Telephony operators vs. web giants
The volume of data exchanged over mobiles is expected to more than double each year over the next five years
Faced with the success of Google, Facebook and Apple, will telephony operators be reduced to acting as access providers? There are indications that their future will be brighter than this... providing they can capitalize on their strengths. Operators are unique in being able to provide access to the end customer, a situation expected to continue: service-providers such as Google, Facebook and Apple are not prepared to invest the tens of billions required to access the end customer at world level. Their isolated initiatives in this area have always been triggered by particular scenarios: for example, scarcity of access (Google's aborted attempt to obtain a mobile license in India) and spectacular marketing campaigns (Google's Wi-Fi network in San Francisco). Today these operators, the builders of "digital superhighways", are indispensable to the mega-giants Google and Apple.
The forthcoming battle will be fought on the front line of mobile data. The challenge for operators will be to provide quality access to these mobile services at the best price. Until now, the development of mobile data has provided operators with a golden opportunity. iPhone, for example, has boosted their income significantly – the average bill for iPhone users is one and a half times higher than that of flat-rate customers. Mass purchases of smartphones are expected (representing 90% of mobile phone sales over the next five years, compared with 25% at present, due in particular to the Google Android), leading to multiple uses: Internet, applications, videos... This development will generate an explosion in data traffic: the volume of data exchanged over mobiles is expected to more than double each year over the next five years.
Faced with this explosion, operators will have to upgrade their networks and acquire new frequencies. The need for a return on their investments will mean they will have to capture a share of the value created. But the new players – Google, Apple... – are seeking to marginalize the role of operators in the eyes of customers. Two examples, by no means anecdotal, illustrate this attempt. Firstly, the method used to market iPad, decided and controlled by Apple, selection of the operator 3G and access to its network, is presented as a simple option, rather like choosing a phone cover – indeed customer data is captured by Apple from the outset with an obligation to register for iTunes. Secondly, the capture of behavioral data undertaken by Facebook and Google, whose aim is to monopolize it. This is the real danger for operators: loss of control over customer relations and awareness. Imagine when Facebook or Google will add a "call me" button!
The forthcoming battle will be fought on the front line of mobile data. The challenge for operators will be to provide quality access to these mobile services at the best price. Until now, the development of mobile data has provided operators with a golden opportunity. iPhone, for example, has boosted their income significantly – the average bill for iPhone users is one and a half times higher than that of flat-rate customers. Mass purchases of smartphones are expected (representing 90% of mobile phone sales over the next five years, compared with 25% at present, due in particular to the Google Android), leading to multiple uses: Internet, applications, videos... This development will generate an explosion in data traffic: the volume of data exchanged over mobiles is expected to more than double each year over the next five years.
Faced with this explosion, operators will have to upgrade their networks and acquire new frequencies. The need for a return on their investments will mean they will have to capture a share of the value created. But the new players – Google, Apple... – are seeking to marginalize the role of operators in the eyes of customers. Two examples, by no means anecdotal, illustrate this attempt. Firstly, the method used to market iPad, decided and controlled by Apple, selection of the operator 3G and access to its network, is presented as a simple option, rather like choosing a phone cover – indeed customer data is captured by Apple from the outset with an obligation to register for iTunes. Secondly, the capture of behavioral data undertaken by Facebook and Google, whose aim is to monopolize it. This is the real danger for operators: loss of control over customer relations and awareness. Imagine when Facebook or Google will add a "call me" button!
To tackle this classic balance-of-power situation between access and content and recoup their substantial investment in network upgrades, operators have a number of options. They could find new, more profitable, methods of access pricing. SMS (billed at 0.15 euro for every 160 characters) is a good example of perceived value pricing, rather than pricing based on simple use. The decline of O2 in the UK and ATT in the US on their unrestricted flat-rate services is indicative of the need for operators to undertake an in-depth review of their value packages. Operators could secure a position on the services market (following the example of Orange with its iPhone applications or SFR with its music packages) to capture a share of revenue and also gain better awareness of habits and habit trends. Such a scenario will only be viable if the objective is not merely to retain the local market… global players cannot be tackled by remaining local or multi-local! Operators could also enter into alliances and research and development partnerships aimed at creating real alternatives to the OS iPhone or Google, although the odds are not good. Finally, they could capitalise on access by repositioning themselves as the middleman between the customer and service-provider, following the example of Free on the Internet today, perhaps on mobiles tomorrow.What this means is that, although the players in the new economy, Google, Facebook and Apple, have secured enviable positions on the market, the multiple strengths of telecoms operators should provide them with solid weapons for the fight and enable them to preserve their relationship with the end customer… surely the strategic edge in this war.
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