New business models required for wireless operators: Transverse

Wireless service providers could easily increase revenue by 20% to 30% if they worked with third parties to implement mobile advertising, according to the co-founder and COO of Austin TX-based Transverse.North American wireless operators have reached a market saturation point with flat to declining average revenue per user (ARPU) rates. This has resulted in intense price competition from the operators, say Chris Couch. "In order to actually grow their revenue per user, they're going to have to look to innovative business models that involve third parties," he tells Report on Wireless.While price competition has been intense in the US for some time, it has picked up in Canada with a direct impact on ARPU. Telus Mobility has been the most vocal about declining voice ARPU. In the past seven quarters, overall blended ARPU at Telus increased from $62.03 to $64.14, but the $2 jump comes as data ARPU rose from $6.27 to $10.19, clearly showing an erosion of voice ARPU.Rogers Communications saw an increase in overall post-paid ARPU as a result of solid data usage. But the company noted in its financial results that voice revenue for blended ARPU declined 1.5%.Post-paid ARPU at Bell Mobility has fluctuated between $64 and $68 over the past seven quarters. The company doesn't break out data ARPU figures so it's difficult to discern the impact of declining voice ARPU.Mobile advertising is one such approach to help offset declining voice ARPU, where the carrier can leverage the customer as an asset by monetizing it with outside partners, says Couch."When you start to run the numbers, even just the back-of-the-napkin calculations, on how much a third party would spend to target based on some pretty specific subscriber information you quickly get to the point where the carrier could raise their revenue 20% to 30% by bringing in third parties."And mobile advertising appears ready for prime time, at least in consumers' minds. A recent survey conducted by iGR on behalf of Tansverse shows that Americans are more than willing to view advertising on their handsets. Overall about half of survey respondents said they would view ads on their cell phones if they were received a 25% to 50% discount on their monthly bill. Wireless users aged 18 to 25 were among the most willing to trade the number of text messages sent and received for discounts on their bill, while those in the 26 to 44 age category were more interested in getting discounts on voice usage.Wireless subscribers are not only willing to trade voice or text for viewing ads, they are also ready to give up significant information regarding their usage in exchange for discounts on monthly bills. The survey reveals that 46% of respondents said a 25% to 50% reduction in their monthly bill would be "enough of an incentive to provide access to their usage patterns, including browsing, email and texting habits, as well as location." They weren't ready to part with personal information, however, such as the content of texts and emails. This cooperation from the customer to share information with their service provider, according to Couch, opens a tremendous opportunity for carriers. Even if operators reduced monthly bills to the break-even point, which he suggests might be a 25% cut in prices, carriers would more than make up the revenue short fall by working with multiple third parties."As that advertising or that interaction proves successful, going to continue to add more and more advertisers on the back of the 25% discount and it will start to grow revenue from that point on," he explains.Mobile advertising not the same as Internet advertisingCouch acknowledges that mobile operators are working with third parties to provide a whole host of services, but the subscriber is still the main revenue source - the customer pays for the airtime and that revenue is then divided among the third parties. As well, he adds that the vast majority of the activity is organizations simply trying to import the Internet advertising model onto the mobile platform. Couch says that won't work because consumers interact with mobile end user devices differently and the services provided aren't the same."We believe what has to happen in order for this to be successful, and we think we're starting to see movement in a number of carriers today, you have to take the mobile platform and grow your own sort of third party revenue base out of it," Couch contends."All the third parties involved want to use the mobile platform as either an incentive to buy their products and services or use it as an advertising medium. There are a number of other relationships that can exist, but the carrier is now not sharing revenue that comes from the subscriber with third parties, the third parties are paying the carrier for access to the customer base," he adds.Barriers to entryToday, most carriers aren't equipped to implement mobile advertising and other types of service that monetize the customer base by selling access to third parties. Their back-end systems - billing and operational support systems - support a two-party system involving the carrier and the customer. Transverse's business logic execution environment and platform, or bleep, is an open source system that is suited for all types of situations, whether an operator executing a wholesale switch in back office systems or a new carrier just getting off the ground. Couchsays the system is modular so that incumbent operators looking to upgrade only parts of their back office can do so to enable new features or reduce total cost of ownership."The back office should be used to monetize subscribers as assets and get more from them than they have today and to be able to launch new products and services effectively," Transverse CEO Jim Messer tells RoW.Example of mobile sponsorshipA major car manufacturer sponsors an hour of a consumer's mobile service time every day for the next six months if that person buys a car by the end of this month. The person buys the car, signs up for the incentive package and picks the hour per day to be sponsored by the car manufacturer, which then pays the wireless carrier for the customer's airtime."You get enough of those types of incentives in place with big brands, all of sudden the subscriber is not paying for 10-12 hours a day of usage, and the carrier is getting a premium on every bit of that usage through third parties," says Couch.

New business models required for wireless operators: Transverse

News | 11/17/2008 6:22 pm EST

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