with reputations for poor data quality of service (QoS), putting them at a severe competitive disadvantage, and increasing their customer service and network costs.

"The popularity of video and other third-party OTT services are breaking mobile broadband networks and business models because they siphon off revenue while adding to the network's workload," said Pat McCarthy, Vice President, Marketing, Service Delivery Solutions, Telcordia. "Operators should use this problem as an opportunity to transform themselves from dumb pipes into value-added players that capture revenue from OTT personalization services."

According to McCarthy, operators must distinguish between different types of traffic and properly prioritize them. For example, personalized end user services that generate revenue for an operator and its business partners should enjoy priority access to network resources, while zero-revenue OTT content should be managed with a tiered bandwidth management solution.

Policy-based bandwidth management and real-time charging provide operators and their customers with the necessary flexibility to keep costs from getting out of hand. As service providers connect with their customers with a personalized service, customers get the choice to choose which quality of service they want, just as with TV they choose standard broadcast or high definition. These tools can also enable operators to reduce data traffic during peak hours by offering discounts if customers choose to download songs and other bandwidth-intensive applications during off-peak periods.

"An operator's need to manage bandwidth is the first step toward realizing a profitable business, and they must build on that capability, forming active partnerships with end users and their choice of content providers, to get their fair share of the profits," added McCarthy.

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