Research Notes

An increasing number of mobile operators are now focusing on changing into intelligent pipes

–  it started with Premium SMS and is now centred around selling access to various APIs.

When we speak with the top management of mobile operators around the world there are two areas they fear the most; the price development of mobile broadband and that they may end up developing into “dumb pipes” in the future.

When we look at how the mobile broadband market is developing, there is no doubt that the broadband speed that customers are being offered is growing faster than their requirements. Similarly there is no doubt that the mobile operators’ total ambitions within this area exceed a total market share of 100 percent.

In practice this will result in the well-known war over voice customers being repeated on the mobile broadband market – but with a far greater intensity than we have seen so far during the past 15 years.

The price of a mobile broadband modem in the form of a dongle is decreasing so quickly, that the hardware subsidy costs are becoming marginal. This is resulting in the high subsidies we are seeing e.g. in the smartphone market becoming a diminishing problem for the mobile broadband world, as mobile broadband prices drop.

This will simply result in competition increasing and that customers will be offered faster broadband connections at increasingly inexpensive prices – which is exactly the opposite of what most operators had hoped for. Any operators that believe they can increase prices by introducing LTE are in our opinion naive.

So the big question is what strategy an operator should choose on this type of market? One method would be to reduce their costs by implementing traditional cost-cutting measures. Alternatively an operator could share their network with one or more competitors like Telenor and Tele2 currently are doing in Sweden and 3, Orange and T-Mobile are doing in England. A third alternative could be to follow in French SFR’s footsteps; SFR is building a new 3G network in rural areas in France that will be shared by SFR, Orange and Bouygues.

Another strategy would be for operators to look at new business models that can move them away from being dumb pipes to becoming intelligent pipes. Our analyses show that mobile operators have many possibilities of achieving this, if they understand how to transfer the intelligence that is built into their networks over to the APIs that third-party partners can use to develop exciting new mobile services that function over mobile networks.

There is also the possibility of elevating quality of service into an everyday product that customers will pay extra for. QoS is in practice much more than simply guaranteeing a certain bandwidth at a given time – it is also about the possibility of creating and offering a larger variety of differentiated products and services than customers are currently being offered.
In our report Successful Strategies for the Mobile Broadband Market   we have taken a closer look at the mobile broadband market and how it is developing, and we have examined the challenges that mobile operators are facing. The report looks at how mobile operators can ensure that their business develops positively, with a healthy balance between the cost of producing a service and the payment from a customer for using that service.

In our report OneAPI – Next Generation Value Added Services in the Mobile industry we have examined how mobile operators can take advantage of the intelligence built into their networks to develop, market and sell APIs to third-party partners, that can then develop, market and sell services via the mobile operators’ networks.
More information:

Successful Strategies for the Mobile Broadband Market

OneAPI – Next Generation Value Added Services in the Mobile industry

Related Reports:

Show me the money – The future Business models for mobile Broadband Services

How MVNO´s can get success in the Mobile Broadband market

How media companies can get success on the mobile broadband market

How to get success with Value added services on the Mobile Broadband market

How can a Wimax operator survive in a world full of WCDMA

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