Content Partnering to Supercharge 3G Growth

Content Partnering to Supercharge 3G Growth

Summary

Background

Analysis

Recommendations

Authors

Subject: Wireless Industry: Communications

Date: June 2005

3G networks are gearing up in Europe, making that region the global testing-ground for a new type of relationship between operators and content providers. From networks to handsets, 3G service components are being developed, integrated and optimized in readiness for take-off. However, amid the pre-launch rush, one key question is possibly being overlooked: where is the money? By the end of 2005, shareholders will be demanding proof of incremental revenue and usage flowing from 3G handsets.

As attention turns to the commercial potential of high-speed mobile services based on 3G technology, the omens are not encouraging. Publicly-available information suggests that the early levels of mobile data usage at the interim 2.5G level are far from satisfactory. Despite the fact that the new 3G services are reported to be capturing customers’ imagination, there is little sign so far of them capturing a huge share of wallet. Figures to date suggest that the majority of users are not yet touching their 3G button—and that the ones that do press it are generating just a few dollars per user per month.

One place where European and US operators might look for lessons is Asia. Operators in Japan and Korea worked out how to make money from data some time ago and now generate approximately 100 percent more revenue per customer from mobile data than their European counterparts. But the main difference between these operators, apart from cultural distinctions, is the nature of this revenue. While the majority of data revenue in Europe derives from messaging (80-85 percent), in Asia content and applications make up the majority (60-70 percent).

While "content is king" remains the mantra in mobile data, the way this has manifested itself in Asia—via thousands of different content creators and in a continuously changing format—is far removed from the original expectations. It also differs sharply from the market in Europe, where mobile content's limited scope and depth has prevented it from competing satisfactorily with TV and the Internet. Operators in Asia typically have commercial relationships with around 1,000 selected content providers—and this broad provider base helps to keep competition alive and get the best content ideas to market.

However, European operators report that effectively managing thousands of content providers is operationally impossible, meaning that much of the effort they put into promoting open competition for content was, in fact, wasted. So what really sets the Asian operators apart is that they have managed to execute their original business plans, offering the most compelling developer experience to the mass market.

Based on interviews with a number of content providers and operators, Accenture has identified four areas in which an operator must develop outstanding capabilities to attract the best third-party providers. These four capabilities, illustrated in Figure 1, are:

1. Design/Test 2. Operate 3. Commercial 4. Support

While an operator would need to be world-class in all these capabilities to meet every conceivable third-party requirement, in practice it needs to make a pragmatic assessment of what developers expect from it—and invest accordingly.

1: Design/Test—Up to now, most service design has been focused around SMS, MMS and WAP standards. With the advent of Java technologies on high-capability handsets and faster mobile IP networks, developers now want better Service APIs and Development Kits to complete their offerings. 3G operators take two main approaches to selling content—either acting as an aggregator via a central repository, or providing developers with guidelines and xHTML templates.

The development of a new mobile content site takes from one to four months. To shorten this cycle, several operators are providing Development APIs to give third-party content providers greater flexibility in areas such as charging mechanisms and controlling access to content.

2: Operate—Many developers cite the lack of any clear organizational structure as a major drawback in their relationships with operators. Another common headache is the legal/contractual wrangling required before joining a large 3G operator’s development community, while 3G operators themselves face the challenge of integrating third parties into their own real-time billing systems.

Providers and partners also expect a steady testing environment, access to representative production data and responsiveness in the event of operational problems. However, most operators are currently failing to provide developers with clearly-defined service levels—despite this being standard practice in the fixed phone world.

3: Commercial—Developers’ commercial expectations could not be greater—and their impact to date could not be more disappointing. Developers would welcome the introduction of more flexible business models with fair revenue-sharing. Not surprisingly, developers would also like to see flawless charging−billing–payment−settlement flows so they receive their hard-earned money as quickly as possible. Operators should come up with a portfolio of billing models and give their providers the flexibility they need to match their specific offering with the most suitable model.

4: Support—Most developers expect some support for their own development activities. The availability of SDKs and well-documented material will prove adequate for most of their activities. However, they would also like to get in-depth management information capabilities, such as SLA Tracking or KPI Reporting. Such information allows them to develop services geared to specific target customer segments. Certainly, many operators could improve on their capabilities in this area, and Accenture research shows that the market is now waking up to the importance of doing so.

Bottom-line Benefits

In the introduction to this article, we asked: “where is the money?” As we have shown, while pulling all these capabilities together for third parties is neither cheap nor easy, it is worth the investment. For operators looking to grow their revenues and build market share, a roadmap to acquire the right partnering capabilities is not just a good-to-have—it’s a prerequisite for future success.

Tunc Yorulmaz is an associated partner in Accenture’s Communication & High Tech group, based in the London office.

Philippe Delaide is a partner in Accenture’s Communication & High Tech group, based in the Paris office.

Jean-David Benassouli is a manager in Accenture’s Communication & High Tech group, based in the Paris office.

Simone Maggi is a consultant in Accenture’s Communication & High Tech / CRM group, based in Sophia Antipolis.

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