Operators are feeling the pincer effect of a disconnected business model that requires vast investment in the network, just as revenues from voice and messaging services are diminishing.
The solution to this dilemma is twofold: reduce the cost of the network, while providing increased capacity, and seeking new sources of revenue. Operators are already finding ways to initially transition from backbone and connectivity provider to capitalize on emerging digital economy opportunities.
One of the practices emerging as a contender in the new digital eco-system is Sponsored Data – an approach that gained huge publicity when unveiled by US operator, AT&T, in January last year. The Sponsored Data model is designed to harvest data revenue from sponsoring companies, rather than AT&T customers, who can enjoy the free data usage when they browse and stream specific contents under the programme.
Although AT&T told Fierce Wireless that the carrier remains “bullish” on the program’s prospects, and sees the program as a “capability that will take time to evolve into various business models”, it has clearly received little market attention so far. From our perspective, there are two critical challenges to the AT&T Sponsored Data program:
- Subscribers remain unconvinced that the idea has much merit. With minimal concentration on user experience, encouraging customer participation is a big challenge.
- Secondly, the approach places more of a burden on these companies to incur an additional cost just to get their content to people, while the benefits of doing so are hard to measure. This might be the reason why only ten companies have signed up to the AT&T Sponsored Data programme so far.
Additionally, AT&T’s program has flagged up a grey area for net neutrality. Although the FCC ruling does not take a position on existing Sponsored Data program like AT&T’s, digital rights activists say that the service breaches the spirit of net neutrality (I will reserve this discussion for a later blog).
Sponsored Data at China Telecom
While the AT&T Sponsored Data programme has been under the Western spotlight, China Telecom has been tackling this challenge in the East – and, arguably, has had more success in doing so.
China Telecom has focused on the end user experience, and has built an enriched ecosystem around its Sponsored Data program to support this aim.
Where AT&T encourages subscribers to access content with the promise that it won’t eat into their existing data allowance, China Telecom has taken a different, and more powerful, approach: motivating customers to click on ads by rewarding them with free data that they can use independently and making the process of doing so…fun. (and maybe more in keeping with the spirit of net neutrality!)
One service that has gained traction for China Telecom’s partners and subscribers is its digital currency ‘Niu Coin’, where one coin is equivalent to 1MB of data. Subscribers are eligible for the currency when they participate in China Telecom’s partner campaigns (e.g. downloading apps, doing quizzes, watching ads through China Telecom’s gamified app). China Telecom offers other user-centric features like “Beg Coin” (requesting coins from friends), “Send Coin” as well as multi-step activities to earn coins, in order to encourage regular participation of partner services.
“China Telecom’s focus on the user experience has helped business partners gain very good results from effective customer engagement,” says Praewpun Topol, a senior business analyst at AsiaInfo.
“If the incentivized data currency program was available in the US market, where the mobile users are even more eager for data usage, then I think the results would be very different compared to current offers from AT&T.”
According to the latest Telecoms.com Intelligence Survey, 67% of telecoms professionals believe that bundling offers from third party content providers is a serious consideration for new revenue generating services. However, only a minority also felt that more novel data services, such as ad sponsorship and time-based data tariffs, had much potential to generate revenue.
The success that China Telecom is having with its Sponsored Data might suggest that conclusion is a bit premature.
There’s a big difference between:
a) Offering extra data allowance for *general use* as a loyalty/engagement bonus
b) Paying for the data used for accessing a *specific* application
The second one is essentially technically-impossible, as it involves provision of developer APIs in iOS & Android (good luck persuading Apple & Google), as well as ways to measure/predict data use for different devices and tasks.
The first is much easier, as it operates more like a loyalty scheme, redeeming “points” (however earned) for MB of data, rather than flight miles or discounts off of consumer goods