Big Data impact to Telecommunication Industry

Written during Data Scientist Enablement Program study As assignment in Fast track to Data Science (DSE 400) module February 2014 Big Data and Telecommunication Industry Big Data is phenomena of last couple of years. And it affects all businesses no matter what domain. Telecommunication industry is really interesting from that point of view. Mobile service providers (SP) realized the fact they are just platform for delivery content not content makes. In worst term of definition they provide just pipe for content distribution from many content providers to customers. And thus their struggling about survival and protect and grow business is really enormous. And in case they cannot adopt to this new situation their business die.

MOTIVATION
What is motivation for telecommunication business which mobile SPs have [5] [6]? Fast growing data usage: Smartphones penetration is growing really fast and data usage over voice and SMS is obvious. By Cisco forecast, global mobile data traffic will grow at a compound annual growth rate of 71% to 2016, reaching 10.8 Exabytes per month [1]. Mobile SPs already generate Big Data. Call Detail Records (CDRs) even in small countries with small customer base generate huge number of records. Also network data represents enormous volume of data as well as data about customers. But even though mobile SPs historically managed large volumes of data, the complexity (unstructured data, many different sources with different volumes of data) is really big challenge [8]. Protect and grow revenue: Revenue is main company prosperity indicator. And constantly grow and emerge company needs also grow its revenue and margin. Telecommunication market is really competitive and really fast changing. The new products in portfolio are cannibalized by better offers. Each quarter is presented new offer. In order to protect and grow revenue mobile SPs need to be flexible and quickly react on competitor changes as well as customers needs. On one hand it means offer better product for decreasing prices (e.g. flat rates) which means decrease revenue on the other hand investment into infrastructure such as LTE which means increase costs. In final case it means smaller margin which is unacceptable. So, adaption to quick changes with some concurrence advantage as Big Data analysis is really big opportunity for its quick implementation and use.

Next chart proves this fact based on two Telecommunication companies. Dark blue is Telefonica O2 with orange trend. Increase revenue is till the end of 2010 and then it falls down. Similarly for red Vodafone, maximum peek is around middle of 2010 and then it is going down.

2011Q1

2008Q1

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18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Telefonica O2 Revenue QTD Trend (TO2 Revenue QTD) Vodafone Revenue QTD Trend (VF Revenue QTD)

Telefonica O2 revenue [3] in Euro and its trend indicator per quarter for overall products, for whole world and Vodafone revenue [4] in Pounds and its trend indicator per quarter over mobile prepaid and postpaid for Europe. Average Revenue per User decreasing: ARPU is one of metric shows company profitability. It is very useful for trend identify. Even company is succeeded on market and its revenue is increasing, ARPU can show for overall products or per product what is wrong in product portfolio, because customers dont consume it at all or substitute it by something else. In last few years is ARPU decreasing because spending of voice and text messaging services doesnt grow. The commodity which grows is data, but they are offered in bundles for fixed price. Next few examples demonstrate real status of ARPU for last few years in Telecommunication companies. As you can see on first chart, absolute value of ARPU per quarter or per year is decreasing constantly with few small grows. Year over year ARPU in % definitely indicate decrease from 2nd quarter of 2011. Second chart shows decrease of ARPU per specific countries. Each country is going down, some slowly, some fast. Third chart shows absolute value of ARPU per quarter and per year which decreasing. Also year over year ARPU in % is decreasing little bit more than in first chart.

2013Q1

60 55 50 45 40 35 30 25 20 15 10 5 0 -5 -10 -15 ARPU (EUR/cust) MAVG (ARPU) ARPU YoY (%) MAVG (ARPU YoY) Average Year ARPU

Telefonica O2 ARPU [3] in Euro and year over year (YoY ARPU in %) indicator per quarter for overall products, for whole world.
2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1

40.0 35.0 30.0 25.0 20.0 15.0 10.0 Germany (EUR) Spain (EUR) Greece (EUR) Italy (EUR) Netherlands (EUR) UK (GBP) Portugal (EUR)

Vodafone ARPU [4] in Pounds per quarter over mobile prepaid and postpaid for specific country.

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30 25 20 15 10 5 0 -5 -10 -15 ARPU (GBP/cust) MAVG (ARPU) ARPU YoY (%) MAVG (ARPU YoY) Average Year ARPU

Vodafone ARPU [4] in Pounds and year over year (YoY ARPU in %) indicator per quarter over mobile prepaid and postpaid for Europe. Protection against Churn: How important is to fight against Churn? A 1% reduction in customer churn translates to a 6% increase in profits [5]. And Churn information is more important in moment when market is saturated which happens with telecommunication business last few years. Next chart shows Vodafone Churn which is between 30 and 40 %.
Q1 08/09 Q1 09/10 Q1 10/11 Q1 11/12 Q1 12/13 Q1 13/14 India

80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Germany Italy Spain UK

Vodafone Churn [4] in % per quarter over mobile prepaid and postpaid for different countries.

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Network monitoring: Monitoring network based on CDRs in real time is advantage which helps to prevent issues in network or at least know about them in very short time. It is proactive solution to not overload customer support. Also identification of problem based on specific CDRs is possible and it allows to know problem almost online or with minimal delay rather than by the next day [5].

OPPORTUNITIES
According to previous part we should identify opportunities coming from motivation [5][9]: Network monitoring o Optimize traffic routing o Network quality service o Network performance measurement o Traffic measurement for provisioning o Reduce problem resolution time Service Access o Fraud detection o Customer usage performance and measurement Marketing and Sales o Event base marketing use Geo-location Social media o Better customer targeting Corporation o Operational performance o Profitability analysis Customers o Reduce customer Churn o Customer behavior insight

BIG DATA, DATA PRICE EVOLUTION AND ITS CORRELATION

Increasing usage of data over voice and text messaging service has impact to products. Voice and text messaging service are usually available for flat rate for long time, because with use of these main mobile SPs commodities are easier to target marketing than with data which are from mobile SP point of view black box. Anyway products and price of data have its evolution too [1].

Evolution of data and products offered by mobile SPs. From small volume of data to the largest. From time based pricing to value based. Evolution of data: Time based: subscription fee or time amount related fee Volume based: flat rates adoption all you can consume Usage based: traffic tiers fee with limits (FUP) Value based: fee based on access speed and traffic tiers with possible increase usage Pricing on: Penetration: Service usage tiers with additional fee per additional usage increment. For example for mobile broadband are setup caps 1 GB, 3 GB, 10 GB for monthly fee and then each additional 100 MB costs additional fee increment. Value based: Additional value in case of consuming internet can be done by its internet speed (from standard broadband to ultra-broadband internet), guarantied bandwidth, guarantied latency, guarantied quality of service, embedded connectivity (Amazon Kindle, Burns and Noble Nook, internet of things in common sense) or time of the day pricing.

All this products and its monitoring require adaption to the real-time situation. Which means collection big data about network online and balance workload through network to ensure capacity and quality as required and offered. In addition, it also allows better target of specific product via personalized marketing campaign. Offer higher traffic tier based on specific usage; combine it with location (localization via BTS and/or Wi-Fi hotspots 3rd party data). Offer additional increase of data packages nearly before reach limit of current broadband tier or immediately after.

BIG DATA, CONTENT CREATION AND ITS CORRELATION

Provide services contain voice, text message service and data usage leads to be a data transfer pipe not content maker. One way that mobile SPs can fight commoditization is by offering value-added services (VAS) to end users or to over-the-top (OTT) players. It requires industry simultaneous cooperation and competition [2]. Since beginning of providing data broadband content was mostly provided by mobile SPs from content owners to customers.

Content (ring tones, wallpapers, games, etc.) has been provided from content owners via VAS aggregators to the customers. After 2007 when mobile broadband data starts to grow and smartphones penetrated market enough with many different and flexible operational systems (Android, OSX, and later Windows Phone). Offer of the content change really significantly. And mobile SPs provide just transfer medium and data packages for data usage utilized by these services.

Content (any kind of, music, web content, web services, applications, etc.) has been provided with direct access to customer via application store. Then mobile SPs are just data transfer pipe. Value added services (VAS) For increase revenue mobile SPs can provide few types of VAS, it helps them to differentiate themself from concurrency [2]: End user information: Means content type consumed and location. This is really interesting information for content providers. But there have to be approval from customer about privacy related questions and only with this approval makes it legal. Anyway by different local law could be different private data prohibited to use for any kind of analysis and application activity. Moreover data consistency and standardization over more SPs is necessary to make this information valuable. User identification: SPs already know user identification in case of postpaid and sometimes in case of prepaid usage voice, text messaging and data. Provide this information to OTT can help to improve their user experience and better target content. Additionally acquire companies which provide application or service for instant messaging or VoIP could potentially help with user identification and sender, recipient of IM or who initiate call and who accepted it. Also identify conference call or discussion IM participants its initiator and followers and thus improve social relationship and networking of customer base for future marketing actions. Building own content: buy or create mobile applications and online services, multimedia, on demand content or digital broadcasting for broadcasting via IP TV, publish news and magazines. And support own business by promoting new products and provide additional space for advertisement. Cloud computing: Provide different type of cloud computing services or participate on them: o Infrastructure as a Service (IaaS) o Platform as a Service (PaaS): especially Mobile PaaS or mPaaS o Backend as a Service (BaaS) o Software as a Service (SaaS): for example customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, human resource management (HRM), content management (CM) and service desk management and many others.

Anyway most content providers try to bypass VAS from SPs and get this information by different way. Exchange registration for credit which is usually available via micro transactions or get it from 3rd party login (via Google/G+, Facebook, LinkedIn, Twitter or other account). Also information about type of content can be collected by specific content provider application (YouTube player, magazine reader) or operational system itself. And this information should be offered to content providers by these 3rd sides as VAS not by mobile SPs.

Over the Top (OTT) Over-the-top content (OTT) refers to delivery of video, audio and other media over the Internet without a multiple system operator being involved in the control or distribution of the content. OTT in particular refers to content that arrives from a third party, such as on-demand video, online TV broadcasting, online gaming, etc. and is delivered to an end user device, leaving the mobile SPs responsible only for transporting data. Anyway mobile SPs can play a major role in helping content providers deliver a unique experience. Mobile SPs can offer guarantied quality of service (QoS) for OTT via two options [2]: Content Delivery Network (CDN) service: provide this service to host (customer) and facilitate the distribution of OTT content over the broadband operator footprint. Bandwidth: guarantee specific bandwidth for specific OTT service.

CONCLUSION
Mobile SPs have many options how to use Big Data as a concurrence advantage and increase their revenue and market share. In first stage to improve their current services such as Network monitoring, Service access, Marketing and simultaneously with this to increase their revenue from VAS and OTT cooperation. And despite thing that data are beat up in near future voice and text messaging service via VoIP and IM, mobile SPs are able to provide adequate advantage for use this kind of services by information which they already have (end user information and/or user identification) or by opportunities which they already acquired or they plan to do that in near future. They are also able to provide partnership and service to OTT content providers such as CDN and bandwidth in cooperation with offer guarantied QoS and others [7]. Anyway they really need to change their behavior about better usage of Big Data and starts to process them, analyze and turn into information or competitive advantage like for example increase marketing revenue [11].

REFERENCES
[1] Rethinking Flat Rate Pricing for Broadband, Cisco, Marco Nicosia, Roland Klemann, Kate Griffin, Stuart Taylor, Bernhard Demuth, Jaak Defour, Richard Medcalf, Thomas Renger, Praveen Datta, July 2012 [2] Monetizing the Mobile Data Explosion, Cisco, Marc Latouche, Cedric Rauschen, Orsolya Oszab, Jean-Baptiste Creusat, Wouter Belmans, May 2013 [3] Telefonica O2 Quarterly Results, Telefonica O2, 2008 - 2013 [4] Vodafone Financial Results, Vodafone, 2008 2013

[5] Telecommunications: optimize revenue, reduce cost, increase efficiency with big data analytics, Actian [6] Big Data Analytics Adoption in Telecommunications Industry : The Korean Telcos Perspectives, Patrick Oghuma [7] A new approach to revenue generation for mobile broadband, Senza Fili Consulting, Monica Paolini, 2012 [8] Analytics: Real-world use of big data in telecommunications, IBM, 2013 [9] Benefiting from Big Data A New Approach for the Telecom Industry, Booz, Olaf Acker, Adrian Blockus, Florian Ptscher, 2013 [10]Changing Dynamics of Telecom Industry, Telecom Circle, Mohit Agrawal, March 2011 [11]Telefonica | Vivo nets a 30 percent increase in marketing revenue with IBM Unica, IBM, 2012