TMT Telecommunications Predictions 2013
Deloitte predicts that in 2013 between 50 and 100 mobile operators will offer all-you-can-eat services with unlimited access to specific applications. All-you-can-app (AYCA) will, for a fixed monthly subscription, offer unrestricted use of each service’s content, with connectivity charges bundled in. Over the course of the year the portfolio of AYCA services available should grow. Pricing is likely to range from zero to tens of dollars per month, with the price indicative of the content’s value and data volumes. AYCA services will complement existing data tariffs.
In 2013 AYCA services will be aimed primarily at customers interested in, but hesitant about, mobile data usage, due to worries about running up large data charges. These will mostly be the hundreds of millions of users currently migrating or recently migrated to smartphones. Further, AYCA may be popular in countries with low income levels, where they will aim to stimulate usage of mobile data services.
AYCA is a middle ground between unrestricted all-you-can-eat tariffs and metered data charging. All-you-can-eat is attractive to consumers but unpredictable, and occasionally rampant usage has made the offer uneconomic for some operators1. Metered usage enables carriers to charge according to network impact, but inadvertent usage can land subscribers with unexpectedly high data bills3.
A fundamental challenge of metered billing is that it requires subscribers to know the file sizes of digital content they want to download. However, the size of a digital file is not always obvious. Consumers are familiar with CDs and DVDs: they look the same, are of similar size and a CD album plays about half the time of a DVD movie. However consumers may not realize there is a thousand-fold difference in the size of a compressed MP3 track, which is typically a few megabytes (MBs) and an hour of high-definition video, which can be many gigabytes (GBs)3.
Operators are likely to be eager to introduce AYCA tariffs to encourage more of their subscriber base to use mobile data services. Data revenues are needed to counterbalance declines in mobile voice, SMS and roaming revenues. But a large proportion of smartphone owners do not appear to use data services. By year-end 2013 about 400 million of the 1.9 billion smartphone installed base may never or only rarely (less than once a week) be used to connect to the Internet. In 2013, and over the medium term, a large proportion of the four billion mobile users still using feature phones may upgrade to a smartphone4. This large group needs a mobile data pricing model appropriate to later adopters. This needs to be perceived as low risk.
AYCA may fit the bill. Among 15 countries surveyed in a Deloitte study, between 29 percent and 54 percent of smartphone owners would like to have unlimited access to services they use most (see Figure 3)5.
Figure 3: Smartphone owners that would prefer to subscribe to a package which would give them unlimited access to services they use most, by country.
Source: Deloitte Global Mobile Consumer Survey, May-June 20126. Sample: Respondents who own a smartphone and use the mobile network to connect to the Internet (all countries, 5,398 respondents)
The same study also found that between 26 and 60 percent of users had a higher-than-expected bill in the past 12 months (see Figure 4). Over half wanted to cap their monthly mobile spend and would be prepared to set a limit in excess of their current average spend7.
Figure 4: Respondents who have had a higher-than-expected bill in the past 12 months
Source: Deloitte Global Mobile Consumer Survey, May-June 20128. Sample: Respondents who have a mobile phone contract (all countries, 11,090 respondents)
There are proven parallels to the AYCA model. The pay TV sector has for decades offered unlimited access to specific services or genres, such as sports, movies, music or kids content. Customers can readily increase or reduce their content bundles – and the monthly spend is predictable.
Deloitte’s research indicates that the most popular AYCA services would likely be for social networks, email, video and Instant Messaging (IM) services. Facebook was ranked the number one most desired service in 12 of the 14 countries surveyed – with Russia and Japan the only exceptions9. YouTube was second most popular, being ranked number one in Japan and number two in five countries. WhatsApp (an instant messaging service) and BlackBerry Messenger were also among the most popular services. Deloitte expects the range of AYCA services offered to steadily become more diverse over 2013 and beyond.
Operators are likely to partner with existing third party companies to jointly offer AYCA services, as well as create their own. For example in India, Reliance offers unlimited access to WhatsApp and Facebook for Rs16 ($0.30) per month10. Some operators offer unlimited access to apps when roaming. Hong Kong firm 3 offers unlimited access to WhatsApp for around $6 per month while roaming11. Telkomsel Indonesia offers optimized access to third party voice over Internet Protocol (VoIP) services12.
Operators are also likely to offer AYCA music and TV services, which are more data intensive. In Thailand, Malaysia and Singapore, online music service Deezer Premium + is available for a fixed fee with connectivity charges included13. In Germany, Deutsche Telekom has teamed up with Spotify to offer a €10 ($12.88) service that bundles unlimited access to music with inclusive access charges14. As for TV, Vodafone in Spain and Greece is offering unlimited access to a range of TV channels for €1.77 ($2.28) and €2.46 ($3.20) respectively per week15.
Some operators and operator groups may offer AYCA services for free for a limited period to stimulate usage. In Q4 2012, Telefónica offered free usage and subscription to Joyn, a messaging application16. Some AYCA services may be offered for free to encourage usage of an indirectly monetized service. For example, Google has launched a service in partnership with Globe Telecom, in the Philippines, offering free access to Google products such as search, Gmail and Google+17. Users are able to access websites that show up in Google's search results for free. Accessing a site outside those results prompts an invitation to subscribe to a mobile data plan.
Confusion over data pricing benefits none of operators, consumers or content creators. While initial data users may have had a reasonable understanding of file sizes, mainstream users are more likely to get bill shock through inadvertent downloads of large files via cellular networks.
It is a good time to introduce AYCA: the majority of mobile customers have yet to move to smartphones, and predictability in pricing should provide sufficient reassurance to try out mobile data services. Further, the technological tools needed to deploy AYCA are increasingly economically viable – for example the cost of deep packet inspection (DPI) technology falls every year, due to Moore’s Law18.
AYCA will not suit every customer or every carrier. Heavy users may prefer unrestricted all-you-can-eat packages, where available, and figure out for themselves which services to use each month. Business users may prefer metered packages. Carriers should offer the range of data tariffs most suited to their customer bases. In a few markets, AYCA may not be the right approach: rather offering differing tiers of unlimited usage but at different access speeds may be considered the best approach.
AYCA need not be limited to offers from carriers. Content companies and aggregators could offer products and services with bundled mobile connectivity charges19. Consumers would not have to pay twice: once for the content and again for data used in the download.
Carriers should also note that other connectivity providers are likely to offer AYCA-type services. For example, Google has entered into a partnership with a Wi-Fi provider in India which offers users unlimited access to Google+ and 10 minutes of free access to YouTube each week20.
Some handset vendors may want to proactively partner with content owners and pre-agree potential AYCA deals. This could make the vendors’ handsets more attractive to operators when determining which handsets to support.
1 Source: Mobile data could spell end to “all you can eat”, ZDNet, 14 February 2012. See: http://www.zdnet.com/mobile-data-boom-could-spell-end-to-all-you-can-eat-3040095041/
2 For examples of bill shock: Source: Boy of 12 who ran up £1,700 phone bill in a month chatting to girlfriend on his father's mobile, Daily Mail, 17 June 2012. See: http://www.dailymail.co.uk/news/article-2160819/Boy-12-ran-1-700-phone-month-chatting-girlfriend-fathers-mobile.html; Mobile phones: how a child's £12 plan gave his father a £188 bill, Guardian, 19 November 2011. See: http://www.guardian.co.uk/money/2011/nov/19/mobile-phone-child-plan
3 The exact size of files will also be dependent on the type of data compression technology used.
4 Deloitte estimates that by end 2013 there will be seven billion mobile subscribers worldwide. The installed base of smartphones is expected to reach 1.9 billion by year-end. See 2013 Prediction: Smartphones ship a billion but usage becomes simpler.
5 Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. All research has been undertaken via online research. Fieldwork took place between May to June 2012. In Belgium, Canada, Finland, France, Germany, Japan, the UK and the United States are nationally representative. In Argentina, Brazil, Croatia, Mexico, South Africa and Turkey, the online research approach used results in a high concentration of urban professionals. These are likely to be relatively high earners within their country. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer
6 Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer
7 Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. All research has been undertaken via online research. Fieldwork took place between May to June 2012. In Belgium, Canada, Finland, France, Germany, Japan, the UK and the United States are nationally representative. In Argentina, Brazil, Croatia, Mexico, South Africa and Turkey, the online research approach used results in a high concentration of urban professionals. These are likely to be relatively high earners within their country. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer
8 Deloitte Global Mobile Consumer Survey is a 15-country survey of mobile phone users around the world. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer
9 This question around preferred services was not asked in the United States survey. For more details, see: The state of the global mobile consumer, Deloitte Touche Tohmatsu Limited, December 2012. See: www.deloitte.com/mobileconsumer
10 Reliance in India offers unlimited WhatsApp and Facebook for Rs 16 ($0.30) per month. Source: Reliance to offer unlimited WhatsApp, Facebook for Rs 16 per month, Firstpost, 16 October 2012. See: http://www.firstpost.com/tech/reliance-to-offer-unlimited-whatsapp-facebook-access-for-rs-16-per-month-491380.html ; Etisalat Nigeria offers unlimited access on Facebook with some bundles Source: Etisalat Offers Unlimited Access On Facebook With New Bundles, Mobile World, 11 June 2012. See: http://www.mobileworldmag.com/etisalat-provides-unlimited-access-on-facebook-with-new-bundles.html;
11 3 in Hong Kong offers unlimited access to WhatsApp for about $1 per month or just over $6 per month when roaming. Source: WhatsApp and 3 HK tie the knot, The Standard, 13 September 2012. See: http://www.thestandard.com.hk/news_detail.asp?pp_cat=21&art_id=126418&sid=37629339&con_type=1&d_str=20120913
12 Source: Telkomsel partners with Skype to bring a new communications experience in Indonesia, Skype, 26 October 2011. See: http://about.skype.com/press/2011/10/telekomsel_partners_with_skype.html
13 The service may also launch in Indonesia and the Philippines in Q1 2013. Source: Deezer launches in Thailand, Singapore and Malaysia, Music Week, 15 August 2012. See: http://www.musicweek.com/news/read/deezer-launches-in-thailand-singapore-and-malaysia/051384
14 Source: Spotify makes German push with Deutsche Telekom partnership, Strategy Digital Media, 30 August 2012. See: http://www.strategyeyedigitalmedia.com/article/2012/08/30/spotify_makes_german_push_with_deutsche_telekom_partnership/
15 The prices include VAT. Source: Toda la TV en tu móvil, Vodafone, December 2012. See: http://www.vodafone.es/apps-y-descargas/es/tv/toda-la-tv-en-tu-movil/; Source: Toda la TV en tu móvil, Vodafone, December 2012: http://www.vodafone.gr/portal/client/cms/viewCmsPage.action?pageId=10858&request_locale=en
16 For example, as of December 2012, Movistar Spain was offering usage of Joyn, a messaging application for free. Usage of the service was not deducted from data customers’ plans; those that did not have a data plan could still use the service. Source: Movistar, December 2012. See: http://www.movistar.es/particulares/movil/servicios/ficha/joyn
17 Source: Google launches free internet access for developing countries, Engage Web, 13 November 2012. See: http://www.engageweb.co.uk/google-launches-free-internet-access-for-developing-countries-6212.html
18 Moore’s Law is an observation made by Gordon Moore, a cofounder of Intel, in 1965 that the number of transistors which can fit in a given area doubles every two years. A transistor is a semiconductor device which acts as a sort of remote control valve, or switch, for electricity. The challenge over the years has been making smaller transistors. This is an engineering problem which requires a series of surmountable challenges in a number of fields. It is not a physical limitation. Once those problems have been solved the cost to manufacture a square centimeter of smaller transistors is roughly the same as the cost to manufacture a square centimeter of larger transistors. So, unique in the semiconductor industry, you get more and better transistors for the same amount of money. That in a nutshell, is Moore’s Law.
19 Amazon’s Kindle 3G services include bundled connectivity charges. Domestic and roaming cellular charges are included in the price of the device and the service. For more information: Source: Kindle Keyboard 3G, Amazon, 2012. See: http://www.amazon.co.uk/Kindle-Wireless-Reader-3G-Wifi-Graphite/dp/B002LVUWFE/ref=sr_1_6?s=digital-text&ie=UTF8&qid=1354449955&sr=1-6#kindle-features-wireless
20 Source: Google, O-Zone tie up to offer free Wi-Fi access, Business Standard, 11 January 2012. See: http://business-standard.com/india/news/google-o-zone-tieto-offer-free-wi-fi-access/461448/