Cashing in on data

Operators are looking for strategies to profit from network-congesting content and data applications

Tags: 3GBatelco Middle East CompanyEtisalat International - UAESaudi Telecom CompanyUnited Arab Emirates
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Cashing in on data Operators have been frustrated by heavy mobile data use since the launch of Apple's iPhone back in 2007. (Getty Images)
By  Roger Field Published  June 22, 2010

Operators have long been grumbling about the pressure exerted on their networks by data-hungry smart phone users.

All-you-can-eat data packages were seen as the best means to attract mobile data customers when 3G devices first appeared, but with the launch of the Apple iPhone back in 2007, subscribers' data use surged, putting strain on already stretched networks.

But it took until this month for operators to decide that enough was enough. It is likely that no operator wanted to be the first to cave in and place restrictions on mobile data use, but with AT&T in the US and O2 in the UK both placing restrictions on the amount of data their mobile subscribers can use, many more operators are likely to follow.

And the Middle East will also surely follow suit. Indeed, one of the main topics raised at the recent Arab Advisors' Convergence Conference in Amman, Jordan, was strategies operators can adopt to ensure they make a sound business case from their data - and particularly mobile data - networks.

Mohammad Omran, chairman, Etisalat, admitted that in one of the company's markets, it had already sought to put a cap on all-you-can-eat mobile data use, by introducing what he referred to as a "fair usage" policy. Essentially, Etisalat reduces the broadband speed for subscribers to the said package once they have exceeded 30Mb of data use.

While it might seem a somewhat flawed strategy to frustrate heavy data users with slower speeds, rather than simply charging an additional fee, Etisalat's decision to impose these limits in one of its markets is a sure sign of things to come.

At the same event, Peter Kaliaropoulos, CEO, Batelco Group, said that the industry as a whole holds much of the blame for the predicament. 

"We as an industry... have conditioned customers over many years to get a lot more for a lot less, and how do we actually move away from that?" he asked.

He added that Batelco had also moved away from all-you-can eat packages in one of the seven countries it operates in, and predicted that "most telcos will go down that path".

But according to a report from Pyramid Research, addressing all-you-can-eat packages may be just the tip of the iceberg for operators.

Indeed, data is expected to account for the vast majority of traffic on mobile networks by 2014, but will still constitute only 37% of total revenue, according to Pyramid Research.

In this light, the challenge facing operators is not only to charge the minority of mobile broadband customers that use above-average amounts of data, but also to find alternative ways of generating revenues from data applications.

Most of the panel discussions at the Arab Advisors' conference demonstrated a strong recognition of this fact by the operators, which almost all raised the issue as being the biggest challenge they faced.

Many of the CEOs present, including Mohammad Omran and Peter Kaliaropoulos, and Zain KSA CEO Saad Al-Barrak, admitted that operators had been upstaged by players such as Google, Facebook, and applications including Youtube.

But far from sounding defeatist, the operators were almost unanimous in their conviction that they were also well-positioned to benefit from the changing habits of their end users, as long as they are able to forge the right partnerships with content and application providers to take their share of the pie.

As Ghassan Hasbani, CEO-international, STC, pointed out, the media, social networking and application companies still command a relatively small revenue share compared to the telecom industry.

"We still hold the power to invest in innovation, and to invest in new concepts and ideas to reinvent our industry," he said.

While the precise strategies that the operators adopt to achieve this may differ, the next couple of years will almost certainly prove crucial to their success in tapping content and applications as a key revenue source.

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