Seizing the opportunity in   Mobile broadband   -Brazil Perspective-                   March 2011                         ...
1.   Introduction and Overview ..............................................................................................
8.   Seizing the Opportunity in Mobile broadband ........................................................................ ...
1. Introduction and OverviewIn August of 2010, Acision commissioned independent market research agency, Quantinet, to unde...
The challenge lies in the fundamentally constrained nature of mobile broadband, which is already beingexperienced by opera...
Quality of Experience issues are not isolated incidents with the vast majority of customers stating that        these issu...
Report synopsisThe results outlined below are based on the research Acision commissioned Quantinet to conduct in August 20...
2. The Mobile Broadband Life CycleWith the widespread adoption of mobile broadband in many parts of the world, operators a...
2. Pricing models are a necessary trigger – only if consumers feel they can use mobile broadband without being   penalised...
Quality of Experience – ride the hype cycleThe explosion of data is not the only challenge that operators face in mobile b...
Seizing the opportunity – a head start on differentiationIn terms of the mobile broadband lifecycle, many markets are now ...
The root cause – oversubscription ratio in mobile broadbandThe root cause of the profitability issue in mobile broadband i...
The core network is by nature an IP network which is only packet-aware. The core network therefore doesn’t‘know’ what type...
Seizing the opportunity – maximise network utilisationThe disconnect between content provider andmobile user needs to be a...
4. The Consumer PerspectiveIn August 2010, Acision commissioned research with Quantinet, aimed to understand in greater de...
Quality of Experience – core service already under pressureQuality of Experience of the core service is already creating i...
Satisfaction levels – pricing is key dissatisfierWith Brazilian customers having relatively high Quality of Experience iss...
5. Comparing Brazil with Mature MarketsAs part of our global research initiative, Acision commissioned independent researc...
The lifecycle – growing mobile broadbandIn section 2 of this report we have discussed the mobile broadband life cycle mode...
Figure 16 – Consumers paying per KB/MB                            Figure 17 – Dissatisfaction on priceIn the US and the UK...
Streaming video including services such as YouTube, is becoming more popular every day and is predicted togenerate over tw...
6. Preparing for GrowthWhen looking ahead on the lifecycle curve, there are three key areas operators in emerging countrie...
Once consumers have a better understanding of the reasons behind fair use policies, they are able to consider thevalue tha...
Differentiate the offer – add monetisable value to the serviceThe final area focus is on the potential of service differen...
7. Converging Eco Systems – Telco’s in the Internet WorldPerhaps most fundamental to mobile broadband is the fact that two...
Seizing the opportunity – leverage the content eco systemA key opportunity exists within the content eco system to harness...
8. Seizing the Opportunity in Mobile broadbandIt is difficult to overestimate the impact of the mobile broadband challenge...
Control QoE by managing relevant service aspectsIn such a constrained environment, Quality of Experience is evidently unde...
Required capabilities – the mobile broadband investment agendaTo achieve the business priorities outlined above, a step ch...
Acision Seizing the Opportunity in Mobile Broadband - Brasil Perspective-09 mar 2011
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Acision Seizing the Opportunity in Mobile Broadband - Brasil Perspective-09 mar 2011

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The Acision's report "Seizing the Opportunity in Mobile Broadband" brings new data about the mobile broadband market in Brazil and other countries: the challenges and the potential for this value added service in the mobile business.

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Acision Seizing the Opportunity in Mobile Broadband - Brasil Perspective-09 mar 2011

  1. 1. Seizing the opportunity in Mobile broadband -Brazil Perspective- March 2011 Acision Mobile broadband Research for the Brazilian market In association with: 1 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  2. 2. 1. Introduction and Overview ..................................................................................................... 4 Brazil – an emerging mobile broadband market ............................................................................... 4 Main conclusions ............................................................................................................................. 5 Report synopsis ............................................................................................................................... 72. The Mobile Broadband Life Cycle ............................................................................................ 8 The mobile broadband lifecycle – igniting consumer adoption ......................................................... 8 The growth of data volumes – the continuous tsunami .................................................................... 9 Quality of Experience – ride the hype cycle .................................................................................... 10 Seizing the opportunity – a head start on differentiation ............................................................... 113. The Operator Challenge ....................................................................................................... 11 The root cause – oversubscription ratio in mobile broadband ........................................................ 12 The network impact – connecting the IP and Mobile worlds .......................................................... 12 Seizing the opportunity – maximise network utilisation ................................................................. 144. The Consumer Perspective ................................................................................................... 15 Untapped potential – connecting the next 44 million ..................................................................... 15 Quality of Experience – core service already under pressure .......................................................... 16 Satisfaction levels – pricing is key dissatisfier ................................................................................. 175. Comparing Brazil with Mature Markets ................................................................................. 18 Mobile broadband – crucial for Brazilian broadband penetration ................................................... 18 The lifecycle – growing mobile broadband ..................................................................................... 19 Pricing models – the necessary trigger ........................................................................................... 19 Service usage – frequency vs. video ............................................................................................... 20 Quality of Experience – a challenge throughout the lifecycle.......................................................... 216. Preparing for Growth ........................................................................................................... 22 Fairness principles – securing fair distribution of bandwidth .......................................................... 22 Content Optimisation – improving video Quality of Experience ...................................................... 23 Differentiate the offer – add monetisable value to the service ....................................................... 247. Converging Eco Systems – Telco’s in the Internet World .......................................................... 25 Regulators – achieve sustainable net neutrality ............................................................................. 25 Content providers – delivering the mobility experience ................................................................. 25 Seizing the opportunity – leverage the content eco system ............................................................ 26 2 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  3. 3. 8. Seizing the Opportunity in Mobile broadband ........................................................................ 27 Grow ARPU by enabling a differentiated service offering ............................................................... 27 Decrease cost by maximising network utilisation ........................................................................... 27 Control QoE by managing relevant service aspects......................................................................... 28 Enable value driven engagements with content providers ............................................................. 28 Required capabilities – the mobile broadband investment agenda................................................. 29 3 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  4. 4. 1. Introduction and OverviewIn August of 2010, Acision commissioned independent market research agency, Quantinet, to undertake a detailedsurvey to understand consumer perceptions of mobile broadband in Brazil. The research covered key aspectsassociated to mobile broadband today, including insight in Mobile broadband usage and Quality of Experience.The research in Brazil forms part of a global research initiative that Acision has undertaken in the United Kingdom,the US, Australia and Singapore. For every region, the Acision research focuses on all aspects of mobile broadbandincluding the usage of the mobile internet on Smartphones, mobile handsets, dongles, modem sticks, data cards,netbooks, and integrated mobile broadband within laptops.The motivation for Acision to undertake this global research has been the phenomenal uptake of mobilebroadband worldwide and the rumoured Quality of Experience issues accompanying it’s steady rise. One of thekey objectives of the research has been to quantify these QoE issues, understand it’s principle drivers anddetermine whether global parallels exist in its development lifecycle. Also, the potential for addressing the keyissues in terms of consumer awareness of mobile broadband and willingness to accept fairness, optimisation anddifferentiation measures, has been another key objective. In both areas we can conclude the global researchinitiative has been very successful and provides insight in this new and exciting market segment which is beneficialto all stakeholders, being consumers, operators, content providers and regulators.In this report we have dedicated a section on how Brazil can prepare for growth in Mobile broadband subscriberuptake and usage. Comparing the research results from Brazil with those from mature Mobile broadband markets,like the US and the UK, provides useful insight for Brazilian operators on fairness principles, how to deal withvideo, and ways to differentiate the Mobile broadband offer.The Brazil research was conducted by Quantinet, between the 17th and 22nd of August 2010 and is based on arepresentative sample of 819 mobile internet users aged between 16 and 74 from Brazil. The research in The US,UK, Australia and Singapore, which is also referenced in this report, had been conducted by YouGov and Toluna.Separate reports for each of these countries are available as well. Brazil – an emerging mobile broadband marketMobile broadband has undeniably turned a corner. High speed networks, flat fee pricing models, Smartphones,tablets and laptops have together fuelled a level of growth exceeding everyone’s expectation. Clearly mobilebroadband represents a very significant and strategic opportunity to operators worldwide.Brazil represents an emerging Mobile broadband market with enormous growth potential. Even though Brazilianoperators can expect similar challenges faced by operators in mature markets, they have the advantage of beingable to draw lessons from these earlier experiences. One key lesson is the fact that simply adding networkcapacity will not be sufficient to ensure customer satisfaction. While investment in network technology andmobile coverage are essential prerequisites for the success of mobile broadband, mature markets havedemonstrated that more control is required to make the service a continued success going forward. 4 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  5. 5. The challenge lies in the fundamentally constrained nature of mobile broadband, which is already beingexperienced by operators across the globe. With today’s pricing models, where substantial bundles are offeredwith ever diminishing revenues, it doesn’t matter how much one invests in network technology, the demand forcapacity will always outstrip supply. This is evident when taking into account specific cell locations, where arelatively low number of users can already create congestion issues. Because of these fundamental constraints,consumer experience will always be under pressure as users compete with each other for limited availablecapacity. Consumer experience therefore takes centre stage in the evolution of mobile broadband and itrepresents the focal point of the research Acision has undertaken.This report focuses on exploring what the next challenges are in mobile broadband and what can effectively bedone by operators in emerging markets like Brazil, to evolve the service further and continue to capitalise on theopportunity. Main conclusionsThe main conclusions of Acision’s Brazil mobile broadband research can be summarised as follows:Brazil and the mobile broadband lifecycle – With 8 million subscribers on a population of 190 million, mobilebroadband is still in its infancy. But for those who use it, it is perceived as an important service. High dependence on fixed broadband with 77% of Brazilian consumers using a fixed line connection to access the internet, compared to 16% using a phone and 30% a laptop dongle. It also means that a relative low percentage of Brazilian consumers use multiple devices to access the internet. Mobile only use is relatively high as for 52% of the consumers that use mobile broadband for access, it is the only way they access the internet. Only 48% of Brazilian consumers also uses fixed next to mobile. Frequency of use similar to mature markets with almost 7 out of 10 users (69%) using the service on a weekly basis. Over half of Brazilian consumers (51%) even uses the service on a daily basis. High bandwidth, time sensitive services like video showing low usage with just over a quarter (26%) of Brazilian subscribers stating they watch videos. Only 11% of Brazilian subscribers watch videos frequently while the remaining 15% watches videos sporadically. Pricing models do not stimulate mass market uptake with 39% of subscribers paying per KB/MB and another 32% on a restricted package. So only 29% of the subscribers can use the service without restrictions or being (severely) penalised.Quality of Experience and customer satisfaction – Even though subscriber uptake and traffic volumes arerelatively low, the majority of consumers have regular occurrences of Quality of Experience issues while usingtheir mobile broadband service. This results in alarming customer satisfaction levels. 90% of Brazilian customers have Quality of Experience issues of some kind especially regarding core aspects of the service such as slow speeds (75%), no connection and connections stability (73% and 68% respectively) and network coverage (67%). Image quality issues show a much lower percentage, but still affects over half the customers (51%). Only 10% of respondents state they haven’t experiences any issues. 5 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  6. 6. Quality of Experience issues are not isolated incidents with the vast majority of customers stating that these issues occur frequently. Core service QoE issues caused by speed (67%), no connection and connections stability (64% and 60% respectively) and network coverage (59%) occur the most frequent. Image quality is perceived as the least recurring issue with 44%. Dissatisfaction exists on certain elements of the service with price causing the highest level of dissatisfaction by far at 45% (bottom 2 out of a 5 point scale). Core service dissatisfaction levels related to stability (27%), download speeds (26%), signal quality (22%) and coverage (21%) are considerably lower. Core service satisfaction levels are relatively high, especially when compared to the (frequency of) QoE issues Brazilian customers have to deal with. 40% of customers are satisfied about the coverage and signal quality (top 2 out of a 5 point scale), followed by speed (35%) and stability (34%). Satisfaction about pricing levels is, as expected, extremely low at 23%.Enormous untapped potential – With 65% of the research respondents having the capability to access the mobileinternet on their device, two thirds do not use this services, representing 44 million potential customers operatorscan target. Of these prospects, 14% are considering the service, representing a core target market of 6 million. Butthe single most important obstacle for consumers to even start considering the service is price (55% of non-mobilebroadband users). Once pricing models become less restrictive, mobile broadband can really take off.Growing mobile broadband – A comparison with the mature mobile broadband markets in the US and the UKprovide 2 important lessons for Brazilian operators: Pricing is the necessary trigger for subscriber uptake and data usage. Transparent pricing models such as per day pricing, GB bundles and ‘all you can eat’, do not constrain the customer the way per KB/MB pricing does. Even though, per KB/MB pricing is the most common pricing model in Brazil (39%), compared to only 2% in the US and 4% in the UK. Quality of Experience remains a challenge throughout the mobile broadband lifecycle, resulting in considerable customer dissatisfaction levels. The mature markets even show higher levels of dissatisfaction, with UK consumers the most dissatisfied about all the core service aspects speed (37%), reliability and coverage (both 27%). The US scores slightly better on speed (33%) and reliability and coverage (both 21%).Preparing for growth – Looking ahead the lifecycle curve, learning from mature markets in the US, the UK,Singapore and Australia, there are 3 areas emerging markets should focus on from the start: Fairness policies - Consumers, once they understand the need for resource management, have a high acceptance of policies that enable a fair allocation of the available capacity. Mature markets show 67% support for such a policy. Many (35%) are even prepared to pay a premium if it provides improved QoE. Video optimisation – In mature markets, 60% of video users will accept video optimisation as long as they benefit from an improvement of those aspects of the service experience they find most important. Paid Value Added Services – Mature markets show a clear need for VAS and willingness to pay an additional fee for services like notifications, customisation etc. This provides a third area where operators in emerging markets can immediately start building a more diverse and long term revenue model. 6 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  7. 7. Report synopsisThe results outlined below are based on the research Acision commissioned Quantinet to conduct in August 2010.Mobile broadband usage – With 8 million subscribers, mobile broadband is still a niche service in Brazil. 51% of the respondents use the service daily and 18% at least ones a week Fixed broadband is the most common way to access the internet (77%), compared to mobile access via laptop (30%) and phone (16%) 48% of mobile broadband users are hybrid fixed/mobile users, 52% use mobile broadband only. Video penetration stands at 26%, with 11% frequent users and 15% sporadic usersQuality of Experience of Core Service – These issues are widespread, with only 10% of the users having no issues. Speed is the most encountered problem affecting 75% of the respondents, with 67% stating this issue as their most frequently experienced problem. All other core service aspects show considerable issues; no connection / staying connected (73% / 68%), no coverage (67%) and low image quality (51%). And all these issues occur frequently; no connection / staying connected (64% / 60%), no coverage (59%) and low image quality (44%).Customer satisfaction – Relatively high when looking at the amount and frequency of QoE issues. Pricing is the main source of dissatisfaction with 45%, compared to 23% satisfaction. Core service dissatisfaction levels (bottom 2 out of a 5 point scale); stability (27%), download speeds (26%), signal quality (22%) and coverage (21%) Core service satisfaction levels (top 2 out of a 5 point scale); coverage / signal quality (both 40%), speed (35%) and stability (34%).Untapped potential – Two thirds of the research respondents can access mobile internet but won’t. Hot prospectsare the ones planning to buy (14%). The biggest obstacle is price (55%). Other reasons; don’t need it (31%), notreliable (13%), value unknown (11%), not available (6%), use unknown (5%), not offered (1%) and other (6%).Growing mobile broadband – Can only happen if pricing models are stimulating uptake and usage. Per KB/MBpricing models are most common in Brazil (39%), compared to 2% in the US and 4% in the UK. Other types ofrestricted pricing models represent another 32% of Brazilian pricing models. 7 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  8. 8. 2. The Mobile Broadband Life CycleWith the widespread adoption of mobile broadband in many parts of the world, operators are entering afundamentally new playing field. Until recently, the mobile internet was a niche service reserved for businessusers or the affluent consumer. However, today things are very different and mobile broadband is on the verge ofbecoming telecom’s next mass market service. With its stellar growth, especially in recent times, the mobilebroadband service has become of vital importance to the future of mobile operators.There is, however, more at stake than the classic topic of telco revenue. Broadband access is increasingly seen asplaying a vital role in society at large. Many countries are making broadband a key policy area and are increasingregulatory control. Finland is a case in point, being the first country to designate broadband access as a statutoryright1. This is especially relevant to mobile broadband as large parts of Finland can only be reached through usingmobile technologies.Clearly mobile broadband is here to stay and is providing operators with an excellent opportunity to create a newlong term revenue stream. Achieving long term success is, however, far from obvious and many challenges lieahead on the road to broadband profitability. The mobile broadband lifecycle – igniting consumer adoptionFundamental to understanding the challenges in mobile broadband is the lifecycle of the service (figure 1). A key aspect in this life cycle is the occurrence of exponential volume growth (the black line in figure 1). At some point in the lifecycle a massive explosion of broadband traffic occurs which, in turn, is a key driver for many of the issues challenging mobile broadband providers. The exponential growth of mobile broadband traffic is a result of two main determinants: 1. Usability of the service is the main prerequisite – Usability is a combination of network capacity Figure 1 – The mobile broadband lifecycle which provides broadband access, combined with a mobile device able to run on these networks that provide an intuitive internet experience. The recent advances in both these areas, HDSPA and LTE for network technologies and devices such as android devices, iPhones and, most recently, tablets have now created the fertile starting point for a true broadband experience. Without this prerequisite, traffic explosion will not occur. 8 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  9. 9. 2. Pricing models are a necessary trigger – only if consumers feel they can use mobile broadband without being penalised for usage, will the service really take off. The data traffic explosion is triggered by transparent pricing models such as per day pricing, Gigabyte bundles or even ‘all you can eat’ unlimited packages. This allows consumers to use the service without feeling constrained. Once this point is reached, mobile broadband will cross the chasm from being a niche service to a mass market mobility service which consumers embrace and freely use anytime and anyplace they like. The growth of data volumes – the continuous tsunamiAcquisition strategies as the all you can eat model have been, without doubt, very successful indeed. In fact,mobile operators have, in a sense, become victims of their own success. Mobile broadband is proving to satisfy such an important need in consumers that, once 7,000,000 TB per month they start using the service in earnest, they find it impossible to stop. As a result, data volumes in mobile are rising continuously each year. In Latin America, traffic is projected to grow at a CAGR of 92% CAGR 2010 - 2015 111% between 2010 to 2015, representing the second highest level of growth of all the regions worldwide2. Traffic is not only changing in terms of volume. The traffic mix in mobile broadband is also under Figure 2 2 – Growth and breakdown of mobile broadband traffic Figure – Growth and breakdown of mobile broadband traffic considerable change. Especially the share of time(source: Cisco Visual Networking Index, 2011) sensitive, real time content will grow significantly in mobile broadband. These are types of serviceswhere packet loss or any delay in transmitting data has an impact on the user experience. Video, VoIP and gamingare examples where round trip delays or packet loss can result in immediate Quality of Experience degradationsuch as a stutter in a video or on a VoIP call. Current projections estimate the share of time sensitive content togrow to approximately 70% of all mobile broadband traffic.The data challenge for mobile broadband is therefore twofold. On the one hand operators have to deal withsignificantly more traffic each year for which they have to size all their systems accordingly, including thesupporting infrastructure. In addition, they have to deal with traffic which is predominantly time sensitive. Thisleaves very little room to manoeuvre for operators in terms of how they handle traffic, a topic explained in thenext section when we consider the impact on the operator’s technical infrastructure. 9 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  10. 10. Quality of Experience – ride the hype cycleThe explosion of data is not the only challenge that operators face in mobile broadband. Quality of Experience isan often ignored second challenge that operators need to address. Many factors can influence the userexperience, but limited network capacity and congestion issues caused by the data explosion mentioned above,are the most important ones. The crux of the challenge lies in the fundamentally constrained nature of mobile broadband. Regardless of how much one invests in network technology, the demand for capacity will always outstrip supply. When taking into account specific cell locations, a relative low number of consumers can already create congestion issues. Because of the physical constraints, consumer experience will always be under pressure as consumers compete for limited available capacity. Consumer experience therefore, takes centre stage in the evolution of mobile broadband and it represents the focal point of consumer research Acision has Figure 3 – The consumer hype cycle of mobile broadband undertaken around the globe.We found the Gartner hype cycle (the red line in figure 3.) most effective in explaining the outcomes of ourresearch. Consumer expectations rise significantly during the early stages of mobile broadband introduction, tosuch an extent that expectations are becoming inflated. The expectation in the early days of mobile broadbandthat it could completely replace fixed broadband is a case in point. Although this is an inherent mechanismaccompanying many technology lifecycles, operators would do well not to fuel such expectations. Focus onmanaging Quality of Experience enables operators to manage the hype cycle much more effectively and reach aplateau of enlightenment and productivity earlier in the lifecycle.Acision therefore believes that the Quality of Experience of mobile broadband is essential going forward. Itrepresents a key area where capabilities should be deployed to measure and enhance the Quality of Experience ofindividual consumers. In this context it is important to realise two things. First, Quality of Experience is a verypersonal concept. For some consumers price is an overriding concern while others find content quality moreimportant. Each consumer should be able to determine which type of experience is most suitable to theirindividual needs. Secondly, Quality of Experience is all about the actual services being consumed such as video,gaming, voice or browsing. It is at this level that the experience needs to be optimised and tailored to individualconsumer needs. This represents a step change from being packet aware to content and service awareness. 10 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  11. 11. Seizing the opportunity – a head start on differentiationIn terms of the mobile broadband lifecycle, many markets are now entering the first stages of maturity. The initialacquisition stage has been very effective in making mobile broadband a service which is attractive to the massmarket. For Brazil, these more mature markets provide a valuable source of information on how to fuel MobileBroadband growth without compromising the Quality of Experience.Profitability remains a key challenge for operators in mature markets, especially as they are forced to move awayfrom the ‘all you can eat model’ and are frantically looking for ways to differentiate their offering and dig into newrevenue streams. Differentiation will be a core strategy for operators to deploy, creating value for targetedconsumer segments and monetising this value accordingly. The most essential element in building this value is theconsumer experience. Operators in emerging markets have the advantage they can start acquiring capabilities todifferentiate early in the lifecycle. A differentiated consumer experience at the content and service levelrepresents the key to the continued successful growth of the mobile broadband market. 3. The Operator ChallengeAs mature markets have shown, the initial success of mobile broadband can be partly attributed to the "all youcan eat” and “flat fee” pricing models, providing clarity to consumers with little risk of bill shock. Our research has shown that in the US, for instance, only 2% of consumers state paying per Megabyte (figure 4) a comparable number to the UK (at 4%). Other markets, such as Singapore and Australia have under 10% on MB pricing models. In Brazil, however, over a third of all users are paying per megabyte. Packages allowing 5 Gigabytes per month to unlimited usage are very popular in mature markets, with over 50% of consumers subscribed to such packages. For the US this is even 84%. As part of the path to maturity, pricing models in Brazil needs to introduce affordable and less restrictive models, making the service more attractive and fuel mobile Figure 4 – Per MB pricing in Brazil, US, UK, Sing and Aus broadband uptake.The relatively unrestricted packages outlined above do have an important knock on effect on operator profitabilitythough. In order to handle the traffic and QoE demands, operators have to invest heavily in network capacity andsupporting infrastructure. As such, the costs associated with supporting the consumption of a single subscriberrises significantly while the basic flat fee pricing models lead to a decreasing Average Revenue per User.Profitability is therefore under severe pressure, with a number of operators that have already bitten the bullet,including O2 UK and AT&T US, switching to a model with data caps3. These are just the first steps in defining newpricing models. Much is still to come in this area and operator capabilities will be stretched to the limit to supportmore innovative and targeted pricing models aimed at improving profitability levels. 11 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  12. 12. The root cause – oversubscription ratio in mobile broadbandThe root cause of the profitability issue in mobile broadband is the oversubscription ratio or contention ratio. Thefixed broadband model has always been based on the principle that a megabit per second (Mbps) of ‘real’ capacity could be sold many times to individual consumers. This mechanism, which has served its purpose well in fixed broadband, is failing in mobile for a number of reasons. First of all, capacity in a mobile network is much more vulnerable at the network’s edge; the Radio Access Network (RAN). In a specific mobile cell, RAN capacity can easily become very constrained as more people move into the cell. In fixed this is of course much more predictable as connected households do not move around. Capacity in mobile can therefore become exhausted easily in specific cell sites, especially during certain times of the day. Figure 5 – The issue of dropping oversubscription ratiosA second important characteristic driving the decline of mobile oversubscription ratio’s is the proportion of timesensitive content in mobile broadband traffic. As mentioned above, up to 70% of mobile traffic is expected to belong duration and time sensitive traffic such as video and VoIP. These services not only generate high levels of datavolume, but in addition, claim network capacity for a sustained period of time. A YouTube movie for instance,depending on its quality, can generate between 0.5 to 2.5 Mbps of traffic. Assuming RAN capacity of 14.4 Mbps,between 6 and 30 video users can claim the capacity of an entire base station. This combination of limited RANcapacity and high time sensitive content, such as video, poses one of the core challenges in mobile broadband. The network impact – connecting the IP and Mobile worldsAddressing the oversubscription ratio issue requires an end to end analysis of the chain of delivering the mobilebroadband access service. In this service chain a number of fundamental issues exist:The devices that connect to the internet come in an ever increasingly wider variety, ranging from laptops,smartphones, netbooks and iPads to game consoles. Each device has its own characteristics, screen size, memorycapacity and usage patterns. Also the types of services accessed on these devices vary substantially, creatinghighly unpredictable levels of demand in mobile data traffic and usage patterns.The radio access network (RAN) has limited capacity, especially taking into account the unpredictable number ofconcurrent users in a specific cell at a given time. In addition, many other factors can adversely impact RANcapacity, such as interference from other radio sources or atmospheric conditions. 12 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  13. 13. The core network is by nature an IP network which is only packet-aware. The core network therefore doesn’t‘know’ what types of services it is processing. Take the delivery of a time sensitive video for instance. At a packetlevel, the network might be functioning perfectly, while the actual service is compromised because of round tripdelays or packet loss. The core network can therefore not understand such Quality of Experience issues and is notable to optimise the service at this level.The IP network (‘the internet’) has thesame characteristics as the core networkbut with significantly higher capacity.Under the right circumstances, the levelsof traffic it can potentially generate areable to overwhelm the mobile network,in particular the GGSN at the mobileedge and, of course, the downstreamRAN network and base stations.Content providers, finally, tend toassume there is unlimited capacity tothe consumer which, of course, clearly isnot the case. They are not fully aware of Figure 6 –The mismatch between the IP and mobile networksthe potential constraints that can occuren route towards the mobile device. As a result, they are unaware of the QoE level of the content they provide.A fundamental disconnect therefore exists between the two ultimate ends of the mobile broadband chain; thecontent provider and the mobile consumer. This disconnect is caused by a lack of Content Admission Control: There is no end to end management of content as a the delivery networks are only packet aware. There is no specific mechanism in place to ensure the content is delivered in an optimal way. In particular, no decisions are made to prioritise certain packets, because they represent a time sensitive audio stream for example, over other packets which are non-time sensitive. A p2p packet, for instance, can easily be delayed in preference to a VoIP packet without impacting the service experience. There is no end to end resource awareness prohibiting content providers to incorporate end user capacity as part of the content delivery. If the video content provider such as YouTube, for instance, would be aware that the consumer only has 300 Kbps of capacity, it could stream a version of the video which meets those capacity requirements. There is no end to end consumer awareness which is required for tailoring the Quality of Experience to a specific consumer. A good example are cost conscious consumers, which our research has identified as 15% to 25% of the population. These consumers prefer all content to be as compressed as possible in order to save on bundle use. Another example are corporate consumers, who are willing to pay an additional fee for a premium VoIP service which prioritises all their VoIP traffic. In order to enable these types of scenario’s the network needs to be both consumer and Quality of Experience aware. 13 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  14. 14. Seizing the opportunity – maximise network utilisationThe disconnect between content provider andmobile user needs to be addressed in order toincrease the oversubscription ratio as well asimproving Quality of Experience levels. In termsof network capabilities this is where we believeoperators should seize the opportunity; byadding Content Admission Control capabilities,making the end to end network content,resource and consumer aware.Only by adding these levels of awareness will itbe possible to manage content in such a waythat the network resources are fully utilised .Also, it increases the oversubscription ratio,enabling more simultaneous users on thenetwork. And finally, these three levels ofawareness allow end to end management of theQuality of Experience for individual consumers Figure 7 –Introducing content admission controlObviously capabilities are required between the mobile and IP networks to enable end to end content admissioncontrol. These capabilities will be discussed in section 8 of this document. 14 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  15. 15. 4. The Consumer PerspectiveIn August 2010, Acision commissioned research with Quantinet, aimed to understand in greater detail the specificconsumer perceptions and needs in the Brazilian mobile broadband market. The research shows there exist clearopportunities for mobile broadband providers in Brazil.First and foremost, the research confirms the increasingly important role of mobile broadband in Brazilianconsumer’s everyday lives, with 69% of Brazilian consumers accessing the internet with their mobile broadbandservice at least once a week and over 50% on a dailybasis (figure 8). Secondly, the research shows thereexists a significant untapped Mobile broadbandpotential and the opportunity to accelerate subscriberuptake. Finally, the research provides a useful insightin ‘preparing for growth’, using the research findingsfrom mature markets like the US and the UK. Thisallows Brazilian operators to prepare for futuregrowth, learn from the challenges faced by operatorsin mature countries today, and obtain a clear Figure 8 – Mobile broadband frequency of useunderstanding of the opportunities that emerge duringthe mobile broadband road to maturity. With fairness policies, content adaptation and paid for value add servicesshowing high consumer acceptance in mature mobile broadband markets, the necessary technological capabilitiescan already be adopted by Brazilian operators early in the mobile broadband lifecycle. Untapped potential – connecting the next 44 millionThe research identifies a substantial untapped mobile broadband potential in Brazil. With 65% of the research respondents having the capability to access the mobile internet on their device, two thirds do not use mobile internet services. This indicates there are potentially 44 million Brazilian consumers that operators can target directly with attractive mobile internet offerings. In particular, the research shows that 14% of non mobile internet users are already considering to start using the service, representing over 6 million potential new customers (figure 9). Another 11% are unaware of Figure 9 – Perception of non-mobile broadband consumers the value or the types of services mobile internetprovides (5%), representing another 7.3 million of potential customers. But the biggest obstacle for consumers isthe price. Over half of the consumers (55%) that are able to access mobile internet services, won’t do so becausethey find it too expensive. With 39% of mobile broadband subscribers paying per MB (figure 4), pricing is clearlythe most important barrier to increased market penetration. This is a clear demonstration that Brazil is still in theearly stages of the mobile broadband lifecycle. Once pricing starts to become less restrictive, operators shouldprepare themselves for exponential traffic growth and the associated challenges it poses. 15 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  16. 16. Quality of Experience – core service already under pressureQuality of Experience of the core service is already creating issues for consumers in Brazil, even though penetration levels are still low (figure 10). The significant majority of consumers have experienced problems with the service, with only 10% of the respondents stating they have experienced no issues in the past. The majority of issues relate to the network with speed causing issues for 75% of consumers. Also 73% of the users were not able to connect at a certain moment and if connected, 68% has experienced issues staying connected. Network coverage has been a problem for two thirds of users. Issues not related to the core network, such as image Figure 10 –Consumers with QoE issues quality, have significantly lower numbers.When considering the frequency of these issues, connection speed again tops the poll with 67% of respondentsstating this is a recurring issue (figure 11). Also the other core service issues pose a recurring problem for themajority of users, with no connection (64%), stayingconnected (60%) and no coverage (59%) all affectingthe vast majority of users. Even though image qualityis perceived as the least recurring issue, with 44% itstill affects a significant portion of the subscribers.These outcomes, the number of users affected as wellas the frequency of issues, are significantly higherthan in any of the other more mature markets Acisionhas researched. Figure 11 – Frequency of QoE issue 16 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  17. 17. Satisfaction levels – pricing is key dissatisfierWith Brazilian customers having relatively high Quality of Experience issues, one would be tempted to expectsatisfaction levels to be very low. But surprisingly enough, this is not the case (figure 12). Although dissatisfactionlevels on core service aspects are between 21% and 27%, more consumers tend to be satisfied with core service performance. Coverage, for instance, is rated by 21% of users as poor, compared to 40% rating it good. The same is true for signal quality, with 22% rating it poor and 40% good. And even though speed poses the largest QoE issue, significantly more users are satisfied regarding this service aspect (35%) compared to dissatisfied (26%). Service stability shows similar satisfaction levels, with 34% rating it good and 27% poor. The key dissatisfier, by far, is not the core network but pricing with 45% of consumers being dissatisfied about the price compared to 23% being satisfied. This is again completely in line Figure 12 – Customer satisfaction levels with Brazil’s position on the mobile broadband life cycle.The relatively high levels of satisfaction, in light of the Quality of Experience issues, is another example of the earlystages of the market and the effects of the hype cycle in these early stages. For many consumers today’sexperience is their first exposure to (mobile) internet and attitudes toward the service are mainly one ofexcitement and exploration. The fact that they can access the internet from a mobile device opens up a wholenew world and provides a positive experience on its own. Once consumer progress along this hype cycle,operators will find it more difficult to satisfy customers deepening the challenge of customer satisfaction. 17 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  18. 18. 5. Comparing Brazil with Mature MarketsAs part of our global research initiative, Acision commissioned independent research agency Yougov to conductconsumer research in the mature markets of the US and the UK. This provides an excellent opportunity tocompare the ways in which consumers experience their mobile broadband service in the emerging market ofBrazil with those in the mature markets of the UK and the US. Mobile broadband – crucial for Brazilian broadband penetrationMobile broadband in Brazil is still a niche service, with 8 million subscribers on a population of 190 million. In theUK and the US on the contrary, Mobile broadband is well on its way of becoming a mass market service, with 18million subscribers in the UK (on a population 62 million) and 120 million subscribers in the US (on a population of309 million)4. In Brazil, 77% of consumers uses a fixed line connection to access the internet, compared to 16% 235% using a phone and 30% a laptop dongle (figure 13). With Laptop 201% penetration only at 123%, it shows that Brazilian consumers Phone are highly dependent on their fixed line connection. In the Fixed US and the UK, consumers are far less restricted in the way 123% they want to access the internet. Phone and laptop dongle access show similar or even higher penetration than fixed line access. The US has an overall penetration of 201%, with an almost even spread between fixed line (70%), Phone (67%) and laptop (64%) access. The UK has the highest overall penetration with 235%, with laptop access (85%) Figure 13 – Accessing via fixed, phone or mobile more popular than fixed line (82%) and phone access (68%).Even though the majority of Brazilian internet users still depend on their fixed line access (figure 13: 77% pointsout of 123%), there are signs of change. The research shows that for the majority of mobile broadband subscribers(currently 30% points out of 123%), it is their only way to access the internet (52%). Only 48% of Brazilian mobilebroadband subscribers also have fixed access (Figure 14). Mature markets like the US are very different, as 20% ofthe subscribers use mobile broadband only and 80% useboth mobile and fixed. Subscribers in the UK show evenhigher levels of hybrid usage, with 17% using mobilebroadband only and 83% using both fixed and mobile. Sowhere mobile broadband in the US and the UK is in manycases a supplement to fixed broadband, for Brazil it is anecessary service with limited to no alternatives. Thelimited availability of a reliable fixed broadbandinfrastructure makes mobile broadband a strategic servicefor Brazil, much more so than in the US and the UK wherean extensive and reliable fixed broadband infrastructure isavailable. Figure 14 – Mobile only vs mobile and fixed use 18 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  19. 19. The lifecycle – growing mobile broadbandIn section 2 of this report we have discussed the mobile broadband life cycle model which allows us to comparedifferent countries based on their position onf this life cycle (figure 15) . Before comparing the research results, it is important to understand how each market is advancing on the Mobile broadband lifecycle and how they are positioned against one another. Mobile broadband penetration in Brazil is low with only a few percent generating CUSTOMERT SATISFACTION relatively low traffic volumes (figure 15, black line). In order to accelarateTRAFFIC VOLUME consumer adaption, the main operator focus in this stage is on acquisition driven strategies. The introduction of attractive CSD GPRS EDGE HSDPA HSDPA+ LTE LTE+ ? pricing models with limited or no 2000 2002 2004 2008 2010 2012 2014 2016 CUSTOMER PENETRATION constraints will provide the necessary Figure 15 – Maturity and the hype cycle: Brazil vs. the UK and the US trigger required to fuel penetration.In the US and the UK penetration levels are well above 25% and traffic volumes are growing exponentially. Inorder to support this growth, massive network investments are required and profitability is under severe pressure.As a result, operators in these markets have abandoned the acquisition driven pricing models and shifted theirfocus to profitability driven strategies.Part of the mobile broadband lifecycle is the consumer hype cycle, which tracks how Quality of Experiencedevelops throughout the lifecycle (figure 15, red line). For the majority of users in Brazil, this is their firstintroduction to mobile broadband (or perhaps even the internet). Satisfaction levels will therefore always be high,even if the service experience is relatively lacking. The mature users in the US and the UK, with the innovativeedge gone, have become more critical about service quality creating downward pressure on Quality of Experience.It is these relationships which explain the outcomes of the Brazilian research. Pricing models – the necessary triggerAs described in section 1, mobile broadband can only really take off if consumers feel they can use the servicewithout being penalised for usage. Subscriber uptake and data usage are triggered by transparent pricing modelssuch as per day pricing, Gigabyte bundles or even ‘all you can eat’ unlimited packages. This allows consumers touse the service without feeling constrained. Once this point is reached, mobile broadband will cross the chasmfrom being a niche service to a mass market service which consumers embrace and freely use anytime andanyplace they like. 19 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  20. 20. Figure 16 – Consumers paying per KB/MB Figure 17 – Dissatisfaction on priceIn the US and the UK, pay per use pricing models have almost completely been replaced by bundles or ‘all you caneat’ packages. In Brazil however, over a third of all consumers is still paying per KB/MB (figure 16). In addition,another 32% is on a package with restrictions, where they have to pay extra if they exceed their limits. As a result,around 70% of Brazilian users have a subscription that penalizes use in some way.The restrictive nature of the pricing models translates into significant dissatisfaction on price. In Brazil pricingdissatisfaction stands at 45%, which is one and a half times the US level and more than twice as high compared tothe UK (Figure 17). The pricing models in Brazil not only create a barrier to stimulate traffic consumption, they alsoconstrain further mobile broadband penetration. As mobile broadband is the only option to access the internet formany Brazilians the need for the service is very high. This represents a great opportunity to grab market share byoperators willing to introduce pricing models which will stimulate consumers more to start using the service. Service usage – frequency vs. videoMobile broadband proves to be part of everyday life in all markets when looking at frequency of use (figure 18). Even though Brazil has the lowest number of mobile broadband users accessing the service at least ones a week (62%), they are not that far behind the US (70%) and the UK (77%). The difference between users accessing the service on a daily basis is even lower, with approximately 50% of US and Brazilian consumers accessing the service on a daily basis, behind the UK with 58% of daily users. The high frequency of use by Brazilian consumers is probably related to the fact that the majority of users only accesses the internet via mobile broadband. This will also include more family and household usage with multiple people using a single mobile broadband Figure 18 – Using the service > once a week connection. 20 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  21. 21. Streaming video including services such as YouTube, is becoming more popular every day and is predicted togenerate over two thirds of all mobile broadband traffic in 2014. In the US, already 49% of mobile broadbandsubscribers are watching videos (figure 19). For the UK this is 36%. In Brazil however, only 26% of mobilebroadband subscribers watch video. Of these users, only11% frequently watch video and 15% state they watch itsporadically. This doesn’t come as a surprise with themajority of Brazilian consumers either on a per KB/MBpackage or on a restricted package, which prevents themfrom using high bandwidth applications like video. So eventhough Brazilian consumers are frequent users, they are notconsuming the same data volumes as their counterparts in Figure 19 – Video Usersthe US and the UK. Quality of Experience – a challenge throughout the lifecycleIn Section 4 we discussed that Brazilian consumers are already faced with significant Quality of Experience issuesregarding the core service, with speed, reliability and coverage causing the majority of problems. As these issuesare occurring at mobile broadband penetration levels below 5%, and well before the exponential traffic explosion,a comparison with mature markets can provide useful insights how Quality of Experience issues develop duringthe Mobile broadband lifecycle.Even with the previously outlined QoE issues, consumer dissatisfaction on core service aspects is lower in Brazil than in mature markets (figure 20). UK consumers are on40% 37% Speed average the most dissatisfied about the core service. Of the 33% Reliability core service aspects, speed is by far the biggest cause of30% 27% 27% consumer dissatisfaction in the US (33%) and in the UK 26% 27% 21% 21% Coverage (37%). Reliability is the leading cause of consumer20% 21% dissatisfaction in Brazil (27%), closely followed by speed (26%).10% Despite investments of billions of dollars in network expansions and upgrades, consumers in the US en the UK 0% Bra US UK are still faced with significant problems in core service Figure 20 – Dissatisfaction about core service aspects performance. It is clear from these numbers that Quality of Experience will increasingly become an important issue forconsumers and operators. Although networks will become more powerful and able to handle more traffic andconcurrent users, pure network investment alone will not prove enough to avoid this upward curve. With trafficgrowing exponentially and consumers becoming more critical as the service matures, operators will need to demore to maintain, let alone improve quality of experience.The challenge to operators is therefore to do more in addition to rolling out state of the art telecoms networks.The next section will explore the avenues operators can take to seize the opportunity and make the most out oftheir investments. 21 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  22. 22. 6. Preparing for GrowthWhen looking ahead on the lifecycle curve, there are three key areas operators in emerging countries should focuson from the moment they introduce mobile broadband: 1. Introduce fairness principles that secure fair distribution of bandwidth. 2. Optimise specific services, such as video, to improve Quality of Experience. 3. Differentiate the service offering to increase customer choice, satisfaction and revenues.Deploying capabilities in these areas will enable operators in emerging markets such as Brazil to early address theQoE and profitability issues that operators in mature markets are struggling with today. Most importantly, theoutcomes of our research in mature markets demonstrates that high levels of consumer buy-in exist to deploythese capabilities. Providing value add in areas such as fairness, service optimisation and differentiation isproviding consumers with services they are explicitly asking for. By catering to these demands, operators inemerging markets would be in an ideal position to seize the opportunity early on in the life cycle and combine highlevel of acquisition with strong levels of customer satisfaction and loyalty. In the following section this promisingoutlook will be discussed. The results are based on Acision’s research in the UK, US, Singapore and Australiaproviding clear guidance to what lies ahead. Fairness principles – securing fair distribution of bandwidthFair use policies of some kind are being deployed by most providers of fixed and mobile broadband. Consumerawareness globally of these fair use policies is, however, quitelimited with 63% of consumers not aware whether they havea fair use policy as part of their service (figure 21). So only37% of consumers is aware whether a fair use policy is inplace or not. When asked about the underlying reasons forfair use policies, consumers are, however, quite unaware whyoperators have implemented such policies.When asked if they are aware that a small percentage of userscan generate the majority of network traffic and therefore Figure 21 –Do you have a Fair Use Policy?negatively impact the experience of all users, 64% states they are not aware of this issue (figure 22). Another 9% is unsure which basically equates to not being aware of the consequences. So only 27% of consumers are aware that a relatively large part of the available mobile broadband resources can be claimed by individual consumers at the expense of others. Without such awareness, it is less likely customers will accept certain fairness measures that secure a better overall QoE for all users. Raising customer awareness of such key technological and business issues should therefore be an essential operator objective. Figure 22 –Aware of network abuse 22 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  23. 23. Once consumers have a better understanding of the reasons behind fair use policies, they are able to consider thevalue that applying fairness principles can provide. At the same time, it is very important that customersunderstand how the fairness principle applies to them personally and how it enables a better QoE for all.When asked if they would allow the operator to apply a fairness policy in order to improve the QoE, on average15% of consumers globally stated categorically they would notaccept such a policy (figure 23). Two thirds of consumerwould, however, accept fairness policies with another 18% ofconsumers who could possibly be persuaded to accept apolicy, probably if they better understand the impact.In conclusion, there is a clear support for fairness principles, aslong as consumers are made aware of the necessity and theimpact on their personal QoE. Awareness can be createdthrough education campaigns explaining the constraints of Figure 23 – Support for fairness policiesmobile broadband and policy acceptance increased by pro-actively informing consumers about the applied policy, reason and intended outcome. This provides an excellentopportunity to actively manage the available broadband capacity for the benefit of the majority of consumers. Content Optimisation – improving video Quality of ExperienceA second key capability operators can deploy is content optimisation, especially in those cases where it improvesthe consumer experience. Streaming video is a good example of a popular service where operators can realiseimpressive QoE improvements. The global research shows that consumers are most annoyed by videos that pausefrequently or take a long time to download. Also, they are hardly at all worried about lower quality in full screen.This understanding of Quality of Experience preferences provides essential input for optimizing the video service. Operators can play with the buffer time and quality of the video as long as they ensure that once the video starts running, it does so uninterrupted. This way, content optimisation can significantly enhance consumer satisfaction. When specifically asked whether they would accept video optimisation (figure 24), 60% of consumers explicitly confirm they would accept such an approach or would contemplate it (17%). Only 23% of consumers would, at present, oppose to such an approach. Figure 24 –Acceptance of video optimisation The support for a combination of picture and video optimisation proves to be even stronger; when asked if they wouldcontemplate to pay for a service enabling compression of videos and pictures in order to save on the data bundle,29% confirmed they would (figure 26). This 29% of global consumers represents a marketable segment of costconscious consumers that are very willing to sacrifice content quality to improve on spend. It clearly shows thatwhen it comes to content, consumers considers a variety of parameters of which content quality is just one.Consumers are very well able to determine which trade-offs they want to consider in order to create their optimalpersonalised services combination. 23 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  24. 24. Differentiate the offer – add monetisable value to the serviceThe final area focus is on the potential of service differentiation, which provides the opportunity for mobilebroadband ARPU growth and competitive offerings.First the question was posed whether consumers would be prepared to pay for an overall Quality of Experience improvement of their mobile broadband service. As figure 25 shows, 35% of global consumers are willing to pay for an improvement in their current Quality of Experience, with 20% not sure yet. This provides a clear opportunity for a marketing strategy which targets high value consumers willing to pay more for an improved overall service. In terms of value added services (VAS), the focus of the research is to ascertain whether there is an intrinsic need and interest in value added services which can be monetised. Figure 25 – Pay for improved QoE? Many more considerations can be made to determine in depth which specific VAS services generates the highest revenuepotential and further research in this area will certainly be valuable. Such a deep dive will, however, require muchmore than the panel research used for this report. As such, the revenue opportunities investigated in this researchshould be seen as preliminary input for a more detailed consumer propensity study.The panel research shows a clear monetisable opportunity in VAS, with the majority of respondents statinginterest in one or more paid services. Each ofthe polled VAS services could provide a solidfoundation for a marketable consumersegment:1. Notifications at predefined spend limit (41%)2. Bandwidth equally shared between as many users as possible, ensuring connection stability and maximum download speeds (35%)3. Spend control / prevent bill shock (35%)4. Roaming package with predefined Figure 26 – Support for paid value added services conditions when connecting to a foreign network (34%)5. Shared bundles like sharing usage allowance with family members (33%)6. Service customisation like personalised video and picture quality settings (30%)7. Content compression of video and pictures, allowing more downloads with the same usage allowance (29%)8. Priority providing the user with higher speeds or more bandwidth (26%) 24 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  25. 25. 7. Converging Eco Systems – Telco’s in the Internet WorldPerhaps most fundamental to mobile broadband is the fact that two previously separate eco systems are gettingincreasingly closely intertwined. Operators entered an entirely new ecosystem which is driven by content,accessed in many different ways and provided in even more varied formats and business models. In this content-driven ecosystem operators need to develop fruitful relations with its key actors, especially content providers,(content) consumers and regulators. Two aspects of thiseco system are especially important as they are raising a Consumerslot of publicity. Information, productivity, communication, entertainmentRegulators – achieve sustainable net neutralityFirst of all, operators should consider playing a leadingrole in the net neutrality debate. For some, the concept of Regulatorsnet neutrality means providers should treat all consumersequally in terms of internet use and access, preventingthem from inspecting, shaping or controlling any traffic Network Operators Content Providersrunning over their networks. However, mobile broadband Run a sustainable and profitable Ubiquitous access and content business ownershipcapacity is a physically constrained resource wheredemand fundamentally outstrips supply for the foreseeable future. If left ‘free’ and unchecked, congestionbecomes a permanent feature of the mobile broadband service turning it into a service which is very difficult touse in any real sense of the word. Also, it does not consider the interest of all stakeholders involved. Operators,content providers, regulatory bodies and consumers need to work together to agree on a clear definition of‘fairness’ that can be applied uniformly across the market. The debate is essential to the fundamentals of theindustry and it is essential that all parties, including operators, are heard to ensure a fair and sustainable outcomeis achieved. For operators there is an opportunity to lead in this area and build a reputation of internettransparency, fairness and trustworthiness. Content providers – delivering the mobility experienceSecondly, the internet ecosystem provides fresh opportunities for operators to leverage internet based contentwithin the mobile domain. Operators need to look for ways to partner with content providers and create adifferentiated content offering that is beneficial to the consumer as well as the content provider. On top of this,alternative business models can be developed. This of course places very different demands on mobile providers,creating wholesale type relationships with certain content providers, including developing capabilities in areassuch as content mediation. This creates a completely new space in terms of consumer interaction, revenuepotential, business models and capabilities for operators to occupy and develop.The Acision research shows consumers are looking for value add on top of their basic access service. In the endconsumers are most interested in the service itself, not the access method providing it. This provides a greatopportunity for content providers and operators to work together and develop the next wave of killer apps. 25 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  26. 26. Seizing the opportunity – leverage the content eco systemA key opportunity exists within the content eco system to harness and leverage its inherent power andcapabilities. The net neutrality debate should be taken as an opportunity by all stakeholders to define terms ofengagement which are beneficial to all, consumers, operators and content providers. Going forward we believethe following aspects are key requirements for a successful evolution of the content eco system: 1. The development of the mobile content eco system considers the specific challenges of mobile broadband, especially the issues of volume growth and low oversubscription ratio’s. Operators should be allowed to deal with these fundamental challenges which threaten to erode the business model. 2. The Quality of Experience (QoE) of the internet service is one of the key considerations going forward. Our research shows that consumers have very different opinions on what is important in a service. For some it is price, for others it is speed or uninterrupted play. In order to deliver on these consumer expectations, operators should be allowed to optimise the service for specific consumers. 3. It is of course vital that consumers are able to choose their preferred QoE based on unambiguous and transparent information. If presented with a choice, they are able to make considered decisions on which aspects of the service they value most. Consumers should not be denied this choice. 4. The affordability of the internet service is another important requirement for de the development of the eco system. In this information age, internet access can rightfully be consider a fundamental human right. A low cost no frills package that is affordable for nearly everyone has to exist . Such a service can only exist if there is a wide range of premium value added services that will subsidise such a basic package. In order to create these levels of differentiation, operators need the capabilities to enforce different service levels and monetise them, just as any other business. 5. The fair treatment of all stakeholders in the eco system, consumers, content providers and network operators alike, is another vital requirement in a constrained resource. Especially as it is inevitable that demand outstrips supply and consumers continuously contend for more capacity than is available. The only way to deal with this is to apply fairness principles. Is it fair that some people take the lions share of available bandwidth just because they are smarter internet users? Should someone who has been watching video’s all day be treated exactly the same as someone who is just logging on? Clearly not. 6. Transparency and accountability of operators towards consumers and regulators is the bedrock of a successful content eco system governed by sustainable net neutrality principles. Given the importance of information and internet access in today’s society, mal use by any party in the content eco system, be it certain consumers, content providers or operators, has to be avoided. Operators and content providers should equip themselves to provide these levels of transparency and accountability to any party who is rightfully requesting such information. 26 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  27. 27. 8. Seizing the Opportunity in Mobile broadbandIt is difficult to overestimate the impact of the mobile broadband challenges outlined previously. Current dataconsumption levels are already causing network congestion and seriously impacting the Quality of Experience. Themajority of growth is, however, yet to come. The investments in core network and backhaul capacity required todeliver acceptable Quality of Experience levels will therefore be very significant indeed. As backhaul cost alonetypically represents 30% of operator OPEX, these investments could fundamentally undermine the mobilebroadband business case.The challenges in Mobile broadband cannot be solved by simply throwing more network capacity at it. Even if itwere possible to create such capacity levels in the Radio Access Networks and core networks, the investmentlevels alone would destroy the business case. A more comprehensive and broader approach that addresses allessential areas is therefore required.In order for Mobile broadband providers to establish a sustainable business model with a healthy profitabilitylevel, Acision believes the following business priorities are essential. Grow ARPU by enabling a differentiated service offeringIncreasing revenue per subscriber is achieved by increasing the perceived value of the broadband service, enticingconsumers pay a premium. Our research shows that consumers wantvalue added services and are willing to pay additional fees for it. The Consumer Segmentneed for a personal Quality of Experience is clear demonstrated. The Price Speedability to target different segments by differentiating the service and Tieredproviding value added services is essential in achieving this. Especially Packages Priority & Locationthe mobility aspects of mobile broadband provide a rich set of possible Pricingdifferentiation parameters to be deployed. This requires a step change Application Timein operator capability in terms of controlling the service. If higher valuesegments are created, it is essential that the agreed Quality of BundleExperience levels of these premium services are met. Decrease cost by maximising network utilisationThe required network capacity to handle peak concurrent users is the single most important factor in determiningcost levels in mobile broadband. With oversubscription ratio’s significantly lower than in fixed broadband, mobileoperators need to find ways to spread the limited capacity much more efficiently over the customers using theservice at any given point in time.Operators therefore need to control traffic levels at certain peak times, locations, service types and specificindividuals to free up capacity. By making more efficient use of the network and spreading the freed up excesscapacity over other users, the network cost per user can be brought down. In essence this is a matter ofmaximizing network utilization, ensuring network demand is spread out evenly over the day and the number ofconcurrent subscribers that can be supported is maximised. 27 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  28. 28. Control QoE by managing relevant service aspectsIn such a constrained environment, Quality of Experience is evidently under pressure. Acision’s global consumerresearch confirms this is clearly the case in every country and region. QoE issues are not exclusively related to coreaccess service aspects as coverage, connection stability and speed. More importantly, the QoE of services runningover these networks are at stake. Video is a case in point where considerable issues exist in key video QoE aspectssuch as time to screen and video stalling. These issues are widespread in all regions worldwide, ranging fromgrowing economies such as Brazil to highly developed and densely populated countries such as Singapore.In addition to increasing network capacity, ensuring a fair distribution of available network resources will beessential in raising Quality of Experience levels. A capacity constrained environment can only provide high levels ofQoE by enforcing fair distribution of the limited resource between the many users of the service.In the end, however, it is all about the actual service itself. It is services such as video, VoIP, browsing and gamingwhich consumers are enjoying, not ‘megabits per second’. Only if operators are able to optimise the relevantaspects of these services, taking into account variables such as identity, device, location, service and congestionlevel, will they be able to deliver personal Quality of Experience levels for each individual customer. This again setsrequirements on operators far beyond today’s capability levels. Enable value driven engagements with content providersThe net neutrality debate is as much a potential threat to operators as it is a great opportunity. Operators shouldactively participate in this debate and seek new ways to create value by working closely together withstakeholders such as content providers, creating differentiated types of services. In addition, operators can start tocompete on reputation in terms of openness, transparency and accountability in the internet eco system. Toachieve this, operators need to become conversant with a new set of stakeholders, especially regulators andcontent providers. They need to provide full transparency on the types of interventions they undertake andprovide full accountability to individual consumers as well as regulators. In delivering content to consumers,operators can play a crucial role by mediating the most appropriate content based on available network capacityand device capability. This would enable a truly pro-active content delivery approach, matching source contentwith available capacity and capability at the receiving end of the value chain. Imagine the impact of such an end toend delivery approach on future service offerings and quality of experience levels.Most importantly it is clear that consumers want the operator to address bottlenecks in the content eco system.Our research shows that consumers expect operators to optimise their content on their behalf. For some thedriver is improving QoE in areas such as video stalling and time to screen. For others it is about saving money bycompressing all content so their bundle lasts longer. In any case, when operators take a proactive role in thecontent eco system, it will be a substantial benefit to all stakeholders involved. 28 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil
  29. 29. Required capabilities – the mobile broadband investment agendaTo achieve the business priorities outlined above, a step change in operator capabilities will be required. In orderto achieve maximum network utilisation and a differentiated consumer offering which is underpinned by accurateand effective fairness policies, unprecedented levels of control are necessary. Additional capability is required inthree main areas.Data Enforcement - Provides high performance and reliable components that handle all network traffic. As aresult the Data Enforcement Solution needs to scale very efficiently in order to support hundreds of Gbps of trafficat cost effective levels of investment. Its key capabilities include traffic insight into consumer, service and networkbehaviour, deep packet inspection,traffic shaping and flow control.Content Optimisation - Provides fitfor purpose components which areneeded to optimise specificcontent services such as video orbrowsing. These types ofcomponents provide a highlyspecialised and dedicatedcapability which handles all Qualityof Experience aspects of thespecific service. The ContentOptimisation Solution also reducesdata traffic peaks at a minimumhardware footprint, while maximising Quality of Experience. It provides key capabilities such as video flow control,video optimisation, web optimisation and content detection.Policy Management - Provides highly intelligent components that are required to enable real-time, complex andrich decision making. These capabilities allow the Data Enforcement and Content Optimisation capabilities to beapplied intelligently based on a wide range of criteria such as customer type, usage to date, available allowance,time of day and many other potential variables. A Policy Management Solution is essential in enabling theflexibility required to determine a targeted approach for each individual consumer, service and network event. Itcontains a wide, integrated set of capabilities including policy control, quota management, event notifications andlocation management. 29 Seizing the Opportunity in Mobile broadband Consumer perception of mobile broadband in Brazil

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