Monetising 5G calls for reinvention … And the time to start is now – Part one
These days, we are witnessing many telcos preparing for the next generation of mobile communications, putting a lot of hope into the promise of growth offered by 5G technology. However, there are still numerous opportunities for growth to exploit today, offering a significant promise for telcos’ business.
Moreover, overlooking these opportunities and putting all the eggs in the 5G basket is not only missing an opportunity today, but it also can impact preparations for 5G monetisation, says Shay Assaraf, CMO of Optiva.
Following is Part One in a two-part series looking at steps service providers can take now to maximise monetisation, today and tomorrow.
Let’s take data, for example. Global mobile data traffic has increased more than fourfold over the past three years, driven mainly by technological innovation, customer demand and the rapid expansion of 4G networks. Yet, for the most part, mobile data service revenues have not kept pace with traffic increases. And although the trend of data traffic growth is projected to intensify with the greater speed and capacity enabled by 5G, expecting that the data revenue trend will be different in 5G, for the long term, is not a solid projection.
In fact, 5G cannot be fully monetised by itself without a significant change in the state of mind and business focus, bringing new and innovative ways to monetisation strategies and targeted populations. And such changes should be done now to allow communication service providers (CSPs) to benefit from them in the current era — coined by T-Mobile CEO John Legere as the “post-unlimited/ pre-5G era”— as well as to better prepare for 5G monetisation.
An important question, then, is what are the changes that CSPs need to embrace to generate revenue from the mobile data that traverses their networks, or from any other voice/messaging service? One direction is to focus only on capabilities enabled by 5G — such as network slicing and massive IoT.
But if early 5G mobile data plans are any indication, 5G pricing strategies that are replicating the monetisation schemes of 4G are far from the answer.
The reality is that CSPs have to invest in innovating around their growth strategies. A potential framework can be viewed in three directions, offering a 360-degree view of potential growth verticals: beyond their core data, beyond mobile-only services, and beyond consumer-focused services. And such innovation should start today, rather than waiting for 5G to be developed.
Beyond data – Manage the core
While data commoditisation is an inevitable stage of the telco product lifecycle — and judging by some mature markets, it is already here — intelligent management of their service portfolio enables CSPs to down-pace commoditisation. To do so, it’s essential to understand the market-specific dynamics of commoditisation for CSPs, which can take place when competitors enter a market and aggressively work to capture price-sensitive audiences.
This is relevant for CSPs’ strategies today as well as in 5G because, in many cases, such a situation can drag the market into a pricing war that inevitably results in a race to the bottom. This could be the result of many 5G commercial launches if not managed correctly.
To escape this trap, CSPs should profile and target different audiences in a personal way and gain an understanding of their consumption patterns and preferences. The end goal should be determining the value their customers attribute to various service features, differentiating the service instead of providing “one size fits all” with a price that keeps getting lower.
One example of such a strategy can be seen through VOXI, a sub-brand of Vodafone in the UK, which targets the youth audience. VOXI provides unique pricing schemes, marketing language, brand values and marketing channels, all of which specifically target a younger demographic. This kind of differentiated offering allows a CSP to retain and obtain customers in a particular segment without cannibalising its entire customer base, while also avoiding the “race to the bottom” with competitors.
Another key way that CSPs can establish meaningful brand differentiation — for their entire base or for specific premium segments — is through customer experience (CX). This multifaceted term encompasses service quality, digitalisation, accessibility, customer care and more.
A good example is BT’s Keep Connected Promise, which transfers the dialogue with customers from a common, service-related transaction to a dialogue on experience and commitments. With 5G at our doorstep, it is interesting to note the 3UK approach, emphasising their technical superiority as the real 5G network providers — aiming to attract and retain the advanced, technical and data-savvy segment in their country.
In Part Two, we’ll explore strategies beyond the conventional mobile network operator playbook.
The author is Shay Assaraf, CMO, Optiva