September - 2010 - issue > Technology
4G & the Dawn of Service-based Pricing
Rakesh Kushwaha & Badri Nath
Wednesday, September 1, 2010
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.
The 4G “Service Pipe”
For wireless broadband to be a game-changing technology right from launch, it is probably best if the “all you can eat for one flat price” strategy is avoided from the start. Service providers need to think in terms of a service-based pricing model for 4G right from the time of deployment rather than as an afterthought. Instead of a dumb bit pipe, a 4G “service pipe” would provide a medium for offering “service channels” and packages or tiers based on those channels. The basic service channel or package would include voice and SMS. Beyond that, each service offering could be offered as a micro-service, similar to a particular channel on TV. Continuing with the TV analogy, individual 4G services could be grouped into packages to allow tiered pricing — for example, a Basic package could include voice and SMS, while a Premium package might also include video, streaming, and presence. There could even be pay-per-use services (e.g., live sports, interactive games, augmented reality). To allow for innovation in terms of service creation, hooks or network APIs into the 4G network should be made available so that service developers can use these APIs to create new services for the 4G network.
Service Enablement in 4G
Given the increasing availability and rapid growth in the adoption of smartphones, “superphones” and other devices such as tablets, netbooks and the like supporting wireless broadband services, mobile device management (MDM) becomes the preferred platform for service enablement and management. The device management platform need to evolve to service enablement and management platform which enables 4G services to be activated based on user preference and acceptance. New services can be offered dynamically, including pre-packaged and pay-as-you-go services. A provider’s service offerings can be presented as a catalog to users, encouraging them to choose services on the fly using their smartphones or other 4G devices. The service enablement process would include several steps, including the downloading of any needed application software and configuration of the service or enabling security features needed for the operation of the service.
In addition, a service enablement and management platform would manage the lifecycle of the applications used to provide certain services. When the service is first enabled, application components would be downloaded, installed and configured on the device. If the service is updated in such a way as to require a configuration or application change, the platform would manage any required configuration changes or application updates on the device. Additionally, the platform would be used to diagnose and repair any problems with the application or service. And finally, if the user unsubscribes from a particular service, the platform would ensure the uninstallation of any application components that need to be removed from the device.
Conclusion
4G has the potential to significantly change the way we live and work, particularly if service providers treat 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. 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 key to the success of these new 4G service offerings. This makes the service enablement and management platform a critical factor in the success of new 4G networks and services, helping service providers capitalize on the power and potential of their 4G network investments.
The authors are Rakesh Kushwaha, CTO and Badri Nath, Chief Scientist at Mformation
