Looking at the mobile operator industry in mature markets today one finds a similarity: they in fact offer a commodity too. A mobile operator’s service is something that people use every day but do not care much about it except when it stops working and when the bill arrives. Telecom operators have become utility companies and offer a service that most people find essential but uninteresting, just like a water or electricity company. There are two reasons this is bad news for operators.

First, offering a commodity means that you’ll have a hard time making people pay premium fees – because there is no premium in the service itself when there are others offering the same thing. Like electricity or consumer banking services. That’s exactly why someone invented the notion of “commodity hell”: once something has become a commodity there is no going back.

Second, offering a commodity also means that customers do not care much who delivers it – because the product or service looks just the same. Electricity isn’t differentiated between suppliers; as long as the bulb lights up when you flicker the switch you’re good. Most mobile operator customers reason the same way: if you can make a call from where you are and browse the web at reasonably high speeds you’re good. Today all operators can make that happen. That means there are few reasons for a customer to stick to their current operator if someone else offers the same thing but at a lower price. The perceived value comes from the device or from services, content and applications not provided by the operators. Customers are therefore not very loyal or engaged which means that they are easily lost to competitors.

Most operators are nevertheless doing financially well because of their oligopoly-like situation (which we covered in the November 2011 blog post “It’s not all in the network”) and because voice and SMS still contributes so much to the overall profit. In their frantic search for new service pricing models, operators should also consider the customer experience. Customer experience is all the things surrounding the service delivery before, during and after sales. That includes things like personalized offers, excellent online self-service, friendly staff and other aspects that make people feel “wow, great service”. Think Starbucks, where people pay more and queue longer to be able to say “wow, great coffee”.

Being “customer centric”, as many claim to be, isn’t the same thing as providing great overall customer experience. Nor is it equal to the quality of the network itself. Customer experience is the sum of the interactions that a customer has with the company and requires a multi-level, cross-functional approach to be fulfilled. In addition to a good network it involves IT, sales, customer service, product development and essentially anyone that ever provides the end-customer with anything.

The beginning to the solution for operators is to acknowledge the importance of customer experience and dedicate resources to it. Like airline Virgin Atlantic – also in a commodity industry – where CEO Steve Ridgway announced that £100 millions will be invested to “retain and enhance […] leadership in customer service and experience”. I’m intrigued to see who the first telecom operator to announce a similar program in 2012 will be.

/ Erik

Erik E. Byström is a Manager at Northstream

Feedback to blog@northstream.se

4T, the mobile payment joint venture established by Sweden’s mobile network operators Telia, Tele2, Telenor and 3, presented its strategy at an industry event in Stockholm on Wednesday.

The blockbuster acquisition by AT&T of Deutsche Telekom’s T-Mobile network in the United States may have collapsed, rejected by regulators nervous of price inflation were the number of national networks to have fallen from four to three, but European deal makers are undeterred.

Like most people living in Western Europe, my Christmas shopping involved a combination of ‘On-line’, ‘High Street’ and ‘Shopping Mall’ purchases; I also had the opportunity to spread the shopping between London and Stockholm. During this period, I experimented with some of the popular mobile phone apps with location services such as Facebook Places, Foursquare and O2 Moments with the hope that these apps would improve my shopping experience in terms of cheap deal offers, item recommendations, assistance etc. As much as the apps helped in keeping me informed of my friends’ locations and of many promotional offers around my location, I found that the apps were too focussed on the social networking experience. What I, as a consumer, really needed from these apps was however not readily available. As a consumer, I needed my digital footprint (mobile and desktop computer generated data such as location, browsing, social networking etc.) to be harnessed and fused to offer intelligent and personalised services that can be used when I embark on my shopping ventures.

So what/how should future location-based services look like to fulfil expectations and exploit mass-market potentials?

Before I proceed with the description, it is important to note the implicit assumption that the user gives the permission for his/her data to be used. A detailed Privacy discussion is beyond the scope of this blog but in general, I find that most people are happy to have their data used provided that the following basic contract is agreed between the user and the service provider:

• That true value is offered in exchange (and agreed upon prior to data collection).
• That the data is collected for a purpose, used for that purpose and then destroyed once it no longer serves the purpose.
• That the user is constantly informed about the data kept about them and the processes applied to it.

It may sound plain and obvious, from both sides of the ‘contract’, but in reality neither implementations nor user perceptions satisfy all the criteria.

Future location-based services must rely on a combination of innovative concepts with far greater flexibility and capabilities than those of a single phone app. The reflections below are not intended to give a full specification but rather touch on some of the key aspects that I think will make a difference. It’s also worth noting that most of the core technologies involved already exist in some form, they just need to be reapplied from a different perspective.

Indoor Location
Using my Christmas shopping example, my mobile should be able to log every store (indoors or outdoors) I walk into (and if it’s a large store such as IKEA, the various sections or aisles that I visit should also be logged). The stores that I visited should have the means to know that I visited them and possibly log the items that I purchased from them at that time (not difficult to achieve if mobile payments are in use).

Digital Activity Tracking
In my example, I browsed various items from different outlets such as Amazon, eBay, Facebook Marketplace etc. I also booked flights to travel to London. For an enhanced service, future location-based services should be able to tap into my digital activity and build a picture of what I could need or where I could be, in a similar way to a top-end personal assistant. The purpose of tracking my digital activity and utilising it in location-based services would be to match my behaviour and movements with relevant retailers in such a way that I don’t feel spammed or intruded upon but instead feel assisted and guided.

Data Fusion
For the entire system to work there needs to be some means of aggregating the data, adapting it and constructing a personalised service. As an example, let’s say that the day before I travelled to London, I visited Stockholm Kravatt (a tie store) but didn’t buy any ties. Future location-based services should be intelligent enough to check for attractive deals (or even broker a deal) at Tie Rack at Heathrow airport and suggest it to me upon arrival.

We will get there!
The system that would enable location-based services will rely on innovative concepts that will make it more than just a social network-based app. Some of the technology heavyweights such as Google and Apple have, in the past, demonstrated their ability to design and market large software ecosystems. To nurture this with enabling technologies and service ideas, there is a countless amount of smaller innovative companies (and we’ve seen many of them) just waiting to get their 15 minutes; So there is no shortage of brains to seize the opportunity. I therefore hope that in the next couple of Christmases, I will be able to rely on my phone to help me find the gifts I want from the most convenient location and at the right price. Industry, please help me out!

/ Landry

Landry Ndikumasabo is a Consultant at Northstream

Feedback to blog@northstream.se

In spite of the fact that data is the ‘hot topic’ in mobile today, and it’s clearly a driver for LTE deployments, voice is still essential to the mass take-up of a network technology. LTE networks cannot yet support carrier grade voice and this is the main reason for a continued slow take-up of LTE in 2012. Instead, a technically inferior solution has to be relied upon – circuit switch fall back, or CSFB.

It will be mid 2013 or later before VoLTE – a high quality voice solution on LTE – is in place, and this requires continued development of technical specifications and a considerable increase in the coverage reach of LTE networks.

Operators face a Catch 22 situation: greater coverage is needed to offer voice, yet voice is a key driver for increased network investment and take-up. The LTE journey is going to be thrilling, but there are obstacles to overcome before true mass adoption.

For the first time in seven years – since the entrance of the large Chinese equipment vendors – we are seeing the beginnings of an end to excessive price pressures. A number of factors have led to this development, and finally vendors will begin to see pricing that is in line with the real cost of delivering mobile broadband.

The infrastructure market is maturing and normalizing, and the result is that there is less aggressive pricing to win market share. Ericsson and Huawei have created a clear leadership and will not contribute to price wars. At the same time NSN, Alcatel-Lucent and even ZTE are under financial pressure and cannot continue to try to buy market share.

For operators, the need for constant and ongoing network modernization increases the demand for more capable hardware, greater capacity and greater network optimization. As the complexity of planning and implementing a multi-service network increases, operators are taking a more holistic approach to their sourcing activities, putting less focus on price and more on finding the right partner. Without the right equipment partner, operators will not be able to manage the spiralling growth in mobile data consumption.

In recent years, topline revenue decline has been the trend, largely due to competition for market share in saturated markets. Contributing to this, new VoIP and messaging services from so-called ‘OTT’ service providers are eating into operator revenues. These pressures, combined with the increased cost and complexity of building and running a mobile network, will expedite the trend of operator consolidation. That, in turn, will reduce price pressures.

To take advantage of this, innovative marketing departments will lead the revolution, delivering new and compelling price plans for mobile data connectivity. Well packaged data plans will compensate for dwindling voice and messaging revenues, and will begin to correct the under-charging that has been inherent to mobile data in recent years.

Ultimately, operators will have to focus more on being a ‘connectivity provider’ and leverage the inherent positive price elasticity of data to increase overall revenues. Operators must capitalise on users’ willingness to consume and to pay for mobile broadband that is constantly improving due to strong innovation of both technology and services. For some operators, we may even see data revenues exceed voice revenues by the end of 2012.