4G alone will not make magicI just returned from the Barcelona LTE World Summit where some of the world’s largest operators gathered to discuss LTE technology, more commonly known as 4G. There was a lot of talk about future business models and how to turn LTE into a “revenue generator” with “killer applications”. However, practically none of the companies behind the most famous mobile services were there to talk about what LTE/4G meant for their businesses and users.
The lack of service companies made it fascinating to see how telecom still calls everything that comes from the Internet an “over-the-top” (OTT) service. If you’re unfamiliar with the term, OTT in essence means that operators make no money from a service such as YouTube. For operators seeing their networks increasingly filled with bits’n’bytes instead of voice calls and SMS this is troublesome.
Some operators say they can’t keep up with the increasing costs of expanding network capacity to meet demand unless “OTT providers” – meaning Google, Facebook and others – start paying them money. Imagine that local electricity companies such as EDF in France or Exelon in the US demanded that international home appliance manufacturers like Philips pay them fees because appliances puts load on the power grid. Ridiculous? Not if you’re a mobile operator, this is a “two-sided business model” that some are still hoping for.
In my opinion the terms “OTT” and “two-sided business model” are signs that operators are in denial how Internet access has fundamentally changed mobile device usage. Smartphone and tablet services are in most cases by definition over-the-top today and will most likely remain so. Fixed Internet service providers (ISPs) had to accept that they should deliver connectivity only years ago. Those that didn’t disappeared, such as Prodigy and CompuServe in the US. Mobile operators now need to accept their fate too and move on.
The only way forward to make money is to provide functional and emotional value to people. For some operators that means providing only the best connection quality at the lowest possible cost. Operators looking for premium customers will find huge greenfields in offering a better overall customer experience beyond the pure network connectivity. Such “customer experience” is not only network quality, but also things that make someone happy to be a customer at a particular company rather than another.
Technology is a vehicle and a very important one, but it’s not the ultimate reason why people adopt it. People use new technology because it helps them lead a better, smoother and happier life. Connect technology to human aspirations and magic happens. This is exactly what happened in the early years of mobile networks when people could for the first time communicate over long distances without the need for a fixed telephone. It happened again when people could use mobile broadband to access their favourite Internet services. This is what could happen with LTE/4G.
Now operators need to find a way to be relevant again, but it won’t happen by demanding money from third-party companies or blocking services for consumers. Instead operators should make sure to understand what kind of experiences their customers crave. Some may want the cheapest option, others the fastest speeds and yet other superior product packages. Focusing on their assets and new capabilities operators can align technology, packaging and processes to delivery what people really want: great value for money with a smooth customer experience on top.
Erik E. Byström is a Manager at Northstream
Feedback to firstname.lastname@example.org
31 May 2012