Sowing the Seed of Loyalty HOW CUSTOMER EXPERIENCE MANAGEMENT IS BEING USED AS the NEW COMPETITIVE DIFFERENTIATOR

the future of wireless ISSUE 174 FEBRUARY 2012

featuring CEM: Injecting CEM into every stage of the mobile customer lifecycle.

Smartphones: 2012 looks set to be a make-or-break year for several players in the high-end device market.

Sowing the seed of loyalty HOW CUSTOMER EXPERIENCE MANAGEMENT IS BEING USED AS THE NEW COMPETITIVE DIFFERENTIATOR

OFC_MCI174.indd 1 09/02/2012 09:52 News, Analysis and Opinion for the global telecoms industry

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Editorial 02 contents FEBRuaRy12 Analysis 04 UK regulator Ofcom has revised its plans for 4G spectrum allocation. In India, meanwhile, a bungled allocation process for 2G spectrum has led to 122 licences being revoked. New RIM CEO Thorsten Heins has his work cut out to improve the firm’s fortunes—while fortunes will be made by the See centre Facebook IPO. section of magazine MCI Interview:

David Ffoulkes-Jones, CEO, WDS 10 A special supplement The CEO of customer experience solutions provider on cloud services WDS speaks to MCI as an introduction to our CEM in the mobile industry, special focus. produced in association with FEATURE

Customer Experience Management 12 CEM needs to be injected into every element of the mobile operator’s business if it is to be successfully used as a differentiator. In three features, each covering a particular period of the customer lifespan, we look at how carriers are trying to put the customer experience at the forefront of their operations. | Global Events 2012 Handsets: LTE World Summit Smartphones 23 23 – 24 May 2012 2011 was a tumultuous year for the smartphone CCIB, Barcelona, Spain sector, and it ended in dramatic fashion. 2012 will http://www.lteconference.com/world be a crucial year for several of them as new products and platforms are put to the test. 2012 will see up to 139 LTE of the world’s top 100 operators networks deployed across 5 and with 8 years of proven success Applications and frameworks 34 continents by operators wanting to in delivering operator-led LTE The software side of the mobile experience is in bring superfast mobile broadband events, the LTE World Summit is a state of flux, and 2012 may still be too early to to the market. If you want to meet THE place to meet all the major place confident bets. ALL of the major LTE operators buyers and decision-makers and players from across the global underneath one roof. If you can that matter, this is the place to be! only make ONE LTE event in 2012.... The future of the interface 40 2011’s event in May attracted 85 make it this one!. In 2012 the handset interface is all about the touchscreen. But alternatives are in development—from Broadband World Forum MENA MVNO Industry Summit gesture recognition to flexible and wearable devices. 25 - 27 March 2012-02-07 24th - 26th April 2012 Dubai UAE Barcelona, Spain Vendor View: http://mea.broadbandworldforum.com/ http://mvnoindustrysummit.com/

Mike Coward, VP for strategy and innovation at 32 IP&TV World Forum Policy Control 20 - 22 March 2012 24th - 25th April 2012 Radisys, argues that encryption does not mean the London UK Krasnapolsky Hotel, Amsterdam end for Deep Packet Inspection. http://iptv-forum.com/ http://www.policycontrolconference.com/ Executive Interview:

Paul Bultema, UK and Ireland strategy lead for 38 communications, media and technology at Accenture, talks about consolidation, differentiation and the rise of OTT services.

The leading source of news, Subscribe to MCI today! The Informer analysis and opinion for the Email: [email protected] global telecoms Industry www.telecoms.com/magazine/ The Informer looks at some of the first financials 44 Visit www.telecoms.com of 2012 in a bid to divine the winners and losers of the year.

Mobile Communications International | First for news, best for business 01

01_MCI171.indd 1 09/02/2012 09:54 EDITORIALFEBRUARY12 [email protected] Deﬁ ning Experience

here is a great deal of lip service paid In this issue of MCI we take three phases of HEAD OFFICE Mortimer House, 37-41 Mortimer Street, to Customer Experience Management the customer life cycle—retail, contract dura- London, W1T 3JH in this industry. Even people who sell tion and retention—and look at how operators Tel: +44 (20) 701 75000 T Fax: +44 (20) 701 75647 solutions aimed at enabling operators to can and do promote customer experience man- EDITORIAL address and improve their CEM concede agement within them. An interview with David Please send all press releases to [email protected] that not all the enthusiasm for the topic is Ffoulkes-Jones, CEO of CEM specialist WDS, Editorial Director genuine. Some go so far as to describe much completes our special focus on this new trend. Mike Hibberd Email: [email protected] of the discussion surrounding CEM as ‘guff’. Nothing else in the industry evolves with Tel: +44 (20) 701 75201 There are two reasons for this: ﬁ rst, no such frequency as the device space, of course, Deputy Editor operator in business can afford to be seen and the second of this issue’s twin themes James Middleton Email: [email protected] as anything other than devout in its pursuit is the handset sector. 2011 was an eventful Tel: +44 (20) 701 75257 of quality customer experience. Second, and year for many of the players in this space, Assistant Editor more crucially, it’s extremely difﬁ cult to put and 2012 will be a proving ground for several Dawinderpal Sahota Email: [email protected] into practice the theory of successful CEM. vendors whose futures could yet swing in Te l : +44 (0)20 7017 4010

This theory stresses that concern over the very different directions. Correspondents: customer experience should penetrate every In the lead handset feature we have The Informer [email protected] element of the operator’s business. And when exclusive comment from operator handset you consider that this runs from the bored specialists who, between them, oversee the ADVERTISING Sales Manager teenager working Saturdays in a commuter purchase of some 150 million mobile devices Michael Butcher town retail store to the third-party provided every year. We also take a look at the applica- Email: [email protected] Tel: +44 (20) 701 75601 engineer tasked with ensuring quick resolution and framework space, and peer into the Chris Beales tion of network issues—and everything in future to see how the form factor and user Email: [email protected] between—it’s easy to see where the funda- interface of the mobile device as we know it Tel: +44 (20) 701 6893

mental difﬁ culty lies. might be revolutionised. DESIGN & PRODUCTION For all that, CEM is emerging as the new As we go to press the industry is gearing Design & Production Manager Joanne Lowe competitive battleground for mobile operators, up for MWC, at which all of these issues will Email: [email protected] as other points of comparison have either been doubtless be the subject of intense scrutiny. Tel: +44 (20) 701 75604 worn ﬂ at, or taken from them by over the top Doubtless many of our readers will be going MARKETING / LIST RENTAL players. The lack of interest shown by some of to the show. I hope you have a fruitful trip Head of Marketing Sophie Burdajewicz those OTT players in managing the customer this year and, if you can’t make it, be sure to Email: [email protected] experience should put operators in a solid keep your eyes on Telecoms.com for updates Tel: +44 (20) 701 75461 position to build relevance and dependency—if on the most interesting developments. PUBLISHER Tim Banham they are able to structure and prioritise their Email: [email protected] business accordingly. Tel: +44 (20) 701 75218

SUBSCRIPTIONS/ CUSTOMER SERVICES c/o Mobile Communications International Mortimer House, 37-41 Mortimer Street London, W1T 3JH, UK

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02_MCI174.indd 2 08/02/2012 15:21 Comviva.indd 1 26/01/2012 09:10 NEWS Analysis [email protected] | @telecomsjames

A rock and a hard place

UK communications regulator Ofcom has been forced to make some tough decisions to bring the UK telecoms industry up to 4G speed. There’s good news and bad news in equal measure, with the regulator readily accepting that you can’t please all of the people all of the time.

K communications regulator Ofcom is under 1800MHz from Everything Everywhere before the spectrum pressure to bring the country up to speed, amid auction, Ofcom would not necessarily guarantee them Ufears that it is lagging behind other European spectrum in the 800MHz band. nations in terms of 4G deployment. The necessary “On balance, Ofcom decided that Everything Everywhere’s spectrum is not due to be auctioned until later this year, holding of 1800MHz is sufficient for the operator to use with rollouts not expected to begin until 2014. in order to deploy LTE, rather than worry about it getting In January the regulator announced revised plans access to 800MHz for that,” said Matthew Howett, analyst at to promote competition in the country ahead of the 4G Ovum. The regulator believes the benefits of operating LTE spectrum auction. Ofcom believes that consumers are likely at 1800MHz are higher than operating at 800MHz, because to receive better services at lower prices in the future if 1800MHz allows more capacity. there are at least four operators in the market and that— Of course the operator itself was not happy to hear the without the right quality and mix of spectrum—an operator news and criticised Ofcom for missing, “a huge opportunity might struggle to compete with other national wholesale for the UK to address the imbalance in sub 1GHz spectrum providers. holdings, which has damaged consumer interests for the The spectrum in the 800MHz band that is becoming last 20 years.” available, freed up from the nationwide switchover from The remaining UK operators, Vodafone and O2, are analogue to digital TV, is equivalent to three quarters of the likely to be the happiest at Ofcom’s revised proposals, with mobile spectrum in use today. This re-farmed 800MHz band Vodafone claiming that the revisions bring the UK closer to a will be auctioned along with higher frequency airwaves in “fair and open auction that will benefit the wider economy, the 2.6GHz band later this year. increase competition and ultimately lead to the creation of innovative new services for consumers.” As a parallel consideration for the forthcoming auction, The decisions Ofcom takes now are likely to Ofcom has also outlined new proposals to extend 4G affect the level of competition in the sector coverage to at least 98 per cent of the population. This builds on the initial requirement that one of the 800MHz for at least a decade. Striking a balance was licences up for grabs would oblige the holder to roll out a never going to be easy. 4G network that provides coverage to 95 per cent of the UK population. Due to a recent government investment plan, which will see £150m go towards the elimination of ‘not spots’ in the UK, Ofcom believes its new condition can be But from its latest consultation it is clear that Ofcom strengthened in one of two ways. continues to value 3UK’s disruptive nature, and intends The first option is to increase the coverage obligation to reserve spectrum in the 800MHz digital dividend attached to that licence to 98 per cent of the UK population. band for the market’s smallest carrier. A marked change The second and, in Ofcom’s view potentially more effective from previous proposals is that the regulator considers option, is to require that this 800MHz spectrum license has Everything Everywhere—which operates the T-Mobile and a condition that forces the buyer to provide 4G coverage Orange brands—to have sufficient spectrum overall not to be that not only matches existing 2G coverage but also extends protected in the same way. into mobile ‘not spot’ areas of the UK where the £150m will Industry analyst Ovum acknowledges that Ofcom has provide infrastructure capable of supporting 4G coverage. essentially been stuck between a rock and a hard place. It This may have the potential to extend 4G mobile coverage wants to award these frequencies as quickly as possible in even further than 98 per cent of the population, according order to benefit consumers, but it also wants to ensure that to Ofcom. it does so in a competitive way, as the decisions it takes now According to Ovum’s Howett, the country may be lagging are likely to affect the level of competition in the sector for behind its European neighbours but the regulator has not at least a decade. done a bad job. “The decisions Ofcom takes now are likely 3UK is likely to be quite happy with the proposals to affect the level of competition in the sector for at least a because it is almost guaranteed spectrum in the sub 1GHz decade. Striking a balance was never going to be easy. The band. However, there’s a wildcard in the form of Everything set of proposals now on the table appear to leave everyone Everywhere’s 1800MHz spectrum, some of which it is with something to be optimistic about, but at the same time being forced to offload as part of the merger of T-Mobile requires compromises to be made. Perhaps Ofcom have got and Orange. If 3UK, or a new entrant acquired some of the it right.” n

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04-09_MCI174.indd 4 07/02/2012 15:08 Untitled-4 1 08/02/2012 17:24 NEWS Analysis [email protected] | @telecomsSahota

Blackberry crumble?

To say new CEO Thorsten Heins faces a challenge in turning Heins has put on a brave face, which arguably, is his around RIM’s fortunes would be an understatement. only option. He claimed a strong balance sheet with approximately $1.5bn in cash at the end of the last quarter and negligible debt. And he noted that the company esearch In Motion’s share price dropped by around reported revenue of $5.2bn in its last quarter, up 24 per 80 per cent from June 2008 to September 2011 cent from the prior quarter, and a 35 per cent year-to-year Rand the firm’s second quarter profits in 2011 slid increase in the BlackBerry subscriber base, which is now to less than half of what it generated in the first quarter, over 75 million. amounting to little over 40 per cent of what it made in the “Going forward, we will continue to focus both on short- same quarter last year. term and long-term growth, strategic planning, a customer- The most damning assessment of the company’s chances and market-based product approach, and flawless for the year ahead—and there have been a few contenders— execution,” he said. “We are in the process of recruiting a was given by one of RIM’s own shareholders, Canadian new CMO to work closely with our product and sales teams merchant bank Jaguar Financial. to deliver the most compelling products and services.” “While its rivals have demonstrated an ability to develop One advantage that the firm has over some of its and market products with features that inspire consumer competitors is the strong ties it enjoys with the world’s enthusiasm and drive higher adoption rates, RIM has clearly mobile operators. It has begun offering services such as fallen short,” the company said in a statement. “Its failure carrier billing on its App World store, enabling carriers to let to offer products with innovative features, combined with its their customers put app purchases on their bills. From its limited selection of applications, has resulted in RIM losing early trials, the firm has seen carriers increase their revenue market share to its competitors.” from applications by 141 per cent. The shareholder called for the company to undertake a In the year ahead, the company has high hopes for its value maximisation process that could involve selling the firm. BlackBerry 7 mobile operating system for smartphones, 2011 was a grim year for a company that was once one which supports more HTML5 standards than any other of the industry’s most widely hailed success stories. RIM mobile browser, according to Rory O’Neill, VP for marketing, announced its intention to lay off 2,000 staff, more than EMEA, at RIM. And devices are also now beginning to ten per cent of its workforce, as part of its cost-cutting support NFC after RIM became the first smartphone vendor programme, and its CMO Keith Pardy handed in his to be MasterCard approved and certified. resignation just a month before the company launched Meanwhile the company has signalled its intent for its first tablet, the PlayBook. To compound the misery, a 2012 by making a host of acquisitions to enhance its cloud high profile outage in October saw millions of BlackBerry offerings. It has bought digital content services provider users around the world experience a service disruption, NewBay, cloud-based video editing services provider JayCut, preventing them from using the browser and the BBM mobile social gaming firm Scoreloop, cloud-based calendar messaging platform for three days. and scheduling services provider Tungle.me and contacts management startup Gist, all in the past year. “BlackBerry will build out on its cloud infrastructure and on its core strengths which is a proposition around One advantage that the firm has over some social, sharing and around building and engaging social of its competitors is the strong ties it enjoys communities—that’s the piece we can look to differentiate on.” said O’Neill. with the world’s mobile operators. However, not everyone shares the enthusiasm voiced by Heins and O’Neill. According to Northstream CEO Bengt Nordstrom, 2012 is going to be very tough for RIM. The outage irked customers who took to social networks “They missed the boat on touchscreens and the software to vent their fury. As some measure of compensation, the around them—it almost became too late,” he said. “One of firm offered users access to premium apps for free from its their biggest challenges is how to make the BlackBerry app App World store, and gave business users one month of free range compelling. In truth, they need to be successful with BlackBerry technical support. However, the damage done to their efforts to support Android apps.” the firm’s reputation was severe, which it can ill-afford in such a And Informa analyst Dave McQueen agreed. “Making hotly competitive market. Android apps work on RIM’s devices is not a bad idea, but Former co-CEOs Mike Lazaridis and Jim Balsillie, who it’s almost worth them starting again and figuring out what resigned in January, remain on RIM’s board and maintain that they want to achieve—a bit like Motorola did, like Sony are the appointment of a new CEO was their own decision. “There starting to do now and like Nokia did with Microsoft,” he comes a time in the growth of every successful company said. when the founders recognise the need to pass the baton to “Whether BBX will be the one platform moving forwards new leadership. Jim and I went to the Board and told them —that’s possible, but they have to back that up with decent that we thought that time was now,” said Lazaridis. devices. n

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04-09_MCI174.indd 6 07/02/2012 15:16 Untitled-1 1 01/02/2012 10:17 NEWS Analysis [email protected] | @telecomsHibberd

Indian 2G licences in limbo as Supreme Court intervenes after corruption scandal The long-running saga of India’s 2G licence allocation reached a peak this month when 122 licences were revoked, leaving many foreign investors unsure of their future in the country.

he Indian 2G licensing scandal reached a sensational criticising its attempts at fundraising for the venture and crescendo early in February as the country’s offering to buy it out of the Indian operation as a means of Tsupreme court declared invalid the 122 2G licences settling the issue. that were controversially issued in 2008 by then telecoms For its part, Telenor seems resolved to stay put; not minister A. Raja. The licences in question were awarded on least because of the significant customer base that it has a first come first served basis amid accusations of bribery amassed since acquiring the disputed licence. Tor Odland, and corruption, and sold at values set in 2001, rather than vice president, group communications for mobile at Telenor, through an auction. told MCI that, overall, 66 million customers would be The Comptroller and Auditor General of India submitted affected by licences being revoked, with 36 million of those a report to the Indian government in 2010 which argued customers of Unitech Wireless. that, by severely undervaluing the spectrum, Raja—who is He added that the Supreme Court announcement currently in jail—cost the national purse as much as $40bn. actually stimulated an acceleration in the growth of the This figure has been disputed by the Indian regulator, TRAI, firm’s subscriber base. In the approach to the Supreme and the Central Bureau of Investigation, however. Court’s decision, Unitech had been signing up 100,000 new The 2008 sell-off was intended partly to bring new customers each day on average, but this actually increased players into the market, and several large operators— in the days immediately after the ruling. including NTT DoCoMo, Telenor and Etisalat—now face their “On Thursday, the number increased to 106,000 new spectrum being reclaimed. The Indian Government has sign-ups; on Friday it was 150,000, and on Saturday, indicated its intention to reallocate the disputed spectrum, we saw it increase to 175,000,” Odland said, the week most likely through an auction process. after the ruling. He attributed the growth to sales staff in India making a concerted effort to continue growing the subscriber base at a difficult time, and said that the The 2008 sell-off was intended partly to operator may have also benefitted from sympathy and bring new players into the market, and support from the general public in the country. And, with the firm having already invested some two thirds several large operators—now face their of the $3.43bn set aside for its Indian operations, Odland said spectrum being reclaimed. Telenor is reluctant to cut its losses and exit the market. “It’s particularly hard given that we had just begun to get on track with hitting our targets for 2013,” he said. “We will do what we can to operate in India. Currently, Each of the affected operators will be allowed to continue everything is an option. We definitely don’t think of it as offering their services for four months, while the TRAI a lost cause. It will be challenging but we are inspired to devises new guidelines for the auction process and decides continue,” he said. how to handle any transition of assets between current It may be that for Telenor and its fellow licenses, the only licence-holders and new licensees. “It’s looking like [the option will be to reapply for the spectrum they feel they current licensees] could lose all of their investments, but already own legitimately, and participate in whatever auction once the regulator comes out with guidelines, there will be process TRAI decides to put in place. Crucially, TRAI must more clarity about what kind of losses these operators will decide whether or not it restricts the new auction to foreign make. It’s still not very clear,” said Anubhuti Belgaonkar, investors and newcomers once again, or whether it throws senior analyst with Informa Telecoms & Media. the process open to incumbent carriers that are always ready The nature of the allocation process is not the only to acquire more spectrum in a rapidly growing market. controversy surrounding the licences, though. A number How the disputed licensees react when they have had a of the 2008 licensees were already under investigation little more time to absorb the ruling will be interesting to for failing to meet deployment targets set in the licence watch. No specific, public accusations have been made, but conditions. Among these players were Aircel, Etisalat, it is widely inferred from criticisms of the process that at Loop Telecom, Sistema Shyam and Unitech—the company least some of the licensees are believed guilty of bribing with which Telenor has partnered in the Indian market. A. Raja to get their spectrum allocations at a drastically And towards the end of last year it became clear that reduced price. Whether or not they seek compensation from all was not well between the Norwegian incumbent and the Indian Government for investments already made, in the its Indian partner. Unitech filed a petition to the Company event that they do not look to remain in the market after Law Board in India accusing Telenor of mismanagement, the licences are revoked, will be a telling sign. n

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04-09_MCI174.indd 8 07/02/2012 15:09 [email protected] | @telecomsSahota NEWS Analysis

The one they’ve all been waiting for

Facebook announced an impending IPO early in 2012, and it’s going facto part of handsets that are sold in emerging markets,” to be a big one. But what will it mean for the mobile industry? said Michael Gartenberg research director at Gartner. The firm is also in a strong position to offer marketing services beyond display advertising. There is a mass of acebook revealed in documents supporting its filing consumer data accessible via the Facebook platform, and third that it had 823 million unique users per month, as parties are also integrating Facebook functionality into their Fof December 2011, and that more than half of that websites. But perhaps the most interesting development is the number—around 430million—are using the site from a volume of revenue Facebook is seeing from in-app purchases, mobile device. To put that into perspective, 430 million is through services such as games, according to Adrian Drury, larger than the global installed Android user base. practice leader and senior consultant at Ovum. The site generated $3.74bn in gross revenue for 2011, “One of the most notable things we’ve seen is the volume with $1.7bn operating profit before tax and $1bn net income, of revenues coming from PAYG services in the platform, translating into a healthy margin of around 27 per cent. which is brought about by its exposure to [social network However, there is still vast scope for growth and, with an influx game developer] Zynga,” he said. “Users are paying for of around $5bn expected with the firm’s stock market flotation, premium content and features through these games and commentators are suggesting that the most promising avenues apps, and everybody is surprised by just how much money for investment are mobile and in-app purchases. that is generating for Facebook.” The aggressive expansion of its mobile efforts might But it will be a challenge to maintain this pace of growth. not be plain sailing for Facebook. Net advertising income Becoming a public company, the firm will now have the from a mobile user is currently less than for a PC-based added burden of a responsibility not just to its users, but browser user for Facebook because the site does not display also to shareholders. third-party advertising in either native or web mobile According to Fred Huet, MD of telecoms and media applications. It has been suggested that the firm may even consultancy Greenwich Consulting, Facebook has need to work out revenue share deals to gain support from acknowledged in the past that it needs to generate more operators and ensure they do not feel threatened by its revenue per user, and the floatation is only going to increase services. Facebook chat on mobile could easily cannibalise that pressure. Huet argued that the current model of the income from text messaging, for example. Facebook platform playing host to third-party games and apps is overly dependent on other industries and players moving to Facebook and finding ways to make money from the site. Becoming a public company, the firm will now “Now it is going to be quoted, it will probably have to take have the added burden of a responsibility not a little bit more of a driving seat in that space as well. It will surely continue the platform play—providing third parties with just to its users, but also to shareholders. a great way to make money, while making a cut for itself. But it will also have to do a bit more on its own—and this means developing more products in-house for its own platform.” Despite such concerns, the proliferation of smartphones However, Gartner’s Gartenberg does not believe that represents a huge opportunity for the site. In developed the IPO will significantly impact the way that Facebook markets there is scope for Facebook to increase revenues does business. He said that the site will continue operating from mobile-dependent applications such as location-based largely as is, because if the user and the user experience services and coupons. At the same time, the firm is aiming were no longer the priority, Facebook would suffer and so, to sow its appeal beyond advanced smartphone users in inevitably, would its shareholders. developed markets. “Zuckerberg still has a controlling interest within the In many emerging markets, such as Africa and parts of company, and they are going to pursue the market as they South East Asia, growth in internet penetration via desktop see fit,” he said. PCs is modest. However, while they are not investing in He also argued that it has been taking into account PCs, many consumers are investing in feature phones, and shareholder considerations for a few years now, with Facebook can capitalise on the opportunity that presents. venture capitalist firms such as Elevation Partners, recently In October last year, Facebook introduced a version of its investing in the site. However, he conceded that there will platform that can be embedded on the SIM. SIM manufacturer be more pressure on the company to drive higher levels of Gemalto developed the offering, which is targeted at the mass revenue via advertising, particularly in mobile apps, where market, and the Facebook software application is embedded it currently has no display advertising. inside the SIM, allowing users to access core features from the It has to strike the balance between advertising phone’s main screen, through a cascade of menus revenue and becoming annoying to consumers; too much “Right now people think the Facebook mobile experience advertising with no targeting ends up doing more harm is primarily for smartphone users but Facebook wants to be than good. “It needs to focus on preserving the user accessible on every device, not just smartphones but lower- experience on Facebook, because if that begins to change end handsets as well. That means making Facebook a de then they will have bigger issues.” n

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04-09_MCI174.indd 9 07/02/2012 15:09 MCI interview

MCI executive interview

Have you ever been experienced?

David Ffoulkes-Jones, CEO of CEM solutions provider WDS, shares his views on how operators can develop customer experience management into a true competitive differentiator.

here is more than a dash of understatement in David Ffoulkes- TJones’ observation that, “being the CEO of a network operator right now would be a challenge.” In a verbal sketch of the industry, Ffoulkes-Jones, chief executive of customer experience management specialist WDS, depicts mobile operators battling on a number of fronts—internal as well as external—and struggling to maintain their lines. “They’ve got their shareholders, which are probably the larger pension funds, in a depressed market, saying they want cash so they can afford to make their pension payments. They’ve got their engineers complaining about capacity issues caused by the marketing department subsidising smartphones onto the network and they’ve got the post-sales support teams reporting that those smartphones cost an arm and a leg to support,” he says. “And on top of all David Ffoulkes-Jones these negatives, they’re already deep into the price game, commoditising the product as it stands.” the road is going to do the same thing. experience, many customers interact In this scenario, he says, it becomes So it is not a point of differentiation. with their operators’ support teams increasingly difficult for the operator I also have to tariff and market the far more frequently. Invariably, in the to convince its shareholders that a products in the right way, manage wake of each of these interactions, an multi-billion dollar investment in new them in the right way and get my post- automated CRM system pings the user network technology like LTE makes sales services right. I need to create a text message asking them to rate financial sense. Of course, once one stickiness—and the customer experi- the experience. Websites do the same operator makes this move in any given ence, knowing the customer, delivering thing, while technical reports from the market, the rest have little choice but a great service, managing them in the network feed in information on device to follow. But this relegates the net- way that’s right for them—will create connection rates and dropped calls. work to the level of a hygiene factor that stickiness.” The net result is a far greater volume for consumers comparing operators Today’s mobile operators have a of data on the customer experience— with one another. Meanwhile, the degree of customer interaction that which, on the face of it, should be a world of content and applications, would have been unthinkable just good thing for any operator looking to which operators had expected to ten years ago. Historically—espe- put CEM at the heart of their brand enable a new wave of differentiation, cially in the days when 12-month differentiation. has become dominated by over the contracts were routine—an opera- But, says Ffoulkes-Jones, informa- top providers. tor might feasibly have interacted tion only has value if it is properly Against this backdrop a new compet- with a customer only at the point of exploited—and even then that value itive arena has emerged, he says, and it uptake and the point of departure or can vary significantly. Furthermore, is customer experience management. retention. And if there was contact the increase in data volume could be “As an operator, while I have to between these points, it went largely just as easily be a burden as a bonus. spend money on the network because un-analysed. “The challenge is getting a clear without it I won’t have customers, I Today, due in part to the increasing message out of all of the noise gener- have to accept that the operator down depth and complexity of the mobile ated by these multiple touch-points,”

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10-11_MCI174_ExecInterview.indd 10 06/02/2012 10:32 MCI Executive interview

he says. “Even if I can get all of this can also be improved upon, he says. own—think services, content and data, and process it in a very clear Operators may well carry out com- billing—have been colonised by third and concise way, who do I give it to? pliance testing for devices that they party providers. But Ffoulkes-Jones And is that person set up to receive want to offer to their customers but argues that this creates an oppor- it? Network operators—and OEMs— ticking the box doesn’t go far enough. tunity for mobile operators, as well traditionally run very siloed environ- “How many times do they test the as a threat, because the over the top ments but I need to be able to deliver device against the experience their players are not making the customer this information into an organisation customers have had of the father of experience a core focus. that is capable of making decisions that device previously? That would “They’re saying they’ll have a good and acting on those decisions in an help operators start to understand, deal of the revenue but they don’t effective way. So there’s real change from a user’s perspective, whether fancy any of the costs, which is a great required, structurally and culturally, that device is really appropriate for business model if you can work it,” he to create an industry that becomes the network.” says. “But if you look at Google, they far more customer experience focused The trouble with customer experi- have the OS and they’ll sell the apps than it is today. The customer experience is that, while operators labour but they’re not assuming responsibil- ence needs to be managed horizontally, to meet KPIs on everything from ity for the experience of the whole as a process.” dropped calls to complaint resolu- solution. So the operators have the The type of feedback generated by tion, customers add an abstract, opportunity to step in and tell users automated survey tools in the imme- emotional layer to the mix that is that they should be loyal to them be- diate wake of a customer interaction far more difficult to manage. While cause they will manage the experience needs to be treated with caution, this can’t be controlled, says the WDS and make sure that it is reflective of Ffoulkes-Jones says, describing it as CEO, it can be influenced. If an opera- their brand.” of “questionable value”. While he says tor works to build brand equity with But if operators do pursue this that it is an absolute requirement for its customer, by consistently execut- approach, they will not be alone. At operators to survey their customers, ing well on its customer interactions the retail end at least, they are likely he points out that text-based feed- and by learning and improving, to soon have competition from inde- back, for example, provides only the then they can be honest with their pendent players. “Some retailers could snapshot of a moment. customers about their successes. If, take a truly independent view of the “It’s not a measure of the customer on the other hand, the operator is customer and say that, of everything experience, it’s a measure of how they promising to deliver something that that is on offer, a particular product feel right at that minute,” he says. “If cannot be delivered, a gap is created is most suitable,” he explains. “That they’ve had a tremendous transaction through which customer loyalty can solution could be a television, a laptop within the operator, they can feel re- seep away. or a tablet, or it could be a network, ally positive. But the next day they “That’s why we would say that a device or an application. That’s not could get a dropped call and then customer experience isn’t about the how it is yet, but there are lots of feel terribly negative. So these data user interface, or the fact that you’ve other companies that could get into are important but they are not the done network compliance testing, or this space if it’s not taken up by the only things that operators should be your dropped call rates. It’s about operators.” looking at. all of these things and more. It has Under fire from all sides as they “A truer test would be looking at the to be a continuous and relentless are in Ffoulkes-Jones’ sketch of the churn rate, the level it’s at and wheth- drive towards building better and industry, this is the last thing that er it’s trending in the right direction. better services for the customer— operators will want to hear. And he But even that isn’t a completely safe that’s how operators can build that suggests that they can only ensure basis for assumption because it could loyalty,” he says. their continued relevance by weighting just be that the operator was the first Competition for loyalty is intensify- the customer’s experience such that it to launch the iPhone. O2 has one of ing, though. Over the top players have occupies a complete 360-degree world the lowest churn rates in the UK and increased the complexity and depth view. “It’s not the only information I wonder if that’s because they’re a of the mobile experience but are also you’ll need to make the right decisions, great network, or because they were threatening the operator community’s but it’s a significant chunk of it if you the first to market with the iPhone,” control of the customer relationship. want to ensure that you are delivering he says. One by one, core territories that the an experience that’s reflective of your Data derived from the network operators sought to retain as their brand,” he says. n

Mobile Communications International | First for news, best for business 11

10-11_MCI174_ExecInterview.indd 11 07/02/2012 09:43 feature CEM – Retail

Soft Cell

The retail store is back in vogue as operators look to inject the customer experience into the first and most influential touch-point in the customer relationship lifecycle.

By Mike Hibberd

ot too long ago, “customer acquisi- is because technology obeys laws of physics. however, they become a support burden to tion” was something of a dirty term in People are an altogether more unpredictable the operator. A third customer might simply Nthe cellular industry. Operators were element of the operator’s world—employ- return the phone—resulting in wasted time queasy with the hangover from their land ees as well as customers—and this is what or even churn—while in the fourth, ideal grabbing activities and the focus turned to makes customer experience management in scenario, the customer is well matched to customer retention as they sought to identify general, and retail in particular, such tricky the product and services they have bought, the highest value customers and keep them games to play. and is well set up to become a profitable user. in the fold. Nonetheless, the retail phase of the cus- “Getting things right in that first retail The industry operates on cycles, though, tomer lifecycle is benefiting from a great deal period will really shape the profitability of and acquisition has now come back to the of analysis and investment as operators try the customer,” Deluca-Smith says. “When we fore—driven, as much within the industry is to refine their acquisition activities. Greater do root cause analyses as part of a support today, by the arrival of the smartphone era. sophistication in the retail process is neces- contract, it’s amazing how many of the issues That era, of course, was ushered in by the sary because of greater sophistication in the can be traced back to a deficiency in the retail iPhone and—yet again—Apple’s influence can devices and services being retailed—and the phase. Products are too often incorrectly be detected in some of the key shifts that we blend of channels being used by operators to matched or mis-sold.” are witnessing. initiate contracts is a delicate balancing act. The importance of properly aligning custom- While retail is once again a key priority for In addressing the retail experience they ers with products is driving some operators operators, the focus is less on shifting boxes offer as smartphones become more pervasive, to promote their physical stores in the retail and signing up cud-munching consumers operators need to look at potential retail out- channel mix. Online and call centre sales may than on using this first point of contact as comes. According to Tim Deluca-Smith , VP for well be more convenient and cost effective, but a launch pad for the somewhat ephemeral marketing at customer experience specialist person-to-person interaction is now seen as ex- Customer Experience. The ideal is that eve- WDS, there are four potential destinations in tremely important by operators looking to inject rything the operator’s brand stands for can retail, and only one of them is good. the customer experience into the retail process. somehow be distilled into a retail experience The first sees the customer taking owner- The influence of Apple’s retail stores cannot that leaves each customer feeling so happy ship of the device and finding, after some be overestimated here. Vodafone’s director with the product they’ve bought that they initial experimentation, that they are defeated of content services, Lee Epting, says that, “in never want to churn. Nowhere else in the by the complexity of the handset and/or the terms of retail customer experience, Apple mobile operator’s business is the ideal more associated services. The user then reverts to set the bar with its Genius Bar.” This facet of divorced from the reality. basic service use, such as voice and text. In Apple’s retail environment, where a number Network technology, broadly speaking, the second scenario the initial experience of in-store agents are trained to an expert works. And when something goes wrong with is the same but the user is more motivated degree in the firm’s products and solutions, it, the problem can be identified and fixed. This to overcome their difficulties. In being so, enabling them to answer any customer query »

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12-14_MCI174.indd 12 06/02/2012 10:50

feature CRM – REtail

or demonstrate any process, is a defining As more and more it. Operators need to satisfy customer needs element of the firm’s customer experience. in a way that suits their business. Don’t turn There is a very short evolutionary line be- subscribers upgrade to down the client, given them a choice. Because tween Apple’s Genius Bar and O2UK’s Guru if you push back, the client will go somewhere programme, introduced in 2010. more sophisticated devices, else and never come back,” he says. In the run-up to Christmas 2011, there was it seems unlikely that the Operators are now using online chat sales a two-week waiting list for an appointment agents to snare potential customers that are with an O2 Guru at the firm’s flagship store renewed importance of the browsing their retail sites comparing tariffs on London’s Oxford Street retail centre, which and handset pricing. The offer of a chat shows demand exceeding supply, if nothing physical store will diminish session is triggered automatically and the else. O2 has also set up a YouTube channel for potential customer is questioned by a real its Guru project, in a bid to catch the overspill of anytime soon. person and responded to in real time. The customers looking for that extra level of tuition. appeal of this channel for operators is that, The average in-store device sale across These users might not research their pur- in a world where consumers have rejected the industry is getting longer, according to chases in store, preferring to rely on online off-shore call centres because of language research from WDS, and now sits at around comparisons, social media and unofficial user and accent barriers—and because of a feel- 40 minutes. As more and more subscribers feedback to help them make their decisions. ing of remoteness—it offers the best of both upgrade to more sophisticated devices, it They will then look to make the purchase worlds. Written communication skills can be seems unlikely that the renewed importance of online. Clearly in this environment it is more higher in off-shore environments than spoken the physical store will diminish anytime soon. difficult for operators to inject customer ex- communication skills, drawing a veil over the This may be a difficult reality for some perience into the retail process than when fact that the transaction is being conducted within operators to accept. For an executive they are presenting users with an in-store across a gap of thousands of miles. tasked with increasing efficiencies in the retail ambassador for the brand. Native speakers of the language might see process, the duration of the sale is a KPI that Most operators have automated, database- through the veil, though, as operators in some needs to be reduced, not extended. The longer oriented systems that allow users to create cases are carefully scripting the responses a sales agent spends talking to a customer what they’re told is a “bespoke” package by that their agents are permitted to give, in who has already decided to buy a device, selecting services they like to use and the line with their desire to create a positive “yes” the less time they will have to convince the volume of minutes, text messages or data they environment. Indeed, according to Sarenac, next person that comes into the store. But if might consume (largely useless in the last ‘soft skills’ is an area drawing increasing the extra time spent with that first customer case since almost nobody understands the investment from operators looking to set deflects one or two future customer support correlation between content consumption and themselves apart on customer experience. interactions, it is time well spent. data consumption). But these are inherently But retail is not an environment in which Programmes like O2’s Gurus are motivated restrictive and, if an operator wants to project many people look to forge a career. Even in a in part by public relations, and rely on glossy the customer experience through online chat flagship store in a European capital, the staff visibility to create a sense of the brand values or call centre retail processes, flexibility and are likely to view their roles as transitory—12 the operator wants to project. But putting the dynamism are paramount. months to two years to earn some money, and customer experience into the retail phase of the Perhaps ironically, given Lee Epting’s then off they go to do something else. Retail is customer lifecycle has to be done throughout comments, one of the carriers most adept at a high turnover environment and yet operators the operator’s processes. As WDS’ Deluca-Smith this—according to Igor Sarenac—is Vodafone. must invest in training to ensure that their has it: “There’s more to a good retail experience “They try to be able to respond to anything a sales agents are winning the customers per- than a shiny store full of good looking people. “ customer wants in real time, to be as dynamic sonal investment as well as their financial one. This is especially true given that not as possible,” he says. “What they try to do is And this is the biggest problem with all retail activity happens in-store. While to say “yes” to customers.” Clearly injecting customer experience in retail: An operator Vodafone’s Lee Epting argues that remote customer experience into the retail process is can have the best systems in place, the most retail channels “will never be that significant about moving away from price as a differen- dynamic approach to tariff building and overall,” because, “users want to be able to tiator, rather than simply meeting customer’s a chief of retail sitting in head office who touch the devices and discuss them with tariff demands, but Sarenac suggests it is a genuinely believes in the sales environment knowledgeable staff,” the fact is that, for some more subtle approach. they are trying to create. But it simply can- customers, online retail, online chat and call “The idea is to create a positive relationship not be guaranteed that the person standing centre sales are actually preferable. with the client, to say “yes” even when you don’t face to face with the customer, on the other “These kind of channels were originally really mean it. You might be saying that certain end of the phone, or typing responses into introduced as a cost reduction,” says Igor things are possible, but explaining to the cus- the chat window, will be motivated to act as Sarenac, VP for communications at Convergys. tomer that there are certain requirements that an ambassador for the customer experience. “But things have changed. The younger and have to be met in order to get those things,” Customer experience is people dependent— upcoming generations simply prefer the web he says. “Clients are much more receptive to and people are nowhere near as dependable channel. And that’s the generation that will this approach than to being told that they’re as the technology mobile operators employ be around for a very long time.” not eligible for something, or not entitled to them to sell. n

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12-14_MCI174.indd 14 06/02/2012 10:50 DONT GET CAUGHT READING SOMEONE ELSE’S COPY.

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MCI_subscription_advert.indd 1 08/02/2012 14:46 feature customer relations

The lives of others The 18 or 24 months in between the key touch points of acquisition and retention is where operators have to deliver on the customer experience promises that were made at the point of sale. By Dawinderpal Sahota

n the not too distant past, operators were longer the biggest show in town. A company- the customer’s phone has failed to register slow to react to customer sentiment as the wide strategy is needed to address satisfac- because they were not provisioned properly Itouchstones between the provider and the tion and an outstanding customer experience for international roaming but can also see customer were few and far between—the most should be embedded in all aspects of operator that this is a high-value customer with a common interaction coming at the end of the strategy, from marketing and advertising to good credit rating, who has historically used customer’s lifecycle when it was already too the network and smartphone portfolios. This international roaming, a business rule can be late to act. Yet as technology has evolved, those is not to say that automated technological set up to automatically turn on international touchpoints have grown more frequent, push- solutions are not vital, though. roaming. The operator would also need to ing customer experience centre stage. This is “Operators should be giving me alerts send the customer a notification via SMS reflected, etymologically speaking, in the transi- about things that are happening that may that it has enabled roaming services, and if tion from ‘customer relationship management’ affect me; such as planned outages or service the customer does not want it to be enabled, to ‘customer experience management’. disruptions,” says Scott Kolman, senior vice they can choose to disable it. The argument is that, to deliver an unri- president of marketing for customer experi- “If that all happens in real-time; if I come valled customer experience during the lifespan ence solutions provider Speech Cycle. “They off the plane, turn the phone on and it works, of the customer relationship (not just when need to let me know that issues do exist and then clearly, there are big gains,” explains selling to them, or trying to stop them churn- that there is a resolution—action will be taken Jeff Gordon, CEO at Syniverse, a technology ing), an operator must prioritise the needs of and the issue will be resolved. Proactive care and services provider for telcos. “From an that customer throughout the organisation—in such as this will show me they acknowledge economic point of view, that device is being the culture, structure, technologies and busi- me as a customer and make me feel that my used, it’s generating revenue, instead of be- ness processes the operator employs. concerns and welfare are valued,” he says. ing out of commission for a few hours or a “There was a lot of system development activ- For example, if a subscriber gets off a few days, and my cost to serve, because I’ve ity ten or so years ago; operators were putting in plane in a foreign country and turns on their automated that infrastructure, is peanuts. these CRM platforms, and having one dynamic handset, only for the phone to fail to register, It’s less than if the customer got in touch to interface for selling and serving gave you a ho- they will have a negative experience. But if initiate the roaming, which will have required listic view of the customer. But really, this was the operator has a platform to automatically tier one or tier two support.” fundamentally just a customer database, it’s not suggest a response to this, the customer will Operators that are serious about customer customer experience management,” says Iain have a positive experience. service also need to prioritise it in the structure Regan, global head of business development, at If the operator can see in real-time that of their business, and according to Gordon » business process outsourcing firm Firstsource. Likewise, technology has allowed the system of customer reward to evolve beyond the unsophisticated loyalty points model pioneered by supermarkets and petrol stations. As Michal Harris, director of marketing insight and strategy at Amdocs, points out: “Every telco had a section related to retention and loyalty but the main focus of this was all about whether the end user had enough loyalty points. Really, you have to build a relationship with the user with a more holistic approach to win customer loyalty.” This is the critical difference between customer relationship management and customer experience management—technology is no

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16-18_MCI174.indd 16 06/02/2012 10:56 KapschCarrierCom.indd 1 07/02/2012 16:37 feature customer relations

Rawling, senior marketing director at Oracle, Chief and senior executives tion with self-care services are increasingly carriers really do understand the challenge. driven by social media, and it is crucial to It’s the way you bring it all together. “Systems are now being given remits recognise how this one factor is dramatically and technologies need to talk to each other,” changing the customer service landscape. he says. “The customer experience is where including ownership of, There is an inherent danger in social media differentiation is going to be. It’s not a network as, when customers take to social network- initiative, or about billing or a call centre, it’s and accountability for, ing sites to communicate with brands, it is about organisational change. It’s about all these ensuring that the customer often to vent their frustrations at an instance things,” says Rawling. “It’s a business problem.” of poor customer service, and share their Often, this necessitates the appointment experience is consistent negative experiences with their friends and of a head of customer service or, in the case acquaintances. of Everything Everywhere, a chief customer of information and, in order to create great “It is critical that operators step up their officer (CCO). discovery features on the device, we realised notion of customer service and realise that— The CCO’s role is to ensure that the cus- we can integrate customer care too. It was an for those that don’t – their customers can not tomer service team continuously reviews its ‘aha’ moment.” only defect to someone else, they can also processes and its engagement with custom- Epting believes that customer experience infect a far wider community. Their sphere ers to identify opportunities for improve- is an area of differentiation for providers and of influence goes well beyond their friends ment, while the team’s goal is to improve returns to this idea about transparency of down the block; now that sphere of influ- customer loyalty and recommendation rates. information—a two-way flow of data between ence literally encompasses the globe,”says One method Everything Everywhere uses is the operator and the consumer—as a means Syniverse’s Jeff Gordon. to set up specific teams to deal with issues of preventing churn. “Are we listening to our One way Everything Everywhere has tackled in anticipation of significant events, such as customers and understanding their needs, this challenge is by putting into place a buzz when there is a new product entering the wants and desires as they relate to support monitoring system that tracks and evaluates market that is likely to be immensely popular. and access to information?” she asks. “How social comment and sentiment. The company “We have an experienced team in place to do I, as a provider, put data about your phone says that the solution gives it access to real time support all enquiries and we have dedicated usage into something you can understand, and information which it uses in four main ways: to teams for certain enquiries. For example, when help you change your behaviour?” engage in online conversation where appropri- we launched the iPhone we had a dedicated As head of content, Epting is involved ate; to manage its own social media campaigns; team to support on this and this alone,” a in many of these touchpoint opportunities to evaluate online sentiment and its campaign spokesman tells MCI. between Vodafone and the end user and she performance; and to educate the business with Such an executive will need to be able to believes that, in a digital world, the ability to real-time info on products and services. marshal data feeds from all other parts of serve customers from a digital perspective is The operator also uses dedicated corre- the operator’s business, says Convergys’ VP absolutely key. “So we’ve focused on giving our spondents to track customer sentiment and for communications, Igor Sarenac. “Every customers access to information that is valu- communicate with customers experiencing functional group in an operator has their own able to them and related to their relationship poor service. The spokesperson explains: set of data reports,” he says. “You have a set or with Vodafone. Telcos have sometimes been “One example of how we use social media as marketing data, a set of data that comes from accused of being a bit grey with regards to the a tool to provide customer service is the @ customer surveys, a set that comes from listen- transparency in their offerings and usage, and OrangeHelpers Twitter stream which helps ing into the call centre. If you don’t connect all making that information available really is key.” customers with questions about everything of these up to each other, that’s a big mistake.” According to Oliver Finn, VP marketing at from handsets to contracts, apps to bills and Accountability is a development also picked active subscriber intelligence provider The tariffs to texts.” up on by Iain Regan from Firstsource, who says Now Factory, this is one area that allows the A grasp of social media is just one strength that chief- and senior executives are now being operator to position itself as gatekeeper of that operators will need to develop if they are given remits extending across all parts of the the smartphone ecosystem. to truly place the customer experience at the telco operation, including ownership of, and Finn says that operators should promote the heart of their business for the duration of each accountability for, ensuring that the customer ex- apps that are most suitable for the network and customer’s life cycle. They will need to back perience is consistent across the entire operation. cause the fewest issues to the operator, as these this up by exploiting the full range of data at Lee Epting, content services director at will also be the ones that cause fewest issues their disposal from the different functional Vodafone, is a case in point. While each Voda- to the consumer. In addition they should also units within their business. Appointing a chief fone operation has a dedicated team, which empower the consumer and promote self-care. customer officer, or equivalent, is a positive in the company’s parlance caters to CVM A positive experience can be created, without move and one that many operators will likely (customer value management ), Epting takes requiring costly support intervention. “This make. But in reality this is just another way of aspects of the customer experience under her means giving customers more information slicing the cake of business responsibilities. If own umbrella. “When I was focused on the about the devices and apps that they’re using, that senior executive does not have the power discovery of content, the customer experi- and directing them to self-care portals so that to effect change within the organisation, then ence wasn’t really in my remit,” she says. “But they can easily configure their devices,” he says. the operator will not be able to effect change now there’s this focus on the transparency The consumption of content and interac- in the customer experience. n

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16-18_MCI174.indd 18 06/02/2012 10:56 Untitled-3 1 03/10/2011 11:28 feature CEM – Retention

The long goodbye

Keeping hold of your customers in a hyper-competitive marketplace is notoriously difficult and requires a strategy that goes way beyond unsophisticated loyalty programs.

By James Middleton

an Hesse, the CEO of major US opera- about the fickle nature of their customers, value to the company in terms of both current tor Sprint, recently commented that admitted that their main focus when it came and future revenue and profitability, as well D“improvement in churn is the quickest, to customer relations was on churners (65 as their influence on other customers. fastest, most significant way of improving per cent) and potential churners (91 per cent), Paul Bultema, executive director, UK and your bottom line.” Although operators are suggesting that retention and loyalty efforts Ireland strategy lead, for the communications, rightly focusing on growing ARPU and aver- rely on last-minute actions? media and technology operating group of age customer spend, winning the loyalty of “There’s an issue with priority in terms Accenture, says: “Analytics is playing an im- existing customers and extending their stay of customer segments,” says Michal Harris, portant role in tailoring and defining services on the network arguably plays a stronger role director of marketing insight & strategy at for customers. It gives operators the ability to in maximising customer profitability. Amdocs. “We should be talking about a dif- dynamically link customers to their products Churn is a serious issue for the vast ma- ferent customer lifecycle now, which needs and services and then to the financials and jority of operators. It has steadily increased a different approach to how you treat your back to the network quality, so they can pro- on a global scale in recent years, from three customers. Many carriers are still focused actively respond to and address the customer per cent in 2009, to 3.5 per cent at the end on last minute efforts,” she says. experience. This is a great differentiator.” of 2010 and almost 3.9 per cent towards the This attitude is somewhat bewildering given The consultancy also believes operators end of 2011. Take Sprint as an example of a that, by the reckoning of Firstsouce CEO, Iain can infer the drivers of churn by using multi- tier-one operator in the US: With a churn rate Regan, the cost of acquiring a new customer is dimensional analysis in novel ways, such of 1.91 per cent for the third quarter of 2011, six times that of retaining an existing one. And, as correlating churn with the interactions a the company lost a net of 44,000 postpaid of course, there is a cost attached to that last customer has had with the company in order subscribers, each bringing in an ARPU of ditch attempt to appease a customer. However, to trigger retention treatments, as well as $58 for the quarter. That’s a potential loss he says that, with a well thought out reactive identifying areas where the customer experi- of $2.5m for the quarter outright, and a far process in place, it is not uncommon that an ence needs to be improved. This is a strategy greater sum over a contract lifespan. exit interview can provide an opportunity to which may sound straightforward, but is one Obviously, no carrier wants to see their fix a problem and hold onto a customer. that requires the ability to build a service in- valuable subscribers move to competitor That’s all well and good, but common teraction history across all channels to identify networks, yet it’s only recently that opera- sense—and numerous balance sheets—argue these churn ‘hot spots’. tors have changed tack to focus on building that there are great savings to be made by tack- But Firstsource’s Regan suggests that, as a relationship with the end user in order to ling customer restlessness before it gets too operators measure and incentivise or penalise actively prevent churn, rather than retain late, with a proactive focus through analytics. against the performance of their divisions customers in a reactive, last-ditch attempt. Accenture recently boasted that a leading with regards to the customer experience, the By and large, it’s still something that’s only US wireless provider—one of its clients—was real question is whether all the incoming data really addressed at the last minute. able to cut churn by 15 per cent in six months, is providing operators with tangible insight? In a late 2010 survey of operators by Infor- retain more than one million subscribers His company’s approach is perhaps more ma Telecoms & Media on customer loyalty, 66 and generate hundreds of millions of dol- material. Firstsource uses analysis tools to per cent of respondents commented that they lars in incremental net OIBDA, all thanks to gain insight into customer interactions to thought customers had become less loyal in analytics-driven customer segmentation, and identify broken processes or pinpoint where the two years since the last survey. Only nine the company’s creation of a ‘Churn Command competitors are ahead of the game. A big part per cent thought they had become more loyal, Centre’ dedicated to driving customer lifetime of this is reactive analytics around pre-churn yet 79 per cent of the same respondents said profitability. customers; the ones that are in the process they expected competition in their market to By leveraging a diversity of data—demo- of drifting out of the zone of contentment. increase dramatically over the next 18 months. graphic and behavioural—retention analytics “With voice analysis tools on care calls we So why is it that in the same survey, these can predict just when and why customers are listen for emotional strain in the customer’s operators that so clearly expressed concerns likely to churn. They determine the customers’ voice. Or keywords like ‘sorry’. This allows the

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20-21_MCI174.indd 20 06/02/2012 10:58 CEM – retention feature

Common sense—and numerous balance sheets—argue that there are great savings to be made by tackling customer restlessness before it gets too late, with a proactive focus through analytics.

a network and take advantage of your rollout and your coverage,” says Schöpf of Kapsch Car- rierCom, referring to the over the top players. “Through billing expertise operators can offer much more charging for third party content devices on which they’ve come to rely,” he says. for example. Users aren’t interested in having Moreover, in light of the smartphone and several accounts with several different provid- operator to get on the front foot and intervene application store revolution, the same argu- ers. They want one bill, one point of contact to get a specialist on the phone and fix the ment applies to content as much as to devices. and one system for customer care.” problem with the customer,” he says. Given that operators are now in many cases It’s the market that is changing, according to “No one takes this lightly. This is all about editorialising content for consumers, they Michal Harris of Amdocs, and providers need insight and about what we can change. Most are in a position where they can use this to change their model to focus on the network customers expect problems but it’s how those hand holding to their advantage in terms of experience. “If providers say ‘my core value is problems are rectified that matters.” customer satisfaction. Indeed, Thomas Schöpf, the network, this is what I do best,’ then they But the operator’s role as a problem solver COO of integrator Kapsch CarrierCom, believes should do their best to sell the network to the raises another interesting paradigm. The ar- operators should be looking to develop their end user or a third party.” The network should rival of the smartphone changed the entire own content or form a partnership giving ac- be the enabler and in reference to the OTT guys, landscape of customer experience manage- cess to good content for their users. there are plenty of companies willing to provide ment, and with a plethora of increasingly com- The point is well supported by Alcatel- the experience to the end user. plex connected devices entering the market, Lucent’s, Ben Geller, senior director of solu- By acting as a gatekeeper, the operator is user expectations have risen dramatically. tions marketing, who believes operators have rewarded with total ownership of the customer No longer content with a desire to make calls all recognised that at some point they are and all the trappings and information that go and send text messages, telco customers now going to have to foster some pretty compelling with it. On the one hand, the sea change in busi- expect to tech support and troubleshooting partnerships because they can’t be all things ness strategy is still held back by technological advice from anything to in-car communica- to all people. “There is a desire to truly own hangovers such as the persistence of post and tions systems to ‘connected home’ gadgets that customer experience and OTT players are pre pay billing, which codifies who you are as a like set top boxes or smart meters. The issue not equipped with the infrastructure required customer and defines the entire user experience being that if they don’t get everything they to provide a world class experience. Opera- when it really is just a payment mechanism expect from their connected gadgets, they tors can keep themselves at the heart of the that has been shaped by technology. In essence, point the finger squarely at the provider of relationship and add value too.” operators have tied up the customer experience that connection the operator. Informa’s 2012 Outlook survey, which high- with things that aren’t that important users are According to Tim Deluca-Smith, VP for lighted the intention of carriers to address the just after a service after all. marketing at WDS, if mobile operators want area of customer experience over the coming But the knowledge consistency of the opera- to provide unparalleled customer service and year, also discovered that the single most im- tor-gatekeeper means that telcos have access to capitalise on the opportunity the connected portant asset for a service provider building a so much knowledge and with such an integrated home concept offers, they will need to start content ecosystem is the billing relationship, profile of the customer, that Amdocs’s Harris getting more creative, and generous, with with 40 per cent of responses—more than believes they can compete against the databases their data sharing policies, as this will make twice the number for the next most significant nurtured by Facebook and Google. the customer’s life much easier. element—ownership of customer data. As the CEO of a tier one operator in France “Consumers don’t want to consciously think “The real USP of the operator today is that recently commented during a survey on about the device or network to which they’re at- it owns the customers through billing and customer experience carried out by Informa: tached. They want to buy a data allowance and customer care. It’s no longer the basic network “Good Customer retention practice is about use it, at their discretion, across the multiple because at the end of the day anyone can run business culture, not technology.” n

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The Clone Wars The handset market is more competitive than ever, and success is increasingly being defined by performance at the top end. 2012 will be the year of the Windows Phone push but can Nokia and Microsoft really compete with established leaders like Apple, Android and Samsung?

By Mike Hibberd

he final quarter of 2011 was an eventful in 2011 than it was in its heyday, surfaced in set to intensify. In November Matthew Key, one in the handset sector. Nokia marked partnership with Orange and Facebook, as head of the Digital unit at the newly restruc- Tits return to the smartphone market the social networking firm revealed more of tured Telefónica, revealed that the firm is and its first Windows Phone product with a the cards it plans to play in the device space. planning to slash the number of handsets in great deal of fanfare, while Apple announced For Blackberry vendor RIM, the situation its global range by more than half. in quick succession the availability of the simply went from bad to worse; leading to With a portfolio of around 240 handsets, iPhone 4S and the death of its inspirational the resignation of co-CEOs Jim Balsillie and there is clearly a lot of fat to cut at Telefónica. leader Steve Jobs. Samsung released the first Mike Lazaridis in January. But while the firm’s device range is at the handset to run version 4.0 of the Android OS And these were just the headlines. Behind larger end of the scale, relative to subscriber and Sony Ericsson announced that its tenth the biggest stories, the device sector contin- base, Key’s announcement reflected a trend birthday would be its last, as Ericsson finally ued to pulsate with activity in 2011, as its visible in the wider industry. exited the joint venture and Sony absorbed constituent parts battled for their place in Simon Lee-Smith, general manager UK what remained. the value chain, the hearts of the consumer and group devices at Telefónica, says that Meanwhile Chinese vendor Huawei set out and for supremacy over one another. the surplus in the portfolio can be explained its stall, pledging an assault on the smart- For all the change, one constant remains: by a handset strategy that has historically phone market to match the one it has mounted the mobile operator is still the primary route been local in focus, with individual terri- with such success on the infrastructure sector. to market for handset vendors. And competi- tories responsible for procuring handsets Alcatel, a handset brand far less prominent tion for a place in operators’ portfolios looks deemed especially suitable for their markets. »

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The launch in October of This is now changing to a more “aligned” ap- of suppliers is not a goal, says Lee-Smith, proach, hence the cut in numbers, which will but the firm expects “natural consolidation”. Huawei’s first own-branded happen mostly at the low end. None of this paints a rosy picture for hand- At Vodafone, where the device portfolio is set vendors and, mindful of the importance Android smartphone, the currently at the kind of size that Telefónica is of the carriers in getting to market, they targeting, the drive is to reduce the range still don’t want to ruffle any feathers. Apple aside, Vision, offers the perfect further, says Peter Becker-Pennrich, global di- which in terms of operator relationships is illustration: It simply wasn’t rector of terminals marketing. Becker-Pennrich in a shot-calling class of its own, the vendors says that Vodafone plans to “go down in size seem universally keen to portray themselves clear what a consumer quite a bit” in 2012. And a similar strategy as the operators’ friends and supporters. Sony seems likely at Orange and Deutsche Telekom, Ericsson’s global head of sales, Kristian Tear, would see in the Vision which have announced plans to align procure- is a deferential case in point: that set it apart from the ment of handsets. Orange currently ranges “We have no ambition to replace opera- around 100 handset models per quarter, tors,” he says. “They have acquired expensive alternatives from Samsung, according to Patrick Remy, the firm’s senior licences, built out infrastructure and—to a vice president for devices. large extent—they facilitate the development Sony Ericsson, HTC and Remy says portfolio management needs to of mobile phones and mobile broadband. So take into account the fact that too much choice we try to work together with them.” the rest of the Android can confuse consumers, but Dan Adams, a As if to reinforce the message, Simon collective. partner at Accenture who focuses on device Lee-Smith offers a thinly veiled warning to strategy, points out that there is also a key handset manufacturers when he says that the financial driver. vendors which don’t recognise the “end to end “The research that we’ve carried out into the value chain of devices”—for which read the prices that manufacturers charge operators interests of the operators in that value chain— shows that, until you hit between 500,000 – “rarely do well.” There are some vendors, he 750,000 units, you don’t reach a manufacturer’s says, without naming names, whose interest best price,” he says. “So operators have to set wanes once the operator has bought their their portfolio so that a good chunk of it gets product. How to sell this product onto the over that number per device. If they don’t, consumer is the operators’ problem, as far as they’ll be paying more than the competition these players are concerned—a position which and, while they might have a better range of doesn’t win much favour with Lee-Smith. handsets that’s more adjusted to the local “That’s a very myopic view,” he says, “and market, consumers are not going to pay more we won’t support those vendors.” for a handset they can get cheaper elsewhere.” In truth, though, the handset vendors don’t Vodafone spends $8bn on handsets annual- need threats to motivate them. For most of them ly, according to Becker-Pennrich, including af- a new reality is dawning in which, despite their filiates and partner markets, which translates protestations to the contrary, differentiation is into 60 - 70 million units a year. Telefónica’s becoming increasingly difficult. The launch in Simon Lee-Smith says annual device spend October of Huawei’s first own-branded Android is around $6bn, which buys some 50 million smartphone, the Vision, offers the perfect illus- devices. Patrick Remy doesn’t want to say how tration: It simply wasn’t clear what a consumer much he spends at Orange, but indicates that would see in the Vision that set it apart from he buys in the region of 30 million units an- the alternatives from Samsung, Sony Ericsson, nually. With those kind of shipment numbers, HTC and the rest of the Android collective. it’s easy to see why—according to Accenture’s Peter Becker-Pennrich argues that, while there calculations—the range of devices on offer are actually differences between the handsets needs to be carefully restricted. from the various players, the customer percep- The worry for vendors is that a cut in the tion is that differentiation between them is number of devices on offer might translate minimal. Consumers typically gravitate towards into a cut in the number of suppliers. At the large brands, he says, making it very hard Vodafone just eight suppliers deliver 98 per for the chasing pack to pitch any kind of USP. cent of the volume, and Becker-Pennrich says “What happens at the beginning of the that he “would expect the number of suppli- innovation cycle, typically, is that whoever ers to become less.” Telefónica has around a owns that innovation is able to capitalise on dozen “key vendors” of which half are deemed it and build a brand value,” he says. “Later on, “strategic suppliers” that are able to deliver as the innovation cycle flattens out and more Jim Balsille (left) and Mike Lazaridis (right) breadth and depth. A reduction in the number people can do it—and price goes through

24 Mobile Communications International | First for news, best for business

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the floor—it’s very difficult for the players that Patrick Remy says, “having only two ecosystems were not part of the first wave of innovation would be something that we’d be concerned to explain to customers why they should pay about—having a third is important to us and a premium for their brands.” our customers,” he offers a damning assessment Given that Apple alone can claim to have of RIM by not even considering it as a prospect. truly owned the current innovation cycle from Microsoft’s bid to exploit this need for a the outset, all of the other vendors fall into the third ecosystem, and to drive quality technical second wave and are battling one another for and strategic execution, will surely be one of stability in the market. Those that are success- the great device sector narratives of the next ful—Samsung chief among them—are forced twelve months. And it is not only Microsoft’s to navigate the obstacles placed in their path fortunes that this narrative will chart; Nokia, by Apple’s aggressive legal strategy. too, is fully exposed to whatever difficulty The problem is compounded by what some or reward lies in store for Windows Phone. handset sector executives have identified as The launch of Nokia’s Lumia 800 was ar- the beginnings of a shift in loyalty away from guably the biggest product story to emerge handset brand in the high end towards the OS. from the handset sector in 2011, and with “The growth of Android has demonstrated that good reason. Once arch-rivals in the handset customers value the operating system,” says space, Nokia and Microsoft now depend on Telefónica’s Simon Lee-Smith. “Increasingly one another for success in what is, for both of Nokia Lumia 800 people are coming in and asking for an Android them, the latest (and possibly last) of several device, rather than a Samsung or Sony Ericsson.” costly and involved rolls of the smartphone As handset brands have historically held dice. Both of them talk of the importance of greater sway than operator brands, vendors growing the WP ecosystem, with the participa- and operators are bound together by the tion of other vendors key to its success. But shared threat from the platform players like for the time being Nokia and Windows Phone Apple, Google and—if it is successful with its are essentially one and the same. revamped Windows Phone offering—Microsoft. Microsoft’s other vendor partners, which For Microsoft, being perpetually late to the have shifted en masse to Android during party could finally be construed as a positive, Windows’ time in the wilderness, will not rush at least in terms of the reception it’s now get- back to Redmond until they’ve seen how Nokia ting from operators. None of the carriers feel performs—not least because the exact nature of safe with a smartphone platform duopoly that the relationship between Microsoft and Nokia, Accenture’s Dan Adams categorises as “Apple and in particular the level of favouritism the at the top and Android at the bottom.” Finnish vendor will be shown as part of it, is Peter Becker-Pennrich says that this du- not being communicated. So when Nokia’s UK opoly “feels uncomfortable”. Like all opera- and Ireland MD Conor Pearce says “we’re trying tors, he bends a knee to Apple, saying: “It’s to build a third ecosystem, to bring balance to no wonder they are the most valuable tech the market” and “we’re proud to be doing the Samsung Galaxy Nexus company in the world right now, because they first real Windows Phone,” he is positioning have the best content, delivered through the Nokia, as well as Windows, as the answer to best processes.” And his take on Android is carriers’ concerns over the platform duopoly. also positive. While iOS “makes it difficult for And few people seem willing to write the us to push our services and differentiation partnership off. “The market is open for Mi- agenda,” he says, Android scores highly for crosoft and Nokia to have a really good play operators on issues like commercial flexibility here,” says Accenture’s Dan Adams. “Microsoft and the ability to pre-embed and deeply root have never really cracked the handset market carrier software into the OS. but never bet against them in a consumer play. “The only problem,” he says, “is that if Just ask Sony Playstation if the Microsoft Google had a bad day and changed all of its brand is cool enough to sell to consumers. policies, there would be relatively little that And one thing that can be guaranteed is the industry could do about it. That’s where a that Microsoft will be able to create a good lot of the discomfort is coming from, and we development community.” need more competition in that space.” The marketing push that Nokia is putting Once upon a time carriers would have looked behind the Lumia 800 is immense and, if towards Blackberry vendor Research in Motion the phone falls short of expectation, it won’t for the third platform, but those days are long, be for lack of consumer awareness. Taking RIM 9900 and perhaps irretrievably, gone. When Orange’s its lead from Apple, the Finnish vendor is »

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looking to position its new flagship firmly can travel in the opposite direction. At Nokia neatly summed up by Sony Ericsson’s Kristian at the premium end of the market and this World 2011, where CEO Stephen Elop unveiled Tear in a comment aimed squarely at Apple aspiration may be one stumbling block to suc- the Lumia 800, he said that the operators car- (and one that might perhaps be aimed at cess, at least if the views of Telefónica’s Simon rying the new handset would be spending three Google, too, were it not for Sony Ericsson’s Lee-Smith are any measure of the situation. times as much on marketing it than had been commitment to Android): “We want to support “Nokia are coming back at high end levels, spent on any other Nokia handset. the operators, rather than try to steal their but generally Nokia devices are expensive—and In the UK, Telefónica’s O2 has a phalanx customers and consumers away from them, if they want to sell in volume they need to bring of in-store sales specialists called Gurus, and we’ll continue to do that.” out devices that are cost competitive,” he says. schooled to a specialist degree in the work- A dynamic that sees the market leader “Manufacturers seem to think that a €400-plus ings and strengths of various handsets within challenging for customer ownership and price is the norm. Well, it isn’t; customers and the carrier’s range. The closer the vendors the chasing pack pledging allegiance to the operators won’t pay that level of cost for a work with the Gurus, says Simon Lee-Smith, operator community is nothing new, of course. device which doesn’t differentiate sufficiently.” the better the Gurus will be at selling their While New Nokia would never do such a thing Nonetheless, Lee-Smith—like his opposite handsets. “The Guru programme has been today, it was not that long ago that it launched numbers at Vodafone and Orange—stresses very successful,” he says, “and it has increased Club Nokia, which can be viewed in hindsight enthusiasm for the Lumia 800 as well as the sales for all of the vendors that have been as an overly premature or poorly executed wider Windows platform play. And, while we’ve involved in the programme.” (or both) attempt at the strategy that Apple seen how important it is for vendors to support So Nokia, like the rest of the vendors in the made its own. And when Nokia was making carriers in the handset space, the relaunch of high end market apart from Apple, will now its bid for supremacy, its peers made similar Windows Phone illustrates how that support adopt a pro-carrier stance. This position is noises about the importance of the carrier. »

A buyer’s perspective

As the director of marketing for Vodafone’s global device unit, Peter Becker- They want to be restrictive with their Pennrich is closely involved in the procurement of up to 70 million mobile experience and at the same time they want devices each year. Like all operators in mature markets, Vodafone has an interest to appeal to as many OEMs as possible—and in seeing a third smartphone ecosystem thrive in a market dominated by Apple you just can’t square that. Why would an and Google. Here Becker-Pennrich gives his frank assessment of the prospects OEM be interested in taking the platform if for Nokia and Microsoft as they spearhead the Windows Phone challenge, and they can’t differentiate on top of it? his thoughts on Research in Motion, which at one point would have been viewed as the natural provider of a third way. On the Microsoft-Nokia partnership… My long term expectation is that, at some On Windows Phone… point, Nokia and Microsoft will become WP is not there yet. They are making genuine efforts for WP8 but in WP7 there one, but not necessarily from a financial or is still a lot to be wished for, especially when it comes to offering all those things corporate entity perspective. that we need on the enterprise side, and the overall flexibility of the OS. On Research in Motion… On Nokia… RIM reminds me right now of Nokia Peter Becker-Pennrich Success isn’t guaranteed, but it’s not all doom and gloom, as you sometimes see around the time when they were selling in the analyst opinion pieces. They still have one of the strongest and largest the N97 and a bit later. If you have strong leaders who take credit for leading supply chains in the world and their economies of scale are significant. And they the company to its present position, they really struggle to see that they still have a significant presence in all the markets that they operate in. They shouldn’t be the ones who take it forward. I’m not sure whether RIM entirely know how to work the channels and they have the sales structure in place. understands the magnitude of the problem they have; I don’t think it has They still have brand value, and a lot of brand recognition, which is a dormant completely sunk in. asset. If they manage to underpin that with more attractive products then I What are their options? Licensing another OS doesn’t really make any sense can see how a lot of these things can be leveraged again. Will they succeed for because, what makes your Blackberry really valuable is not the UE, or the sure? I don’t know, but they have a fighting chance and therefore I’m tentatively integration, it’s the unbeaten ability to have push email with very decent battery optimistic. life that is stable and robust. They took a lot of flack for the outage recently, but they ran so many accounts for so many years with no problems. That’s their On Microsoft… strength. And the special sauce of this thing is just about where the silicon hits I continue to be confused by Microsoft’s stance in the smartphone market. On the software. So it’s not going to be easy for them to put some standard soft- the one hand they want to provide a fairly rigid, streamlined experience because ware on top of their hardware and then somehow make best use of everything they say they don’t want to confuse the consumer and they want to offer a they’ve developed. recognisable experience. But this is of no value to anyone in the ecosystem It will be a massive effort, but I think they will go for an open OS which they other than Microsoft. don’t control, which is why they made the QNIX purchase.

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Phone numbers

The latest figures from market analyst Gartner, for the third quarter of 2011, show an increase in handset sales of 5.6 per cent year on year, to reach 440.5 million units. Growth in the smartphone segment was far more dramatic, with sales increasing 42 per cent year on year, although smartphone sales as a share of overall sales grew by just one per cent to 26 per cent in the third quarter. While Nokia remains the overall leader in the market, with 23.9 per cent of overall sales, the third quarter saw Samsung take the top spot in the smartphone market for the first time. The Korean vendor, which sits in second place in the overall market saw sales of its smartphones to end users triple year on year to hit 24 million units, Gartner says. Apple’s iPhone shipments grew 21 per cent to 17 million, although this figure was a decrease sequen- tially. Gartner expects Apple’s Q4 numbers will be far stronger based on pre-orders for its latest device, the 4S. The firm is seeing increasing demand in markets outside of its traditional core, including Brazil, Mexico, Russia and China. Gartner also believes Nokia and Microsoft will see a “true turnaround” in the second half of 2012, as their concerted efforts to push the new Windows Phone products yield fruit.

Worldwide mobile device sales to end users by vendor, 3Q11 (thousands)

Vendor 3Q11 Units 3Q11 Share 3Q10 Units 3Q10 Share Nokia 105,353.5 23.9% 117,461.0 28.2% Samsung 78,612.2 17.8% 71,671.8 17.2% LG Electronics 21,014.6 4.8% 27,478.7 6.6% Apple 17,295.3 3.9% 13,484.4 3.2% ZTE 14,107.8 3.2% 7,817.2 1.9% RIM 12,701.1 2.9% 12,508.3 3.0% HTC 12,099.9 2.7% 6,494.3 1.6% Motorola 11,182.7 2.5% 8,961.4 2.1% Huawei 10,668.2 2.4% 5,478.1 1.3% Sony Ericsson 8,475.9 1.9% 10,346.5 2.5% Others 148,990.9 33.8% 135,384.1 32.5% Total 440,502.2 100% 417,085.7 100%

Worldwide smartphone sales to end users by operating system, 3Q11 (thousands)

OS 3Q11 Units 3Q11 Share 3Q10 Units 3Q10 Share Android 60,490.4 52.5% 20,544.0 25.3% Symbian 19,500.1 16.9% 29,480.1 36.3% iOS 17,295.3 15.0% 13,484.4 16.6% RIM 12,701.1 11.0% 12,508.3 15.4% Bada 2,478.5 2.2% 920.6 1.1% Microsoft 1,701.9 1.5% 2,203.9 2.7% Others 1,018.1 0.9% 1,991.3 2.5% Total 115,185.4 100 81,132.6 100

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years as the leading innovator in the smart- smartphone, tablet and other devices (games phone space, 2011 will go down as one year units, for example) could find themselves in in which the key milestone was not product a very strong position. “Whoever gets that related. The death of Steve Jobs overshadowed right first will be able to command a premium the launch of the iPhone 4S and forced the on their products in the phone space,” says industry to confront what it had long been Becker-Pennrich. debating hypothetically: Can Apple continue Such a trend would play well for the likes to dominate without its leader—a complex of Samsung; strong in TVs and handsets, character who will be remembered as much for and working hard to become so in the tablet his ruthlessness and dictatorial management space. The new Sony device business, when the style as for the clarity and genius of his vision. Ericsson half of the brand has been phased For Tim Cook, who replaced Jobs as CEO out, will be all about adding “Sonyness” to the when Jobs’ illness made it impossible for products, says Kristian Tear. “We believe in the him to continue to lead, the pressure is well convergence of screens and this is putting us and truly on. While his debut performance in an excellent position for the next five to ten unveiling a new product was made under the years,” he says. pall of Jobs’ imminent demise, the iPhone 4OS Simon Lee-Smith is thinking along similar itself met with nothing like the positivity that lines, addressing the question of whether The late Steve Jobs greeted its forebears. The world was waiting whichever company usurps Apple will have for iPhone 5, and what it got was Siri; a voice to exert a similar level of control from one Club Nokia did not sit at all well with the control function that sits alongside Facetime end of the device play to the other. “I think operators, and its failure gave credibility to as another attempt from Apple to breathe life Apple will be challenged by a company that the unsupportive stance they adopted. There into a concept that the mobile industry has has end-to-end control, but not necessarily was no such attempt to stand firm in the face of long used to define the future. » of hardware and software,” he says. “Someone Apple, however, and just as the chasing pack of While Vodafone’s Peter Becker-Pennrich pays will bring out an integrated solution which handset vendors make all the right noises about tribute to Apple’s successes, there is a caveat offers software, services and connectivity as the importance of the operators, so the operators attached: “The question is whether or not the a whole, and it won’t be about the looks of themselves cannot be seen to bellyache about will have the best product going forward,” he the device. There will be another competitive the level of control Apple exerts over them. says. “The iPhone 4s was a disappointment to landscape, and this is where other companies And yet it’s an open secret that the carrier many people and—if you forget about brand will leapfrog Apple.” community harbours a level of resentment value for a moment and compare it to a Galaxy In the immediate term, as the smartphone towards Apple. Of course very few people want Nexus of SII, or the HTC sensation—you’ll find innovation cycle winds down, tablets will to put their head above the parapet and say many reasons why the iPhone wouldn’t be rated lead the next one and, here, Apple looks to so; for an operator spokesperson to voice any as high as the others.” have already established another leadership sentiment along these lines would probably Whether or not Apple can sustain its status position. Given the similarities in the DNA of be a firing offence. But even third parties and as the definitive innovator in the space is prob- smartphones and tablets, however, the chasing partners get extremely jittery on the topic. ably the biggest question in the smartphone pack are already showing themselves to be far One man who doesn’t mind calling the market for the near term. Certainly the tech- quicker off the mark, and the tortuous legal situation as he sees it is industry consultant nological gap between it and its competitors battle between Apple and Samsung, is likely Bengt Nordström, a former CTO at Hong Kong seems to be shrinking. Simon Lee-Smith says only the tip of the iceberg. carrier SmarTone and alumnus of Ericsson that Apple still out-executes its competitors As the carriers, vendors and platform pro- and Comviq, among others. “We hear from the and retains a design edge. But he adds that, viders tussle for position, they are in chorus operators about how Apple treats them and “the others have brought themselves much on the view that the consumer holds the final they’ve never seen anything like it before in closer to iPhone and Apple in general. The gap decision-making powers. In the end it will be the industry,” Nordström says. is closing—and closing rapidly.” down to the consumer to judge whether or “When [Apple] began to dictate the situa- Of course the question of whether Apple re- not the Lumia 800 is worth a certain amount, tion, questioning whether operators were good tains its leadership leads to another, more open or whether Android has evolved to the point enough to sell their product, it conflicted with debate: If Apple is to be ousted, who or what where it is no longer perceived to be a poor the views that operators have of themselves.” will succeed it? Even the people most intimately cousin to iOS. It will be the consumer whose The problem is compounded by performance involved in the handset sector concede that they’d loyalties will reflect the strengths and weak- issues with iPhone products that operators, in be far wealthier by now if they had the answer to nesses of all the players in the value chain and many cases, must shoulder, he says. “Many of this question. But there are a few ideas. the consumer who decides what innovation is these problems are caused by Apple’s technical There is a consensus that, any player that the winning innovation. And it should not be solutions, such as their poor radio antennae,” is able to make a true success of a domestic, forgotten that there is a distinct possibility he says. “But when they try to bring these multi-device connectivity play—somehow that the next great innovation leader in the things to Apple’s attention, they get ignored.” harnessing the benefits and experiences device space is not a name even known to For Apple, undisputed over the past four available through the television, the PC, the that consumer as 2012 unfolds. n

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Encryption: will it be the death of DPI?

As more websites move to encrypt their content and user data, more questions are raised over the future of Deep Packet Inspection. But advances in heuristic classification mean that DPI systems will still be able to function in an encrypted world.

very time that I participate in a the making and will take Standalone service provider DPI products speaking panel on Deep Packet years more to fully deploy. Forecast to grow to $1.6 billion in 2015 Inspection (DPI), someone asks, Other pieces of the solu- E 1.8 “How do you cope with encryption?” tion include small cells, This is a good question since we’re Wi-Fi offload, and opening seeing broader deployment of secure up new spectrum, but each web browsing on the Internet; in fact, of these is likely to provide

Facebook publicly moved parts of their only part of the solution. obal Revenue in $US Billions site to “https://” in 2011, and Google now Given this reality, it is Gl defaults to “https://” for their users. inevitable that there will be 0 What does this mean for DPI and congestion in the network— 2011 2015

all the investment that operators have because operators can’t roll ©Infonetics Research, Service Provider Deep Packet Inspection Products Biannual Market Size, Share, and Forcasts, October 2011 made in DPI technologies? Are all of the out new technologies and DPI-based traffic shaping systems in the spectrum fast enough to market suddenly going to become use- meet the demand. Once this congestion packet processing platform, and those less? Will we need to come up with new hits, an operator has a limited set of options: built with dedicated ASICs or FPGAs. techniques to manage traffic? • Do nothing, and allow the users to fight The ASIC/FPGA-based systems have Fundamentally, encryption will not be it out for bandwidth. In this scenario, a an intuitive appeal: for a given fixed the death knell for DPI, but it will force single user downloading a large file can problem, they can be optimised to per- greater innovation as operators seek to cause poor performance for everyone form well on that problem and can offer manage increasing traffic volumes, and else in the same cell site. appealing performance and price points. to deliver the customer experience their • Perform simplistic traffic management While they come with a long develop- subscribers demand. and allocate each user a fixed share of ment cycle and a high development cost, the spectrum. This is better than noth- these drawbacks are often overlooked in The Drivers for DPI ing, but is not very efficient. the zeal to have the densest or highest DPI is a technology that can be used for • Deploy a DPI-based traffic shaping performing system. This approach is multiple purposes, but the most popular platform and intelligently adjust the also more common when the DPI func- to date has been traffic shaping systems bandwidth to each user and to each tionality is integrated into some other used to manage congestion, first on fixed subscriber individually. This allows in- piece of equipment such as a router or networks, and more recently on mobile dividual applications to be prioritised a mobile network node like a GGSN or networks. against each other, and can improve LTE gateway. These systems weren’t It’s a cliché to talk about the rate at the quality-of-experience (QoE) for designed for DPI, so the functionality is which mobile data is growing, but this every subscriber in the cell, including shoe-horned into some limited power growth remains the dominant driver of the heavy users. and space budget. mobile infrastructure development and These traffic shaping platforms have A different approach uses a general deployment decisions. With the amount seen strong market adoption and are purpose packet processing platform, of mobile data almost doubling every expected to be a $1.6bn market by 2015. which uses a blade-based server that year, even long-anticipated solutions has been adapted for use as a packet like Long Term Evolution (LTE) only DPI-based Platforms: Different processing platform by adding load help—they are not the cure. LTE provides Implementations balancing, special packet routing soft- “only” a 3X improvement in spectral Current DPI or Traffic Shaping platforms ware, and multi-core processors. Here efficiency—enough to satisfy 18 months can be separated into two categories: the developer uses the processor cores of the projected growth—but is years in those built around a general purpose to execute the DPI and packet shaping

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Although strict encryption prevents the DPI platform from looking into the packet, there are still plenty of clues for the DPI Mike Coward platform to look at. VP Strategy & Innovation, Radisys

algorithms—making this a software Adapting DPI Platforms to an This approach is more compute-inten- exercise, not a silicon development Encrypted World sive than traditional DPI—it takes more one. This approach has been popular in To come back to the original premise of CPU cycles to track flows, look at packet the standalone traffic shaping market, the article: No, in the general case, DPI sizes and packet arrival times, and then which is aiming to offer the highest per- platforms cannot break the encryption correlate different flows than to just look formance possible and can leverage the and look inside the packets. inside the packet—but it’s still possible. pace of silicon change with new chips In order to think about how a DPI Developers with FPGA and ASIC-based coming out every year. platform can function in an environment platforms are in a tough spot, though: the where most of the traffic is encrypted, it is ASICs can’t be changed once they are in Everything, Encrypted helpful to think back to the main purposes the field, and the task is more complex Encryption has been discussed in the of commercial DPI platforms today: to than FPGAs can be expected to handle DPI community for years, but it was understand which users are consuming because they are good at fixed function always seen as a theoretical problem the available bandwidth and then making but poor at heuristic correlation. with a couple of famous exceptions (e.g., intelligent decisions about which traffic to Developers on Commercial Off-the- Skype going to great lengths to conceal prioritise. Although strict encryption pre- Shelf (COTS)-based packet processing itself). 2011 was a turning point: the year vents the DPI platform from looking into platforms have an easier time: the same started with Facebook announcing that the packet, there are still plenty of clues multicore CPU that was looking inside many of their services would be offered for the DPI platform to look at: the source the packet can instead run heuristic code over encrypted web sessions by default. and destination of the traffic, the packet to infer the application, so systems that Facebook’s decision was triggered by the size, and the pattern of packets. For ex- are already deployed can be repurposed release of a proof-of-concept hacking ample, a stream of small packets every 20 to handle encrypted traffic with just a tool called Firesheep that allowed users milliseconds in both directions is almost new software load. to snoop Facebook traffic on open Wi-Fi always a VoIP call. Traffic to and from networks and impersonate other users. the Facebook servers is, by definition, The death of DPI? This was followed throughout 2011 by Facebook traffic. It’s also possible to cor- The death of DPI has been predicted other high profile services like Twitter relate separate flows: even if everything is multiple times. I’ve no doubt that very and Google moving to encrypt their ses- encrypted, if the platform sees a request prediction will be proffered at this year’s sions as well. to a server at CNN, followed by a request Mobile World Congress. It is fairly clear that this is a one- to Akamai, it can reasonably assume that There are those who believed the way evolution. Significant barriers to Akamai is serving CNN content and thus functionality would be absorbed into encryption have been the hardware apply the appropriate rules. This is called adjacent network nodes. Those who cost and the time it takes to encrypt and “heuristic” or “inferred application” clas- argued that users wouldn’t put up with decrypt traffic. But these are shrinking sification, and can reach similar levels of it. Most recently, there have been those every year with Moore’s Law, as even accuracy as the traditional DPI approach. who believe that encryption will render desktop and mobile CPUs get dedi- With this information, the DPI platform DPI useless. The shift to heuristic-based cated instructions added to accelerate can make the same decisions that it would application classification, however, encryption. Furthermore, once a web have if the packets were unencrypted: coupled with the use of general purpose service has added encryption, it’s hard control the amount of bandwidth that each packet processing platforms, provides a to imagine a reason that they would user is allocated, and within that band- solid path forward that preserves exist- later remove it, so we can expect to see width help the user prioritize interactive ing investment and delivers the same a steady increase in the percentage of services like VoIP and video streaming benefits in a timeframe that meets the encrypted traffic as service after service while de-prioritising less sensitive services needs of operators already struggling adds encryption. like big downloads or backup sessions. with traffic congestion. n

32-33_Vendor view.indd 33 06/02/2012 14:59 feature applications

Spoilt for choice While there are some who believe the devices space has become a two horse race in terms of platforms, with Apple and Google’s Android as the only runners, the software side of the mobile experience is in a state of flux, and 2012 may still be too early to place confident bets.

By James Middleton

ince mid-2008, when Apple cut the rib- offer more novelty value, or whose develop- the Apple App Store that we don’t think Apple bon of its genre-defining App Store, the ers simply got luckier. Moreover, the bigger would be happy with. We don’t know why, Sconcept has swept the mobile industry a store gets, the harder it is to police, and maybe they dropped the bar,” Epting says. and become the primary means for consum- the more likely that a sub-standard or even “But when we quality check these apps they ers to discover content. Today there are more downright malicious app will make it through fail our standards, mainly for using APIs not than 500,000 available apps in the Apple App the vetting process, damaging the experience required for the app. So we’re more stringent Store and over 370,000 in Google’s Android on that platform for everyone. than other app stores.” Market, while Windows Phone Marketplace, According to Lee Epting, director of content In its branded App Select store, a stan- Nokia Ovi Store and BlackBerry App World services for Vodafone group, consumers are dalone experience pushed out via widget and follow behind at some considerable distance. prioritising quality over quantity: “They’re web to new and existing users, Vodafone will There is also a substantial customer base. saying, ‘give me choice but don’t give me too focus on showcasing the top 100 apps from According to Gartner, smartphone sales ac- much choice’. It’s a daunting prospect to have any shop. There will be no archive, with con- counted for 26 per cent of overall handset to scroll through thousands of apps to find tent being refreshed every three months—and, sales in the third quarter of 2011. Then of one quality item and then buy it in the hope if an app is not moving, it will be cut. Fur- course there’s the nascent but not insignificant that it’s ok,” she says. thermore, all content is localised by market. tablet space. Overall there’s a strong ecosys- Vodafone isn’t the first carrier to try and po- If Vodafone is correct in its assessment tem in existence, with plenty of opportunity sition itself as a filter between the thousands there is a new generation of smartphone for developers, who create the applications of available applications and the bamboozled agoraphobics who, unsettled by the wide, that are the lifeblood of these ecosystems, to consumer. But it recently went a stage further, open plains of the internet and its application flock to the biggest store fronts. with the launch of a branded experience in stores, are clamouring to be let back into the And this is the problem. Application stores, the Android Market that introduced carrier walled garden. It could be argued that the now swollen with content, have become billing and also opened a separate, curated growing adoption of HTML5 as a rich web somewhat daunting, especially for the many app store, designed to showcase a selection technology will exacerbate this problem as first-time users migrating to the smartphone of apps from multiple platforms and stores, many see an HTML5 site as a cheaper alterna- space from the feature phone market. For all of which have been tested against Voda- tive to a full blown mobile application. developers, the big risk is getting lost in the fone’s network. “The app store model is certainly a bubble, but crowd, buried beneath dozens of other apps “What we’ve found when we check these this time it’s clear that the shift isn’t temporary,” that might be cheaper or similar in nature, apps, is that there’s lots of stuff getting into says Mark Doherty, strategic solutions manager »

34 Mobile Communications International | First for news, best for business

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The big question is whether these existing channels, left to a ‘let 100 flowers bloom’ model, will be able to maintain, or in some cases regain, quality.

at Adobe Systems. “For agencies and publishers ally aggressive war with each other and they’ve manage their fixed and mobile telecom services we’ve now come out of the era of using marketing all got a lot of money. If something like buying from their phones. The app enables end users budgets to simply join the crowd on iOS. Brands a carrier gave one of them a leg up in terms to check their balance, buy special offers and are now starting to measure their successes and of offering services it may well make a lot of subscribe to services from their respective optimise their spend. We also know that mobile sense. But right now things are held back a lot service providers. It also hits a sweet spot with budgets are not growing, so brands are looking of times by carriers trying to squeeze as much operators by setting up a self-care platform, for ways to reach more devices with the same money as possible out of the industry. Look freeing up the carrier’s in house resources. cost and that’s where HTML and cross-platform at how long the iPhone was stuck on AT&T’s Henri Moissinac, head of mobile business technologies come in.” network while Android got a huge opening by at Facebook, says he doesn’t see Facebook as a In November, Adobe called time on Flash being available on Verizon,” he says. “rival” development platform because a lot of the Player for mobile devices, ending development In Buchheit’s crystal ball, the mobile plat- things done for mobile developers recently are on the browser plugin following the release form space will be a two horse race between on top of Android or iOS. “So we’re making these of Flash Player 11.1 for Android and Black- Apple and Android. “Android has so much platforms more and more relevant for develop- Berry PlayBook. Doherty says that HTML5 is momentum and its free—it has a negative ers. We’re making them social, focusing on social certainly one path forward, although it will cost so how do you compete with that? And apps. So rival isn’t right but we’re starting on take years to produce widely consistent web Apple is just a better experience. So what Android and iPhone and trying to spread out standards necessary to support everything room does that leave for any other players?” into other platforms,” he says. required by the creative and publishing Vodafone’s Lee Epting believes that users In one sense the firm walks a fine line because industries in HTML. Meanwhile standalone exploring the device default to an app-centric it relies on the carriers and handset manufac- applications can still be built using Flash world and, while widgets as a concept are turers to push the social network to the users. tooling and targeting with Adobe AIR across becoming increasingly dynamic, you get more But Moissinac does reveal that the company iOS, Android, Blackberry, Amazon’s Kindle richness from native apps. “I have yet to see is trying to push the envelope with regards to Fire and other devices. “It turned out that one new paradigm put another paradigm specific experiences that pitch Facebook more as content owners just weren’t that interested in to death. Just look at Java,” she says. “It’s a handset UI. “You can sync your address book optimising Flash content for mobile browsers, still a primary breadwinner for a lot of app with Facebook and for some devices and users but they are keen to build applications and so developers today and is a mainstream in the maybe that will be the only address book that Adobe is supporting that model,” Doherty says. emerging markets. Java will still be around they use,” he says, conceding that the proposition While Flash is being refocused towards pre- for some time because people with feature might not be attractive for “the entire world”. mium video and gaming experiences and other phones will want content too. For Facebook, in a mobile environment at use cases that would be impractical or impossible “Developers are living in a mixed soup, so we least, its greatest traction comes through the with HTML, Doherty points out that, with larger are saying a curated app shop is what will matter apps, on various platforms, as every time a screens such as those appearing on tablets, users to the next wave of smartphone users,” she says. user migrates from the mobile site to the app hunt for—and find—different content. “We’re going after an existing channel—Android Moissinac says the company sees “engagement On the flip side, more of those large screens Market—and saying let’s have a curated store going through the roof” due to a better and are coming on line, partly due to the success of within that, but also let’s hit the browser and faster experience. Yet he also sees potential the iPad but more because Android inherently have a widget framework with real time updates.” for a more intelligent browser. lowers the barrier of entry for newcomers to But another player that has seen reasonable In fact, the consensus is that native apps, the tablet and mobile devices scene. And with success as an app development platform, as widgets and rich web sites will co-exist the most successful application stores run by well as managing to cosy up to the operators for some time to come. The big question is a mixture of web entities and device OEMs, the and the device vendors is Facebook, a social whether these existing channels, left to a operator looks somewhat shut out of the ecosys- network that has been smart in its packaging ‘let 100 flowers bloom’ model, will be able to tem, according to Paul Buchheit, an ex-Google of APIs, and very successful in integrating maintain, or in some cases regain, quality. developer credited with the creation of Gmail social gaming and driving brand awareness The users hold all the trump cards and will as well as the company’s “Don’t be evil” motto. through applications. take the simplest option. But this doesn’t “The carriers are such a roadblock to in- Take Nokia Siemens Networks (NSN), which in mean the most permissive player will take novation a lot of times and Google, Microsoft, October, launched a self-care app for Facebook, the lead, rather the most shrewd cultivator Amazon, Apple and Facebook are all in this re- allowing operators’ customers to personally of those pieces of content. n

36 Mobile Communications International | First for news, best for business

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MCI executive interview

Differentiating in a dynamic world

Paul Bultema, executive director, UK and Ireland strategy lead for the communications, media and technology operating group of Accenture, talks about consolidation, differentiation and the rise of over the top services.

he opportunities for differentiation in this industry are cyclical. TAt one time carriers competed on network coverage or price. Today, at the dawn of the 4G era, coverage and price remain important to customers—although in many cases there is nowhere for prices to go—but the deployment of new technology is adding into the mix the expectation of improved performance. As a result, there is a significant opportunity for operators to differentiate on the customer experience, with a focus on the products and services on offer and the brands they represent. Paul Bultema, executive director, UK and Ireland and strategy lead for the communications, media and technology operating group of Accenture, believes that wireless operators are having a tougher time than the fixed line players, which is forcing a certain shift in the network operator business model. Accenture's Paul Bultema “On the wireline side there is more of a sustainable and consistent enterprise space where you have not seen or 4G environment where you have they now have to change tack a bit the same amount of churn,” Bultema to be so dynamic, while at the same and tolerate network consolidation. says. “But on the mobile side you have time deploying your 4G network, and It’s more of a move towards a utility the decline of voice and data revenues catering to tablets and devices that rather than each operator owning their combined with the impact of growth in are very bursty and have never been own network.” data over the last few years as well as seen before in the network,” he says. Bultema cites Australia as a prime the capex investment needed for those This kind of pressure is driving example, where the National Broad- network upgrades. It puts carriers operators to question themselves as band Network is being pitched as in a precarious position and they’ve to what’s really core and non-core to a core national utility—designed to historically been very vertical in eve- their business. Bultema acknowledges make the country more competitive rything like retail and distribution so that operators are increasingly coming and aimed at trying to lower the cost they’ve taken a hit on many levels.” to accept that networks are not core to of provision per subscriber. He also Sticking to comparisons with the their business—a phenomenon which cites national investment schemes wireline industry, Bultema notes that is driving the growth in outsourcing taking place in Brazil and many other operators have “horrific” data qual- and network sharing. countries, where it is unsustainable ity linking the physical layers of the “We’re going to see some major for every operator to have their own network to the services used by cus- changes in the next two to three years network. tomers. And while wireless operators in the mobile space, with increased By the same token, LTE is having a also have this issue, they have the M&A and consolidation impact in dramatic impact on operator business additional challenge of much more terms of retail and distribution and models—with the threat of the dumb dynamic requirements. “It’s one thing substantial consolidation on transmis- pipe—the operator’s greatest fear— trying to manage a POTS customer sion,” he says. “Where regulators have looming ever large. But according to but another managing them in a 3G historically encouraged competition Bultema, the dumb pipe strategy is a

38 Mobile Communications International | First for news, best for business

38-39_MCI174.indd 38 06/02/2012 14:50 MCI Executive interview

good thing for the industry. “Consider as an evolutionary target. There are own network, Bultema argues that this LightSquared in the US, which is trying few players headquartered in any is something that is becoming increas- to be the dumbest pipe possible. It has given country and many don’t even ingly unsustainable. Going forward no product development or R&D but own their planes, preferring instead the requirements for LTE, fibre and what it has is open APIs into their OSS to lease them. Airlines don’t do their network upgrades will drive very deep and BSS and network so customers can own maintenance or their catering, network sharing. Operators will have come and plug in to their network and they outsource both. But what they to morph themselves into much leaner develop products and services on behalf do manage directly—and what they’re organisations in order to compete of their own customers where they have really good at, Bultema says—is pric- against OTT players and provide that greater customer intimacy. I think this ing models, operation heuristics and responsiveness and innovation. model speeds innovation and moves supply chain management as well as And analytics will play a key role innovation closer to the customers in supply and demand forecasting. in tailoring these services. The ability niche segments,” he says. “This is what’s driving network to dynamically link customers to their In the wake of LightSquared’s crea- consolidation and the rise of LTE products and services and then back tion, the industry has seen a prolif- wholesalers. Take Yota for example— to the financials and network quality, eration of the LTE wholesale model it’s a much more capital efficient and so operators can proactively respond adopted by Yota in Russia, as well as faster way of deploying LTE,” he says. to QoS issues and improve the user operators in Poland and Mexico. Ac- “Telecoms has not made that type experience, will be a core competitive centure believes this will drive intense of change–most operators still own advantage and differentiator going competition at the retail level and that everything on an end to end basis and, forward. mobile operators will be put under outside of the US, the way operators Customer touch points should be further pressure as a result. communicate with each other in terms extended throughout the customer “Technology is one of the drivers of third party network access is still lifecycle—not just at the end of a of this business model–Ethernet and through phone, fax and email, there’s customer’s lifespan and not just on backhaul is a pre requisite–and the no e-bonding infrastructure. the sell side but also on the customer upgrades around 4G are more difficult “So telecoms has been ripe for an experience side, he says. “Such as text than operators expect. They may know upgrade for decades but nothing had messages when you land in a foreign network deployment but this is not just emerged as a critical issue that will country giving you information about another network deployment,” Bultema drive this—until now. My belief is that roaming prices and a notification if says. “It has end-to-end ramifications LTE, not as a technology, but because you’re about to hit your data allow- across the company, starting in sales of the fundamental dynamics needed ance–these things can be helpful and marketing, management, infra- to support network upgrades and the or beneficial and can improve your structure and engineering, construc- innovation required to survive at the perception of the operators,” Bultema tion, service delivery, and IT, before you IP layer, is going to drive that kind of says. Again telcos can learn from air- even have your node ready,” he says. structural change in the industry.” lines with their own loyalty programs “Doing that in 3G with a well defined Although some operators are con- and improve their loyalty schemes in a process is one thing but trying to opti- sidering the dumb pipe model, they way that attracts customers, he argues. mise 3G much more dynamically while also need to consider content and “The OTT players, Facebook, Google trying to roll out 4G—and doing that service partnerships, and this is where and Apple have a fairly loyal fan base in an efficient way—is another thing the over the top (OTT) players have and there are lessons to be learned entirely, and I’ve not seen one operator been much more innovative than op- from them by operators in terms of that has an end-to-end management erators. They are closer to and more in- keeping products very simple, and workflow system to align those plans timate with their customers, allowing the interface very clean and straight- on the network. That is a significant them to extract a significant amount forward, creating a suite of services issue and means most operators are of profitability from the changes of around what their core strengths are,” very much behind schedule in terms platforms and ecosystems as they he says. “There is rapid innovation but of 4G upgrades.” develop rapidly within the industry. also rapid abandonment if something According to Bultema, telecoms as Coming back to the key question of does not work and all these product an industry suffers from tremendous whether or not each service provider in management elements are still slow inefficiencies. He picks out airlines any given market needs to have their in the operator community.” n

Mobile Communications International | First for news, best for business 39

38-39_MCI174.indd 39 06/02/2012 14:51 feature interfaces

Interface Schools Mobile devices have come a long way from their walkie-talkie wartime roots, and the user interfaces have come further in a far shorter time. Touchscreens are all the rage today but, in the future, where will the user interface reside? By Dawinderpal Sahota

he Second World War saw the first use games, music and video, or by providing an and their ecosystems, with app stores, internet of transmission of speech by radio, endless array of apps, from those that are use- browsers, and content and contact synching. Twhen Motorola developed a battery- ful to our everyday lives, to those suited purely And with the rise of cloud services, handset powered, backpack-mounted, two-way radio, to idle procrastination. Mobile handsets are design could begin to take even more of a back called the ‘Handie-Talkie’ for the US military arguably the most important object in people’s seat, as devices begin to serve merely as an in the 1940s. It was credited as being the lives, and the chances are they will become access portal to the cloud. As this evolution world’s first mobile phone. It wasn’t until even more important in the future. takes place, one argument is that, rather than 1979, however, that mobile handsets became Gus Desbarats has won an array of creative have one smartphone that encompasses all of commercially available to consumers, when design awards for his work in developing new the functionalities that a user needs, consum- Japanese mobile operator NTT created the handset concepts. He is also a futurologist and ers will be more interested in possessing a world’s first automated cellular network chairman of industrial design agency TheAlloy. variety of devices with different screen sizes. covering the population of Tokyo. Speaking to MCI he says that one of the most “What will become important is screen size, Mobile phones have come a long way since important aspects of the next wave of handsets and that will depend on what information then. We’ve seen manufacturers add colour to enter the market will be how they integrate you’re accessing,” Desbarats says. “Yes, there screens, cameras, personalised ringtones, users’ “important but simple information”. will be more people watching TV on small Bluetooth and messaging. Today’s smart- “Mobile wallets will take off to facilitate in- form factors, but I think you’re going to see phones have internet connectivity, touch- store and online payments, we’ll see handsets just a greater diversity of form factors. We’re screens, dedicated application stores and being used for identification purposes, and seeing that already with the iPhone and iPad. developer ecosystems—but what can we even for access keys – such as house keys. And People are simply consuming content on the expect to see in the next stage of evolution they’ll also be important for ticketing, being form factor that makes sense.” in the mobile phone industry? used as rail or bus tickets,” he says. However, handset manufacturers are not Perhaps the most crucial aspect in the ad- This evolution marks the changing nature of about to sit back and let software providers vancement of mobile handsets is the growing the mobile phone. No longer is the design of the define the mobile phones of the new era. De- dependency of consumers on these devices as a hardware the most influential or crucial factor in vice manufacturers have also invested heavily multipurpose communications tool. People are consumers’ minds when they buy a new hand- in research and development to ensure that using phones not only to communicate by voice, set, as, beyond the inclusion of a touchscreen, consumers opt for their particular brand. but also by SMS, email and social networks. In the user experience is almost exclusively defined Manufacturers are fast approaching the time many developed markets, smartphones are a by what is offered on the software side. The when they will have to entice users with new de- lynchpin of the consumer lifestyle, whether to difference between smartphones and feature signs, and they may need to move away from the keep users informed of global news, updates phones is more than just the form factor, but now common 3.5-4in, touchscreen device, popu- from social networks, entertainment through the access to sophisticated operating systems larised by the first iPhone. In the short-term, »

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40-42_MCI173.indd 40 06/02/2012 11:32 interfaces feature

what this means is that manufacturers will be Manufacturers are fast focused on creating devices that “are more user- friendly,” says Desbarats, as today’s smartphones approaching the time when aren’t as user-friendly as some might think. “Smartphones have been hijacked by the iPhone they will have to entice movement,” he says. “They’ve created this nice, beautiful device. But at the end of the day, if you users with new designs, really think about it, they’re not actually very and they may need to move easy devices to use on the go,” he says. For someone wanting to browse through away from the now common their list of contacts, there are arguably more user-friendly methods than scrolling through 3.5-4in, touchscreen device, an alphabetical list using your finger. TheAlloy popularised by the first works with a host of handset manufacturers and creates concept phones for them, ideas iPhone. Gus Desbarats from which will be used in handsets that will commercially available later down the line. “The new properties that nanotechnology While the agency cannot divulge details of the bring to us are really beginning to impact our interface. It is a wearable system that enables ideas it works on with manufacturers, it also designs, so we are trying to figure out how graphical, interactive, multi-touch input onto creates its own concept phones to demonstrate we could use this to bring meaningful experi- a range of everyday surfaces. fresh and innovative design ideas. One of the ences that really matter to users,” he explains. “We wanted to capitalise on the tremen- concept phones that it has created has an Taking the concept a stage further, Nokia dous surface area the real world provides,” interface that allows users to simply squeeze hopes to challenge the traditional design of the explains Hrvoje Benko, of Microsoft’s natural and tilt the handset in order to scroll through mobile phone, with a project called Iho. Iho is interaction research group. “The surface area content, which the company claims is easier the Finnish word for ‘skin’ and the project aims of one hand alone exceeds that of typical than using touchscreens while on the go. to create a skin-like wearable phone. “This is smart phones. Tables are an order of mag- “All of these kinds of things just mean that an electronic skin that we could use to create nitude larger than a tablet computer. If we you can navigate in a shorter time and with a flexible, transformable phone that you can could appropriate these ad hoc surfaces in less dexterity focused on the screen,” he says. attach to your skin meaning that it will always an on-demand way, we could deliver all of “You need to be able to do stuff while you’re be there with you 24×7,” Jokinen explains. The the benefits of mobility while expanding the moving—that’s what’s missing in mobile phone would be wrapped around the user’s arm. user’s interactive capability.” phone interfaces generally. Everyone’s going Nokia’s experimentation has found that, The prototype OmniTouch device is built to app crazy but there’s a lot of stuff that can using nanotechnology, the components in a be wearable, and combines a laser-based pico- just be done on the go, such as setting access phone do not have to be in specified places and projector with a depth-sensing camera. “This permissions. These things can be done much can instead be moved around. The technology custom camera works on a similar principle more naturally while you’re doing other things can also be used to create materials that are to Kinect [the Microsoft xBox motion-based and we’ll see more of that.” not just flexible, but also stretchable. gaming interface], but it is modified to work But in order to incorporate this “squeeze But it’s not just the introduction of more at short range,” explains Benko. and tilt” functionality into phones, Desbarats flexible handsets that will challenge what has Another technology that could revolutionise says that manufacturers must move away now become the “traditional” design of the services brought to mobiles, but is today just from the rigid, solid structure of today’s smartphone. Korean firm Pantech has said in its infancy, is augmented reality. AR is set to devices. Indeed, flexible handsets enabled by that it will introduce a portfolio of Android become much more pervasive as researchers nanotechnology are now being touted as the handsets equipped with ‘touchless’ hand are experimenting with new use cases for the future of the mobile device by some vendors. gesture recognition technology. technology. But Gus Desbarats suggests that It may sound implausible, but Samsung has The first device to feature the innovation, the there might be a barrier to uptake in the form confirmed that it will be launching a smart- Vega, was launched in South Korea in November of user inertia. Consumers might simply find phone with a flexible screen in 2012. The firm 2011. According to Pantech it enables users to the idea of a virtual overlay on the real world has been showcasing its flexible Super-AMOLED answer incoming calls, activate the MP3 player, too “weird”. displays since 2010 and company spokesman play games, and perform other tasks using Because of that, he says, AR is: “more likely Robert Yi confirmed in an earnings call in Octo- simple hand gestures, recognised by the phone to be used for professional services applica- ber that products featuring the technology will without the user having to touch the screen. tions, in the short term; for emergency services be on sale in the first quarter of 2012. Microsoft, meanwhile, is looking to extend for example. It could allow you to be able to Market leader Nokia is also working on the capabilities of touchscreen technology, look a building and see who’s there, or look at flexible handsets and Tapani Jokinen, head of with the OmniTouch project one of its most a person and detect their body temperature,” design technology insights at the Finnish vendor, notable programmes. OmniTouch is the name he says. “So many devices and monitors are says it will be introducing similar twist and being given to a technology that turns any going to be connected, we’re just going to be squeeze functionalities in its future phones. surface in the user’s environment into a touch swamped with information.” n

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40-41_MCI174.indd 41 06/02/2012 14:52 OTT IP-based messaging: Outlook for mobile operators and OTT providers Pamela Clark-Dickson Senior Analyst Informa Telecoms & Media

KEY POINTS

Mobile operators are finding that their revenues from traditional The five operators in the G5 group (Orange, Telefonica, Vodafone, •voice and SMS are under pressure from over-the-top (OTT) providers •Deutsche Telekom and Telecom Italia) believe that instant- of voice and messaging services. messaging services based on the GSMA’s RCSe specification will help them to retain customers on their networks. However, a number of Operators are also concerned about the potential erosion of their questions remain over whether RCSe-based services will actually •subscriber bases by OTT providers, not only among smartphone launch, and how relevant they will be to subscribers. users but also their wider customer base. OTT IP-based messaging providers also face several challenges; Data from KPN Mobile and SK Telecom reveals the extent of the •in addition to the mobile operators’ defense strategies, these •challenge that operators face from OTT providers, in terms of providers may also have to contend with subscriber “silo fatigue” declining SMS traffic and revenues. and trying to figure out how to generate revenues from their “free” Some operators are restructuring their tariffs in order to ward service. •off the threat of OTT IP-based messaging providers, introducing integrated price plans that include voice minutes, SMS and data, and that encourage their subscribers to stay “in-bundle”.

Operators search for a Fig. 1: IP communications: the respective positions of over-the-top providers vs. mobile/fixed operators legitimate role in IP-based New competitive environment communications

At Informa Telecoms & Media’s Rich Communications event in Munich at the end of October, representatives of Internet (OTT) communication world Operator communication world each of the operators in the Group of Five (G5) – Orange, Telefonica, Vodafone,

Deutsche Telekom and Telecom Italia – ARPU acknowledged the multiple pressures on their businesses from OTT messaging • Innovative communication services Core communication services • services. The most significant concern • Community-based Highly interoperable • • Best-effort service principle Reliable customer relationships • for operators is not, surprisingly, the • Indirect/no/evolving monetization Direct service monetization • immediate downward pressure they are experiencing on their voice and Source: GSMA messaging traffic and revenues, as subscribers churn to OTT-provided voice- adopters and avid users of OTT services businesses. They believe that if they do over-IP and IP-messaging services, but but, eventually, a significant proportion not act, they risk being marginalized; the potential erosion of their customer of their subscribers. That erosion of their members of the G5 believe that they base by OTT providers (see fig. 1). subscriber base will inevitably drive currently do not have a legitimate role down their revenues even further in the to play with regards to providing IP- G5 members say that, if they do not long term. based messaging. take steps to slow or halt OTT-driven churn as soon as possible, they are Some mobile operators are extremely At present, there is a good chance faced with the prospect of losing – and candid about the threat that OTT that mobile users still recognize that perhaps never regaining – not only the providers of IP- communications the operator provides their voice and high-value customers who are the early represent to mobile operators’ messaging services, but if operators

991 INFORMA-MCI ADVERT-V2.indd 1 6/2/12 12:54:44 PM About Informa Telecoms & Media Informa Telecoms & Media delivers strategic insight founded on global market data and primary research. We work in partnership with our clients, informing their decision-making with practical services supported by analysts. Our aim is to be accessible, responsive and connected, both to the markets we serve and to our clients’ business goals. For more information, visit: www.informatandm.com

do not act to secure their role as a Fig. 2: KPN Netherlands, consumer wireless ARPU, 1Q10-3Q11 provider of voice and messaging 25 50 services – regardless of the bearer – that recognition may very well transfer to

20 40 Nonvoice as % of ARPU an OTT provider of IP-based voice or messaging, such as Skype or Apple. If 15 30 that happens, mobile operators are at

risk of relinquishing the right to charge ARPU (¤) 10 20 for the services that they do provide. 5 10

0 0 KPN and Vodafone restructure 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 service plans to mitigate Note: US$1 = ¤0.72 cannibalization Source: KPN

The operators have good reason to be afraid. Even as the G5 operators SMS and mobile-instant-messaging said it has been able to convert 35% of were outlining their RCSe plans at Rich (MIM) traffic as a result of the proliferation the customers it targeted with the new Communications, KPN Netherlands of OTTs in the country. Between June offers. In September 2011, the operator announced its 3Q11 results, which 2010 and May 2011, SKT’s SMS traffic also introduced new service plans included the information that the slid down from 10.6 billion messages that include a combination of voice, number of outgoing SMS messages per a month to 3 billion, while traffic on its SMS and data. It has also attempted customer had declined 5% year-on-year. MIM service declined from 260 million to differentiate these plans based on Even more significantly, the figure among messages a month in June 2010 to quantity, speed and quality of service. its Hi brand customers declined 24% almost zero in May 2011. year-on-year, a significant change from Vodafone Group is pursuing a the 8% year-on-year decline reported by SKT attributes the precipitous decline to similar strategy: In its 1H12 results KPN in 1Q11. the penetration and use of OTT services, announcement, Vodafone said it including two of the most popular services is using pricing strategies to avert Overall, KPN experienced a decline in in South Korea, Kakao Talk and MyPeople. potential revenue loss associated with its voice and SMS traffic and revenues KakaoTalk, which provides an IP-based the substitution of voice and SMS with in 3Q11, which it attributes to changing messaging service for mobile phones, had data. Specifically, the mobile operator customer behavior – that is, increased 25 million users globally (about 20 million is focused on migrating postpaid take-up and use of OTT services. That in South Korea) by October 2011, who customers to tariffs that bundle voice, OTT activity has, however, increased the were generating 600 million messages a SMS and data; by end-1H12, about 24% data traffic flowing over KPN’s network, day. Meanwhile, MyPeople has 13 million of its contract customers in its five largest which has in turn helped keep ARPU users. Between them, KakaoTalk and European markets had been moved to hovering at €24-25 (US$32.80-34.20) MyPeople have achieved 40% penetration these integrated tariffs. since 2Q10 (see fig. 2). The operator says on smartphones in South Korea, according that smartphone penetration among its to SKT. postpaid customers is 67%, with 74% of This research is taken from a new report postpaid customers also subscribing to KPN is restructuring its service plans to published by Informa Telecoms and Media KPN’s data plans. encourage those postpaid users who entitled “VoIP and IP messaging: Operator strategies to combat the threat from OTT were going out-of-bundle by accessing players”. For more information please visit: In South Korea, SK Telecom has also services such as WhatsApp to stay experienced a significant decline in its within their bundle of services. KPN www.informatandm.com/messagingip

991 INFORMA-MCI ADVERT-V2.indd 2 6/2/12 12:54:46 PM the informer

Early indicators

Want to place some bets on the performance Join the debate of big names in 2012? A round-up of recent reader comments from the industry leading website Telecoms.com. Get involved in the discussion at t the back end of January, as usual, high end—show no signs of letting up. The www.telecoms.com/join-the-debate/ the great and the good of the industry long, drawn out demise of Symbian continues, played show and tell with their bank with Elop confirming that the platform is Leaving customers satisfied requires A more than simply increasing bandwidth. statements. There weren’t many in the market losing out to low-priced smartphones. Nokia revelling in unreservedly good news on the is revising its forecasts for Symbian-based The traditional approach of over-sizing financial front but, true to form, Apple had unit sales downwards. Exactly how far, Elop the network infrastructure is counter- another bonanza to report. didn’t say. productive, as it will defeat the purpose Such is the regularity with which the Nokia really has its work cut out. The of Ethernet as a cost-effective technology. iPhone vendor hoovers up mind-boggling Informer has had a good play with the Nevertheless, while right-sizing is critical sums of the folding stuff that the Informer Lumia800 and it’s a great device (the to staying aligned with the objective of cost has commissioned a new key for his office pre-commercial model that he has is a bit containment, quality of experience (QoE) computer that says Applepostsrecordprofits, temperamental) but will it really spearhead requires also must be balanced in parallel. which will save him from having to type it out a turn-around? The Finnish vendor also Customers who signed up for expensive word by word every three months. announced that it had flogged its 1.5 billionth data service packages, especially those In the last 92 days of calendar 2011, Apple S40 device, one of its new Asha feature with international usage, expect high QoE. grossed $46.33bn, which is more or less phones. These will prove just as important as When they don’t get it, they are much more equivalent to the GDP of Slovenia for 2010. the high end product for Nokia in 2012. likely to churn. Net profit for the quarter was $13.06bn, which Elsewhere in the device vendor community, Marc Lippe on backhaul challenges for LTE exceeded by some distance the total revenue Samsung netted $3.5bn for the final quarter, Google managed to gather for the same contributing to annual profit of $12.2bn. Introducing another operating system period, which was a dash over $10bn. This was down 15 per cent year on year, could be a recipe for disaster. Regardless, How long can this tremendous growth and the Korean player’s endless legal spats it will be interesting to see if Samsung continue? Revenue was up 75 per cent year with Apple are probably taking their toll. move away from Google’s Android on year, while profit more than doubled. With Motorola Mobility, meanwhile, lost $80m for platform during 2012. Time will tell! 37 million iPhones sold, shipments were up the quarter, which was the amount it made in Beacon on Samsung’s plans to merge Bada 128 per cent year on year. And there was a profit for the same period in 2010. Again legal with Tizen 111 per cent upturn in iPad orders, with 15 fees played their part, with Moto also citing million units shipped. The popularity of this tougher competition. Right now, mobile users number 350 increasingly mass market duo is filtering back Japanese vendor NEC was also feeling the million. What happens when 800 million to Apple’s desktop business as well. The firm’s pain, announcing late this week that it is to users engage in Facebook mobile? It puts PCs retail at a substantial premium to most cut 10,000 jobs at home and abroad, on an the data spectrum crunch in perspective, Windows-based machines, but sales were expected annual loss of $1.3bn. Sales are and sheds some light on Google+ user- nonetheless up 26 per cent at 5.2 million units. down across both networks and devices, and focused search responses… With the iPhone 5 certain to roll out flooding in Thailand last year hit a number of Bill Gwinn at Accenture on Facebook on later this year, and a TV play also widely the firm’s factories, NEC said. thae mobile anticipated, you can expect the big numbers In operator land AT&T topped the losses

to keep on coming. table, spurting a monumental $6.7bn into Cellcos are in a tight spot, it must be How others must envy such a performance. the ether during the final quarter of last admitted: users want to do what handsets Nokia, still the handset market leader, leaked year. Revenues were up at $32.5bn and with enable them to do, and that means great €954m for the final quarter of 2011, compared 9.4 million smartphones sold, the firm had strain on mobile data networks. That to an operating profit of €884m for the same its best every quarter in retail terms. But its calls for more investment, and margins period in 2010, and a €71m loss for Q3 last planned takeover of competitor T-Mobile, are getting tighter. Not to mention the PR year. CEO Stephen Elop made a valiant effort which was blown out of the water by US nightmare every time an operator wants to accentuate some positives, trumpeting antitrust authorities, is now coming back to to cap something or make a few quick quid sales of more than one million Lumia haunt AT&T, which for some reason that the on the side, to put it that way. Where and smartphones; Nokia’s new flagship handsets Informer will probably never understand, how this will end, hard to say. based on Microsoft’s Windows Phone platform. agreed to pay T-Mobile $4bn if the deal didn’t But the firm’s struggles in the lower go through. Eustace Breeze on GiffGaff’s decision to end of the market—which has sustained its There’s money to be made in these abortive kick out heavy users leadership during wilderness years in the marriages! n

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