During 2013 we will see the start of a fundamental reshaping of mobile telecoms services offerings driven by new services based on the IP Multimedia Subsystem (IMS), the evolution of mobile wholesale as well as regulatory trends.
Some operators have already introduced services based on IMS, for example in Canada the Rogers One Number service allows the seamless switching between a smartphone and computer. Services of this kind are particularly of interest to operators who are not part of a larger group. It allows mobile operators to leverage the proliferation of free WiFi connectivity to in effect extend their network coverage world-wide. This allows mobile operators to fight back against OTT services such as Skype, WhatsApp and FaceTime by in effect becoming themselves an “OTT over WiFi” player.
Let’s look at a practical example: An operator such as Bouygues in France, Telstra in Australia, or 2degrees in New Zealand introduces a service where its customers are in effect connected to the home network wherever in the world they log on to the internet, whether using a smartphone or laptop with an appropriate client. The customer lands in Singapore’s Changi airport, logs onto the free WiFi and can make and receive calls as if he were on his home network. Initially this might be positioned as a premium service, for say an additional US$ 5 per month. The operator may lose margin on international roaming, but as a smaller operator the roaming margins are not that favourable anyway and more could be gained by attracting new customers. Furthermore, without such offerings the same customer may not make roaming calls anyway, and instead use Skype, Face Time or WhatsApp when out of the country, i.e. completely bypass the operator’s service. There is therefore potentially a lot gain for some mobile operators.
Services which allow users to avoid roaming charges already exist for voice (Truphone, WoldSIM and other) and data (roamline.com, in collaboration with KPN). The business model is built on exploiting the difference between lower wholesale prices paid, for example, by MVNOs and high inter-operator roaming tariffs (IOT), the input cost into roaming retail prices. Some operators, who do not have a lot of roaming margin to lose, may attack and offer their own multi-IMSI services, for, say, an additional $10 per country. In the EU downward pressure on intra-EU roaming comes from regulation and using innovative IMS based services operators may be able to maintain or even increase margins. The conventions which govern how roaming is handled already started to fall apart. There are now special inter-operator deals and “roamer high-jacking”. For example, when a visitor arrives in Jakarta, it is likely that he will be greeted by the Indonesian mobile network with an SMS assigning him a local number.
The opportunity to innovate is not limited to roaming. For example, Turk Telecom already launched a service in Germany and is about to launch a service aiming at the Turkish ethnic segment in Belgium. The service, in conjunction with KPN’s Base, replaces Base’s Ay Yildiz brand. Customers will be charged exactly the same to call numbers in Belgium or Turkey. Turkcell could add the ability to recharge linked accounts (Turkish person working in Belgium can recharge the prepaid SIM of relatives in Turkey) and make small mobile payments across borders. It is easy to see that mobile operators have a lot to gain. Smart, of the Philippines is already going down this route, targeting the Filipino diaspora segment around the world.
Some operators may go all the way and break the link between the mobile telephone number and geography. After all it seems somewhat archaic that in a world where distance does not matter, mobile operator tariffs are still based on location and distance. Location is not an issue with Skype or FaceTime and this is one of the reasons for the success of OTT operators.
Sooner or later someone in the EU will wake up to the fact that charging high prices for cross border calls – whereas within a bundle the marginal cost of in-country calls is in effect nil – constitutes a barrier to EU integration. This is a similar line of reasoning as we have seen with roaming pricing. There is also the precedence of regulation intra-EU retail banking transactions, preventing banks to charge more for intra-EU transaction than for domestic transactions. Again, there is an opportunity for operators who make little margin from international calls. Including international calls in the bundle would make a mobile operators’ service more attractive, possibly even halting the growth of Skype over mobile and taking back business from international mobile call specialists such as Lebara.
We are likely to see offerings from mobile operators where the national number can in effect be used across the whole EU as if the customer was in the home country. Incoming calls will be free and outbound calls will come out of the bundle in the normal way. Some operators are already moving towards this charging model, for example Vodafone’s EuroTraveller which for an extra £3 a day allows customers to use UK bundled minutes, texts and internet in Vodafone’s Europe zone. £3 a day equates to £90 a month, a huge premium that will soon be eroded since there is no link between price and input costs.
In this context the value of a wider international footprint becomes apparent. Some operators may regret that they sold off operations. Dual country “roam-like-home” offerings could be particularly attractive to address certain segments in regions that are well integrated across borders, such as Benelux, Austria-Bavaria, around Geneva and the surrounding region in France, or even Malaysia and Singapore.
The changes are hastened by the rapid decline in mobile termination rates in the EU and other countries as well as regulatory pressure. Data traffic now exceeds voice traffic and soon voice traffic will account for a minor proportion of overall traffic. MTRs based on LRIC will become very small indeed. Eventually location and distance independent mobile tariffs will become a global trend, but it will take a long time in countries, such as Tunisia or Bangladesh, who milk international inbound call termination revenue and visitor roaming revenue as a source of foreign currency earnings.
Written by Stefan Zehle, CEO, Coleago Consulting