Ofcom moves in to protect UK mobile users from loyalty punishments

The UK’s telecom regulator believes out-of-contract mobile users could have saved millions if telcos offered the best deal available, and has released new measures to protect them from being treated unfairly.

After nearly a year’s research the regulator has found that on average the out-of-contract customers, those who have taken out a handset/airtime bundle contract and stay with the operator after the contract runs out, are paying £11 more per month than if they have been offered a better alternative, e.g. a comparable SIM-only deal. This would take the total amount of over-payment made by the 1.4 million out-of-contract customers to £182 million a year.

“Our research reveals a complex mobile market, where not everyone is getting a fair deal. So we’re introducing a range of measures to increase fairness for mobile customers, while ensuring we don’t leave existing customers worse off,” said Lindsey Fussell, Ofcom’s Consumer Group Director.

The new measures introduced today, published in a release titled “Helping consumers to get better deals in communications markets: mobile handsets”, focus on three areas:

  1. Transparency of contract details: mobile operators offering bundle contracts should tell customers the cost of the handset and the cost of airtime separately. This is in line with new EU rules, but Ofcom has decided to introduce it to the UK despite  the decision to leave the EU.
  2. Time limit on “split contract”: this refers to the kind of contacts that a customer would pay for the handsets and usage separately. The new rule would cap such contracts to 24 months, to avoid customers being locked in one contract for to long and to make switching operators easier.
  3. Concretised measure to treat customers fairly, following the more vague “Fairness for Customers” commitment the operators signed up to. Specifically, it requires mobile operators to tell customers that their contract is going to end, and to explain to them the best available deals including SIM-only deals. The easy way of switching operators with a text message that was laid out in June is also coming into effect this month.

Ofcom also declared the first victories in operator endorsements. “All the major mobile companies – except Three – will also be reducing bills for millions of customers who are past their initial contract period,” Fussell said.

O2 and Virgin Mobile will charge their out-of-contract customers the equivalent 30-day SIM-only deal, while both EE and Vodafone are going to reduce the price for their customers out-of-contract for more than three months, though they will only confirm the level of discount by the end of the year. The discount will become effective next February.

“Three is the only major provider that has refused to apply any discount to its out-of-contract customers. As a result, these customers will continue to overpay and will not receive similar protections if they stay on their current deal,” the Ofcom statement said.

The regulator also announced that later this year it will publish its findings on broadband prices, and why some customers find their broadband bills higher than others.

América Móvil strengthens its position in Brazil with Nextel acquisition

The Latin American mobile heavyweight América Móvil has agreed to acquire its competitor Nextel in the Brazilian market for $905 million.

Shortly after the deal was announced by América Móvil on Monday, and the board of NII Holdings, which owns 70% of Nextel, announced that it would propose to the shareholders to accept the offer. The other 30% of Nextel is owned by AI Brazil Holdings, the local operation of Access Industries, an American private company whose portfolio includes natural resources, telecoms, internet services, as well as Warner Music, among other media interests.

The nature of the deal, “cash free / debt free”, will let NII and AI Brazil keep all the cash while América Móvil will not assume Nextel’s debts. Although the total transaction value is less than 1.5 times of Nextel’s annual revenues in 2018 ($621 million), it represents almost four times NII’s market capitalisation on its latest trading day on NASDAQ ($229 million), indicating the buyer’s relatively strong confidence in the business prospect.

Brazil is a highly competitive market. According to research by Ovum, by Q4 2018, Vivo (owned by Telefónica) led with one third of the total mobile market, while TIM and Claro (América Móvil’s existing operation in Brazil) were vying for the second place, each serving about a quarter of the total mobile subscribers. Nextel had slightly over 1% market share. The rest of the market is served by Oi (a JV between Altice Portugal, formerly Portugal Telecom, and Telemar, Brazil’s largest integrated telecom operator).

After the acquisition, América Móvil plans to combine Nextel with Claro to “consolidate its position as one of the leading telecommunication service providers in Brazil, strengthening itsmobile network capacity, spectrum portfolio, subscriber base, coverage and quality, particularly in the cities of São Paulo and Rio de Janeiro, the main markets in Brazil.”

For NII, selling Nextel in Brazil represents the end of an era. The company once operated mobile services in multiple North and Latin American markets, including the eponymous professional radio service in the US, which was later acquired by Sprint. Brazil is its last operation, where it has been struggling in a classic four-operator market. Not only has it not been able to break into the leader group, but also seen business declining fast. The revenues in 2018 were a 29% decline from 2017 ($871 million), which itself was a 12% decline from 2016 ($985 million).

“The announcement of this transaction marks the culmination of an extensive multi-year process to pursue a strategic path for Nextel Brazil and provides our best opportunity to monetize our remaining operating assets in light of the competitive landscape in Brazil and long-term need to raise significant capital to fund business operations, debt service and capital expenditures necessary to remain competitive in the future,” said Dan Freiman, NII’s CFO. Earlier potential buyers included Telefónica Brasil, Access Industries (NII’s JV partner), though the most concrete case was TIM, which, according to Reuters, approved a non-binding offer in November last year. None of these negotiations has come to fruition.

“Management and our Board of Directors believe the transaction is in the best interest of NII’s stockholders,” Freiman added.

The value of AI: are operators missing the big picture?

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Albrecht von der Recke, founder and COO of fonYou, takes a look at how the telecoms industry is approaching the vast potential offered by artificial intelligence.

Artificial intelligence (AI) is disrupting telecoms more than any other industry. From automating business processes to optimising performance, AI technologies have the potential to transform networks, and ultimately provide a better experience for subscribers.

The need to embrace AI is not purely for altruistic reasons. Mobile carriers operate in an intensely competitive market, which has seen new OTT players such as WhatsApp and Snapchat competing within carriers’ traditional realm of voice and messaging services. Business-as-usual is simply not an option.

Given the current market conditions, therefore, and with expensive spectrum, network upgrades, and marketing requirements to contend with, there may be a case for operators to harness the power of AI to build their businesses in addition to tweaking and optimising their networks.

Personalised and contextual

Operators are sitting on a goldmine of personal and usage data, and AI is the key to unlocking its full value.

Powered by AI and with access to this wealth of data, operator can employ sophisticated micro analytics to automatically assess the needs of subscribers, analyse their usage and purchase history, and formulate an offer that matches their specific requirements and context.

Consider a prepaid customer that has run out of credit; an event that will trigger a response on the network in which the customer’s usage and payment history is analysed in real time. Having finalised a risk profile, a ‘just-in-time’ offer could be automatically sent out to the customer, such as a financed data package or the opportunity to top up by credit card. This offer will be delivered using the channel to which the customer traditionally best responds, before the payment is processed and the selected service provisioned.

In this example, AI algorithms will have intelligently computed the right sale to push, specifically aligned to the customer’s immediate needs. Not only is it completely personalised but, by using the insight gleaned from analysing the customer’s historic data, it also completely contextual. This may not sound a particularly taxing task in and of itself, but it’s worth considering that tasks such as this will occur millions of a time a month on any given mobile network, all in real time.

It’s clear, then, that combining AI technology with the right transaction execution and the right channel engagement can provide a real boost to operators’ bottom lines – particularly at scale. Indeed, several operators around the world have already seen an increase of several percentage points on their ARPU having implemented such solutions.

At the centre of all customer interactions

Each month, hundreds of millions of events are overlooked by operators which, if properly exploited, could represent an opportunity to generate revenue. Indeed, even by monetising just 10 percent of these events, operators would enjoy significant additional revenues and increased customer satisfaction.

By way of illustration, take the example of a subscriber on the verge of running out of data from a 1GB prepaid bundle, who doesn’t have a credit card and whose bank balance is too low to allow him to purchase an additional bundle. Under the traditional prepaid model, mobile data service would typically be interrupted or downgraded once the bundle’s data allowance has been consumed. Applying advanced AI technology, however, will enable the delivery of a service much better suited to the individual characteristics of a specific customer.

This is particularly attractive in a prepaid-dominated market with low banking penetration. A smarter prepay platform might, for example, leverage historic data which indicates that this particular customer shows unwavering loyalty, and has a perfect credit record. This being the case, the platform’s micro analytics engine will push out an offer to the customer of the same 1GB bundle he normally buys, but this time in advance, and with up to five days in which to perform a top up. The decision is made, and the offer pushed out in real time and in the digital space, removing the need for the customer to visit a physical top-up point, and avoiding interruption of his mobile data service. As a result, the customer will be satisfied with the experience, and the operator will enjoy increased revenues and lower costs.

Understanding usage and context

Very often, simply recommending the right offer at the right time will result in a customer accepting a deal which they consider to be fair and that meets their immediate needs. By employing artificial intelligence to make these personalised, contextual offers, based on continuous analysis of the huge volume and variety of user data, will not only improve the customer experience, but will bring consistent new revenue to the operator over time.

Intelligent repackaging of an operator’s existing portfolio could create additional new revenue and ARPU increases, too. Bespoke offerings could be created around application-based packages including Netflix or Spotify, for example, social media bundles, or new handset deals.

Fundamentally, all of this comes down to understanding usage and context to ensure that each offer meets the specific requirements of any given user at any given time. And with AI in place and cloud tools, it’s possible to do this without requiring humans to do the heavy lifting.

AI is already transforming many key areas in telecoms, improving network efficiencies and customer service delivery and, with digital transformation projects well underway, more change is yet to come. Looking beyond this, however, and utilising AI-led offers powered by micro analytics, operators have the opportunity to direct impact sales and generate revenue, and more confidently face the challenges of today’s increasingly competitive marketplace.

 

Albrecht von der Recke_fonYouAlbrecht is one of the founders of fonYou and has over 18 years of hands-on experience with mobile carriers. He has led successful service launches with mobile network operators – One (Austria) and Orange (Switzerland) and, as an entrepreneur, in several launches of MVNOs (mobile virtual network operator). Prior to fonYou, he cofounded NextGen, a consultancy specialized in telecoms. Albrecht holds a degree in international business management from the University of Vienna.

Europe has not been great at net neutrality – report

Nearly three years after the EU net neutrality regulations came into effect, neither service providers nor national regulators have been role models in following the rules, a new report concluded.

The Vienna-based non-profit organisation Epicenter.works recently published a report to present its multi-year research into how the EU’s net neutrality regulation has been implemented. The report, titled “The Net Neutrality Situation in the EU: Evaluation of the First Two Years of Enforcement”, examined how the regulation was interpreted differently by the regulators and how the service providers have taken it into their own hands to decide what to implement, or not implement in the 28 EU member states as well as the three EEA nations ((Norway, Iceland and Liechtenstein). The results were not the most encouraging reading.

The EU regulation on net neutrality came into effect on 30 April 2016. The Body of European Regulators for Electronic Communication (BEREC) was mandated to lay down guidelines on the implementation for the national regulators. However, unlike other laws like GDPR, the net neutrality rules give member states the authority to decide the level of penalties if the rules are broken.  “This has lead (sic.) to a situation where some member states have not laid down rules for violations of net neutrality protections two years after the regulation entered into force,” the report says.

More specifically, 17 out of the 31 countries examined have not defined “effective and dissuasive penalties”, while in those countries that have defined monetary penalties, the amounts varied from a symbolic €9,600 in Estonia, to up to 10% of relevant turnover in the Netherlands or the UK. The report finds that, as a result of the less than strict implementation, “the largest telecom companies in Europe can choose not to comply with the law because it is financially advantageous for them.”

The area that the most offences were committed was differential pricing practices, in particular zero-rating data for selected applications and services. Although only Bulgaria and Germany have excluded “illegal commercial practices” (price discrimination when providing access to specific applications and services, in this case, zero-rating certain apps or services) from their penalty provisions, a total of 186 differential pricing products are being offered in all but three member states (Finland, Slovenia, Bulgaria), the majority (144 offerings) of them zero-rating (the rest are application-specific data volume). 17 countries’ regulators have started formal assessment processes into the differential pricing products offered by the service providers in their countries since the regulation came into effect, while the other 14 have not.

The report went on to analyse the impact of zero-rating offers on the consumer data price, and discovered that over a two-year period, the average data price (€/Gb) in countries with zero-rating offers largely held or slightly rose while the comparable price in those countries without zero-rating products went down by about 10%.

net neutrality data price

The reason for the steady price can be attributed to competition dynamics created by zero-rating, according to the report. Since the large service providers (e.g. Deutcshe Telokom) often have the biggest sway in partnering with content and application providers, the authors reckon, they create a “unique selling proposition” to attract consumers and no longer need to compete on the data package size or prize, which MVNOs and smaller operators can match their offers. This in effect has led to a slow-down in the growth of data package sizes or drop in prices in these markets.

It is not only the consumers that have been denied benefits by zero-rating, the authors find, there is also cost on the content and apps providers. In most zero-rating deals, the content and app providers will pay the fee for the traffic to the service providers (according to a report published by the Polish regulator UKE), which will then offer it to consumers at zero-rating. In this case, zero-rated data is actually sponsored data.

On top of the fees, in order for the billing to be correctly done, operators would require the content and app providers to make special data transport setup for the partnerships, e.g. change CDN contracts. This will also add operational cost to the content providers. In a high-profile case, when Vimeo did not participate in Deutsche Telekom’s “StreamOn” programme, it stated in an open letter to the German regulator that, although they are a 200 employee strong company, they cannot sustain co-operations with all the service providers whose customers they want to reach with their service through special programmes like this.

Two knock-on effects also come out of such partnerships. Due to the demand on fees and increased operational cost, most app and content providers can only afford to enter into limited deals. By the authors’ count, the large majority of app and content providers entered no more than three pricing programmes.

net neutrality number of programs

On the other hand, more often it would only be the Silicon Valley heavyweights that could afford to tie multiple partnerships with different operators in different markets, they occupy most of the spots on the leader table of differentially priced services being offered. “Among the top 20 zero-rated applications only three are from the EEA,” the report calculated.

net neutrality Silicon Valley heavy

The findings by the organisation has caught some attention. The Austrian regulator RTR will conduct its own research into the impact of zero-rating on data prices into more recent years and on operator level. The European Commission will also provide an evaluation report of the net neutrality provisions of the regulation by 30 April 2019, three years after the regulation came into effect.

It is starting to become obvious why the US is streaming ahead

When talking about the leaders in the 5G race, Europe is never in the fray. Comparing the attitude of the operators in the US and Europe, it is becoming very clear why.

A couple of weeks ago we travelled across to Austin to attend Light Reading’s Big Communications Event where several US operators gave their perspective on 5G. It was aggressive, bullish and ambitious. There is a race to be the first, it is a point of pride for the operators, and progress is being made in a very efficient manner. Of course, there are some claims which are suspect, creative advertising if you will, but you can’t deny the operators have an excellent roadmap.

This week we attended 5G World with the European and Asian operators taking the stage. In Korea, KT boasted about 5G trials at the Winter Olympics this year, while Japan’s NTT Docomo and KDDI gave some insight to various trials. Again, steady progress can be seen. When looking at Europe, the story is slightly different.

The work is focused on justification and business cases, attitudes are much more risk adverse and the fundamentals of the strategies are not looking anywhere near as comprehensive as elsewhere in the world. Compared to counterparts in the US, European operators are looking positively sheepish; there are few examples of confidence which can be seen in the US.

On the American side of the Atlantic, the operators are talking about commercial 5G services at the end of this year and beginning of next. The operators will be urging the handset manufacturers to hurry up so they can start the plethora of advertising campaigns boasting about 5G networks; for possibly one of the first times, the operators will not be the ones slowing progress.

Of course, 5G services will not be everywhere and the reality will unlikely live up to the promise in the marketing campaigns, but the industry is moving forward. Few people will say the same of Europe, as operators timidly tip-toe towards 5G. The difference is the attitude and ambition, as simple as that.