Seizing the Opportunity in Mobile Broadband. - A Global Perspective -

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1 Seizing the opportunity in Mobile Broadband - A Global Perspective - February 2011 Acision Mobile Broadband Global Research In association with: 1

2 1. Introduction and Overview... 3 Leading broadband markets... 3 Main Conclusions... 4 Report Synopsis The Mobile Broadband Life Cycle... 8 The Mobile Broadband Lifecycle igniting consumer adoption... 8 The growth of data volumes The continuous tsunami... 9 Quality of Experience ride the hype cycle Seizing the opportunity Differentiate in a maturing market The Operator Challenge The root cause oversubscription ratio in mobile broadband The network impact connecting the IP and Mobile worlds Seizing the opportunity Maximise network utilisation The Global Consumer Perspective Quality of Experience core service Quality of Experience video Satisfaction and Loyalty maximise life time value Customer Needs deliver MY broadband Seizing the Opportunity optimise the quality of the entire consumer experience Comparing countries Converging Eco Systems Telco s in the Internet World Regulators Achieve sustainable net neutrality Content providers Delivering the mobility experience Seizing the opportunity Leverage the content eco system Grow ARPU by enabling a differentiated service offering Decrease Cost by maximising network utilisation Control QoE by managing relevant service aspects Enable Value driven engagements with content providers Required capabilities the mobile broadband investment agenda

3 1. Introduction and Overview From June to November 2010, Acision has commissioned a number of independent market research agencies (YouGov, Quantinet and Toluna) to undertake a detailed survey to understand consumer perceptions of mobile broadband in the UK, United States, Brazil, Singapore and Australia. The research covered key aspects associated to mobile broadband today, including Quality of Experience (QoE), customer satisfaction levels, perceived video quality, the potential of Value Added Services (VAS) and consumer awareness and acceptance of fairness policies and content optimisation. For every region, the Acision research focuses on all aspects of mobile broadband including the usage of the mobile internet on Smartphones, mobile handsets, dongles, modem sticks, data cards, netbooks, and integrated mobile broadband within laptops. The motivation for Acision to undertake this global research has been the phenomenal uptake of mobile broadband worldwide and the rumoured Quality of Experience issues accompanying it s steady rise. One of the key objectives of the research has been to quantify these QoE issues, understand it s principle drivers and determine whether global parallels exist in its development lifecycle. Also, the potential for addressing the key issues in terms of consumer awareness of mobile broadband and willingness to accept fairness, optimisation and differentiation measures, has been another key objective. In both areas we can conclude the global research initiative has been very successful and provides insight in this new and exciting market segment which is beneficial to all stakeholders, being consumers, operators, content providers and regulators. All the research was conducted using the same questionnaire and panel based methodology, using a representative sample of over 1000 consumers per market aged 18 years and up. Leading broadband markets Mobile broadband has undeniably turned a corner. High speed networks, flat fee pricing models, Smartphones, tablet devices (such as the ipad) and laptops have together fuelled a level of growth exceeding everyone s expectation. Clearly mobile broadband represents a very significant and strategic opportunity to operators worldwide. The UK, US, Singapore and Australia markets have been at the forefront of the development of broadband and are leading examples of growth markets for this service. Operators in these countries have been creating a state of the art broadband environment which seems poised to take full advantage of the mobile broadband opportunity. The story, however, doesn t end there. While investments in network technology and mobile coverage are essential prerequisites for the success of mobile broadband, it is apparent that more control is required to make the service a continued success going forward. 3

4 The challenge lies in the fundamentally constrained nature of mobile broadband, which is already being experienced by operators across the globe. With today s pricing models, where substantial bundles are offered with ever diminishing revenues, it doesn t matter how much one invests in network technology, the demand for capacity will always outstrip supply. This is evident when taking into account specific cell locations, where a relatively low number of users can already create congestion issues. Because of these fundamental constraints, consumer experience will always be under pressure as users compete with each other for limited available capacity. Consumer experience therefore takes centre stage in the evolution of mobile broadband and it represents the focal point of the research Acision has undertaken. This report focuses on exploring what the next challenges are in mobile broadband and what can effectively be done by operators worldwide to evolve the service and continue to capitalise on the opportunity. Main Conclusions Customer satisfaction and loyalty Mobile broadband is perceived as an important and valuable service by the majority of users. A significant amount of consumers, however, are dissatisfied with certain aspects of the service which can result in churn. The core service aspects provide the highest value with 60% of global consumers stating reliability, coverage or speeds as most important service aspect. Service offering aspects like price, usage allowance or usage control are perceived as most important by 40 % of consumers. Dissatisfaction exists on certain elements of the service with coverage (29%) and pricing levels (28%) causing the highest levels of dissatisfaction. Network speed, service reliability (both 21%), usage allowance (18%) and usage control (17%) are other areas that cause dissatisfaction. Churn potential is considerable at 31%, with remarkably low variance between countries. Hard churn is at 12% with customers switching operators (9%) or cancelling the service all together (3%). The remaining 20% have not made up their minds yet. Consumer perception of Quality of Experience The vast majority of global consumers have regular occurrences of Quality of Experience issues while using their mobile broadband service: 79% of customers globally have Quality of Experience issues of some kind especially regarding core aspects of the service such as slow speeds (62%), network coverage (39%), connection stability and unable to connect (both at 36%). Only 21% of respondents state they haven t experienced any issues. The variance between countries is relatively small and the patterns are similar for all countries. There is a direct relationship between Quality of Experience issues and churn as 44% of the consumers that have decided to leave their operator state poor connections and another 42% slow speeds as reasons for churning. With 34% of consumers stating price as a driver for churn, price sensitivity is also an important churn factor. Video Quality of Experience issues peak at 74% with 37% of consumers watching videos. They experience issues such as waiting a long time for the video to play and frequent pauses (both affecting 54% of the population). 4

5 Consumer needs in fairness, optimisation and VAS The research results, however, provide many important insights operators can leverage to seize the opportunity in mobile broadband. In particular, the research identifies key areas where additional capabilities can be deployed which show high levels of consumer acceptance: Fairness policies Consumers, once they understand the need for resource management, have a high acceptance of policies that enable a fair allocation of the available capacity. The research shows that 67% supports such a policy. Many consumers (35%) are even prepared to pay a premium for the service if it provides them with an improved Quality of Experience. Video optimisation Of all respondents, 60% are willing to accept video optimisation as long as they benefit from an improvement of those aspects of the service experience they find most important, especially less stalling of videos. Paid Value Added Services The majority of consumers state a clear need for some kind of VAS service and a willingness to pay an additional fee for services like notifications, customisation etc. Support for 8 specific VAS services polled range from 41% to 26%, so each signifying a clear marketable consumer segment. This provides another key area where operators worldwide can build a more diverse and long term revenue model. Remarkable global parallels Although regional variations do exist, in many important respects, all markets show a remarkable resemblance. Generic Quality of Experience issues are at comparable levels for instance. Also in terms of dissatisfaction the results show remarkable similarities (between 21% 24%), just like churn potential (between 30 31% for all countries) where the differences between countries are within a few percent of each other. These bottom line KPI s are in the end most important and most fundamental for the operators and the profitability of mobile broadband. Satisfying consumers and building long term loyalty remains a challenge for any operator providing mobile broadband services, regardless of the country where they operate. A significant opportunity In conclusion, Acision believes the research shows very clearly where the opportunity in mobile broadband exists in all of the developed markets. The research identifies what consumers value most about the service and it points to very specific aspects where the service could be improved in the eyes of the consumer. In addition, there is clear consumer support to tackle the fundamental issues in broadband such as cost, quality of experience and revenue. Very significant opportunities in mobile broadband are still uncharted in the global market, and just waiting for operators to leverage their unique capabilities and intrinsic value to seize them. 5

6 Report Synopsis The detailed outcome of the global research can be summarised as follows: Consumer satisfaction and churn With 71% using the service over 3 times a week, mobile broadband is an increasingly important and valuable service for consumers worldwide. On the other hand, the majority respondents state they are dissatisfied with certain aspects of the mobile broadband service creating a churn potential of 31%: 50% use the service daily and 21% between 3 5 times a week making it part of everyday live Core service aspects like reliability, coverage and speeds are most important to consumers (60%), while 40% states aspects as price, usage allowance and usage control as most important. Consumers are most dissatisfied with price (24%) and reliability (21%), very closely followed by coverage (20%) and speeds (19%). The churn potential of consumers contemplating to change operators, stop using broadband altogether or unsure what to do next is 31% in all countries. Consumers that have concrete plans to churn state poor connections (44%), slow speeds (42%), price (34%) and lack of usage (28%) as the key reason to churn. Quality of Experience of Core Service These issues are very common and therefore significant, with 74% experiencing some problem, either with speeds (62%), coverage (39%), connecting or staying connected (both 36%) Speed of the mobile broadband service is the most encountered problem affecting 62% of the respondents. Another 46% states this issue as their most frequently experienced problem. Also frequently experienced issues (issues that happen all the time, very often or often) are network coverage (18%), staying connected (16%), unable to connect (14%) and low image quality (5%). Video Quality of Experience 37% of global consumers watch video and video Quality of Experience issues among these users are significant: 74% of consumers that watch video experience issues with these videos. Wait before play and stalling videos are experienced by the majority, both at 54% of the population. Other issues include the video not playing at all (30%) and poor quality of videos (26%). In terms of the frequency of video QoE issues (issues that happen all the time, very often or often), wait before play (51%) and stalling videos (49%) occur the most frequent. Poor quality (33%) and the video not playing at all (24%) also occur frequently. These numbers raise the question about how many video s are being enjoyed without QoE issues. Most unacceptable, by far, is frequent stalling of the video (49%). Having to wait 30 seconds for the video to play (16%), waiting 10 seconds (10%) and the video stalling once (9%) are relatively less important to consumers. The ability to watch the video with high quality at full screen is important to only 5% of users. This is an important outcome from a content optimisation point of view. For most consumers it is more important to have a smooth running video compared to having high quality resolution in full screen mode. 6

7 Fairness policies 73% is not aware that network resources can be claimed by a limited amount of users. Also, 76% of consumers are not aware whether their provider adopts a fair use policy. Once aware of the fairness issue, 67% of consumers favour an active approach aimed at distributing available bandwidth equally between as many users as possible. Another 18% of consumers are willing to consider this once they have a better understanding of the service details. Video optimisation 60% of video users supports video optimisation in order to increase overall video quality in terms of time to play and no stalling. Another 17% would be willing to consider this. Only 23% of the video users oppose to video optimisation. Differentiation broad support exists among consumers for additional services, with 35% prepared to pay extra for a higher Quality of Experience in general. All polled paid VAS services attract significant, marketable support: notifications (41%), fair bandwidth management (35%), spend control (35%), roaming (34%), shared bundle (33%), customisation (30%), content compression to save on bundle (29%) and priority (26%). Global comparison In many respects the developed markets in the study are showing some important parallels. The amount of Quality of Experience issues are very similar across the globe, ranging from 74% and 77% in the US and Australia to 83% and 84% in Singapore and the UK. Per specific Quality of Experience issue the US and Australia have on average 34% of consumers stating they experience the problem, which is less compared to Singapore (39%) and the UK (43%). The US and Singapore have on average 19% of consumers stating issues happen frequently to them, with Australia and the UK polling slightly higher with 20% and 23%. Customer satisfaction is under pressure. Australia has 22% of average dissatisfaction compared to 21% in Singapore and 24% in both the US and the UK. Churn potential is between 30% and 31% for all countries. Video optimisation has the highest support in the US (69%), followed by Singapore (66%), Australia (57%) and the UK (48%). Consumer support for applying fairness policies is highest in Singapore with 79%. Also the majority of users in the UK (74%), Australia (65%) and the US (64%) support these policies. VAS opportunities show high potential in all markets. Australia ranks first with 68% VAS potential followed by the UK (65%), Singapore (61%) and the US (58%). 7

8 1. The Mobile Broadband Life Cycle With the widespread adoption of mobile broadband in many parts of the world, operators are entering a fundamentally new playing field. Until recently, the mobile internet was a niche service reserved for business users or the affluent consumer. However, today things are very different and mobile broadband is on the verge of becoming telecom s next mass market service. With its stellar growth, especially in recent times, the mobile broadband service has become of vital importance to the future of mobile operators. There is, however, more at stake than the classic topic of telco revenue. Broadband access is increasingly seen as playing a vital role in society at large. Many countries are making broadband a key policy area and are increasing regulatory control. Finland is a case in point, being the first country to designate broadband access as a statutory right 1. This is especially relevant to mobile broadband as large parts of Finland can only be reached through using mobile technologies. Clearly mobile broadband is here to stay and is providing operators with an excellent opportunity to create a new long term revenue stream. Achieving long term success is, however, far from obvious and many challenges lie ahead on the road to broadband profitability. The Mobile Broadband Lifecycle igniting consumer adoption Fundamental to understanding the challenges in mobile broadband is the lifecycle of the service (figure 1). A key aspect in this life cycle is the occurrence of exponential volume growth (the black line in figure 1). At some point in the lifecycle a massive explosion of broadband traffic occurs which, in turn, is a key driver for many of the issues challenging mobile broadband providers. The exponential growth of mobile broadband traffic is a result of two main determinants: 1. Usability of the service is the main prerequisite Usability is a combination of network capacity which Figure 1 The mobile broadband lifecycle provides broadband access, combined with a mobile device able to run on these networks that provide an intuitive internet experience. The recent advances in both these areas, HDSPA and LTE for network technologies and devices such as android devices, iphones and, most recently, tablets have now created the fertile starting point for a true broadband experience. Without this prerequisite, traffic explosion will not occur. 8

9 2. Pricing models are a necessary trigger only if consumers feel they can use mobile broadband without being penalised for usage, will the service really take off. The data traffic explosion is triggered by transparent pricing models such as per day pricing, Gigabyte bundles or even all you can eat unlimited packages. This allows consumers to use the service without feeling constrained. Once this point is reached, mobile broadband will cross the chasm from being a niche service to a mass market mobility service which consumers embrace and freely use anytime and anyplace they like. The growth of data volumes The continuous tsunami Acquisition strategies as the all you can eat model have been, without doubt, very successful indeed. In fact, mobile operators have, in a sense, become victims of their own success. Mobile broadband is proving to satisfy such an important need in consumers that, once 7,000,000 TB per month 4.7% they start using the service in earnest, they find it 6.1% impossible to stop. As a result, data volumes in 20.9% mobile are rising continuously each year. In Asia VoIP (0.4%) Pacific traffic is projected to grow by 119% each 92% CAGR Gaming (1.5%) M2M year from 2009 to 2014, representing the highest 66.4% P2P Data level of growth of all the developed regions worldwide Video Figure 2 Growth and breakdown of mobile broadband traffic (source: CiscoVisual Networking Index, 2011) Traffic is not only changing in terms of volume. The traffic mix in mobile broadband is also under considerable change. Especially the share of time sensitive, real time content will grow significantly in mobile broadband. These are types of services where packet loss or any delay in transmitting data has an impact on the user experience. Video, VoIP and gaming are examples where round trip delays or packet loss can result in immediate Quality of Experience degradation such as a stutter in a video or on a VoIP call. Current projections estimate the share of time sensitive content to grow to approximately 70% of mobile broadband traffic. The data challenge for mobile broadband is therefore twofold. On the one hand operators have to deal with significantly more traffic each year for which they have to size all their systems accordingly, including the supporting infrastructure. In addition, they have to deal with traffic which is predominantly time sensitive. This leaves very little room to manoeuvre for operators in terms of how they handle traffic, a topic explained in the next chapter when we consider the impact on the operator s technical infrastructure. 9

10 Quality of Experience ride the hype cycle The explosion of data is not the only challenge that operators face in mobile broadband. Quality of Experience is an often ignored second challenge that operators need to address. Many factors can influence the user experience, but limited network capacity and congestion issues caused by the data explosion mentioned above, are the most important ones. The crux of the challenge lies in the fundamentally constrained nature of mobile broadband. Regardless of how much one invests in network technology, the demand for capacity will always outstrip supply. When taking into account specific cell locations, a relative low number of consumers can already create congestion issues. Because of the physical constraints, consumer experience will always be under pressure as consumers compete for limited available capacity. Consumer experience therefore, takes centre stage in the evolution of mobile broadband and it represents the focal point of consumer research Acision has Figure 3 The consumer hype cycle of mobile broadband undertaken around the globe. We found the Gartner hype cycle (the red line in figure 3.) most effective in explaining the outcomes of our research. Consumer expectations rise significantly during the early stages of mobile broadband introduction, to such an extent that expectations are becoming inflated. The expectation in the early days of mobile broadband that it could completely replace fixed broadband is a case in point. Although this is an inherent mechanism accompanying many technology lifecycles, operators would do well not to fuel such expectations. Focus on managing Quality of Experience enables operators to manage the hype cycle much more effectively and reach a plateau of enlightenment and productivity earlier in the lifecycle. Acision therefore believes that the Quality of Experience of mobile broadband is essential going forward. It represents a key area where capabilities should be deployed to measure and enhance the Quality of Experience of individual consumers. In this context it is important to realise two things. First, Quality of Experience is a very personal concept. For some consumers price is an overriding concern while others find content quality more important. Each consumer should be able to determine which type of experience is most suitable to their individual needs. Secondly, Quality of Experience is all about the actual services being consumed such as video, gaming, voice or browsing. It is at this level that the experience needs to be optimised and tailored to individual consumer needs. This represents a step change from being packet aware to content and service awareness. 10

11 Seizing the opportunity Differentiate in a maturing market In terms of the mobile broadband lifecycle, many markets are now entering the first stages of maturity. The initial acquisition stage has been very effective in making mobile broadband a service which is attractive to the mass market. A next step is now required where consumer experience becomes the next battle ground. Australia is certainly one of the markets which is furthest developed in these terms and where such a shift is going to be taking place soon.. As with any maturing market, differentiation will be a core strategy for operators to deploy, creating value for targeted consumer segments and monetising this value accordingly. The most essential element in building this value is the consumer experience. A differentiated consumer experience at the content and service level represents the key to the continued successful growth of the mobile broadband market. 3. The Operator Challenge As discussed in the previous chapter, the initial success of mobile broadband can be partly attributed to the "all you can eat and flat fee pricing models, providing clarity to consumers with little risk of bill shock. Our research has shown that in the US, for instance, only 2% of 84% 72% 68% 51% 24% 24% 41% 14% 2% 4% 9% 8% US UK Sing Aus > 5 GB < 5 GB Per MB consumers state having a per Megabyte contract (figure 4) a comparable number to the UK (at 4%). Other markets, such as Singapore and Australia are in a better position with higher levels of per MB pricing models. All markets, however, have the majority of consumers on packages which range from over 5 Gigabytes per month to unlimited usage, with the US again topping the charts with 84% of consumers on such relatively unrestricted packages. The resulting volume and QoE challenges outlined Figure 4 Pricing models in US, UK, Singapore and Australia above, have an important knock on effect on operator profitability. In order to handle the traffic and QoE demands, operators have to invest heavily in network capacity and supporting infrastructure. As such, the costs associated with supporting the consumption of a single subscriber rises significantly while the basic flat fee pricing models lead to a decreasing Average Revenue per User. Profitability is therefore under severe pressure, with a number of operators that have already bitten the bullet, including O2 UK and AT&T US, switching to a model with data caps 3. These are just the first steps in defining new pricing models. Much is still to come in this area and operator capabilities will be stretched to the limit to support more innovative and targeted pricing models aimed at improving profitability levels. 11

12 The root cause oversubscription ratio in mobile broadband The root cause of the profitability issue in mobile broadband is the oversubscription ratio or contention ratio. The fixed broadband model has always been based on the principle that a megabit per second (Mbps) of real capacity could be sold many times to individual consumers. This mechanism, which has served its purpose well in fixed broadband, is failing in mobile for a number of reasons. First of all, capacity in a mobile network is much more vulnerable at the network s edge; the Radio Access Network (RAN). In a specific mobile cell, RAN capacity can easily become very constrained as more people move into the cell. In fixed this is of course much more predictable as connected households do not move around. Capacity in mobile can therefore become exhausted easily in specific cell sites, especially during certain Figure 5 The issue of dropping oversubscription ratios times of the day. A second important characteristic driving the decline of mobile oversubscription ratio s is the proportion of time sensitive content in mobile broadband traffic. As mentioned above, up to 75% of mobile traffic is expected to be long duration and time sensitive traffic such as video and VoIP. These services not only generate high levels of data volume, but in addition, claim network capacity for a sustained period of time. A YouTube movie for instance, depending on its quality, can generate between 0.5 to 2.5 Mbps of traffic. Assuming RAN capacity of 14.4 Mbps, between 6 and 30 video users can claim the capacity of an entire base station. This combination of limited RAN capacity and high time sensitive content, such as video, poses one of the core challenges in mobile broadband. The network impact connecting the IP and Mobile worlds Addressing the oversubscription ratio issue requires an end to end analysis of the chain of delivering the mobile broadband access service. In this service chain a number of fundamental issues exist: The devices that connect to the internet come in an ever increasingly wider variety, ranging from laptops, smartphones, netbooks and ipads to game consoles. Each device has its own characteristics, screen size, memory capacity and usage patterns. Also the types of services accessed on these devices vary substantially, creating highly unpredictable levels of demand in mobile data traffic and usage patterns. The radio access network (RAN) has limited capacity, especially taking into account the unpredictable number of concurrent users in a specific cell at a given time. In addition, many other factors can adversely impact RAN capacity, such as interference from other radio sources or atmospheric conditions. 12

13 The core network is by nature an IP network which is only packet aware. The core network therefore doesn t know what types of services it is processing. Take the delivery of a time sensitive video for instance. At a packet level, the network might be functioning perfectly, while the actual service is compromised because of round trip delays or packet loss. The core network can therefore not understand such Quality of Experience issues and is not able to optimise the service at this level. The IP network ( the internet ) has the same characteristics as the core network but with significantly higher capacity. Under the right circumstances, the levels of traffic it can potentially generate are therefore able to overwhelm the mobile network, in particular the GGSN at the mobile edge and, of course, the downstream RAN network and base stations. Content providers, finally, tend to assume there is unlimited capacity to the consumer which, of course, clearly is Figure 6 The mismatch between the IP and mobile networks not the case. They are not fully aware of all the potential constraints that can occur en route towards the mobile device. As a result, Content providers are unaware of the Quality of Experience level of the content they provide. A fundamental disconnect therefore exists between the two ultimate ends of the mobile broadband chain; the content provider and the mobile consumer. This disconnect is caused by a lack of Content Admission Control: There is no end to end management of content as a the delivery networks are only packet aware. There is no specific mechanism in place to ensure the content is delivered in an optimal way. In particular, no decisions are made to prioritise certain packets, because they represent a time sensitive audio stream for example, over other packets which are non time sensitive. A p2p packet, for instance, can easily be delayed in preference to a VoIP packet without impacting the service experience. There is no end to end resource awareness prohibiting content providers to incorporate end user capacity as part of the content delivery. If the video content provider such as YouTube, for instance, would be aware that the consumer only has 300 Kbps of capacity, it could stream a version of the video which meets those capacity requirements. There is no end to end consumer awareness which is required for tailoring the Quality of Experience to a specific consumer. A good example are cost conscious consumers, which our research has identified as 15% to 25% of the population. These consumers prefer all content to be as compressed as possible in order to save on bundle use. Another example are corporate consumers, who are willing to pay an additional fee for a premium VoIP service which prioritises all their VoIP traffic. In order to enable these types of scenario s the network needs to be both consumer and Quality of Experience aware. 13

14 Seizing the opportunity Maximise network utilisation The disconnect between content provider and mobile user needs to be addressed in order to increase the oversubscription ratio as well as improving Quality of Experience levels. In terms of network capabilities this is where we believe operators should seize the opportunity; by adding Content Admission Control capabilities, making the end to end network content, resource and consumer aware. Only by adding these levels of awareness will it be possible to manage content in such a way that the network resources are fully utilised. Also, it increases the oversubscription ratio, enabling more simultaneous users on the network. And finally, these three levels of awareness allow end to end management of the Quality of Experience for individual consumers Figure 7 Introducing content admission control Obviously capabilities are required between the mobile and IP networks to enable end to end content admission control. These capabilities will be discussed in chapter 7 of this document. 14

15 4. The Global Consumer Perspective In the period of June to November 2010, Acision commissioned research with a number of independent research agencies in Brazil, the UK, the US, Australia and Singapore, with the aim to understand in greater detail the specific consumer perceptions and needs in the global mobile broadband market. The research shows that there are many positive aspects to be found. Reading the graphs The graphs in this section are a combination of the outcomes of the countries where Acision has undertaken research. The detailed outcomes for each of these countries can be found in detailed country reports which have been published separately. The blue bar in the graphs provides the average outcome for the combined countries. The two red dots provide the value for the two countries with the maximum and minimum value. The red line thus gives the total variance between the countries. The smaller the line, the closer the results of the countries are. Figure 8 Mobile broadband frequency of use First and foremost, the research confirms the increasingly important role of mobile broadband in most consumer s everyday lives, with 81% of global consumers accessing the internet with their mobile broadband service at least once a week and 50% on a daily basis (figure 8 1 ). Secondly, the research identifies key areas where operators could improve the service and create additional value and revenue. Capabilities such as fairness policies, content adaptation and paid for value add services can count on consumer buy in as long as these are well explained and providing clear benefit. This identifies important areas of improvement and additional opportunity which will benefit the operator as well as their customers. The research also shows that deploying these kinds of capabilities is not a luxury but a clear necessity. There are a number of significant Quality of Experience issues in mobile broadband which are creating customer dissatisfaction and consumer volatility. The majority of consumers state they are experiencing some kind of Quality of Experience issue. This has a clear effect on customer loyalty and churn potential. Video as a service is also providing challenges to consumers. The positive outcome of the research is that consumers are welcoming operators to address these issues and are also showing a willingness to pay for certain services which are perceived as adding value. 1 The graphs in this section are based on a comparison between the US, UK, Australia and Singapore markets. The Brazilian market is in a very early stage of mobile broadband which is creating a very different outcome compared to the developed markets. These differences are discussed in detail in the Brazil report which is available separately. 15

16 Quality of Experience core service Quality of Experience of the core service is creating issues for consumers worldwide. The significant majority of consumers have encountered problems with Quality of Experience with only 21% on average stating they have experienced no issues in the past (figure 9). The percentage of consumers stating they experience no issues ranges from 26% in the US to 16% in the UK. The variance of affected consumers is therefore quite small between countries. In all countries, the majority of issues relate to the network where speed is the main Figure 9 Consumers with QoE issues issue with 62% of global consumers experiencing problems with this aspect of the service. 39% have experienced network coverage problems, 36% of users have experienced issues staying connected and 36% of consumers could not connect at all. Other issues such as image quality have significantly lower numbers. When considering the frequency of these issues, speed again tops the poll with 46% of respondents stating it is their most frequent Quality of Experience issue (figure 10). Other issues also occur quite frequently, with network coverage and staying connected experienced by respectively 18% and 16% of consumers as their most frequent issue. This pattern of key Quality of Experience issues and the frequency with which they occur is very comparable between all the developed countries that have been part of the research. There is some variance per country but the extent and types of issues is very similar indeed. Figure 10 Which QoE issue occurs most often? Combining the frequency of the issue and the number of respondents stating they are affected by the service issue, it is clear that speeds, coverage and connection stability are all generating significant QoE issues, with speed being the most important issue to solve. 16

17 Quality of Experience video Globally, 37% of consumers watch video via their mobile broadband connection (figure 11). The research has 100% 90% 80% 70% 60% 50% focused specifically on video as part of the mobile broadband user experience. One of the reasons is the fact that video consumption is one of the key determinants of network congestion and resulting network performance issues. Compared to any other 40% internet service, video generates significantly more 30% 20% traffic, claims more continuous network resource 10% 0% 84% 83% 61% 41% 37% 18% and is very time sensitive where any delay in the service is immediately noticeable to the consumer. Browsing e Mail Social N/W Video Mobile apps other Figure 11 Customers that watch video on mobile broadband Video as a service is providing significant issues to consumers, to such an extent that many videos watched on a mobile network probably have some sort of Quality of Experience issue. Of the subscribers using video, only 26% state they don t have Quality of Experience issues. 74% of consumers experience a wide range of issues (figure 12). Waiting before the video starts to play and frequent pauses are the key issues globally with 54% of respondents experiencing these issues. The video not playing at all (30%) and poor quality of the video (26%), come in third and fourth place. The Quality of Experience of video therefore seems to be hampered at all stages of the video delivery cycle and is affecting the Figure 12 Consumers having video QoE issues vast majority of video users. Within the global population of consumers having video Quality of Experience issues, the frequency of occurrence is very high, further exacerbating the situation (figure 13). Especially having to wait a long time before the video starts to play and frequent pauses during the video play, occur very regularly. These issues are experienced by 51% respectively 49% of the respondents either all of the time, most of the time or often. Poor quality of the video (33%) and the video not playing (24%) come in third and fourth place. Given the size of the population affected and the frequency of the issues, the research shows that over two thirds of the Figure 13 Frequency of video QoE issues video consumers regularly experience at some Quality of Experience issue with the videos they watch. 17

18 The video Quality of Experience issue deepens further when consumer annoyance levels of these issues are considered (figure 14). When asked which Quality of Experience issue is most annoying, 49% of respondents select multiple pauses as the most annoying issue. Another 9% states stalling once is the most annoying issue. This means that 58% of global consumers perceive uninterrupted video play to be essential for a positive Quality of Experience. As a distant second, 26% perceive waiting for the video to start playing as most annoying (16% selected longer than 30 seconds and 10% longer than 10 seconds). These are exactly the two Quality of Experience issues which are affecting most Figure 14 Most annoying video QoE issue consumers and are occurring most frequently. With the most annoying Quality of Experience issues affecting the majority of the population and occurring most frequently, it is clear which key aspects of the video experience operators have to focus on. Other aspects are deemed much less of a nuisance. Especially interesting is the fact that having a low quality video in full screen is perceived as insignificant, with only 5% of respondents indicating this as the most annoying issue. This last fact demonstrates that for consumers much more is at stake in terms of their Quality of Experience than the original size and format of the content. Satisfaction and Loyalty maximise life time value A key question to consider is the impact of the Quality of Experience issues on bottom line key performance indicators such as satisfaction and loyalty. Quality of Experience issues are not much of a problem if they don t have an effect on satisfaction, churn and, ultimately, lifetime value. As the research will show, significant levels of dissatisfaction and churn exist in the global market, providing operators with a clear opportunity to compete in this area and outperform each other in terms of Quality of Experience levels. In order to understand the drivers in this area, it is first Figure 15 Importance of service aspect to value of the service of all important to understand what consumers deem most important regarding the service. These aspects represent the key determinants of Quality of Experience. Price represents the most important value aspect of the service globally with a 24% share (figure 15). Reliability (21%) is in second place in terms of consumer value with coverage (20%) and speeds (19%) being nearly equivalent in terms of service importance. Allowance (12%) is stated as being the lowest value service aspect. An important conclusion which can be drawn from these responses is the fact that Quality of Experience is created both from core service aspects as well as other aspects such as price, usage allowance and usage control. Successful operator strategies therefore consider all value aspects of the service. 18

19 Looking at customer satisfaction (figure 16), coverage and pricing provide the highest dissatisfaction levels, with 29% and respectively 28% of consumers selecting the bottom two scores. The next two dissatisfiers, both at 21%, are speed and service reliability. Usage allowance (18%) and usage control (17%) provide the lowest dissatisfaction levels. This is probably due to all you can eat smartphone contracts. We expect the dissatisfaction levels of usage control and allowance to increase significantly with the recent introduction of data usage caps on smartphone contracts. Overall the level of dissatisfaction is quite evenly spread across all the main service elements. Figure 16 Dissatisfaction about service aspects Looking at churn, the levels of dissatisfaction seem to be reflected in a substantial level of churn. About 31% of respondents globally voice uncertainty over the next steps they will be taking with the service (figure 17). 12% of respondents are specifically stating they will change operator or stop using the service altogether, representing a core of hard churn. Sensitive to churn are 19% of respondents, stating they are unsure of what to do next. It is important to consider that the research Figure 17 Consumer loyalty in mobile broadband doesn t take into account the substantial group of longer term contracts who are not considering their future at the time of the questionnaire. The overall level of latent churn could therefore be even higher. Looking at the drivers for churn, it appears that the main reason is related to service quality, with slow speeds and poor connection stated by 44% and 42% of respondents as their main reason to churn. Price is for 34% of the users a reason to churn and 28% quoting low use. The results show that consumers in general have more than one reason to stop using the service. The results indicate that value for money is the primary churn reason, with the overall price perceived as too high compared to the received service quality and speed. Another indication can be that some consumers are not using the service because of low service quality and slow speed. Even though unable to validate, both assumptions provide an interesting angle for operators Figure 18 Churn reasons to investigate in order to reduce future churn levels. In summary, customer satisfaction is clearly under pressure. The key drivers for dissatisfaction are the basic elements of the broadband service, such as speed, connection and reliability as well as non service aspects such as price and spend control. The decision to churn appears to be driven by value for money and service usage. 19

20 Customer Needs deliver MY broadband Although consumers clearly have QoE issues, which is causing dissatisfaction and driving churn, the research reveals important insights operators can leverage to seize the opportunity in mobile broadband. In particular, the research identifies key areas where additional capabilities can be deployed as they show high levels of consumer acceptance. These key areas and related capabilities are described in the following sections. Applying fairness principles to resource allocation Fair use policies of some kind are being deployed by most providers of fixed and mobile broadband. Consumer awareness globally of these fair use policies is, however, quite limited with 63% of consumers not aware whether they have a fair use policy as part of their service (figure 19). So only 37% of consumers is aware whether a fair use policy is in place or not. When asked about the underlying reasons for fair use policies, consumers are, however, quite unaware why operators have implemented such policies. When asked if they are aware that a small percentage of Figure 19 Do you have a Fair Use Policy? users can generate the majority of network traffic and therefore negatively impact the experience of all users, 64% states they are not aware of this issue (figure 20). Another 9% is unsure which basically equates to not being aware of the consequences. This means that only 27% of consumers are aware that a relatively large part of the available mobile broadband resources can be claimed by individual consumers at the expense of others. Without such awareness, it is less likely that customers would accept certain fairness measures that secure a better overall QoE for all users. Raising customer awareness of such key technological and business issues Figure 20 Aware of network abuse should therefore be an essential operator objective. Once consumers have a better understanding of the reasons behind fair use policies, they are able to consider the value that applying fairness principles can provide. At the same time, it is very important that customers understand how the fairness principle applies to them personally and how it enables a better QoE for all. When asked if they would allow the operator to apply a fairness policy in order to improve the QoE, on average 15% of consumers globally stated categorically they would not accept such a policy (figure 21). Two thirds of consumer would, however, accept fairness policies with another 18% of consumers who could possibly be persuaded to accept a policy, probably if they better understand the impact. Figure 21 Support for fairness policies 20

21 In conclusion, there is a clear support for fairness principles, as long as consumers are made aware of the necessity and the impact the policy will have on their personal Quality of Experience. Awareness can be created through education campaigns explaining the constraints of Mobile Broadband and policy acceptance by pro actively informing consumers about the applied policy, the reason and intended outcome. This provides an excellent opportunity for operators worldwide to actively manage the available broadband capacity for the benefit of the majority of consumers. Content optimisation to improve Quality of Experience A second key capability operators can deploy is content optimisation, especially in those cases where it improves the consumer experience. Streaming video is a good example of a popular service where operators can realise impressive Quality of Experience improvements. As figure 14 has shown, consumers are most annoyed by videos that pause frequently or take a long time to download. Also, they are hardly at all worried about lower quality in full screen. This understanding of Quality of Experience preferences provides essential input for optimizing the video service. Operators can play with the buffer time and quality of the video as long as they ensure that once the video starts running, it does so uninterrupted. This way, content optimisation can significantly enhance consumer satisfaction. When specifically asked whether they would accept video optimisation (figure 22), 60% of consumers explicitly confirm they would accept such an approach or would contemplate it (17%). Only 23% of consumers would, at present, oppose to such an approach. The support for a combination of picture and video Figure 22 Acceptance of video optimisation optimisation proves to be even stronger; when asked if they would contemplate to pay for a service enabling compression of videos and pictures in order to save on the data bundle, 29% confirmed they would (figure 24). This 29% of global consumers represents a marketable segment of cost conscious consumers that are very willing to sacrifice content quality to improve on spend. It clearly shows that when it comes to content, consumers considers a variety of parameters of which content quality is just one. Consumers are very well able to determine which trade offs they want to consider in order to create their optimal personalised services combination. 21