Path to quad play

Bundled services could help operators revive ARPU and reduce churn, according to delegates at the recent Quad Play conference in Dubai.
Path to quad play
By Roger Field
Thu 04 Jun 2009 04:00 AM

Bundled services could help operators revive ARPU and reduce churn, according to delegates at the recent Quad Play conference in Dubai.

While many operators in the Middle East may be at a painful stage of transition as they are forced to open up to competition, they at least have the advantage of being able to observe lessons learned by their counterparts in more developed markets, which were forced to open up to competition some years ago.

In particular, many incumbent operators in the MENA region, and particularly the Gulf, face falling ARPU and tough competition from new entrants and new service providers such as VoIP operators, which increasingly threaten to take revenue away from them.

But while some operators see little option but to resist new technologies and competition, for Edmond Osstyn, strategic customer engagements for EMEA region, Alcatel Lucent, the best option for operators is to embrace change by launching bundled services and also accepting VoIP.

When you look at new ways of communicating, such as Skype and all of these new players, operators are thinking, should we fight them, join them, or just give up and stick to being a bit pipe? - Edmond Osstyn

Osstyn, who was a key speaker at last month's Quad Play conference at the Etisalat Academy in Dubai, recommends that operators look seriously at "bundles" of services such as triple play and quad play packages - which typically include fixed and mobile phone, internet and IPTV - as a means to revive ARPU or increase their share of the market.

He also points to a report from the Yankee Group about quad play packages, which makes for sobering reading for any telecom operators that are lagging behind in terms of innovation. The report predicts that by 2012, 80% of telecom revenue will come from bundles, or combinations of fixed, mobile and IPTV.

"Between today 2012, operators will mainly focus on bundles, according to the report. Then beyond 2012 they will start building additional services," Osstyn says.

By looking at the example set by operators in other parts of the world, it is clear that telcos in the Middle East have everything to play for, and that most threats can be turned into advantages.

Value from VoIP

Osstyn cites the example of UK incumbent BT Group, which introduced a triple play bundle back in 2004 and attracted some 2 million customers to the service in the first nine months. One of the key pillars of the service was a VoIP offering, which rivaled Skype on pricing. BT Group offered this service for free to customers subscribing to the bundle, according to Osstyn.

"At the time that this happened, people were surprised - an incumbent that launches a PC calling service, and an incumbent that decides to price it cheaper than Skype. In the first nine months, 2 million triple play customers was enormous, much higher than any of their competitors at that time," he says.

VoIP is just too important for traditional operators to ignore, Osstyn says, and he quotes some statistics to back up his claims. "It you look at 2006-7, the amount of voice minutes going to Skype was quite modest. But by 2012, 50% of call minutes in Europe will not be standard," he says.

"When you look at new ways of communicating, such as Skype and all of these new players, operators are thinking, should we fight them, join them, or just give up and stick to being a bit pipe? BT did something about these upstarts, while Vodafone has also launched its own PC calling service, but always with some slight differentiation."

Indeed there are ways in which operators can profit from VoIP. Osstyn points out that the quality of VoIP services such as Yahoo Messenger and Google Talk is inconsistent, which could offer operators a chance to take a slice of the market. He suggests that operators could collaborate with VoIP providers to improve quality, perhaps by addressing the issue of mail box synchronisation, which can consume bandwidth and disrupt VoIP calls.

Operators that opt to launch their own VoIP service could also seek to profit by selling add on features to their customers. For example, young people might spend significant time video sharing, while people working from home might require additional address books or presence facilities, all of which could provide the operator with an opportunity for up-selling. "When you have these broadband customers, you can track their behaviour," Osstyn says.

Austrian operator Mobilcom, which launched a service linking PC calling to the existing mobile numbers of its customers, provides a good example of a way in which operators can innovate to use VoIP to their advantage.

The company offered its customers a service that allows a call to the customers' mobile phone to also result in a parallel call on their VoIP account, for a small monthly fee, allowing it to offer its customers an attractive service, while also gaining a new revenue stream.

"In that way they introduced PC calling with the smell of Skype and pricing of Skype but they linked it to the mobile number. Consumers love it because they hate having another number. They hate to swap from existing numbers," Osstyn says.

"This is something operators can easily do, whether they are enterprise customers or consumers, it may be one of the main differentiators."

Tailored bundles

VoIP is just one of many potential aspects that can form the voice component of a bundled offering. Indeed, Ossytn points to the convergence of fixed line, mobile and VoIP as giving operators plenty of room to innovate and differentiate themselves from other operators when creating bundled services.

Telecom operators have the benefit of an established customer base, and they also have a certain amount of information on their customers, which they can use to their advantage when creating bundles. It also means that operators already have a ready market for new services, and they can also tailor new products to the needs of their customers by analysing their customer base.

The family is just one important group that operators can tailor bundles to. For example, an operator could consider offering a special mobile tariff for teenagers if their parents already have their fixed line and mobile connections with the company. France Telecom, better known as Orange, is one company that has taken this approach.

"In a lot of markets operators want to get their customers to buy as many services as possible. France Telecom is serious about bundling and is even looking at bundling as something that can be done in a family context," Osstyn says.

"This is important in France as for mobile, many teenagers do not buy the Orange brand. They buy into the competitor. Orange thought if it was selling broadband and mobile for the mother, father and children, then it could add some family management tools around it. If the offer for the kids is attractive enough, the company might get the whole family to buy quad play." Ossytn adds that operators could also consider offering parents "management" tools, giving them some control over their children's calls.

Telecom operators with fixed and mobile operations can also offer their customers converged offerings between fixed, mobile and VoIP. For example, a customer might want a call to switch from a mobile tariff to fixed line tariff if they are speaking on their mobile phone as they enter their home. Customers might also want to receive converged billing, and have one point of contact for their mobile, fixed line and internet connections.By converging services, operators are also more likely to encourage their customers to evolve. As customers start to use more broadband services, they are also more likely to upgrade from a 2G phone to a 3G device, a move that is likely to mean more revenue for the operator.

"When you have your PC base, watch what they do and start selling them these kind of services as a converged service across fixed and mobile. Users will probably swap a 2G for a 3G phone because new services only work on 3G. Gradually you get your customers to evolve," Osstyn says.

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