Differentiate to multiply your revenues
By Grant Lenahan
Executive Director, Wireless Mobility Solutions, Telcordia Technologies Inc.
In the old days, it really was true that "one size fits all" when it came to most telecommunications services. Within what was effectively the equivalent of a socially planned state, the decisions made by politicians, senior executives, and engineers shaped the services that the public received from a nation's networks. The rapid spread of telecommunications deregulation that has swept the world in the last 15 or so years has helped erode the heavy hand of politics. At the same time, number portability and broad coverage make competition—and the realistic ability to switch between mobile operators—a realistic scenario for more and more of the "mobile" population. So, as mobile communication emerges as the de-facto method of telecommunications, how can we, as operators, drive higher value, and thus revenues, from our growing base of clients?
The emergence of a truly competitive market in telecommunications, however, brings with it new headaches and opportunities. This is particularly true for the mobile sector, where three to six operators often have viable networks—and ready access—to desirable subscribers, as opposed to the fixed world, where significant barriers exist in the form of high loop construction costs. The impending introduction of number portability to the mobile sector in both the United States and Europe can only serve to increase the "mobility" of key customers. This is both a challenge to attract and serve these customers and a golden opportunity to attract, grow, and profit from them.
The early bird gets the worm
The evolution of most mobile markets tends to first focus on the development of, and competition via, coverage and subscribership. Those that roll out their networks first get the early adopter customers—as well as prime base station sites, usually at reasonable prices. They also get revenues rolling in to pay for more network investment. The next stage, where build-out is to the point that coverage and capacity are adequate, is where real service competition starts to take off. Competition can follow one of three paths:
- differentiation via packaging and bundling (as is highly common in the United States today with "digital one rate"-type plans
- differentiation through unique services
- price wars.
Valued service
Most mature markets usually decide to put the price wars quickly aside and move on to more exciting and rewarding initiatives—such as staying ahead of the competition in the field of service innovation and by providing unique value. This is where the vital concept of differentiation comes in. Coverage, SMS, WAP access, basic prepaid are all valuable services. Ultimately, however, they are no different from those provided by your competition and thus lead to ruinous price wars. Not a desirable consequence.
A far better outcome is one based on truly unique services—ones that you offer first, ones that are unique to your network and attract a specific demographic. Services that attract clients to your network, despite the fact that you have not lowered rates, only maintain rough parity. These are the services, which, through uniqueness and time to market, let you turn the free flow of customers between networks into a business advantage. It's a nice, profitable trick, and ultimately achievable, given today's technology.
So what are the issues that need to be considered in this search for differentiation?
Standard option
Traditionally, the time taken to create new services in telecommunications has been measured in months, or even years. Service development environments were classically difficult to use or limited to proprietary sets of packages with narrow functionalities available only from the switch manufacturers. Most often, in fact, services are delivered as standard options (or "features," as they are called) on mobile switches or packaged as part of speciality service nodes.
Fatal flaw
These services work well enough and are easy to deploy and integrate, but they have a single, almost fatal, failing. They are more or less the same for each operator. They don't allow differentiation. They do not protect from profitless churn, and ultimately, lead to price wars. Given the costs associated with building out networks, acquiring spectrum, and managing churn rates, it seems that money spent in creating differentiation is money well spent indeed. On a relative basis, it is a small cost, and on that same relative basis it is the one place that realises differentiation.
Tools of the trade
At your disposal are three fundamentally basic tools of the telecom trade. First, and possibly the richest and most pragmatic, are intelligent network (WIN/Customized Applications for Mobile Network Enhanced Logic (CAMEL)) platforms. Well-architected IN platforms give the power to create services rapidly, or at least make them unique, to operators.
As SS7 devices, they also open to competitors the world of fixed-mobile integration, at least at the service plane. Second is the powerful concept of service quality. Too often, we in the industry take a very technical view of quality, focusing on such aspects as dropped call ratios, compression ratios, and bit-error rates. True enough, but these are but one aspect of quality through a customers' eyes, which can also include priority access, simplicity of customer service, and other attributes that can be controlled by creative operators.
Quality-based price points
Regardless of how it is defined, viewed, and marketed, quality should be a key variable in any product line. It provides a way to differentiate between your own services and allows you to service different price-points and price discriminate effectively. This can benefit everyone, giving better quality to one group (at a higher price) while making mobile communication and use affordable to another group (at a slightly lower "quality" level). As the range of mobile applications and services continues to expand, and with the imminent introduction of higher bandwidth access technologies, it now becomes now not only possible, but also desirable, to introduce different levels of QoS, just as automakers offer wide ranges of auto models.
In the future, the corporate traveller who need to link to his corporation's IP virtual private network (VPN) regularly will be relatively happy to pay for guaranteed levels of availability, security, and bandwidth. At the other end of the tariff spectrum, the teenager wanting to download an MP3 file or game could be happy to pay a reduced rate for off-peak data access. Differentiating in this context—down to the individual—will require the highest levels of flexibility in all the supporting systems. For the time being, powerful and appropriate levels of QoS can be delivered using standard IN techniques that also provide a future-proof route to the 3G world.
The weapons of war
So, if we want to offer unique value to our clients and avoid price wars, we need to concentrate more on unique services and just a bit less on the traditional infrastructure (radios, etc.) of the mobile game. The "heavy iron" will still define the capacity, coverage, and price per bit that we can each provide, and as such will remain critically important. But what it cannot do is differentiate. So we expect tomorrow's victors to focus on the often-arcane world of service control points (SCPs), service creation environments, QoS measurement software, and real-time provisioning operational support systems OSS. These are the weapons of tomorrow's war, fought with unique and high-value services. At least it's easy to find a location for your SCP.
About the author
Grant Lenahan is Executive Director of Wireless Mobility Solutions for Telcordia Technologies, with responsibility for defining Telcordia's mobile product and market strategies and for matching Telcordia's OSS, service platform technology, and engineering capabilities to the specific business needs of the dynamic mobile wireless industry worldwide. His experience includes 15 years with Telcordia Technologies, working in such diverse areas as transmission engineering, data equipment analysis, video services design, and economic and operations analysis of new communications technologies/services. Before joining Bellcore in 1984, Grant also worked for GTE Lenkurt Inc., GTE's transmission equipment manufacturing arm.
Lenahan received his BA in Economics and Mathematics (Computer Science) from Drew University (Madison, NJ) and a joint Master's Degree from the School of Engineering and the Sloan School of Management from The Massachusetts Institute of Technology (MIT).
He can be reached at Telcordia Technologies, 3 Corporate Place, Room 2D-341, Piscataway, NJ 08854; phone: 732-699-4894; fax: 732-336-3658; e-mail: glenahan@telcordia.com. (Back to top)