consumerlab SMARTER MOBILE BROADBAND How smarter management and charging of mobile internet can enhance the consumer experience

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1 consumerlab SMARTER MOBILE BROADBAND How smarter management and charging of mobile internet can enhance the consumer experience An Ericsson Consumer Insight Summary Report June 2012

2 contents Setting the scene 3 Four key concepts 4 Smarter management and charging value 6 Speed, caps and unlimited services 7 Different regions different needs 8 Driving increased usage 9 Improving the advanced experience 10 Step-by-step value creation 10 Ericsson ConsumerLab has conducted research to determine whether smarter traffic management and charging of mobile internet could improve the consumer experience, at the same time as securing operator revenue. The research set out to answer three questions: > What is the potential benefit of allowing consumers to personalize their mobile data plans? > Could smart traffic charging increase data usage among basic users*? > Would this improve, or at least maintain, the current level of user experience for advanced users*, while maintaining healthy margins for operators? The research was conducted in four countries: the US, the UK, Indonesia and Brazil. The study focused exclusively on internet usage via mobile phones. *Basic users are those who use few services infrequently. Advanced users are those who use many services frequently. Ericsson consumerlab the voice of the consumer Ericsson ConsumerLab has more than 15 years experience of studying people s behaviors and values, including the way they act and think about ICT products and services. Ericsson ConsumerLab provides unique insights on market and consumer trends. Ericsson ConsumerLab gains its knowledge through a global consumer research program based on interviews with 100,000 individuals each year, in more than 40 countries and 10 megacities statistically representing the views of 1.1 billion people. Both quantitative and qualitative methods are used, and hundreds of hours are spent with consumers from different cultures. To be close to the market and consumers, Ericsson ConsumerLab has analysts in most of the regions where Ericsson is present, which gives a thorough global understanding of the ICT market and business models. All ConsumerLab reports can be found at 2 ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND

3 setting the scene Users previous experiences affect the way they rate the more personalized and dynamic offerings that smarter traffic management and charging allows. Users from the UK and US who have experience with unlimited plans are more cautious about personalization. This is because they are not used to having to think about their online habits. However, in the primarily prepaid markets of Brazil and Indonesia, the concepts were viewed more positively. People in these markets are used to paying for what they use and topping up when necessary, and therefore don t perceive it as much of a restriction to their current plan. People in Indonesia are used to paying for their mobile phone usage in smaller packages adapted to their day-to-day purchasing power. This implies that they are used to frequently managing their plans and that they only like to sign up to things for shorter periods of time. The speed and coverage of the mobile broadband networks in Indonesia are not as good as in many other places, and prices for mobile data are relatively low, which leads to users being highly influenced by, and focused on, network speed and coverage. Brazilians have a tendency to rank answers highly whenever scale questions are asked. However, in some tested concepts, Brazilian respondents were directly negative, so the answers for those questions are perceived as trustworthy and valid. For this reason, the levels on scale questions should not be compared with the other countries, but relatively within Brazil. The Key findings > Users payment method history, and their access to all-you-can-eat plans, affects their perception of differentiated offerings. In prepaid markets where users top up frequently, there is an overall positive attitude towards differentiated data plans. In all-youcan-eat markets with lower user involvement, new and advanced differentiated offers can be met with skepticism. However, if the feeling of not being restricted is maintained, personalized offers can retain their appeal in these markets. > Operators should create value step-by-step from consistent access to differentiated offerings. Differentiated offerings make sense and are appealing. However, the basics need to be in place first. These include having consistent access to the internet, without delays and buffering, regardless of where you are or what you do. > Control over cost, usage and plans are key to user satisfaction. The most appealing concepts offer control over costs, usage and plans. Consumers today don t understand exactly what they pay for and what experience they can expect. Instead of using terms like megabit and megabyte, operators should explain what different levels of service will enable users to do. > Operators should enhance experience and create usage through incremental offers. Users can be encouraged to expand their usage. Operators can offer unlimited use of the specific services that are most important to the user, alongside buckets for more experimental use, encouraging the formation of new habits. This requires operators to gain a deeper understanding of their users, what they want and what they are willing to pay. However, as an indication we can look at the services people use frequently today, and those which people explicitly mention they would like to pick and pay for. ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND 3

4 FOUR KEY CONCEPTS As a premise for the study, we used four management and charging concepts which could contribute to a better user experience. Consumer interest in these concepts is presented later in the report. 1. PAY TO BOOST SPEED/QUALITY FOR A LIMITED PERIOD Users pay a small extra fee in order to increase the speed of their mobile data plan for a limited time period only. This would allow the user to download files and browse the internet much faster, with shorter waits and fewer interruptions. As part of this concept, we also investigated how interested people would be in paying less and postponing their usage to times of day when the network is not as busy. 2. TOP UP YOUR DATA PLAN OR CONTINUE AT REDUCED SPEED When a user is about to exceed their data limit, a window appears which asks them to choose between: > Continued browsing at a reduced speed > Paying a small amount to refill their data bucket, allowing them to continue as normal 4 ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND

5 3. SELECT AND PAY FOR SPECIFIC SERVICES Users would pay a small fee to be able to use a specific website, service or app as much as they want without using up the data in their basic plan. The user could also choose not to have a basic plan, only signing up for unlimited use of specific services. As part of this concept, we specifically tested how interested people would be in being able to control their services, and thereby data costs, while roaming. 4. OVERVIEW AND MANAGEMENT OF SEVERAL MOBILE PLANS IN ONE HOUSEHOLD Many users have more than one mobile plan, and are often paying for and managing the plans of other people within the household. This concept would enable the user to manage all these plans via a simple interface, allowing them to monitor data usage and to place limits on all subscriptions. ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND 5

6 SMARTER MANAGEMENT AND CHARGING VALUE The first basic conclusion that we can draw from the study is that value for the user can be achieved using a step-by-step process, from basic needs to personalization. Figure 1: Create value step-by-step Step 1 Step 2 Step 3 Differentiated offerings Select and pay for specific services Switch between cellular and Wi-Fi networks Enhanced experience Easy overview Manage costs Flexible plan Network and handset matching specific user needs Consistent access Capable handset Affordable plan Capable network For mobile internet users, consistent access is of primary importance. Users grow frustrated at trying to complete activities on substandard connections. If this is the case, they will feel that they do not have reliable access to a sufficient level of service. This means that for the user, access is not simply a matter of coverage or network quality. It entails, for example, having sufficient access in any environment, including places like subways and buildings where applicable, and having a device that is capable of handling the experience. An enhanced experience involves several variables speed, data allowance, value-added services and this differs depending on the user, situation and context. What is considered good value for money also varies, and very much depends on the user s frame of reference: for example, a Facebook-only user and a heavy streaming user both want the same flawless experience, but their demands on the network are vastly different. Neither is likely to know how many megabits or megabytes they need. When the basics of access and experience are in place, we see clear business opportunities to be had in working with differentiated offerings to a greater extent. This is especially true for countries such as Indonesia, where there is an existing culture of using prepaid and frequent top-ups, and where certain services, such as social networking sites, are considered more appealing than others. Such opportunities are also prevalent in Brazil, where certain user groups have shown an interest in personalizing what they pay for and when. Here, simplicity is of the utmost importance. In the US and the UK, differentiated offerings are met with a certain level of skepticism. One reason for this could be the history of unlimited plans which were launched and later capped. However, user experience can be improved by presenting these offerings in the right way, increasing loyalty and spending. We believe the future lies in nurturing the perception of not being restricted. This entails users not having to worry about their spending, alongside an added element of allowing consumers to avoid paying for standard oversized packages that they don t use. This will enable them to have better cost control, increasing the value they get. It will also allow for introductory offers on different levels, in order to create mutually beneficial partnerships for both operators and users. Fast means when we click, it immediately opens. Not like now, sometimes it only opens half a page. College student Indonesia 6 ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND

7 SPEED, CAPS AND UNLIMITED SERVICES We used Maximum Difference Scaling (MaxDiff) to analyze and determine what consumers consider to be the most and least important factors when deciding on their next mobile internet data plan. Respondents were given options of three levels (high/mid/low) of service provision for different variables and were asked to measure the benefits against the associated cost: > Speed, described in terms of the experience those speeds provide > Data caps, described both in GB/MB and in terms of examples of what they enable > Unlimited services of the user s choice, specified in numbers of services The results revealed that: > Speed (or level of experience) was the most important factor in all countries > In Brazil and the UK, the next most important factors were data allowance and the number of unlimited services. However, unlimited use of 2-3 services was considered more valuable than a medium data cap (1 GB for UK, 500 MB for Brazil) > In Indonesia and the US, the number of unlimited services was a more important factor than the data cap. For example, unlimited use of 2-3 services was ranked higher than the highest data cap (10 GB for US, 2 GB for Indonesia), and unlimited use of a single service was seen as more attractive than a medium amount of data (1 GB for US, 500 MB for Indonesia) The overall conclusion we can draw is that unlimited use of a number of services is often more relevant to the user than choosing between different data caps. Figure 2: How valuable are these different options when choosing between data plans? MaxDiff results for the US: perceived value demonstrated by type size ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND 7

8 DIFFERENT REGIONS DIFFERENT NEEDS The study revealed differences in how respondents from the four countries assessed the four tested traffic management and charging concepts previously described (Figure 3). Some elements were deemed attractive in all markets; some had appeal only in certain markets; and some received low interest in all countries. Overall, the idea of a service that allows users to review and manage several mobile data plans in one household was considered one of the most appealing. In Brazil, users were most in favor of selecting and paying for specific services, while in Indonesia users were more concerned with boosting speed. In the US and the UK one of the two most appealing concepts was the ability to control user data cost while roaming. Elements which received little interest in all countries were ones that are more restrictive: > Postpone usage and pay a lower price for it > Don t top up and continue at reduced speed Figure 3: Concept interest by country How interested would you be in... It should be noted that it is difficult to compare the ratings of those who responded positively due to cultural differences in how those questions were answered. However, overall there is greater interest in new concepts in Brazil and Indonesia compared to the UK and the US. Personalized packages benefits and drawbacks Respondents were asked to identify benefits and drawbacks associated with choosing packages which offer greater personalization of services, illustrated by the concepts tested in the study. Benefits In all countries, the main benefits for users were to save money and/or to control their spending. However, a relatively large share in all countries also found it beneficial to be able to pick and choose the services they wanted as they went along. Drawbacks In all countries, a relatively large share believed that the services proposed in the concepts would cost them extra money, although the perception that you would save money was stronger. Another significant disadvantage was the increased need for involvement. Users largely believed that it would be a hassle to decide which plan to sign up for, or that it would be too complicated. Paying to boost speed/quality for a limited period of time? Paying less by postponing your mobile data/internet usage until a later time of day when the network is not as busy/is occupied by fewer users? Paying a small amount in order to top-up/refill your mobile data plan and continue with the same speed as normal? Continuing browsing without top-up/refill, but with a greatly reduced speed? Selecting and paying just for specific services? Controlling your data costs while roaming? This would for instance allow you to block all data traffic apart from specific services that you choose (e.g. only allow s, Facebook, etc.) when traveling. Reviewing and managing several mobile data plans in your household? UK US Indonesia Brazil 0% 10% 20% 30% 40% 50% 60% Respondents selecting in top 2 on 7-point scale 8 ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND

9 DRIVING INCREASED USAGE The question facing many operators is how to go about attracting new users, as well as increasing usage among existing basic users. The study identified a number of ways to address this. Handset cost The results show that more advanced handsets encourage heavier usage of mobile internet. This is also verified by more basic users who identify the cost of more capable handsets as being one of the major barriers for them. However, with the prices of smartphones decreasing rapidly, it is expected that more and more people will start to develop more advanced data habits. Encourage new habits through incremental offers Differentiated, step-by-step offers are one way to encourage people to use their mobile devices more often, by attracting people to the usefulness of mobile internet access. For this to happen, basic access and a high quality mobile internet experience are crucial. The social networking experience is particularly important, as these services are in many cases the major driver for those using mobile data services. Reduce the feeling of risk keep the feeling of not being restricted Reducing the feeling of risk is crucial. Today, capped users tend to limit their usage so that they don t hit the cap. By minimizing the feeling of risk through communication and/or risk sharing, it is probable that more consumers would use data services on their mobile phones, and to a greater degree. The feeling of not being restricted is also important in markets where unlimited plans are or have been common, as users are not accustomed to having to be involved. Users must be guided in finding a plan which fits their usage, and upselling services should be used as an alternative to additional charges or reduced quality of experience. Know your customers: offer price models to suit different wallets and usage As always, it is important to know your users and offer price models based on their different incomes and usage profiles. Figure 4: What would encourage you to use the internet on your mobile phone even more? 40-45% 30-45% 30-40% 30-40% 20-30% 15-25% 15-25% BETTER SPEED LOWER PRICE OF DATA BETTER BATTERY LIFE BETTER COVERAGE BETTER COST MGMT MORE AFFORDABLE PHONES MORE PHONE MEMORY 40-45% 30-45% 30-40% 30-40% 20-30% 15-25% 15-25% Least in Brazil Strongest in Indonesia & Brazil Strongest in UK & US Strongest in Indonesia Strongest in Indonesia Strongest in Indonesia & Brazil Strongest in Indonesia & Brazil ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND 9

10 IMPROVING THE ADVANCED EXPERIENCE The most advanced users are usually willing to pay more for a better and faster internet experience. In countries like Indonesia, where networks are poor and data prices cheap, people are also willing to pay extra for higher speeds. It is important to provide these users with a sense of freedom. Advanced users in countries like the UK and the US are willing to pay extra for an unlimited tariff as it means they will not have to worry about it. This means that for operators to be successful with implementing new types of plans they must first change the user s perception from restriction to personalization, emphasizing the benefits of only paying for what you use. Our study reveals that there is great potential in providing users with the ability to oversee and manage their data plans, in all countries. Through effective cost control and management, people will feel more secure and better able to control how and what they spend their money on. An example of how to meet this demand is to offer staggered plans that encourage further usage, but which do not force users to sign up for the largest plan straight away. For example, an operator could offer a plan that provides 2 GB of data, with an introductory offer that the user can override the cap by 100 MB during the first month. The user would get a notification if they overrun, with an offer to sign up for a larger plan the next month, enabling cost control and creating an incentive to use and pay for more data. STEP-BY-STEP VALUE CREATION We can now look in more detail at how operators can take a stepwise approach to improving the mobile internet experience and increasing service usage: 1. By allowing users to have unlimited access to the specific services they use very frequently those incorporated in their everyday lives they are less likely to worry about restricting themselves. This has great appeal for consumers. The results of the study show that there is considerable interest in paying for not being restricted in usage of specific social networking services in particular. 2. In order to encourage consumers to explore new services and to build new habits, the barriers and risks need to be reduced as much as possible. One way of doing this is by providing a bucket on top of the unlimited usage of the most frequently used services. This would encourage consumers to use the bucket to explore new services, which could lead to the creation of new habits. 3. Once a new habit is formed, consumers are much more likely to pay for new services, since they then understand their value. 4. This could also encourage consumers to upgrade the new habit into an unlimited usage plan for that particular service. 5. The cap is then free to use for other services, again encouraging consumers to explore further. I need more options. I m paying for more than what I need. I need a customized plan but that doesn t exist. Parent USA 10 ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND

11 Figure 5: Driving increased usage Scarcely used services Services used infrequently Buckets to encourage exploring new services, creating new habits and needs Process is repeated Unlimited plan for services used frequently The services that are relevant to include in the unlimited baseline of course vary for different user groups. However, as an indication we can look at services people use frequently today, and those which people explicitly mention they would like to pick and pay for: > UK and US: general browsing, , social networking (Facebook), Wi-Fi access and map services > Brazil: general browsing, social networking (Facebook, Orkut) and instant messaging/chat > Indonesia: social networking (Facebook) and general browsing What s in it for mobile operators? Our research tells us that people want more choice. They want operators to be more trustworthy, uncomplicated and honest. We believe that operators could enhance their favorability with consumers by taking the stepwise approaches proposed in this report. Based on this we believe that the benefits for operators include: > Increased goodwill > Increased loyalty and reduced churn > Differentiation from competition (particularly valuable in Indonesia where consumers don t see much difference between operators) > Increased usage and revenue > Potentially lower cost for customer service Target group and methodology USA Dec web interviews UK Dec web interviews BRAZIL Jan in-hall interviews Cities: Porto Alegre, Belo Horizonte, Rio de Janeiro, São Paulo & Recife indonesia Jan (+ boost of 50 iphone and 50 Android users) in-hall interviews Cities: Jakarta & Surabaya Target group: > Mobile phone owners aged > Access data services on their mobile phones for personal use > Pay at least part of their mobile phone usage themselves Total: 2,300 interviews ERICSSON CONSUMERLAB SMARTER MOBILE BROADBAND 11

12 Ericsson is the world s leading provider of communications technology and services. We are enabling the Networked Society with efficient real-time solutions that allow us all to study, work and live our lives more freely, in sustainable societies around the world. Our offering comprises services, software and infrastructure within Information and Communications Technology for telecom operators and other industries. Today more than 40 percent of the world s mobile traffic goes through Ericsson networks and we support customers networks servicing more than 2.5 billion subscribers. We operate in 180 countries and employ more than 100,000 people. Founded in 1876, Ericsson is headquartered in Stockholm, Sweden. In 2011 the company had revenues of SEK billion (USD 35.0 billion). Ericsson is listed on NASDAQ OMX, Stockholm and NASDAQ, New York stock exchanges. The content of this document is subject to revision without notice due to continued progress in methodology, design and manufacturing. Ericsson shall have no liability for any error or damage of any kind resulting from the use of this document. Ericsson SE Stockholm, Sweden Telephone Fax EAB-12: Uen Ericsson AB 2012

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