5G Monetization of B2C Market. Cases of Telecom Operators
When 4G technology emerged in the telecommunication industry, it changed the world significantly. High-speed data transfer has ensured an explosive growth of mobile devices penetrating into everyday life. Due to their convenience, people started using gadgets for online shopping, social networking, ordering taxi and food delivery via apps. Almost all industries have embarked on digitization journey, which has fundamentally and irreversibly changed the perception of business strategies and customer service. While experts are debating whether 5G will be as revolutionary as 4G once was, mobile operators already admit the prospects and high demand for 5G in the B2B segment. However, the question of demand and monetization of the technology in the B2C market remains open.
In this article, Bercut, a software developer for telecom business development, will analyze innovative cases of 5G monetization in the B2C market, discuss what changes operators must anticipate when implementing such scenarios, and share experience on how to implement some of them now.
Background
Analyzing the demand for 5G, some believe in the explosive growth of high-resolution video content, cloud-based data processing and storage technologies, cyber sports and social networks. We can expect that 5G will significantly improve the gaming process by reducing lags, and bring AR and VR tools development to a new level. However, mobile operators will face a complex upgrade process when implementing this technology.
McKinsey&Company analysts have recently published a report on their experience with telecom operators and service providers from around the world. The report includes a survey conducted in April 2021 among 2,400 customers from 6 countries. In fact, operators believe in monetization potential of 5G in B2C sector. For this purpose, they are considering three innovative models to increase ARPU (average revenue per user); depending on the model, the projected ARPU growth ranges from 16 to 20 %.
- Impulse purchases and business tariff plans.
- Selling 5G-enabled services.
- Leveraging partners to deliver 5G-enabled services.
5G is based on the concept of Network Slicing. Largely, it makes the concept of using the fifth generation so attractive for businesses. The technology is based on ‘slicing’ the network, which allows telecom companies to abandon standard service packages for subscribers. Operators can then charge customers extra for providing a dedicated, high-performance network slice for a limited period of time. Also, network slicing helps to improve customer experience and perception of QoS (Quality of Service).
Let’s review each model with case studies.
Impulse purchases and business tariff plans
The model implies that instead of standard monthly subscriptions with fixed set of services and internet speed, telecom providers will offer flexible plans with a range of services with an option to expand network capacity on demand. This way, operators expect to increase the number of impulse purchases, as the nature of the service or the situation itself drives the subscriber to purchase extra.
Case: A subscriber is at a stadium, where network load is usually high; they want to live stream it on social media. It is expected that, once 5G is available, the subscriber will only need to pay a fee to receive a certain extra bandwidth for the entire duration of the stream. The ‘slice’ ensures high data transfer speed and the best experience of connectivity. The operator, in turn, increases ARPU, UX appreciation and customer loyalty.
What should an operator anticipate when implementing a case?
At the moment of an impulse purchase, IT systems start the mechanism of traffic prioritization; in other words, the evaluation of parameters to determine the speed. One must understand that network elements in this case change speed dynamically, meaning that correct interaction with the internal BSS, — for example, the billing system — must be set up in order to turbo-boost the speed. To ensure proper response to events occurring on the network, the entire technology stack (packet network, DPI, billing system, PCRF and others) must be very tightly linked.
Can we implement this scenario on 4G network?
Sure. The described case is based on the familiar turbo boost scenario, which is most often used by operators to provide a temporary speed increase on demand. BSS Bercut offers a turbo package feature; it provides a variety of options for configuring speed for any period. This enables the operator to respond immediately to subscriber’s requests and increase data speed on demand. The operator can set a dependency on priority or traffic types to determine the available speed.
In order to provide the best service to any subscriber in high-load conditions, you need to solve the problem of network resource limitation ⎯ a dedicated component of the BSS is designed for this.
Bercut Traffic Management is part of the BSS solution; it is designed to redistribute network resources according to real-time traffic prioritization settings.
Accurate prioritization settings will give the subscriber the top status, once they activate the turbo package.
Conclusion: a similar model of monetizing impulse purchases is feasible on the existing 4G network. It just requires the right combination of DPI and a set of products of Bercut BSS.
Of course, during peak load on base stations, only 5G networks will guarantee a stable speed threshold due to high coverage. However, you can prepare the subscribers for the transition and test the hypothesis of speed increase on demand right now.
Cases with business-class tariffs on 5G networks, in other words, premium plans with unlimited capacity guaranteed by the Network Slicing technology, follow a similar model. However, unlike 5G, 4G has limitations, so declaring it to be premium gets more complicated. Nevertheless, efficient distribution of network resources allows one to boost the speed for the target subscriber group by 15–20 % even on 4G. So, even now you can segment customers interested in this service before the network upgrade, and build up its capacity gradually.
Telecom operators that rush to offer customers unlimited 5G data and premium network terms may attract more customers in the short term, but will ultimately suffer from a failure to implement more sophisticated and profitable monetization models. (McKinsey & Company)
Selling 5G-enabled services and Partner Relationship
By focusing on a specific customer experience rather than just connectivity, operators will unlock new revenue sources. For example, the high speed and reduced lag of 5G can ensure the smooth running of multiplayer games or sports broadcast in AR or other areas where the user wants guaranteed performance. But to make this model effective, it is not enough to simply bring together partners that will enhance the operator’s product offering. It is necessary to build a proper and deep interaction between all links: the operator, its partners, and their IT systems.
While some share of customers would be willing to pay operators for improved gaming features or other applications, many more of them will be interested in paying content providers directly for better on-demand network performance. (McKinsey& Company)
That is why one of the promising areas that Bercut, an IT developer with more than 28 years of experience in the telecom segment, is currently developing is a Partner Relationship Management project.
Bercut Partner Relationship Management (PRM) is a solution allowing one to combine convergent ecosystem products with added value from the range of digital and non-digital services of the operator and its partners, and making their cooperation process efficient.
Creation of convergent ecosystems is a global trend. By integrating partner services, operators increase revenue and improve CJM. Bercut PRM is designed to overcome the main barriers faced by telecom operators in developing digital ecosystems, namely:
- technological complexity of integration with partners’ systems;
- failure to support the new logic for managing partner services;
- large number of operational processes that require automation.
Ecosystem products and their charging
One of the 5G monetization models is creating services bundles from different providers: online games, AR and VR services, etc.
Imagine, you are not only playing a game, but playing it in VR. Or a museum provides the operator’s subscribers with exclusive virtual access to a rare exposition for a few hours. The operator needs to charge for content, but traditional data traffic charging (for volume) is not applicable in this case. The operator needs new models that will allow charging for the content itself and the time of its consumption.
This highlights the importance of an advanced convergent billing system and charging platform that allows you to classify and charge traffic as required by new business models. The right detection settings, charging of different types of traffic, charging of non-digital services or products are the key strengths of IN@Voice Bercut convergent billing system. They are also among the key parameters when selecting an automated settlement system that is ready to 5G launch. Without tools for traffic classification, pricing and dynamic price change depending on input variables and the context of a data session, implementing non-standard innovative 5G-enabled cases will be simply impossible.
We have not mentioned all the existing cases of 5G monetization in the B2C market, as well as technology stack that will be required to really launch 5G network. We at Bercut are looking ahead and planning the architecture of the IN@Voice convergent billing system for the future world, keeping in mind that mobile operators need business results right now
IVAN RYL, HEAD OF PRODUCT MARKETING AT BERCUT
