Every now and then, a business launches a new – truly innovative – service offering that makes their competition sit up and take notice. T-Mobile USA did just that with its Binge On “free” unlimited video service.
Since bursting onto the scene last November, says Fergus Wills, director of product management at Openwave Mobility, this counter-intuitive idea appears to be a hit. Let’s look at a play-by-play of the numbers:
- For users joining the plan – 10% increase ARPU (average revenue per user)
- Net reduction in network load of 10-12%
- Churn reduction by 15%
This disruptive strategy seems to be a winning play for T-Mobile. But more importantly, results suggest that subscribers are happy to binge-watch their favorite video content on the go… even if it means paying more for lower resolution video (T-Mobile increased the baseline prices of plans at the same time they launched Binge-On). Seems crazy doesn’t it, paying more for less quality? But there it is, in incremental monthly recurring revenue (MRR).
Doesn’t it make you wonder if this business model could work somewhere else? For example, across the pond in Europe? Of course, we’re not exactly comparing apples to apples.
You say soccer, we say …
With at least three or four operators in each country or region, there are a lot more players in the European market, resulting in lower ARPU across the board. This means a different and more competitive business case than in the U.S. In this competitive climate, European operators are laser-focused on attracting new customers and keeping churn low.
EU regulations handle zero-rating & promotion differently than in the U.S, so European operators have more opportunities to offer enticing packages on a per country basis. This story is not just about free videos, it could be free music streaming, gaming, live streaming and so on.
A key business consideration is whether an all-you-can-eat plan will cannibalise other services and reduce ARPU? Actually, no, that hasn’t been the case for T-Mobile and from a business perspective we can see that calibrating the offer correctly leads to an increase in revenue.
The core of this is that users will move to a new service provider, if the data package is right. The data package can be more diverse than say 5 or 10 GB plans. The operator cannot afford to be left out of the game – and the key to winning is how you play the game.
Free data or binge on… What’s in a name?
Some have tried to compete by offering X amount of Gigabytes (GB) of free data. This might sound like a no-brainer to entice subscribers. But, some subscribers don’t have a clue what a GB is. A study found that 1 in 3 people thought Gigabyte was a South American insect!
There has to be association of service / value for any offer to make sense; so let’s go back and take another look at the T-Mobile playbook. The X factor here is offering a range of content from popular providers. Marketing ‘free’ video content from instantly recognisable brand names like YouTube, Netflix or Amazon is more attractive to consumers than a plain vanilla “free data offering.”
So, can a European operator go one better than just free GB and really get smart about data?
Ready for deployment
The simplest thing to say is that promotions don’t have to start (or stop) at video. Consider other services that might be popular with subscribers. This could include ‘free’ gaming, streaming audio, HD content or even social media.
It’s also worth saying that any offer has to be backed up by the technical toolkit available to operations teams. So being able to identify and handle encrypted (HTTPS) traffic (typically at 60 percent and rising); having an easy to understand opt-in/opt-out process, clearly documented and automatically tracked, detailed traffic reporting and trend analysis – are all key technical components of the game. And these are all areas where European operators could potentially improve on the T-Mobile USA model.
Of course, the variety of network infrastructure across Europe means that group operators like Vodafone, Deutsche Telekom or Telefonica would need to implement the service differently than T-Mobile USA anyway. Likewise, demographics and popular demand for different services vary right across the region. It’s therefore important to tailor country-specific offers.
Binge On à la carte?
Do Europeans have an appetite for all-you-can-eat content? Oui. Sì. Absolutely. A few months ago, our survey of European mobile subscribers found that more than half would consider switching mobile operators in order to get unlimited video.
It’s a matter of when European operators start offering Binge On type services – not if. The real game-changers will disrupt the status quo by delivering something that customers truly value and need. There is also an opportunity to show OTT content providers that the way data is packaged and sold really can lead to a mutually beneficial relationship between subscriber, operator and content provider.
The European mobile market is ultra-competitive. That makes European operators worry and focus more on boosting ARPU and reducing churn than say network loads. Learning from the Binge On playbook but diversifying and extending the services definitely can work for European operators in search of that precious of all commodities — new subscribers.
But in order for this to work in Europe there also has to be a change in mindset – a West coast entrepreneurial model – becoming ‘uncarrier’ like – where speed and agility in the market is to be cultivated. It’s not a matter of cutting prices to make offers enticing, that would defeat the purpose (as mentioned earlier T-Mobile raised theirs).
The author of this blog is Fergus Wills, director of product management at Openwave Mobility.
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