TRANSFORMING NETWORK INTELLIGENCE INTO A POSITIVE CUSTOMER EXPERIENCE AND REVENUE-GENERATING OPPORTUNITIES

Transcription

1 WHITE PAPER TRANSFORMING NETWORK INTELLIGENCE INTO A POSITIVE CUSTOMER EXPERIENCE AND REVENUE-GENERATING OPPORTUNITIES Patrick Kelly, Research Director inside 1www.analysysmason.com Executive summary Customer loyalty and revenue optimisation Business challenges Case study: Tier 1 South African mobile operator Key learnings Recommendations Thinking and doing Contact us p2 p3 p5 p7 p9 p10 p11 p15

2 Executive summary Mobile broadband data services are the engine of growth for most mobile operators. As other mature segments of the mobile operators business decline (voice) as a result of technology innovations and competition, mobile operators hope to capitalise on their growing base of mobile broadband subscribers. Over the past five years, Analysys Mason has reviewed hundreds of telecoms business plans globally, including Africa, the Middle East and Asia Pacific countries. Mobile operators with the best commercial and operational practice typically manage to yield EBITDA margins of between 30% and 50% of revenues, depending on their market share. Achieving high EBITDA margins depends on their commercial strategy, operational efficiency, and the deployment of capital. This paper will evaluate mobile operator strategies that yield improvements in their operational efficiency, positive customer experience, and customer retention by implementing network monitoring solutions that provide network intelligence on the subscriber experience. This paper evaluates the benefits to mobile operators of implementing network monitoring solutions that provide network intelligence on the customer experience. The operator interviews we conducted as part of the research as well as our analysis of mobile operators who have deployed network monitoring solutions that collect data across multiple domains and then corelate this information with subscriber data, yield positive improvements in customer retention. If you would like to discuss further please contact Patrick Kelly, Research Director patrick.kelly@analysysmason.com 2

3 WHITE PAPER Transforming network intelligence into a positive customer experience and revenue-generating opportunities Customer loyalty and revenue optimisation Analysys Mason s proprietary affordability analysis shows that ARPU tends to decline as mobile penetration increases, and historical ARPU trends confirm this. Increasing customer loyalty in a financially sustainable way is one of the main priorities for mobile operators. This is driving mobile operators to increase their investment in service assurance software as a way to improve quality of service and reduce churn. Monitoring subscriber activity on the network and making the data anonymous to protect privacy provides mobile operators with an enormous competitive advantage and should support business intelligence in reporting on customer trends and creating new services. As the market matures and new business models evolve, mobile operators must adapt their systems. In the networking monitoring area, mobile operators will need to deploy real time network analytics to address the following business challenges: decline in ARPU as mobile penetration increases threat from over-the-top (OTT) services churn management rapid service creation Decline in ARPU as mobile penetration increases Analysys Mason s proprietary affordability analysis shows that ARPU tends to decline as mobile penetration increases, and historical ARPU trends confirm this. Typically, ARPU decreases from about 10 15% of people s average disposable income at 20% mobile penetration, to around 4 7% of disposable income at 60% penetration. Network monitoring and analysis is necessary for mobile operators to understand the usage patterns on their network and develop marketing campaigns to offer new services. Threat from OTT services The structure of the telecoms market is changing. Apple has developed a proprietary service delivery eco-system that gives Apple the power to control pricing and distribution of content and applications while operators become more marginalised as transport carriers. Apple has managed to build up a stronger position in the telecoms market by having the control over content distribution, thus retaining a large share of the profits that this market generates. Mobile operators bear the costs of building their network. At the same time, they subsidise a large portion of the cost of iphone devices in exchange for a two-year contract. In the light of this, one could argue that this is not an equitable relationship. Mobile operators must leverage their network assets and customer relationships to avoid marginalizing their role in the mobile broadband value chain. 3

4 Mobile operators want to deploy services in weeks, not months. Legacy hardware and software impeded the deployment of services by communications service providers (CSPs) in a cost-effective and timely manner. Information management systems (IMS) and service-oriented architectures enable CSPs to respond to market changes and introduce IP services faster to consumers. Mobile operators must understand the customer experience and how the service is performing from the access terminal to the content application server and all connection points inbetween Reduce churn Consolidation occurs when markets mature. As growth rates decline, mobile operators need to put more emphasis on retaining their customers and understanding what causes customers to jump to their competitors. Network quality is a major determinant in subscriber churn. Coverage, voice quality, call continuity, call blocking and data transfer rates are important metrics to measure because a predominantly negative consumer perception on each of these metrics will contribute to churn. In order to mitigate the risk of churn, mobile operators must understand the customer experience and how the service is performing from the access terminal to the content application server and all connection points inbetween. Most network operational systems were deployed in a silo to support a specific service. Measuring the user experience will require fewer silos and much tighter integration between systems to identify events that impact a service and contribute to churn. Rapid service creation Mobile operators want to deploy services in weeks, not months. Legacy hardware and software impeded the deployment of services by communications service providers (CSPs) in a cost-effective and timely manner. Information management systems (IMS) and service-oriented architectures enable CSPs to respond to market changes and introduce IP services faster to consumers. Measuring detail sessions in real-time provides operators with a higher degree of confidence that consumers will have a positive experience. 4

5 WHITE PAPER Transforming network intelligence into a positive customer experience and revenue-generating opportunities Business challenges Analysys Mason s findings reveal that one of the biggest challenges facing mobile operators is supporting new technologies and reporting problems that may not be easily correlated in network operation centres. Mobile data services have become a source of significant revenue growth for CSPs during the past three years. Many factors have come together to stimulate adoption of such services among consumers: attractive smart phone devices; useful services and applications; good coverage and data rates; and flat-rate data tariffs. CSPs have benefitted from this revenue growth, but have encountered two notable challenges: mobile traffic is growing at a faster pace than revenue and OTT service providers are taking a significant share of the potential opportunity from data services. Analysys Mason forecasts that the volume of wireless data traffic worldwide will grow at a compound annual growth rate (CAGR) of 67% between 2010 and 2015, increasing from 112PB to 1450PB. During the same period, revenue per gigabyte is projected to fall from USD23.21 to USD4.27 in developed regions. Furthermore, despite recent decreases in the cost of delivering this bandwidth because of more efficient use of spectrum and technology innovations, such decreases are not expected to keep pace with the growing mobile broadband data demand. Mobile operators must have the ability to monitor network usage and understand the customer experience to implement changes that balance both user demands and business profitability targets. Analysys Mason s findings reveal that one of the biggest challenges facing mobile operators is supporting new technologies and reporting problems that may not be easily correlated in network operation centres. According to the handful of mobile operators interviewed, these business challenges fall into three distinct categories: the missing link: capturing and analysing network data in real-time to understand the customer experience first-time call resolution session analysis The missing link: capturing and analysing network data in real-time to understand the customer experience Mobile operators are faced with rapid growth in data traffic, partly stimulated by the availability of attractive flat-rate data tariffs. This growth has created new opportunities, but also an underlying problem: costs are growing at a faster pace than revenue. The decoupling of revenue from network costs will become increasingly significant as mobile operators become more dependent on data services as a source of revenue. Strategically, mobile operators have a pressing need to differentiate their services from those provided by OTT service providers. Implementing real-time monitoring systems enables mobile operators to gain insight and directly market new revenue-generating services to customers. These revenue-generating services include speed boost on a temporary basis, a tiered bandwidth plan for mobile video, or other bandwidthintensive applications. Mobile operators have also acknowledged that their ability to assess customer satisfaction is limited. In many cases, subscriber information is scattered throughout the organisation, making it difficult for mobile operators to gain a unified view of their customers. At the same time, the convergence of services brings with it technology and operational challenges. Mobile operators are faced with managing a ten-fold increase in network data as new protocols and upgrades in network technologies become more widely deployed in an effort to satisfy users appetite for higher-bandwidth services. Wi-Fi offloading will help reduce some of the pressure in capital investments of the radio network infrastructure but it is our opinion that mobile operators must consider additional options including the use of real time network analytics to quickly assess the customer experience. First-time call resolution Mobile operators have to be able to identify the root causes of why customers contact the call centre. Customer service representatives need to be able to solve subscriber issues on the first call. To do this effectively, customer service representatives must have up-to-date relevant customer data at their fingertips. This type of capability is predicated on a customer service representative s ability to manage end-to-end processes effectively, have visibility of actual user experience and good communication between support functions. Mobile operators are looking for better insight into their networks and for automated methods to find and fix network and customer problems fast. Scalability and reliability are also critical, especially in the current economic market where it is essential that operators do it right the first time. 5

6 Mobile operators have to be able to identify the root causes of why customers contact the call centre. Customer service representatives need to be able to solve subscriber issues on the first call. To do this effectively, customer service representatives must have up-to-date relevant customer data at their fingertips. Session analysis Mobile operators want to understand the usage patterns on their network in order to measure the success of upgrades made to their access network to capture more subscribers from other mobile operators or understand the demand characteristics of new services. In order to exploit this revenue potential, CSPs must have a network monitoring solution/system in place that collects user sessions and correlates this data with the operators business objectives. It is this intelligence and analytics of customer behaviour and service usage that will contribute to a more accurate targeting and successful promotion of new services by marketing departments. Figure 1 identifies the four dimensions of customer experience. Real-time network monitoring and detailed session analysis support network quality of service and business analytics. Mobile operators want to understand the usage patterns on their network in order to measure the success of upgrades made to their access network to capture more subscribers from other mobile operators or understand the demand characteristics of new services. Providing a consistent experience across business units Threading together incidents to avoid churn Consistency Interaction Web portal self care Finely tuned interactive voice response Call center contact Marketing new services that match users lifestyle Maintain subscriber profile across access channels Business analytics Positive customer experience Quality of service Reliability Identify configuration errors Figure 1: The four dimensions of customer experience [Source: Analysys Mason, 2012] 6

7 WHITE PAPER Transforming network intelligence into a positive customer experience and revenue-generating opportunities Case study: Tier 1 South African mobile operator Vodacom s network comprises approximately 8000 base stations in South Africa and 2300 in the other countries where the company operates. One of the operators we spoke to as part of our research for this paper was Vodacom Group Limited ( Vodacom ). With around 40 million subscribers, Vodacom is the largest mobile operator in South Africa. It provides voice, messaging, data and converged services, and has expanded its operations to include networks in Tanzania, the Democratic Republic of Congo, Mozambique and Lesotho. Vodacom s subscriber base is mainly prepaid: only 12% of Vodacom s total subscribers are contract customers. Vodacom is majority owned by Vodafone. Vodacom s network comprises approximately 8000 base stations in South Africa and 2300 in the other countries where the company operates. All of Vodacom s operations support GSM 2G technology as a minimum, which enables Vodacom to provide voice, text messaging and basic data services to its customers. All of Vodacom s sites also support general packet radio service (GPRS) data functionality, and many support enhanced data for GSM evolution (EDGE). More than half of Vodacom s customers in South Africa have 3G coverage using the W-CDMA standard. Nokia Siemens Networks (NSN), Huawei and Cisco are replacing Motorola, Siemens and Alcatel Lucent as Vodacom s main network infrastructure suppliers. Vodacom began upgrading its radio access network (RAN) in South Africa in Approximately 2000 of its base stations have already been upgraded for Long Term Evolution (LTE). Vodacom is planning to upgrade its core network in South Africa to a next-generation all-ip network capable of carrying both voice and data services. This will increase the capacity of Vodacom s network and ultimately reduce the costs of running the network. 7

8 Vodacom began upgrading its radio access network (RAN) in South Africa in Approximately 2000 of its base stations have already been upgraded for Long Term Evolution (LTE). Vodacom is planning to upgrade its core network in South Africa to a next-generation all-ip network capable of carrying both voice and data services. This will increase the capacity of Vodacom s network and ultimately reduce the costs of running the network. Vodacom s customer loyalty programmes are designed to enhance its brand reputation and to reduce churn. Vodacom seeks to provide consistent and high-quality customer care across all the countries where it operates. Business challenge Vodacom s customer loyalty programmes are designed to enhance its brand reputation and to reduce churn. Vodacom seeks to provide consistent and high-quality customer care across all the countries where it operates. The domain management systems provided by each of Vodacom s main network equipment suppliers do not provide a complete view of the customer experience and in some cases information gaps exist which fail to report problems. One of Vodacom s main priorities is network quality. This is achieved by reducing call-drop rates and expanding network coverage, but also improving mobile broadband data capacity, speed and reducing network latency. Vodacom has many software systems to monitor customer satisfaction. However, the company has reported that it needs a more complete end-to-end network management system that would enable it to have a better understanding of the problems facing its customers. One of Vodacom s main objectives is to understand the problems reported by its subscribers to its call centres when network operation system dashboards appear green and yet no network alerts indicate any performance or service outage. Some of these problems stem from either handsets not being suitable for using the service requested by the subscriber, configuration errors in the server and across the network, or problems in configuring the access point name (APN) settings. Implementation Vodacom deployed the CommProve solution in 2009 to monitor signalling and data transfer over both the GSM Air and Gb interfaces, which connect the base station subsystem (BSS) to the serving GPRS support node (SGSN). Passive probes and the use of the CommProve NetLedge platform enable Vodacom to obtain more accurate reporting on the customer experience and the alerts that are not reported by the network management systems provided by its main infrastructure suppliers. The NetLedge platform also enables Vodacom to continuously monitor its 2G and 3G network and acquire data pertinent to every individual call or data connection. This helps to better understand the characteristics of inbound and outbound roamers, messaging, and broadband data services. All this data can be visualised on a per-user, per-handset type, perconnection type and per-data application basis. The performance data is complemented with solutions provided by The Now Factory and Tektronix, which provides test and measurement equipment, to identify APN configuration problems. 8

9 WHITE PAPER Transforming network intelligence into a positive customer experience and revenue-generating opportunities Key learnings Mobile operators such as the ones we spoke to that have deployed an end-to-end solution have reported an increase in first-time call resolution rates. 1) Often network operational systems are deployed in a silo to support a specific service. In order to measure the user experience operators will need to unify their software systems across their operating business units to identify events that impact a service and contribute to customer churn. 2) Real-time data collection and analysis enable mobile operators to prioritise traffic and identify congestion points in their access networks. Mobile operators must look beyond the immediate need to implement solutions that address fair-use or bill-shock issues. This should form part of a broader plan to roll out LTE and IMS infrastructure. CSPs must move to a longer-term plan that accounts for the needs of the different functions and provides a platform for service differentiation and innovation. 3) Mobile operators such as the ones we spoke to that have deployed an end-to-end solution have reported an increase in first-time call resolution rates. Early detection of capacity constraints in the network has resulted in fewer inbound calls into the call centre. Specific reporting on usage trends in the access network has yielded a decline in incident costs as the number of subscribers increases, which reflects both economies of scale and detailed usage and trending reporting. 4) Improvements in end-to-end network monitoring contribute to lower customer churn. This brings a number of benefits to those mobile operators that implement this type of solution, including lower customer acquisition costs, enhanced brand loyalty, and higher lifetime revenue. 9

10 Recommendations The use of advanced network monitoring systems is an effective strategy that mobile operators can adopt to move away from flat-rate tariffs and encourage new business usage-based plans. Mobile operators should take a two-prong approach to sourcing network monitoring software to improve the experience of their customers. Network suppliers provide excellent domain management tools for equipment in the RAN and access networks. Independent software suppliers such as CommProve provide higher-level reporting capabilities that cross technology domains and solve problems in multivendor environments. These higher-order functions enable mobile operators to get a better understanding of the customer experience across all technology domains. Mobile operators should also identify all systems that are necessary to provide data feeds into modelling each service. Business intelligence that uses network monitoring systems can benefit many departments. Mobile operators should select suppliers that have developed an open platform for point product integration. In many cases, service modelling will require dozens of data feeds to enable operators to gain an accurate view of how a service is performing. The use of advanced network monitoring systems is an effective strategy that mobile operators can adopt to move away from flat-rate tariffs and encourage new business usage-based plans. Real-time network monitoring combined with policy management enables CSPs to reconnect revenue to cost and make data services profitable. It also enables them to offer differentiated services and maximise the revenue they generate from each market segment. 10

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