Operators, you need to make yourselves more valuable
Today we released a new report with STL Research that reveals mobile operators are missing an opportunity to double their cash returns. The study finds that if operators focus on adding intelligence to their networks so they are capable of delivering smart services, they’ll deliver more value to all of their stakeholders...and in the end increase their own profitability.
There’s no time to waste. Operators need to make the right moves in 2012 to be in the right position to really start profiting from skyrocketing mobile Internet growth.
But how? In the STL Research report, we outline several moves operators can make. In the end, they all require a smart network. Why?
Unclog the mobile network
Today’s networks are constantly congested with applications and traffic that operators can’t benefit from. Much of this traffic is a result of requests for cloud-based services. Mobile networks are sandwiched between smart devices and cloud-based services.
If operators try to more tightly manage the applications running over their networks, they risk delivering bad user experiences. If users have bad experiences, they’re less likely to use the mobile Internet--and even less likely to purchase third party applications from cloud providers. If your Netflix service is constantly interrupted by buffering, eventually you’ll give up on your video downloads.
Smart services can’t run over a network without intelligence. Operators need to unclog their network in the middle, so demand for services can grow and end users can get the content they want. To do this, operators should implement the four principles of intelligence: visibility, optimization, control and monetization. There are structural changes operators can make to regain visibility, optimization and control. But the last piece, monetization, is the most complicated.
Monetization: deliver value, gain profit
The goal of network monetization is to create incremental revenue so that operators can profit from, and reinvest in, their networks. But today, the bulk of the money flows from the end user to the cloud service providers. A user may pay $5.99 for a video rental, but it goes directly to Netflix or iTunes.
Without a smart network, mobile operators can only control data plans. If the operator makes its data plans too stringent, they will throttle the demand for their services. If they make it too elastic, then they don’t get enough return on their network investment. The operator needs other “knobs to turn.”
With a smart network, operators have the tools they need to add value for cloud service providers, and consequently monetize the content flowing to and from the cloud provider. Cloud service providers already expect good quality of service from operators. Added value has to be something the cloud provider is willing to pay for. It needs to enable cloud providers to deliver services that scale rapidly with higher performance--so they can capitalize on the rapid mobile Internet growth, too.
Content Delivery Networks (CDNs) give everyone a piece of the pie
In the STL Research report, we outline several moves operators can make to add value with a smarter network. One specific way operators can deliver this value is by building their own Content Delivery Networks (CDN), in addition to their existing mobile networks.
CDNs have existed since the early days of the Internet, but on their own just deliver a service directly from the cloud to the end user. They have no awareness of the subscriber. This worked fine in a fixed broadband network where congestion is rarely an issue, but mobile networks are much more dynamic--and bandwidth constrained.
Mobile operators can build subscriber-aware networks that would enable the cloud provider to offer tiered services to their subscribers. Cloud providers have the content that mobile users want. They need each other. If operators build their own CDN, they can provide benefits that cloud providers would be willing to pay for--consequently monetizing their network.
CDN networks are one of the many ways that operators can incorporate smart network strategies into their business models, but it’s one with very clear benefits for the mobile user, operator and cloud provider. I’ll post more about the benefits of CDNs next week.
The full STL Research report includes many examples of what operators around the world are doing to make their networks smarter. Be sure to check the report out and share your thoughts.
