4G. The UK lags behind

Update: The UK operator EE (Everything Everywhere), a partnership between Orange and T-Mobile have announced they will be offering 4g to customers in 16 cities by the end of the year. The UK operator Ofcom allowed the roll-out on their existing 1800 MHZ band ahead of their competitors, particularly O2, who would have to bid for the channel when the government announces their auction. More here: http://www.mobilebusinessbriefing.com/articles/everything-everywhere-reveals-uk-lte-launch-plans/25232?elq=fbaeda07d3784a24868b558af464bced#.UE8lQL3vvxo.twitter

In the UK we’re still waiting for our 4G. If the network operator data caps are anything to go by, 3G is creaking under the strain. However, in spite of early promises for the Olympics, it looks like the UK roll-out for 4G will take a while. Ofcom, the regulator won’t decide on how the spectrum will be sold until summer 2012. Then there’s the auctions. Then there’s the roll-out itself. When will we actually see 4G in the UK? 2014 would be my guess. In the meantime, the best solution seems to be O2’s one, which is to install WiFi hotspots for their smartphone users.

Other countries are way ahead. The US has tended  to lag behind other developed countries when it comes to mobile, but they’ve had it for over a year. So have Canada, and the obvious advanced mobile countries including S. Korea, Japan and most of Scandinavia. That’s all well and good, but a number of countries who would be considered less advanced in the mobile space are also starting to implement 4G. The include Bangladesh, Cameroon, Peru, Fiji, South Africa, Ghana, Jamaica and Nigeria. As has been predicted, it looks as if some up and coming countries will leap-frog their more mobile-mature counterparts with new, super-fast mobile connections. And when everyone can get high speed internet everything changes.

Spam SMS and the Operators: what can they do about it?

All the evidence points to a rise in spam SMS. 42% of people in the UK have had an accident claim spam. Add in the other unsolicited marketing messages and it’s fair to assume that more than half of the population have experience SMS spam. And most people blame their operator for it. So why does it appear that they are doing very little to tackle the problem? Why can’t they just filter out these messages?

Some conspiracy theorists have suggested that the operators have an interest in keeping spam going because:

  1.  They earn money from the messages
  2.  They sell the data in the first place

Unfortunately for these theorists neither of these things are true. The messages are typically sent using PAYG SIMS with an unlimited SMS plan. It is therefore better that messages are not sent – they earn money from the top up, and not the message sending itself. When it comes to their data, it is not in their interests to sell it. This would be a pretty fundamental breach of the Data Protection Act – both the fines and damage to their reputation would be far in excess of any revenue from selling numbers. In fact, when some T-Mobile employees sold customer data out the back door, the company informed the police and two people were prosecuted. The biggest reason though is that dealing with spam costs the operators a lot of money. They need a considerable customer service resource to do this.

So, given that it is far better for the operators to be spam free, why can’t they stop it?

First of all, the spammers don’t make it easy to stop. They use multiple PAYG SIMS in a SIM bank. This allows up to 300 cards to send messages via one server. The spammers even spoof IMEI numbers and handset types to make it look like individual phones are sending the messages. However underlying all of this is the fact that operators cannot view the message content by law. Whilst some nameless organisations were happily hacking into mobile phone voice mails, the operators can neither listen in to calls nor look at a text message.

In spam terms this means they have one hand tied behind their back. Still, they have methods of detecting spam – looking at things like message length, originating and IMEI number ranges all helps identify the spammers, but as these constantly change, it is also not easy. In one case in the US the spammers put their SIM bank in a van and drove around to different areas, ensuring that the base station sending the messages constantly changed.

So is there an operator solution?

There are two ways the spammers can be stopped. The first one is by using software, much the same as email spam software. Whilst a human cannot look at message content, a computer can. A good algorithm can identify spam not just through key works, but a whole series of patterns from the sender ID, to the base station, frequency or IMEI number. The second part of the solution is the one that works the best – get customers to report spam. They are the best at identifying it, and if the process is made easy, they will willingly do it.

If it’s so simple, why don’t the operators filter spam already?

Some do, but not all of them. In the UK the amount of spam you get will very much depend on your operator (I won’t name names). However, as one of them put it to me; ‘we didn’t think spam would be a problem’. Naïve? Certainly. But welcome to the world of mobile operators. They are focussed on running big engineering operations for calls, SMS and data and on provider customer service. They can also work at a glacial pace. It’s hard to implement things quickly within these vast organisations. Whilst the spam software can be implemented in a few weeks, it will take an operator years to put it in place.

The other side of this is consumer reporting: if customers tell them when they get an unsolicited SMS it is possible to close the spamming numbers quickly. The timescale to stop the SIM banks is within an hour as around 85% of people respond within that time. Unfortunately at the moment there are two problems with this: firstly consumers don’t know how to report spam. There is a shortcode number for all the operators, but it’s hard to find it. Secondly, the current systems in the operators means that it takes a minimum of three days to close down a number (and typically one week).

In Korea there was a similar problem with spam. They solved it by getting the handset manufacturers to add a ‘this is spam’ link to all of the phone messaging menus. Simple and effective.

Why aren’t they working together?

The biggest issue preventing an operator solution in the UK is that the operators don’t want to publicly admit there is a problem. The primary reason is competition. If one operator puts spam high on their priorities, they are worried that others will simply say they don’t have a problem with it. In many ways, that doesn’t make sense. Most customers are aware of receiving spam, but it would seem that this competitive fear is stopping them from tackling the problem in the best possible way – with the help of their customers. In the end though, they are on a hiding to nothing. At some point, the government will want to legislate. They may happen sooner rather than later if someone in the government gets one of the infamous messages. And when governments legislate around technology, the outcomes are far worse and more draconian that industry legislation. In Canada there is now a fine of $1 million PER MESSAGE for unsolicited SMS. Whilst there are initiatives from the GSMA to monitor and stop spam, it is optional for operators (and they need to pay for the service).

Hopefully that problem will end soon. Representatives from all the UK operators have both discussed the spam problem around accident claims messages, and agreed to give their customers the same advice. I say hopefully because in spite of giving that information to the operators, as yet none of them have updated their site, or publicly admitted to unsolicited messages being a problem. Things move slowly in the world of mobile networks. Very slowly.

Operators need to ebrace apps for new revenue streams

A new report from PwC called Embrace New Revenue Sources: Living in an Apps-driven World, suggests that in the future just 50% of operator revenues will come from text and calls. The remainder of their revenues need to come from other sources such as apps. So how’s that going to work?

The problem for the operators is this:

They have little chance to increase their call/sms/data revenues. Most people are on the package they want, including their data, and don’t feel they should pay any more for it. They also expect a free (or cheap) new phone every 18 months. Yet, the operators are having to provide more and more service for that package. At the same time, their little extras have been eroded: inter-network calls, roaming charges and data charges have all been limited by legislation.

To some extent they have no choice but to get into other revenue streams such as content and apps. The problem for the operators is that they’ve already tried apps and it didn’t work. Contrary to some perceptions, Apple did not invgent the AppStore. The operators were at it a few years before Steve Jobs launched apps on iTunes. Stores such as Vodafone’s Betavine and O2’s revolutions put apps in front of their customers. The problem with them, however, was two-fold:
Firstly from the content provider perspective it was expensive. As one developer put it, ‘it would cost £1000 to get in there, and you had about one weeks’ visibility. Unless you had a major hit on your hands, you would lose money’. Apple changed all that with their appstore, going from a B2B to a direct to consumer model, where the developer received a revenue percentage rather than paying to be there.

Secondly, there is the problem of the consumer relationship. People don’t see their mobile operator as a place for content, but more as a utility company to provide calls, texts and access to that content. The operator portal was a classic of this: users tolerated it as it was the first port of call, but they only used it as a jumping-off point to the things they really wanted. When it came to promotion on these portals, if you weren’t on the first page (the Top Deck) you were basically nowhere.

The biggest problem that the operators now have to face is that the consumer relationship for apps and content is now with the operating system: Apple’s iTunes, Android Market, BlackBerry World and Nokia’s OviStore. Changing people’s perception of operators as a utility will be hard, if not impossible to achieve. In the long-term the only solution for content revenue is to create tie-in’s and joint ventures with the OS app stores.

Operators are NOT the place for mobile marketing

An Orange Shots campaign for Snickers

Who are the media owners/media channels in mobile these days? Is it the operators or is it the app stores and social media owners such as Facebook, Twitter and Foursquare. Most agencies and brands would regard the latter as the place to buy their media. However the operators would like us to think different. Some mobile networks have made valiant attempts to create their own direct marketing channels, namely Orange Shots and O2 More. Both have a reasonable number of opt-in customers who receive marketing messages on behalf of companies. Whilst there are problems with the media planning and buying in these channels, they have a certain amount of brand appeal. Operator revenues are increasingly squeezed so these channels offer a potentially valuable source of income.

However, according to a YouGov report this week, it would seem that consumers are less than impressed with the idea. In short, over 80% of those surveyed said it was unacceptable for operators to include third party offers in their mobile marketing. Consumers will accept a limited amount of brand marketing on their mobiles: 38 per cent said they would want no more than one per month and 31 per cent saidless than that. 14 per cent were prepared to receive offers up to twice a month, but there was a significant difference between the ABC1 (8 per cent) and C2DE (20 per cent) demographics. The study found that whilst consumers are happy to accept a certain number of offers from their mobile phone companies, such as offers on new tarrifs or handsets, when it comes to third party marketing, they are risking alienating them and pushing them to other networks.

More on the YouGov report here.

Are we seeing the end of the SIM card?

There has been quite a bit written in the telecoms press about various initiatives that will see the death of the SIM card as we know it. This is very significant for mobile marketing for a number of reasons, but primarily there could be a major shift in customers’ relationships with their operator. For mobile marketers it means the brand engagement in mobile could shift with it.

Firstly I’ll explain what the change in the technology and business model will be. Since the advent of GSM, the defining technology has been the SIM card. The rectangular card with the corner cut off. Technically it’s not a SIM card at all, but a UICC. SIM is the subscriber information (such as the mobile number) embedded in the card. We will stick with the SIM term as that is what we all understand. At the moment, the SIM comes from the mobile network operator, which has the mobile number and operator information hard coded within it. That’s been good news for the mobile opeartors as they have complete control over the access and billing for that phone. It means that handsets can be sold below cost as the operator has a guaranteed revenue. The operators call it a ‘subsidy’ but technically it’s really a loan, as consumer pay for the cost of the handset (and much more) through their monthly tariff.

However, the change is that the SIM will no longer be hard coded. In the future, the SIM information will be able to be remotely programmed by anyone prepared to provide a service. Apple are showing a particular interest in this for a few reasons. Perhaps the biggest one is that there will no longer be a SIM card in the iphone. Instead you will buy the handset from Apple and the whole thing will be activated via something like itunes. Thus they have cut out the operator from the whole sales model. Apple managed to do it with content, with the app store cutting operators out of the content business, so there’s every reason to suppose that it could happen with the SIM information as well. What this means from a brand perspective is that media ownership will be even further entrenched with the likes of Apple and Google.

By having a remotely programmable SIM, it allows many different things to be done. For starters subscribers are no longer tied to an operator and can jump around from one to the other. No need to get codes and new SIM cards. It also makes it easier to create other SIM embeded devices, such as smart metering. It also means that other information to be programmed into the SIM. One area that would obviously benefit from this is NFC, or Contactless Payments. Apple are beginning to show a keen interest in this area, whilst all the major credit card companies (not to mention the GSM Association) have already invested heavily. The idea is that there will be a standard protocol (not yet agreed!), so any phone with an NFC chip will work on any reader. The specific card company information can then be remotely programmed into the SIM. So, you won’t have to buy a Barclaycard phone, you just get your handset reprogrammed.

The GSM Association are also interested in remote SIM programming. Some observers have thought that a strange position as it makes the operators into providers of even dumber pipes than present. However, when you think of it in terms of NFC, then it makes sense. The operators want to be in on payments and this could be the way to do it.

Operators to charge search engines?

A massive can of worms has been opened by the comments from Telefonica’s CEO about charging search engines for access to the mobile networks.

As we see more internet-y type acitvity through the mobile networks, we are heading for a major clash of business and culture between mobile operators and the internet. The basic problem is a simple one: the mobile business model is to charge for stuff, the internet business model is a free one.

I will qualify this a bit more. The problem for the mobile networks is that they have to run massive engineering operations. They need 1000s of base stations, switching networks and so on, all running 24hrs a day. Not only that, but they have to pay governments billions of pounds to buy a licence to run their network.
On the other hand, Mr Google does not to set up an infra structure to have their search engine. They do not have to buy a licence to run their search engine, nor for their PPC or anything else they do. Of course, Google in particular do have some infrastructure costs – millions of servers for starters, but the basic communication infrastructure, The Internet, already exists. And it’s essentially free. The free model of the internet goes back to its inception first with The Well and then the decision of Tim Berners Lee to give away they key software: http/html to the world. The internet was essentially established by hippies and anarchists (hoorah).
On the flip side, most telecoms companies are from a very non-hippy, non-anarchistic background: in the UK the first providers represented Cellent (by BT, newly privatised ex-nationalised industry), and Vodafone (ex-Racall, the communications company specialising in military comms in particular). ‘Free’ never entered into the thinking of these companies.

So now we are seeing a real clash of these cultures. The telecoms companies do not understand why things should simply be ‘free’. However, most of us are used to the free-ness of the internet, and it makes no sense that we should have to pay to use it, even through our mobiles. The operators began to address this well a few years ago. Introducing flat-rate data plans mirrored the traditional landline experience where you pay one charge and for that you get your internet access.
The problem for the operators now is that they will pretty much max out their data revenues in a few years. In other words, anyone who wants a flat rate data plan, probably has one by now, or will be getting one shortly. However, for operators, internet access (or data), is an expensive thing. The O2 CTO (parent company, Telefonica), pointed out a couple of months ago that downloading one YouTube video could use as much data as 500,000 text messages sent simultaneously. Arguably, they missed a trick some years ago when they set up the 3G networks. It seemed obvious that data, as in internet connections, would be big, yet it seems like the operators never really planned for it, or at least not for the size it would turn out to be.

Google buys Admob … problems for the mobile operators?

Google’s purchase of Admob for $750m seems to be a good thing for both parties and mobile advertising in general. Unless, of course, you are mobile operator.

Why is this a problem for the mobile operators?

The answer is simple … as operator revenues get squeezed, they have started to look at mobile advertising as a significant source of new revenue. In the UK, for example, Orange, O2 (O2 Media) and Vodafone (Vodafone Target) have all put resources into this sector. A case in point is Orange’s acquisition of ad network Blyk, this summer.

Google have not made significant in-roads in mobile advertising, but Admob have. If you are a business or brand, you will have a choice to go to your network operator or Google. Judging by Google’s success with online advertising, it looks like most people will not choose advertise with the operators.