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4G & the Dawn of Service-based Pricing

Rakesh Kushwaha & Badri Nath
Wednesday, September 1, 2010
Rakesh Kushwaha & Badri Nath
The Coming Wireless Broadband Revolution
It is clear that wireless broadband or 4G has the potential to significantly change the way we live and work — possibly even to the same extent that the mobile phone has changed the way billions of people live and work today. But that paradigm shift is less likely to occur if 4G networks are launched solely as better, faster “dumb pipes”. To really drive growth in 4G wireless broadband usage, and to maximize the opportunity for 4G revenue, service providers should consider treating their 4G networks as "service pipes" over which they can make a wide range of services available to the end users — from tiered packages of “service channels” to one-time, pay-as-you-go offerings. In concert with this strategy, as demand for new 4G services grows, the smooth delivery, configuration, security and management of a wide range of services on every single 4G-capable device will become increasingly key to the success of the 4G service offerings. This means that the service enablement and device management platform will become a critical success factor in the launch of 4G networks and services.

Growth In Mobile Data
The number of mobile subscribers worldwide is expected to surpass 5 billion this year. The International Telecommunication Union (ITU) (February 20101) reported that in 2009 there were 4.6 billion mobile cellular subscriptions globally. The ITU expects this to reach 5 billion in 2010, more than 70 percent of the world population (the world population in April 2010 was 6.8 billion). While voice was the killer application for the first few generations of cellular networks, data traffic has overtaken voice traffic in spite of the current 1:10 ratio of data-capable phones to voice/messaging-only phones. This trend in increased data traffic is only going to accelerate, growing exponentially with widespread adoption of wireless broadband networks. However, according to ABI research2, data ARPU is not exhibiting the same growth rate as the data traffic that is carried by the network; thus creating a significant dilemma for mobile operators on how to match generated revenue with resource consumption.

For wireless broadband to have a sustainable business model, it needs to be perceived as more than just a new type of bit pipe. Bandwidth and coverage improvements are really not enough to constitute a new generation of wireless network. Just as there was a paradigm shift in usage when wireless networks moved up a generation from 2G to 3G — from simple voice and messaging to complex data services and applications — with 4G we need a comparable paradigm shift in service offerings.

One way for service providers to change the paradigm is to present 4G as “service pipe” — a broadband pipe that makes a wide range of services (micro and bundled) available to the subscriber, rather than just providing increased bandwidth and coverage. This sort of paradigm would go hand in hand with a tiered pricing strategy based on the service offerings — similar to cable TV, where pricing is based on the channels and packages of channels included in the subscription. This approach has the potential of making 4G into a disruptive technology, unleashing novel services and packages tailored to different markets and, as a result, gaining a huge subscriber base.

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