PCRF Market Research

© 2012 Karthik Ethirajan, all rights reserved

PCRF Market Research Karthik Ethirajan November 2012


I. Market Size

II. Market Trends

III. Competitive Landscape

1. Macro Trends

2. Convergent Billing

3. Flexible Pricing

4. User Experience

5. New Data and VAS

6. New Partner Business Models

7. Network Transformation

8. Marketing Campaigns

9. Regulatory Environment

Agenda


SOS market size is $4 billion and projected to grow at

24% CAGR to $7.7 billion by 2015


Convergent Charging Market

$1.7B in 2012

$3.9B by 2016

CAGR 27%

Software 60%, Services 40%

Primarily driven by Wireless

operators

NA 7%

EMEA 40%

APAC 50%

CALA 3%

Worldwide TAM

Regional TAM


Policy Market

$0.8B in 2012

$1.9B by 2016

CAGR 27%

Wireless 87%, Fixed Line 13%

NA 21%

EMEA 32%

APAC 38%

CALA 9%

Worldwide TAM

Regional TAM


Market trends in the US and globally, are creating the

conditions for greater adoption of alternative mobile

communications services

• Mobile Adoption: There are over 6B mobile subscriptions globally vs. 1B 10 years ago.

Landlines peaked at 1.3B in 2006 and are in decline.

• Smartphone Headroom: Of the 6B mobiles, only 1B are smartphones. The US is ahead of

the world with 50% of the devices being smartphones.

• Urbanization: Concentration of the global population to urban areas will continue to stress

the cellular infrastructure and drive the deployment of Wi-Fi

• Share of Wallet: US households on average have reduced their spending on such things as

dining out (-$48), entertainment (-$126) and apparel (-$141) to be able to afford their rising

expenditures on wireless service.

• Recouping LTE $’s: Carriers are moving their subs to usage based data plans to recoup the

cost of LTE and to drive revenue growth.

• Connected Devices: By 2020 the total connected mobile devices is expected to double to

12B driven by non-phone devices. 29% of US adults already have a tablet or eReader.

• Satisfaction with Carriers: Customer satisfaction with US wireless carriers declines again

this year to just 70%. High satisfaction levels for smartphone devices (iPhone) are artificially

inflating consumers real feelings about carriers.

Ma

cro

Tre

nd

s

1


Consolidation of billing and charging systems across

services, networks and/or subscribers

Market Trend Real World Example Implications

Reduce number of

billing systems

Verizon Business embarked on a

billing transformation project to

reduce 30 billing systems after MCI

acquisition to 4

Operators embark

on long-term billing

transformation

projects in part to

reduce OpEx

Operators are

looking to gain

flexibility around

service features,

service bundles

and pricing

Post/prepaid services Vodacom Tanzania

Fixed/Wireless

networks

Orange Cote d’ivoire and ALU

CTBC in Brazil enabled a fair usage

quota across its networks

3G/4G networks Bell Canada and Openet

Consolidate all Asian

subsidiaries

Telenor and Huawei

Consumer/Enterprise

customers

Brazilian mobile operator and Orga

Cable/Wi-Fi Cablevision lets its broadband subs

to access its public hotspots for free

Co

nve

rge

nt

Billi

ng

2


Flexible pricing models based on real-time usage,

location, content, etc.


Dynamic pricing based

on real-time usage

Telecom Italia allows its IPTV subs to

access prepaid VoD content Dynamic pricing is

key to selling from

OTT and other

content providers

DPI capability is

needed to decipher

traffic type

Mashups of

location, context,

billing and other

capabilities are

needed to roll out

new service

offerings

Zero-rated content

packages

Orange offers unlimited access to

Facebook in Eastern Europe

Orange Tunisia allows free access to

Wikipedia in specific languages

Location-based pricing Pakistan operator Zong’s cost of

voice and data session varies with

subscriber’s location

Armenian operator VivaCell-MTS

charge variable rates based on the

subscriber’s location

Time-based pricing Some operators charge a premium

for bandwidth “boost” during peak

usage hours for certain services

Fle

xib

le P

ric

ing

3



Single user profile One of the biggest selling points of

Triple Play is user convenience

arising from a single profile

Subscriber

management is a

key service

differentiator

Identity remains

the same as subs

move across

devices and

networks

Improves customer

stickiness and

reduces churn

Employees using

company phones

could retain the

operator’s services

for personal

Corporate controlled

services

Usage controlled postpaid plan from

AMC, an Albanian operator

Shared family plans

with member controls

Impose caps to not to exceed credit

balance or set usage limits to

individuals

Hybrid prepaid/postpaid

plans

An Indonesian operator allows a

company to pay for mobile device

usage during certain hours, with all

other usage applied to a prepaid plan

paid for by the employee

Parental controls Fixed line service TalkTalk in UK uses

a combination of policy and DPI to do

URL filtering for parental controls

Use

r E

xp

eri

en

ce

4

Enhancing user experience by simplifying identity and

empowering enterprise and consumers to self-manage

their usage levels


Launch of new data and other services to better

monetize upgraded network infrastructure


Service tiers NA operators changed unlimited data plans to

tiered data plans Operators are

looking to better tie

bandwidth

consumption to the

price being

charged

Operators look to

increase ARPU by

upselling value-

added services

Shared data plans Verizon introduced family plans where a

“bucket” of data can be shared among family

members or across devices

Day passes Rogers offers day pass options to its voice

customers that allow them to combine web

browsing and access to social network sites

with email and mobile messaging for a daily

rate

VAS UNE in Colombia offer VAS over LTE

Saudi Telecom block calls during prayer time

using location, time of day, and time of year to

determine those hours

New

Data

an

d V

AS

5


Operators encounter innovative business models when

interfacing with new partners such as OTT, Cloud, M2M, etc.


Content packages

from OTT providers

Bundling a specific application or service

such as gaming or HD video with a

guaranteed QoS or bandwidth as a way to

better monetize OTT services

OTT applications

may need real-time

management and

QoS to ensure its

SLA with 3rd party

content providers

Many new

business models

require an

integrated

policy/charging

suite

Ability to do real-

time management

of high volume

transactions from

M2M

Cloud services Many cloud models such as Naas, exposing

APIs to developers, and others are

emerging. AT&T exposed its Watson

speech recognition APIs to developers.

Revenue assurance Operators must pay their partners for 3rd

party content regardless of whether they are

able to recover revenue from their

subscribers

Mobile money or

“Stored Value” credit

Oi Brazil allows subs to pay for small

purchase, such as taxi rides, from funds in

their prepaid balance

NTT DoCoMo’s osaifu keitai is a mobile

wallet service

M2M providers Best Buy offers MVNO service for

connected devices and home appliances

New

Pa

rtn

er

Bu

sin

es

s M

od

els

6


Operators are looking to transform legacy systems and

better utilize network resources to meet growing

subscribers and data demand


Traffic-based rating Orange Botswana charges higher

rates during peak hours Real-time

management of

bandwidth is

fundamental to

many new services

Launch of cloud-

based and other

IP-based services

necessitate

network and

OSS/BSS

upgrades

Congestion

management

An operator could opt to prioritize the

service of its more lucrative

customers who have exhibited a high

propensity to churn in order to

optimize its retention rates

New services (e.g.,

PacketCable 2.0)

enabled by IMS and

FTTH upgrades

Network upgrades by Fixed and

Wireline operators are often

accompanied by convergent charging

transformations to support new and

innovative services from fixed/mobile

convergence

Transformation of IN-

based systems

Legacy IN-based prepaid systems

are getting consolidated with

software-based postpaid systems

Netw

ork

Tra

nsfo

rma

tio

n

7


Customer acquisition & retention initiatives require

mashups of capabilities such as location, real-time

contextual data, etc.


Real-time campaign

management

DST Brunei is delivering targeted

contextual campaigns to subscribers

and automatically deliver rewards

New innovative

marketing

campaigns rely on

a combination of

location, real-time

contextual data,

subs profile, and

others

Customer acquisition &

Loyalty programs

Ukrainian operator Astelit’s customer

acquisition program under its life:)

brand gives top-up credits to

subscribers who bring new customers

Astelit’s loyalty programs under Lady

life:) brand lets subscribers receive

points redeemable at retail partners

for bringing on new customers

Churn reduction In the Philippines, Globe Telecom

addressed high churn rates by

providing subscribers with unlimited

free voice calling between Globe

handsets and any landline within a

specific geographic area

Ma

rke

tin

g C

am

paig

ns

8


Regulatory climate is either helpful in spurring

innovation or creates an impasse

Regulation Real World Example Implications

“Bill Shock” regulation

in EU

Once a subscriber’s bill reaches a

certain limit operators are required to

implement,

• Real-time subscriber spend

notifications

• Cut-off mechanism

BT alerts a user close to usage threshold

and provide different offers and PAYGO

pricing options

Operator could turn

regulatory hurdle

into a revenue

opportunity by

extending an offer

real-time to subs

Operators, for

example, cannot

penalize OTT

services

Operators may

hold back on

implementing DPI

to prioritize one set

of data packet

differently from

another

Net Neutrality

regulation by FCC

This regulation for “fair usage” is still

evolving for fixed line operators. Current

version requires operators not to

disadvantage certain services based by

probing traffic pattern.

Net Neutrality

regulation in

Netherlands

Bars operators from charging a premium

for consumers’ use of specific services

or applications

Reg

ula

tory

En

vir

on

me

nt

9


Competitors include traditional BSS & ISV players with

NEPs and IT vendors taking a stronger hold on the

market

Able to integrate BSS capabilities in GGSN, other network elements

Active M&A

Highly scalable support and services organizations

Financial stability

Existing relationships with operators

Network Equipment Providers (NEPs)

IT Vendors BSS Specialists and

ISVs

Policy and Charging decision makers are increasingly IT folks

Active M&A

Expertise in handling large-scale transformation projects

Organic growth

High growth startups

Gained traction in emerging markets

Highly customized solutions


Charging and Policy markets are oligopolic

Charging Policy

Convergent Charging market is oligopolic with 8 NEPs, billing and ISV vendors holding three-forth share of the market

PCRF market is oligopolic with half the market composed of smaller regional players