Sponsored Data and Zero-Rate Charging.pdf

Mobile Broadband Business Models:

Sponsored Data & Zero-Rate Charging

Dean Bubley, Disruptive Analysis

London, 30th June 2014

[email protected] @disruptivedean

mailto:[email protected]



About Disruptive Analysis

London-based tech analyst house & strategic consulting firm

Cross-silo, contrarian, independent

Advisor to telcos, vendors, regulators & investors

Research reports, internal workshops & advisory projects

Clients include many top telcos, vendors, webcos & startups

Speaking roles at 30+ events per year in Europe, US & Asia

Research on “Telco-OTT Strategies”, WebRTC etc

New Strategy Report on “Non-Neutral Broadband Models”

Twitter @disruptivedean Blog: disruptivewireless.blogspot.com

Copyright Disruptive Analysis Ltd 2014 June 2014

http://disruptive-analysis.com/nonneutral.htm

Telecoms industry in a nutshell


Flat/falling telephony

Declining SMS

Direct/Internet competition

Substitutes & alternatives

Costly infrastructure

Regulatory impact

Data still growing

Digital content

Verticals

Telco-OTT

APIs & partnerships

Better segmentation

The big problem for the mobile industry…


0

200

400

600

800

1000

1200

1400

2012 2013 2014 2015 2016 2017 2018 2019

Voice telephony

VAS / digital

Internet/data access

SMS/MMS

$bn – Global Mobile

Operator Revenue

?

New/partner services?

Voice/video-based?

Verticals?

High-end mobile users

already nearing

saturation for mobile

Internet spend Source: Disruptive Analysis “Non-Neutral Mobile Broadband” report, June 2014

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Huawei E220

USB modem

Original

iPhone

(browser

only)

iPhone

3G +

AppStore

H3G open-

Internet

access

(+Skype etc)

NTT DoCoMo

iMode, 1999

Nokia 9000

with HTML &

modem, 1996

O2/HTC

XDA

Facebook

Zero launches

Samsung

Galaxy

range

starts

Android

goes

mainstream

Kindle 3G

Whispernet T-Mobile

Web’n’Walk Verizon

BREW app

store

AT&T

sponsored

data 1st LTE

network &

zerorated

music

iPad 3G

KPN threatens

OTT charging

Tuenti zero-

rates

TelcoOTT

WebRTC app

History of mobile data business models/devices

Galaxy

Note LTE

Phablet


Open Internet access was not original intent for 3G data services

Mobile data: Tsunami or just normal rising tide?


3G/4G Smartphone data use

• Disruptive Analysis has doubts on realism of some traffic forecasts

• Growth manageable with pricing, small cells, LTE, LTE-A. 5G is mostly hype for now

• “Spectrum crunch” narrative highly questionable (landgrab vs broadcast?)

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015 2016 2017 2018 2019

Growing usage per smartphone

Growing # smartphone subs

?

NB 2012-13 subs growth possibly skewed by

older smartphones without data plans

Smartphone data use growth year-on-year

c20-30% growth/user/yr

Source: Ericsson, Disruptive Analysis

Many issues for app-based biz models


No clear

definition

of “app”

Business

model fit

Device

depend-

ency

Device

OS API

exposure

HTML5 WiFi fit

OSS /

BSS

head-

aches

Pricing,

selling,

support

Network

depend-

encies

Arbitrage

& other

side-

effects

Organis-

ational

troubles

Mobile

differs

vs. fixed

Non-neutral models of mobile broadband access face a broad range of

generic issues in implementation & commercialisation

Two different worlds for mobile data-plans


Source: Disruptive Analysis “Non-Neutral Mobile Broadband” report, June 2014

Nobody who can afford the whole Internet will be happy with just half of it

Application-based mobile data models

Mobile Data models

Neutral open access

User pays for all data

Certain data zero-rated

Certain data sponsored

Partial Internet access

Specific applications

allowed

Specific applications

blocked

Differentiated Internet access

Paid priority “specialised”

services

Differentiated Wholesale /

MVNO


Many of today’s mobile broadband plans

“Fully neutral mobile Internet”

Data treated equally, charged

differently: “Grey Area”

Data treated differently by network

“Non-Neutral”

Zero-rated data: 4 sub-types

• “Data inclusive” for video, music, gaming etc. sold by telco

• Long history of zero-rating eg for MMS, BlackBerry data traffic

• Competitive advantage in deal-making, not data subsidy

Paid bundled apps / content

• Mostly used in developing markets; Facebook/WikiPedia Zero

• Risks of market distortion vs. benefits of digital inclusion

• Already very widely-used (but now banned in Chile)

Free apps / content

• Most operators developing own comms/content apps

• Available to all Internet users, but poss. free for on-net subs

• Helps bridge Digital/OTT efforts with existing bundles Telco-OTT apps

• Long history of zero-rating data for OSS/BSS purposes

• Self-care, updates, billing portals, customer service helpdesks

• Mostly not Internet-based but private internal data network

Self-care & self-service


Zero-rated data – attractiveness matrix


Good

Fair

Poor

Bad


Attractiveness for mobile operators vs. key criteria

Telco-

OTT

apps

Paid

apps /

content

Free

apps /

content

Self-

care &

service

Ease of implementation

Ease of selling by telco

Ease of buying by client

Revenue potential

Impact on network

Reputational risk

Market maturity required

Workarounds/"gotchas"

Adjacent revenues/costs

Prevalence 2014

Prevalence 2019

Sponsored data for:

Zero-rating examples are already widespread


Use of zero-rating will continue to grow strongly


0

200

400

600

800

1000

1200

1400

1600

1800

2000

2012 2013 2014 2015 2016 2017 2018 2019

Global mobile Internet

users exploiting zero-rated

data, m, year-end, est.


Note: excludes non-Internet zero-rating eg of MMS & BlackBerry BIS data

Sponsored data: 4 sub-types

• Advertiser pays to send ads/promos/demo etc

• Fits into existing ad-buying value chain

• Consumers resent paying to “be advertised at”

• Concept believed to be invented by Disruptive Analysis in Nov 2010

Paid advertising traffic

• Data relating to specific URLs is paid by site owner

• Highly unclear there is either demand or robust technology Paid website traffic

• Certain applications’ data traffic is paid-for by app provider

• At least 10 separate major problems. Almost unworkable

• In extremis, risks replacing retail data fees with cheap wholesale

Paid app data (1-800 apps)

• Companies pay for employees’ work data used on own devices

• Potential to combine with VPN/BYOD & other solutions

• Moderate potential but business-case unproven

Enterprise/BYOD paid data


Sponsored data – attractiveness matrix


Ads Web Apps BYOD

Ease of implementation

Ease of selling by telco

Ease of buying by client

Revenue potential

Impact on network

Reputational risk

Market maturity required

Workarounds/"gotchas"

Adjacent revenues/costs

Prevalence 2014

Prevalence 2019

Sponsored data for:

Good

Fair

Poor

Bad


Attractiveness for mobile operators vs. key criteria

Sponsored data…. so far, mostly just AT&T


? Plus one or two other

unproven rumours (trials?)

Advertising partners Enterprise mobile

app partners

Very few sponsored-data customers

announced or reported by users

As well as many technical complexities,

sponsored data models need strong

partnerships to sell/support

Sponsored data – limited growth potential


Sponsored Mobile

Data revenues,

worldwide, $bn


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2012 2013 2014 2015 2016 2017 2018 2019

Advertising traffic

Other use-cases

Sponsored data expected to be <1% total mobile broadband revenue in 2019

Sponsored data may reach 3-5% total mobile advertising budgets

Successful non-neutral models

Legally permissible

Technic –ally

feasible

Consumer demand

App / content player appeal


Practical forms of non-neutral

mobile broadband only a

small % of the conceptual

variants & use-cases

Policy & innovation…… …..vs. politics


Strategy

Mobile broadband

control

In-house apps & content

Marketing / Product

IT Core network

Radio network

Devices

Legal

Tensions

Tensions

Distance

Net/Not neutrality won’t stop data flattening too


Sponsored data, paid-priority QoS etc will have negligible financial impact

Source: Disruptive Analysis Non-Neutral MBB Report

Conclusions

Mobile operators hope to increase data revenues & control

Developed markets: segmentation, loyalty & bundling add value

Developing markets: converting low-ARPU voice users to data

Pricing differentiation easier & less controversial vs. QoS

Two-sided business models sounds theoretically appealing…

… but are virtually impossible to create for mobile data

Zero-rating already widely used & will grow further

Applicable to free & paid content, plus admin & self-care tools

Some questions over neutrality, but arguments mostly weak

Sponsored data largely unworkable, except for advertising

Generic 1-800 apps model almost impossible to create, sell or manage

Bottom line: Zero-rating is key “mostly neutral” model



Published June 2014:

Non-Neutral Mobile Internet

Business Models Report

On request: private workshops &

expert advisory retainers

For details email

[email protected]

www.disruptive-analysis.com

disruptivewireless.blogspot.com

@disruptivedean

[email protected]

Skype:disruptiveanalysis


http://www.disruptive-analysis.com/






Sponsored Data and Zero-Rate Charging.pdf

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