Acision Seizing the Opportunity in Mobile Broadband - Brasil Perspective-09 mar 2011

Seizing the opportunity in
Mobile broadband
-Brazil Perspective-
March 2011

Acision Mobile broadband Research
for the Brazilian market

In association with:

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Seizing the Opportunity in Mobile broadband
Consumer perception of mobile broadband in Brazil

1. Introduction and Overview ..................................................................................................... 4
Brazil – an emerging mobile broadband market ............................................................................... 4
Main conclusions ............................................................................................................................. 5
Report synopsis ............................................................................................................................... 7
2. The Mobile Broadband Life Cycle ............................................................................................ 8
The mobile broadband lifecycle – igniting consumer adoption ......................................................... 8
The growth of data volumes – the continuous tsunami .................................................................... 9
Quality of Experience – ride the hype cycle .................................................................................... 10
Seizing the opportunity – a head start on differentiation ............................................................... 11
3. The Operator Challenge ....................................................................................................... 11
The root cause – oversubscription ratio in mobile broadband ........................................................ 12
The network impact – connecting the IP and Mobile worlds .......................................................... 12
Seizing the opportunity – maximise network utilisation ................................................................. 14
4. The Consumer Perspective ................................................................................................... 15
Untapped potential – connecting the next 44 million ..................................................................... 15
Quality of Experience – core service already under pressure .......................................................... 16
Satisfaction levels – pricing is key dissatisfier ................................................................................. 17
5. Comparing Brazil with Mature Markets ................................................................................. 18
Mobile broadband – crucial for Brazilian broadband penetration ................................................... 18
The lifecycle – growing mobile broadband ..................................................................................... 19
Pricing models – the necessary trigger ........................................................................................... 19
Service usage – frequency vs. video ............................................................................................... 20
Quality of Experience – a challenge throughout the lifecycle.......................................................... 21
6. Preparing for Growth ........................................................................................................... 22
Fairness principles – securing fair distribution of bandwidth .......................................................... 22
Content Optimisation – improving video Quality of Experience ...................................................... 23
Differentiate the offer – add monetisable value to the service ....................................................... 24
7. Converging Eco Systems – Telco’s in the Internet World .......................................................... 25
Regulators – achieve sustainable net neutrality ............................................................................. 25
Content providers – delivering the mobility experience ................................................................. 25
Seizing the opportunity – leverage the content eco system ............................................................ 26

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8. Seizing the Opportunity in Mobile broadband ........................................................................ 27
Grow ARPU by enabling a differentiated service offering ............................................................... 27
Decrease cost by maximising network utilisation ........................................................................... 27
Control QoE by managing relevant service aspects......................................................................... 28
Enable value driven engagements with content providers ............................................................. 28
Required capabilities – the mobile broadband investment agenda................................................. 29

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1. Introduction and Overview
In August of 2010, Acision commissioned independent market research agency, Quantinet, to undertake a detailed
survey to understand consumer perceptions of mobile broadband in Brazil. The research covered key aspects
associated to mobile broadband today, including insight in Mobile broadband usage and Quality of Experience.

The research in Brazil forms part of a global research initiative that Acision has undertaken in the United Kingdom,
the US, Australia and Singapore. For every region, the Acision research focuses on all aspects of mobile broadband
including the usage of the mobile internet on Smartphones, mobile handsets, dongles, modem sticks, data cards,
netbooks, and integrated mobile broadband within laptops.

The motivation for Acision to undertake this global research has been the phenomenal uptake of mobile
broadband worldwide and the rumoured Quality of Experience issues accompanying it’s steady rise. One of the
key objectives of the research has been to quantify these QoE issues, understand it’s principle drivers and
determine whether global parallels exist in its development lifecycle. Also, the potential for addressing the key
issues in terms of consumer awareness of mobile broadband and willingness to accept fairness, optimisation and
differentiation measures, has been another key objective. In both areas we can conclude the global research
initiative has been very successful and provides insight in this new and exciting market segment which is beneficial
to all stakeholders, being consumers, operators, content providers and regulators.

In this report we have dedicated a section on how Brazil can prepare for growth in Mobile broadband subscriber
uptake and usage. Comparing the research results from Brazil with those from mature Mobile broadband markets,
like the US and the UK, provides useful insight for Brazilian operators on fairness principles, how to deal with
video, and ways to differentiate the Mobile broadband offer.

The Brazil research was conducted by Quantinet, between the 17th and 22nd of August 2010 and is based on a
representative sample of 819 mobile internet users aged between 16 and 74 from Brazil. The research in The US,
UK, Australia and Singapore, which is also referenced in this report, had been conducted by YouGov and Toluna.
Separate reports for each of these countries are available as well.

Brazil – an emerging mobile broadband market

Mobile broadband has undeniably turned a corner. High speed networks, flat fee pricing models, Smartphones,
tablets and laptops have together fuelled a level of growth exceeding everyone’s expectation. Clearly mobile
broadband represents a very significant and strategic opportunity to operators worldwide.

Brazil represents an emerging Mobile broadband market with enormous growth potential. Even though Brazilian
operators can expect similar challenges faced by operators in mature markets, they have the advantage of being
able to draw lessons from these earlier experiences. One key lesson is the fact that simply adding network
capacity will not be sufficient to ensure customer satisfaction. While investment in network technology and
mobile coverage are essential prerequisites for the success of mobile broadband, mature markets have
demonstrated that more control is required to make the service a continued success going forward.

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The challenge lies in the fundamentally constrained nature of mobile broadband, which is already being
experienced by operators across the globe. With today’s pricing models, where substantial bundles are offered
with ever diminishing revenues, it doesn’t matter how much one invests in network technology, the demand for
capacity will always outstrip supply. This is evident when taking into account specific cell locations, where a
relatively low number of users can already create congestion issues. Because of these fundamental constraints,
consumer experience will always be under pressure as users compete with each other for limited available
capacity. Consumer experience therefore takes centre stage in the evolution of mobile broadband and it
represents the focal point of the research Acision has undertaken.

This report focuses on exploring what the next challenges are in mobile broadband and what can effectively be
done by operators in emerging markets like Brazil, to evolve the service further and continue to capitalise on the
opportunity.

Main conclusions

The main conclusions of Acision’s Brazil mobile broadband research can be summarised as follows:

Brazil and the mobile broadband lifecycle – With 8 million subscribers on a population of 190 million, mobile
broadband is still in its infancy. But for those who use it, it is perceived as an important service.

High dependence on fixed broadband with 77% of Brazilian consumers using a fixed line connection to
access the internet, compared to 16% using a phone and 30% a laptop dongle. It also means that a relative
low percentage of Brazilian consumers use multiple devices to access the internet.
Mobile only use is relatively high as for 52% of the consumers that use mobile broadband for access, it is
the only way they access the internet. Only 48% of Brazilian consumers also uses fixed next to mobile.
Frequency of use similar to mature markets with almost 7 out of 10 users (69%) using the service on a
weekly basis. Over half of Brazilian consumers (51%) even uses the service on a daily basis.
High bandwidth, time sensitive services like video showing low usage with just over a quarter (26%) of
Brazilian subscribers stating they watch videos. Only 11% of Brazilian subscribers watch videos frequently
while the remaining 15% watches videos sporadically.
Pricing models do not stimulate mass market uptake with 39% of subscribers paying per KB/MB and
another 32% on a restricted package. So only 29% of the subscribers can use the service without
restrictions or being (severely) penalised.

Quality of Experience and customer satisfaction – Even though subscriber uptake and traffic volumes are
relatively low, the majority of consumers have regular occurrences of Quality of Experience issues while using
their mobile broadband service. This results in alarming customer satisfaction levels.

90% of Brazilian customers have Quality of Experience issues of some kind especially regarding core
aspects of the service such as slow speeds (75%), no connection and connections stability (73% and 68%
respectively) and network coverage (67%). Image quality issues show a much lower percentage, but still
affects over half the customers (51%). Only 10% of respondents state they haven’t experiences any issues.

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Quality of Experience issues are not isolated incidents with the vast majority of customers stating that
these issues occur frequently. Core service QoE issues caused by speed (67%), no connection and
connections stability (64% and 60% respectively) and network coverage (59%) occur the most frequent.
Image quality is perceived as the least recurring issue with 44%.
Dissatisfaction exists on certain elements of the service with price causing the highest level of
dissatisfaction by far at 45% (bottom 2 out of a 5 point scale). Core service dissatisfaction levels related to
stability (27%), download speeds (26%), signal quality (22%) and coverage (21%) are considerably lower.
Core service satisfaction levels are relatively high, especially when compared to the (frequency of) QoE
issues Brazilian customers have to deal with. 40% of customers are satisfied about the coverage and signal
quality (top 2 out of a 5 point scale), followed by speed (35%) and stability (34%). Satisfaction about
pricing levels is, as expected, extremely low at 23%.

Enormous untapped potential – With 65% of the research respondents having the capability to access the mobile
internet on their device, two thirds do not use this services, representing 44 million potential customers operators
can target. Of these prospects, 14% are considering the service, representing a core target market of 6 million. But
the single most important obstacle for consumers to even start considering the service is price (55% of non-mobile
broadband users). Once pricing models become less restrictive, mobile broadband can really take off.

Growing mobile broadband – A comparison with the mature mobile broadband markets in the US and the UK
provide 2 important lessons for Brazilian operators:

Pricing is the necessary trigger for subscriber uptake and data usage. Transparent pricing models such as
per day pricing, GB bundles and ‘all you can eat’, do not constrain the customer the way per KB/MB
pricing does. Even though, per KB/MB pricing is the most common pricing model in Brazil (39%), compared
to only 2% in the US and 4% in the UK.
Quality of Experience remains a challenge throughout the mobile broadband lifecycle, resulting in
considerable customer dissatisfaction levels. The mature markets even show higher levels of
dissatisfaction, with UK consumers the most dissatisfied about all the core service aspects speed (37%),
reliability and coverage (both 27%). The US scores slightly better on speed (33%) and reliability and
coverage (both 21%).

Preparing for growth – Looking ahead the lifecycle curve, learning from mature markets in the US, the UK,
Singapore and Australia, there are 3 areas emerging markets should focus on from the start:

Fairness policies - Consumers, once they understand the need for resource management, have a high
acceptance of policies that enable a fair allocation of the available capacity. Mature markets show 67%
support for such a policy. Many (35%) are even prepared to pay a premium if it provides improved QoE.
Video optimisation – In mature markets, 60% of video users will accept video optimisation as long as they
benefit from an improvement of those aspects of the service experience they find most important.
Paid Value Added Services – Mature markets show a clear need for VAS and willingness to pay an
additional fee for services like notifications, customisation etc. This provides a third area where operators
in emerging markets can immediately start building a more diverse and long term revenue model.
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Report synopsis

The results outlined below are based on the research Acision commissioned Quantinet to conduct in August 2010.

Mobile broadband usage – With 8 million subscribers, mobile broadband is still a niche service in Brazil.

51% of the respondents use the service daily and 18% at least ones a week
Fixed broadband is the most common way to access the internet (77%), compared to mobile access via
laptop (30%) and phone (16%)
48% of mobile broadband users are hybrid fixed/mobile users, 52% use mobile broadband only.
Video penetration stands at 26%, with 11% frequent users and 15% sporadic users

Quality of Experience of Core Service – These issues are widespread, with only 10% of the users having no issues.

Speed is the most encountered problem affecting 75% of the respondents, with 67% stating this issue as
their most frequently experienced problem.
All other core service aspects show considerable issues; no connection / staying connected (73% / 68%),
no coverage (67%) and low image quality (51%).
And all these issues occur frequently; no connection / staying connected (64% / 60%), no coverage (59%)
and low image quality (44%).

Customer satisfaction – Relatively high when looking at the amount and frequency of QoE issues.

Pricing is the main source of dissatisfaction with 45%, compared to 23% satisfaction.
Core service dissatisfaction levels (bottom 2 out of a 5 point scale); stability (27%), download speeds
(26%), signal quality (22%) and coverage (21%)
Core service satisfaction levels (top 2 out of a 5 point scale); coverage / signal quality (both 40%), speed
(35%) and stability (34%).

Untapped potential – Two thirds of the research respondents can access mobile internet but won’t. Hot prospects
are the ones planning to buy (14%). The biggest obstacle is price (55%). Other reasons; don’t need it (31%), not
reliable (13%), value unknown (11%), not available (6%), use unknown (5%), not offered (1%) and other (6%).

Growing mobile broadband – Can only happen if pricing models are stimulating uptake and usage. Per KB/MB
pricing models are most common in Brazil (39%), compared to 2% in the US and 4% in the UK. Other types of
restricted pricing models represent another 32% of Brazilian pricing models.

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2. The Mobile Broadband Life Cycle
With the widespread adoption of mobile broadband in many parts of the world, operators are entering a
fundamentally new playing field. Until recently, the mobile internet was a niche service reserved for business
users or the affluent consumer. However, today things are very different and mobile broadband is on the verge of
becoming telecom’s next mass market service. With its stellar growth, especially in recent times, the mobile
broadband service has become of vital importance to the future of mobile operators.

There is, however, more at stake than the classic topic of telco revenue. Broadband access is increasingly seen as
playing a vital role in society at large. Many countries are making broadband a key policy area and are increasing
regulatory control. Finland is a case in point, being the first country to designate broadband access as a statutory
right1. This is especially relevant to mobile broadband as large parts of Finland can only be reached through using
mobile technologies.

Clearly mobile broadband is here to stay and is providing operators with an excellent opportunity to create a new
long term revenue stream. Achieving long term success is, however, far from obvious and many challenges lie
ahead on the road to broadband profitability.

The mobile broadband lifecycle – igniting consumer adoption

Fundamental to understanding the challenges in mobile broadband is the lifecycle of the service (figure 1). A key
aspect in this life cycle is the occurrence
of exponential volume growth (the black
line in figure 1). At some point in the
lifecycle a massive explosion of
broadband traffic occurs which, in turn,
is a key driver for many of the issues
challenging mobile broadband
providers.

The exponential growth of mobile
broadband traffic is a result of two main
determinants:

1. Usability of the service is the main
prerequisite – Usability is a
combination of network capacity
Figure 1 – The mobile broadband lifecycle
which provides broadband access,
combined with a mobile device able to run on these networks that provide an intuitive internet experience.
The recent advances in both these areas, HDSPA and LTE for network technologies and devices such as
android devices, iPhones and, most recently, tablets have now created the fertile starting point for a true
broadband experience. Without this prerequisite, traffic explosion will not occur.

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2. Pricing models are a necessary trigger – only if consumers feel they can use mobile broadband without being
penalised for usage, will the service really take off. The data traffic explosion is triggered by transparent
pricing models such as per day pricing, Gigabyte bundles or even ‘all you can eat’ unlimited packages. This
allows consumers to use the service without feeling constrained. Once this point is reached, mobile
broadband will cross the chasm from being a niche service to a mass market mobility service which consumers
embrace and freely use anytime and anyplace they like.

The growth of data volumes – the continuous tsunami

Acquisition strategies as the all you can eat model have been, without doubt, very successful indeed. In fact,
mobile operators have, in a sense, become victims of their own success. Mobile broadband is proving to satisfy
such an important need in consumers that, once
7,000,000 TB per month
they start using the service in earnest, they find it
impossible to stop. As a result, data volumes in
mobile are rising continuously each year. In Latin
America, traffic is projected to grow at a CAGR of
92% CAGR 2010 - 2015
111% between 2010 to 2015, representing the
second highest level of growth of all the regions
worldwide2.

Traffic is not only changing in terms of volume. The
traffic mix in mobile broadband is also under
Figure 2 2 – Growth and breakdown of mobile broadband traffic
Figure – Growth and breakdown of mobile broadband traffic considerable change. Especially the share of time
(source: Cisco Visual Networking Index, 2011) sensitive, real time content will grow significantly
in mobile broadband. These are types of services
where packet loss or any delay in transmitting data has an impact on the user experience. Video, VoIP and gaming
are examples where round trip delays or packet loss can result in immediate Quality of Experience degradation
such as a stutter in a video or on a VoIP call. Current projections estimate the share of time sensitive content to
grow to approximately 70% of all mobile broadband traffic.

The data challenge for mobile broadband is therefore twofold. On the one hand operators have to deal with
significantly more traffic each year for which they have to size all their systems accordingly, including the
supporting infrastructure. In addition, they have to deal with traffic which is predominantly time sensitive. This
leaves very little room to manoeuvre for operators in terms of how they handle traffic, a topic explained in the
next section when we consider the impact on the operator’s technical infrastructure.

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Quality of Experience – ride the hype cycle

The explosion of data is not the only challenge that operators face in mobile broadband. Quality of Experience is
an often ignored second challenge that operators need to address. Many factors can influence the user
experience, but limited network capacity and congestion issues caused by the data explosion mentioned above,
are the most important ones. The crux of the challenge lies in the fundamentally constrained nature of mobile
broadband. Regardless of how much
one invests in network technology, the
demand for capacity will always outstrip
supply. When taking into account
specific cell locations, a relative low
number of consumers can already
create congestion issues. Because of the
physical constraints, consumer
experience will always be under
pressure as consumers compete for
limited available capacity. Consumer
experience therefore, takes centre
stage in the evolution of mobile
broadband and it represents the focal
point of consumer research Acision has
Figure 3 – The consumer hype cycle of mobile broadband undertaken around the globe.

We found the Gartner hype cycle (the red line in figure 3.) most effective in explaining the outcomes of our
research. Consumer expectations rise significantly during the early stages of mobile broadband introduction, to
such an extent that expectations are becoming inflated. The expectation in the early days of mobile broadband
that it could completely replace fixed broadband is a case in point. Although this is an inherent mechanism
accompanying many technology lifecycles, operators would do well not to fuel such expectations. Focus on
managing Quality of Experience enables operators to manage the hype cycle much more effectively and reach a
plateau of enlightenment and productivity earlier in the lifecycle.

Acision therefore believes that the Quality of Experience of mobile broadband is essential going forward. It
represents a key area where capabilities should be deployed to measure and enhance the Quality of Experience of
individual consumers. In this context it is important to realise two things. First, Quality of Experience is a very
personal concept. For some consumers price is an overriding concern while others find content quality more
important. Each consumer should be able to determine which type of experience is most suitable to their
individual needs. Secondly, Quality of Experience is all about the actual services being consumed such as video,
gaming, voice or browsing. It is at this level that the experience needs to be optimised and tailored to individual
consumer needs. This represents a step change from being packet aware to content and service awareness.

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Seizing the opportunity – a head start on differentiation

In terms of the mobile broadband lifecycle, many markets are now entering the first stages of maturity. The initial
acquisition stage has been very effective in making mobile broadband a service which is attractive to the mass
market. For Brazil, these more mature markets provide a valuable source of information on how to fuel Mobile
Broadband growth without compromising the Quality of Experience.

Profitability remains a key challenge for operators in mature markets, especially as they are forced to move away
from the ‘all you can eat model’ and are frantically looking for ways to differentiate their offering and dig into new
revenue streams. Differentiation will be a core strategy for operators to deploy, creating value for targeted
consumer segments and monetising this value accordingly. The most essential element in building this value is the
consumer experience. Operators in emerging markets have the advantage they can start acquiring capabilities to
differentiate early in the lifecycle. A differentiated consumer experience at the content and service level
represents the key to the continued successful growth of the mobile broadband market.

3. The Operator Challenge
As mature markets have shown, the initial success of mobile broadband can be partly attributed to the "all you
can eat” and “flat fee” pricing models, providing clarity to consumers with little risk of bill shock. Our research has
shown that in the US, for instance, only 2% of consumers
state paying per Megabyte (figure 4) a comparable number
to the UK (at 4%). Other markets, such as Singapore and
Australia have under 10% on MB pricing models. In Brazil,
however, over a third of all users are paying per megabyte.
Packages allowing 5 Gigabytes per month to unlimited usage
are very popular in mature markets, with over 50% of
consumers subscribed to such packages. For the US this is
even 84%. As part of the path to maturity, pricing models in
Brazil needs to introduce affordable and less restrictive
models, making the service more attractive and fuel mobile
Figure 4 – Per MB pricing in Brazil, US, UK, Sing and Aus broadband uptake.

The relatively unrestricted packages outlined above do have an important knock on effect on operator profitability
though. In order to handle the traffic and QoE demands, operators have to invest heavily in network capacity and
supporting infrastructure. As such, the costs associated with supporting the consumption of a single subscriber
rises significantly while the basic flat fee pricing models lead to a decreasing Average Revenue per User.
Profitability is therefore under severe pressure, with a number of operators that have already bitten the bullet,
including O2 UK and AT&T US, switching to a model with data caps3. These are just the first steps in defining new
pricing models. Much is still to come in this area and operator capabilities will be stretched to the limit to support
more innovative and targeted pricing models aimed at improving profitability levels.

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The root cause – oversubscription ratio in mobile broadband

The root cause of the profitability issue in mobile broadband is the oversubscription ratio or contention ratio. The
fixed broadband model has always been based on the principle that a megabit per second (Mbps) of ‘real’ capacity
could be sold many times to individual consumers.
This mechanism, which has served its purpose well in
fixed broadband, is failing in mobile for a number of
reasons. First of all, capacity in a mobile network is
much more vulnerable at the network’s edge; the
Radio Access Network (RAN). In a specific mobile cell,
RAN capacity can easily become very constrained as
more people move into the cell. In fixed this is of
course much more predictable as connected
households do not move around. Capacity in mobile
can therefore become exhausted easily in specific cell
sites, especially during certain times of the day.
Figure 5 – The issue of dropping oversubscription ratios
A second important characteristic driving the decline of mobile oversubscription ratio’s is the proportion of time
sensitive content in mobile broadband traffic. As mentioned above, up to 70% of mobile traffic is expected to be
long duration and time sensitive traffic such as video and VoIP. These services not only generate high levels of data
volume, but in addition, claim network capacity for a sustained period of time. A YouTube movie for instance,
depending on its quality, can generate between 0.5 to 2.5 Mbps of traffic. Assuming RAN capacity of 14.4 Mbps,
between 6 and 30 video users can claim the capacity of an entire base station. This combination of limited RAN
capacity and high time sensitive content, such as video, poses one of the core challenges in mobile broadband.

The network impact – connecting the IP and Mobile worlds

Addressing the oversubscription ratio issue requires an end to end analysis of the chain of delivering the mobile
broadband access service. In this service chain a number of fundamental issues exist:

The devices that connect to the internet come in an ever increasingly wider variety, ranging from laptops,
smartphones, netbooks and iPads to game consoles. Each device has its own characteristics, screen size, memory
capacity and usage patterns. Also the types of services accessed on these devices vary substantially, creating
highly unpredictable levels of demand in mobile data traffic and usage patterns.

The radio access network (RAN) has limited capacity, especially taking into account the unpredictable number of
concurrent users in a specific cell at a given time. In addition, many other factors can adversely impact RAN
capacity, such as interference from other radio sources or atmospheric conditions.

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The core network is by nature an IP network which is only packet-aware. The core network therefore doesn’t
‘know’ what types of services it is processing. Take the delivery of a time sensitive video for instance. At a packet
level, the network might be functioning perfectly, while the actual service is compromised because of round trip
delays or packet loss. The core network can therefore not understand such Quality of Experience issues and is not
able to optimise the service at this level.

The IP network (‘the internet’) has the
same characteristics as the core network
but with significantly higher capacity.
Under the right circumstances, the levels
of traffic it can potentially generate are
able to overwhelm the mobile network,
in particular the GGSN at the mobile
edge and, of course, the downstream
RAN network and base stations.

Content providers, finally, tend to
assume there is unlimited capacity to
the consumer which, of course, clearly is
not the case. They are not fully aware of
Figure 6 –The mismatch between the IP and mobile networks
the potential constraints that can occur
en route towards the mobile device. As a result, they are unaware of the QoE level of the content they provide.

A fundamental disconnect therefore exists between the two ultimate ends of the mobile broadband chain; the
content provider and the mobile consumer. This disconnect is caused by a lack of Content Admission Control:

There is no end to end management of content as a the delivery networks are only packet aware. There is
no specific mechanism in place to ensure the content is delivered in an optimal way. In particular, no
decisions are made to prioritise certain packets, because they represent a time sensitive audio stream for
example, over other packets which are non-time sensitive. A p2p packet, for instance, can easily be
delayed in preference to a VoIP packet without impacting the service experience.

There is no end to end resource awareness prohibiting content providers to incorporate end user capacity
as part of the content delivery. If the video content provider such as YouTube, for instance, would be
aware that the consumer only has 300 Kbps of capacity, it could stream a version of the video which
meets those capacity requirements.

There is no end to end consumer awareness which is required for tailoring the Quality of Experience to a
specific consumer. A good example are cost conscious consumers, which our research has identified as
15% to 25% of the population. These consumers prefer all content to be as compressed as possible in
order to save on bundle use. Another example are corporate consumers, who are willing to pay an
additional fee for a premium VoIP service which prioritises all their VoIP traffic. In order to enable these
types of scenario’s the network needs to be both consumer and Quality of Experience aware.

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Seizing the opportunity – maximise network utilisation

The disconnect between content provider and
mobile user needs to be addressed in order to
increase the oversubscription ratio as well as
improving Quality of Experience levels. In terms
of network capabilities this is where we believe
operators should seize the opportunity; by
adding Content Admission Control capabilities,
making the end to end network content,
resource and consumer aware.

Only by adding these levels of awareness will it
be possible to manage content in such a way
that the network resources are fully utilised .
Also, it increases the oversubscription ratio,
enabling more simultaneous users on the
network. And finally, these three levels of
awareness allow end to end management of the
Quality of Experience for individual consumers Figure 7 –Introducing content admission control

Obviously capabilities are required between the mobile and IP networks to enable end to end content admission
control. These capabilities will be discussed in section 8 of this document.

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4. The Consumer Perspective
In August 2010, Acision commissioned research with Quantinet, aimed to understand in greater detail the specific
consumer perceptions and needs in the Brazilian mobile broadband market. The research shows there exist clear
opportunities for mobile broadband providers in Brazil.

First and foremost, the research confirms the increasingly important role of mobile broadband in Brazilian
consumer’s everyday lives, with 69% of Brazilian consumers accessing the internet with their mobile broadband
service at least once a week and over 50% on a daily
basis (figure 8). Secondly, the research shows there
exists a significant untapped Mobile broadband
potential and the opportunity to accelerate subscriber
uptake. Finally, the research provides a useful insight
in ‘preparing for growth’, using the research findings
from mature markets like the US and the UK. This
allows Brazilian operators to prepare for future
growth, learn from the challenges faced by operators
in mature countries today, and obtain a clear
Figure 8 – Mobile broadband frequency of use
understanding of the opportunities that emerge during
the mobile broadband road to maturity. With fairness policies, content adaptation and paid for value add services
showing high consumer acceptance in mature mobile broadband markets, the necessary technological capabilities
can already be adopted by Brazilian operators early in the mobile broadband lifecycle.

Untapped potential – connecting the next 44 million

The research identifies a substantial untapped mobile broadband potential in Brazil. With 65% of the research
respondents having the capability to access the mobile
internet on their device, two thirds do not use mobile
internet services. This indicates there are potentially 44
million Brazilian consumers that operators can target
directly with attractive mobile internet offerings.

In particular, the research shows that 14% of non
mobile internet users are already considering to start
using the service, representing over 6 million potential
new customers (figure 9). Another 11% are unaware of
Figure 9 – Perception of non-mobile broadband consumers the value or the types of services mobile internet
provides (5%), representing another 7.3 million of potential customers. But the biggest obstacle for consumers is
the price. Over half of the consumers (55%) that are able to access mobile internet services, won’t do so because
they find it too expensive. With 39% of mobile broadband subscribers paying per MB (figure 4), pricing is clearly
the most important barrier to increased market penetration. This is a clear demonstration that Brazil is still in the
early stages of the mobile broadband lifecycle. Once pricing starts to become less restrictive, operators should
prepare themselves for exponential traffic growth and the associated challenges it poses.
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Quality of Experience – core service already under pressure

Quality of Experience of the core service is already creating issues for consumers in Brazil, even though
penetration levels are still low (figure 10). The significant
majority of consumers have experienced problems with
the service, with only 10% of the respondents stating
they have experienced no issues in the past. The majority
of issues relate to the network with speed causing issues
for 75% of consumers. Also 73% of the users were not
able to connect at a certain moment and if connected,
68% has experienced issues staying connected. Network
coverage has been a problem for two thirds of users.
Issues not related to the core network, such as image
Figure 10 –Consumers with QoE issues quality, have significantly lower numbers.

When considering the frequency of these issues, connection speed again tops the poll with 67% of respondents
stating this is a recurring issue (figure 11). Also the other core service issues pose a recurring problem for the
majority of users, with no connection (64%), staying
connected (60%) and no coverage (59%) all affecting
the vast majority of users. Even though image quality
is perceived as the least recurring issue, with 44% it
still affects a significant portion of the subscribers.

These outcomes, the number of users affected as well
as the frequency of issues, are significantly higher
than in any of the other more mature markets Acision
has researched. Figure 11 – Frequency of QoE issue

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Satisfaction levels – pricing is key dissatisfier

With Brazilian customers having relatively high Quality of Experience issues, one would be tempted to expect
satisfaction levels to be very low. But surprisingly enough, this is not the case (figure 12). Although dissatisfaction
levels on core service aspects are between 21% and 27%, more consumers tend to be satisfied with core service
performance. Coverage, for instance, is rated by 21% of
users as poor, compared to 40% rating it good. The same
is true for signal quality, with 22% rating it poor and 40%
good. And even though speed poses the largest QoE
issue, significantly more users are satisfied regarding this
service aspect (35%) compared to dissatisfied (26%).
Service stability shows similar satisfaction levels, with
34% rating it good and 27% poor. The key dissatisfier, by
far, is not the core network but pricing with 45% of
consumers being dissatisfied about the price compared
to 23% being satisfied. This is again completely in line
Figure 12 – Customer satisfaction levels with Brazil’s position on the mobile broadband life cycle.

The relatively high levels of satisfaction, in light of the Quality of Experience issues, is another example of the early
stages of the market and the effects of the hype cycle in these early stages. For many consumers today’s
experience is their first exposure to (mobile) internet and attitudes toward the service are mainly one of
excitement and exploration. The fact that they can access the internet from a mobile device opens up a whole
new world and provides a positive experience on its own. Once consumer progress along this hype cycle,
operators will find it more difficult to satisfy customers deepening the challenge of customer satisfaction.

17

5. Comparing Brazil with Mature Markets
As part of our global research initiative, Acision commissioned independent research agency Yougov to conduct
consumer research in the mature markets of the US and the UK. This provides an excellent opportunity to
compare the ways in which consumers experience their mobile broadband service in the emerging market of
Brazil with those in the mature markets of the UK and the US.

Mobile broadband – crucial for Brazilian broadband penetration

Mobile broadband in Brazil is still a niche service, with 8 million subscribers on a population of 190 million. In the
UK and the US on the contrary, Mobile broadband is well on its way of becoming a mass market service, with 18
million subscribers in the UK (on a population 62 million) and 120 million subscribers in the US (on a population of
309 million)4. In Brazil, 77% of consumers uses a fixed line connection to access the internet, compared to 16%
235%
using a phone and 30% a laptop dongle (figure 13). With
Laptop
201%
penetration only at 123%, it shows that Brazilian consumers
Phone
are highly dependent on their fixed line connection. In the
Fixed
US and the UK, consumers are far less restricted in the way
123% they want to access the internet. Phone and laptop dongle
access show similar or even higher penetration than fixed
line access. The US has an overall penetration of 201%, with
an almost even spread between fixed line (70%), Phone
(67%) and laptop (64%) access. The UK has the highest
overall penetration with 235%, with laptop access (85%)
Figure 13 – Accessing via fixed, phone or mobile more popular than fixed line (82%) and phone access (68%).

Even though the majority of Brazilian internet users still depend on their fixed line access (figure 13: 77% points
out of 123%), there are signs of change. The research shows that for the majority of mobile broadband subscribers
(currently 30% points out of 123%), it is their only way to access the internet (52%). Only 48% of Brazilian mobile
broadband subscribers also have fixed access (Figure 14). Mature markets like the US are very different, as 20% of
the subscribers use mobile broadband only and 80% use
both mobile and fixed. Subscribers in the UK show even
higher levels of hybrid usage, with 17% using mobile
broadband only and 83% using both fixed and mobile. So
where mobile broadband in the US and the UK is in many
cases a supplement to fixed broadband, for Brazil it is a
necessary service with limited to no alternatives. The
limited availability of a reliable fixed broadband
infrastructure makes mobile broadband a strategic service
for Brazil, much more so than in the US and the UK where
an extensive and reliable fixed broadband infrastructure is
available. Figure 14 – Mobile only vs mobile and fixed use

18

The lifecycle – growing mobile broadband

In section 2 of this report we have discussed the mobile broadband life cycle model which allows us to compare
different countries based on their position onf this life cycle (figure 15) . Before comparing the research results, it
is important to understand how each
market is advancing on the Mobile
broadband lifecycle and how they are
positioned against one another. Mobile
broadband penetration in Brazil is low
with only a few percent generating

CUSTOMERT SATISFACTION
relatively low traffic volumes (figure 15,
black line). In order to accelarate
TRAFFIC VOLUME

consumer adaption, the main operator
focus in this stage is on acquisition driven
strategies. The introduction of attractive
CSD GPRS EDGE HSDPA HSDPA+ LTE LTE+ ?
pricing models with limited or no
2000 2002 2004 2008 2010 2012 2014 2016
CUSTOMER PENETRATION constraints will provide the necessary
Figure 15 – Maturity and the hype cycle: Brazil vs. the UK and the US trigger required to fuel penetration.

In the US and the UK penetration levels are well above 25% and traffic volumes are growing exponentially. In
order to support this growth, massive network investments are required and profitability is under severe pressure.
As a result, operators in these markets have abandoned the acquisition driven pricing models and shifted their
focus to profitability driven strategies.

Part of the mobile broadband lifecycle is the consumer hype cycle, which tracks how Quality of Experience
develops throughout the lifecycle (figure 15, red line). For the majority of users in Brazil, this is their first
introduction to mobile broadband (or perhaps even the internet). Satisfaction levels will therefore always be high,
even if the service experience is relatively lacking. The mature users in the US and the UK, with the innovative
edge gone, have become more critical about service quality creating downward pressure on Quality of Experience.
It is these relationships which explain the outcomes of the Brazilian research.

Pricing models – the necessary trigger

As described in section 1, mobile broadband can only really take off if consumers feel they can use the service
without being penalised for usage. Subscriber uptake and data usage are triggered by transparent pricing models
such as per day pricing, Gigabyte bundles or even ‘all you can eat’ unlimited packages. This allows consumers to
use the service without feeling constrained. Once this point is reached, mobile broadband will cross the chasm
from being a niche service to a mass market service which consumers embrace and freely use anytime and
anyplace they like.

19

Figure 16 – Consumers paying per KB/MB Figure 17 – Dissatisfaction on price

In the US and the UK, pay per use pricing models have almost completely been replaced by bundles or ‘all you can
eat’ packages. In Brazil however, over a third of all consumers is still paying per KB/MB (figure 16). In addition,
another 32% is on a package with restrictions, where they have to pay extra if they exceed their limits. As a result,
around 70% of Brazilian users have a subscription that penalizes use in some way.

The restrictive nature of the pricing models translates into significant dissatisfaction on price. In Brazil pricing
dissatisfaction stands at 45%, which is one and a half times the US level and more than twice as high compared to
the UK (Figure 17). The pricing models in Brazil not only create a barrier to stimulate traffic consumption, they also
constrain further mobile broadband penetration. As mobile broadband is the only option to access the internet for
many Brazilians the need for the service is very high. This represents a great opportunity to grab market share by
operators willing to introduce pricing models which will stimulate consumers more to start using the service.

Service usage – frequency vs. video

Mobile broadband proves to be part of everyday life in all markets when looking at frequency of use (figure 18).
Even though Brazil has the lowest number of mobile
broadband users accessing the service at least ones a week
(62%), they are not that far behind the US (70%) and the UK
(77%). The difference between users accessing the service on a
daily basis is even lower, with approximately 50% of US and
Brazilian consumers accessing the service on a daily basis,
behind the UK with 58% of daily users. The high frequency of
use by Brazilian consumers is probably related to the fact that
the majority of users only accesses the internet via mobile
broadband. This will also include more family and household
usage with multiple people using a single mobile broadband
Figure 18 – Using the service > once a week
connection.

20

Streaming video including services such as YouTube, is becoming more popular every day and is predicted to
generate over two thirds of all mobile broadband traffic in 2014. In the US, already 49% of mobile broadband
subscribers are watching videos (figure 19). For the UK this is 36%. In Brazil however, only 26% of mobile
broadband subscribers watch video. Of these users, only
11% frequently watch video and 15% state they watch it
sporadically. This doesn’t come as a surprise with the
majority of Brazilian consumers either on a per KB/MB
package or on a restricted package, which prevents them
from using high bandwidth applications like video. So even
though Brazilian consumers are frequent users, they are not
consuming the same data volumes as their counterparts in
Figure 19 – Video Users
the US and the UK.

Quality of Experience – a challenge throughout the lifecycle

In Section 4 we discussed that Brazilian consumers are already faced with significant Quality of Experience issues
regarding the core service, with speed, reliability and coverage causing the majority of problems. As these issues
are occurring at mobile broadband penetration levels below 5%, and well before the exponential traffic explosion,
a comparison with mature markets can provide useful insights how Quality of Experience issues develop during
the Mobile broadband lifecycle.

Even with the previously outlined QoE issues, consumer dissatisfaction on core service aspects is lower in Brazil
than in mature markets (figure 20). UK consumers are on
40%
37% Speed average the most dissatisfied about the core service. Of the
33%
Reliability
core service aspects, speed is by far the biggest cause of
30% 27% 27% consumer dissatisfaction in the US (33%) and in the UK
26% 27%
21%
21%
Coverage
(37%). Reliability is the leading cause of consumer
20%
21% dissatisfaction in Brazil (27%), closely followed by speed
(26%).
10%
Despite investments of billions of dollars in network
expansions and upgrades, consumers in the US en the UK
0%
Bra US UK are still faced with significant problems in core service
Figure 20 – Dissatisfaction about core service aspects performance. It is clear from these numbers that Quality of
Experience will increasingly become an important issue for
consumers and operators. Although networks will become more powerful and able to handle more traffic and
concurrent users, pure network investment alone will not prove enough to avoid this upward curve. With traffic
growing exponentially and consumers becoming more critical as the service matures, operators will need to de
more to maintain, let alone improve quality of experience.

The challenge to operators is therefore to do more in addition to rolling out state of the art telecoms networks.
The next section will explore the avenues operators can take to seize the opportunity and make the most out of
their investments.

21

6. Preparing for Growth
When looking ahead on the lifecycle curve, there are three key areas operators in emerging countries should focus
on from the moment they introduce mobile broadband:

1. Introduce fairness principles that secure fair distribution of bandwidth.
2. Optimise specific services, such as video, to improve Quality of Experience.
3. Differentiate the service offering to increase customer choice, satisfaction and revenues.

Deploying capabilities in these areas will enable operators in emerging markets such as Brazil to early address the
QoE and profitability issues that operators in mature markets are struggling with today. Most importantly, the
outcomes of our research in mature markets demonstrates that high levels of consumer buy-in exist to deploy
these capabilities. Providing value add in areas such as fairness, service optimisation and differentiation is
providing consumers with services they are explicitly asking for. By catering to these demands, operators in
emerging markets would be in an ideal position to seize the opportunity early on in the life cycle and combine high
level of acquisition with strong levels of customer satisfaction and loyalty. In the following section this promising
outlook will be discussed. The results are based on Acision’s research in the UK, US, Singapore and Australia
providing clear guidance to what lies ahead.

Fairness principles – securing fair distribution of bandwidth

Fair use policies of some kind are being deployed by most providers of fixed and mobile broadband. Consumer
awareness globally of these fair use policies is, however, quite
limited with 63% of consumers not aware whether they have
a fair use policy as part of their service (figure 21). So only
37% of consumers is aware whether a fair use policy is in
place or not. When asked about the underlying reasons for
fair use policies, consumers are, however, quite unaware why
operators have implemented such policies.

When asked if they are aware that a small percentage of users
can generate the majority of network traffic and therefore Figure 21 –Do you have a Fair Use Policy?
negatively impact the experience of all users, 64% states they
are not aware of this issue (figure 22). Another 9% is unsure
which basically equates to not being aware of the consequences.
So only 27% of consumers are aware that a relatively large part of
the available mobile broadband resources can be claimed by
individual consumers at the expense of others. Without such
awareness, it is less likely customers will accept certain fairness
measures that secure a better overall QoE for all users. Raising
customer awareness of such key technological and business
issues should therefore be an essential operator objective.
Figure 22 –Aware of network abuse

22

Once consumers have a better understanding of the reasons behind fair use policies, they are able to consider the
value that applying fairness principles can provide. At the same time, it is very important that customers
understand how the fairness principle applies to them personally and how it enables a better QoE for all.

When asked if they would allow the operator to apply a fairness policy in order to improve the QoE, on average
15% of consumers globally stated categorically they would not
accept such a policy (figure 23). Two thirds of consumer
would, however, accept fairness policies with another 18% of
consumers who could possibly be persuaded to accept a
policy, probably if they better understand the impact.

In conclusion, there is a clear support for fairness principles, as
long as consumers are made aware of the necessity and the
impact on their personal QoE. Awareness can be created
through education campaigns explaining the constraints of Figure 23 – Support for fairness policies
mobile broadband and policy acceptance increased by pro-
actively informing consumers about the applied policy, reason and intended outcome. This provides an excellent
opportunity to actively manage the available broadband capacity for the benefit of the majority of consumers.

Content Optimisation – improving video Quality of Experience

A second key capability operators can deploy is content optimisation, especially in those cases where it improves
the consumer experience. Streaming video is a good example of a popular service where operators can realise
impressive QoE improvements. The global research shows that consumers are most annoyed by videos that pause
frequently or take a long time to download. Also, they are hardly at all worried about lower quality in full screen.

This understanding of Quality of Experience preferences provides essential input for optimizing the video service.
Operators can play with the buffer time and quality of the video
as long as they ensure that once the video starts running, it does
so uninterrupted. This way, content optimisation can significantly
enhance consumer satisfaction. When specifically asked whether
they would accept video optimisation (figure 24), 60% of
consumers explicitly confirm they would accept such an approach
or would contemplate it (17%). Only 23% of consumers would, at
present, oppose to such an approach.

Figure 24 –Acceptance of video optimisation The support for a combination of picture and video optimisation
proves to be even stronger; when asked if they would
contemplate to pay for a service enabling compression of videos and pictures in order to save on the data bundle,
29% confirmed they would (figure 26). This 29% of global consumers represents a marketable segment of cost
conscious consumers that are very willing to sacrifice content quality to improve on spend. It clearly shows that
when it comes to content, consumers considers a variety of parameters of which content quality is just one.
Consumers are very well able to determine which trade-offs they want to consider in order to create their optimal
personalised services combination.
23

Differentiate the offer – add monetisable value to the service

The final area focus is on the potential of service differentiation, which provides the opportunity for mobile
broadband ARPU growth and competitive offerings.

First the question was posed whether consumers would be prepared to pay for an overall Quality of Experience
improvement of their mobile broadband service. As figure 25
shows, 35% of global consumers are willing to pay for an
improvement in their current Quality of Experience, with 20%
not sure yet. This provides a clear opportunity for a marketing
strategy which targets high value consumers willing to pay
more for an improved overall service.

In terms of value added services (VAS), the focus of the
research is to ascertain whether there is an intrinsic need and
interest in value added services which can be monetised.
Figure 25 – Pay for improved QoE? Many more considerations can be made to determine in depth
which specific VAS services generates the highest revenue
potential and further research in this area will certainly be valuable. Such a deep dive will, however, require much
more than the panel research used for this report. As such, the revenue opportunities investigated in this research
should be seen as preliminary input for a more detailed consumer propensity study.

The panel research shows a clear monetisable opportunity in VAS, with the majority of respondents stating
interest in one or more paid services. Each of
the polled VAS services could provide a solid
foundation for a marketable consumer
segment:

1. Notifications at predefined spend limit
(41%)
2. Bandwidth equally shared between as
many users as possible, ensuring
connection stability and maximum
download speeds (35%)
3. Spend control / prevent bill shock (35%)
4. Roaming package with predefined
Figure 26 – Support for paid value added services
conditions when connecting to a foreign
network (34%)
5. Shared bundles like sharing usage allowance with family members (33%)
6. Service customisation like personalised video and picture quality settings (30%)
7. Content compression of video and pictures, allowing more downloads with the same usage allowance (29%)
8. Priority providing the user with higher speeds or more bandwidth (26%)

24

7. Converging Eco Systems – Telco’s in the Internet World
Perhaps most fundamental to mobile broadband is the fact that two previously separate eco systems are getting
increasingly closely intertwined. Operators entered an entirely new ecosystem which is driven by content,
accessed in many different ways and provided in even more varied formats and business models. In this content-
driven ecosystem operators need to develop fruitful relations with its key actors, especially content providers,
(content) consumers and regulators. Two aspects of this
eco system are especially important as they are raising a
Consumers
lot of publicity. Information, productivity,
communication, entertainment

Regulators – achieve sustainable net neutrality

First of all, operators should consider playing a leading
role in the net neutrality debate. For some, the concept of Regulators
net neutrality means providers should treat all consumers
equally in terms of internet use and access, preventing
them from inspecting, shaping or controlling any traffic Network Operators Content Providers
running over their networks. However, mobile broadband Run a sustainable and profitable Ubiquitous access and content
business ownership
capacity is a physically constrained resource where
demand fundamentally outstrips supply for the foreseeable future. If left ‘free’ and unchecked, congestion
becomes a permanent feature of the mobile broadband service turning it into a service which is very difficult to
use in any real sense of the word. Also, it does not consider the interest of all stakeholders involved. Operators,
content providers, regulatory bodies and consumers need to work together to agree on a clear definition of
‘fairness’ that can be applied uniformly across the market. The debate is essential to the fundamentals of the
industry and it is essential that all parties, including operators, are heard to ensure a fair and sustainable outcome
is achieved. For operators there is an opportunity to lead in this area and build a reputation of internet
transparency, fairness and trustworthiness.

Content providers – delivering the mobility experience

Secondly, the internet ecosystem provides fresh opportunities for operators to leverage internet based content
within the mobile domain. Operators need to look for ways to partner with content providers and create a
differentiated content offering that is beneficial to the consumer as well as the content provider. On top of this,
alternative business models can be developed. This of course places very different demands on mobile providers,
creating wholesale type relationships with certain content providers, including developing capabilities in areas
such as content mediation. This creates a completely new space in terms of consumer interaction, revenue
potential, business models and capabilities for operators to occupy and develop.

The Acision research shows consumers are looking for value add on top of their basic access service. In the end
consumers are most interested in the service itself, not the access method providing it. This provides a great
opportunity for content providers and operators to work together and develop the next wave of killer apps.

25

Seizing the opportunity – leverage the content eco system

A key opportunity exists within the content eco system to harness and leverage its inherent power and
capabilities. The net neutrality debate should be taken as an opportunity by all stakeholders to define terms of
engagement which are beneficial to all, consumers, operators and content providers. Going forward we believe
the following aspects are key requirements for a successful evolution of the content eco system:

1. The development of the mobile content eco system considers the specific challenges of mobile broadband,
especially the issues of volume growth and low oversubscription ratio’s. Operators should be allowed to
deal with these fundamental challenges which threaten to erode the business model.

2. The Quality of Experience (QoE) of the internet service is one of the key considerations going forward. Our
research shows that consumers have very different opinions on what is important in a service. For some it
is price, for others it is speed or uninterrupted play. In order to deliver on these consumer expectations,
operators should be allowed to optimise the service for specific consumers.

3. It is of course vital that consumers are able to choose their preferred QoE based on unambiguous and
transparent information. If presented with a choice, they are able to make considered decisions on which
aspects of the service they value most. Consumers should not be denied this choice.

4. The affordability of the internet service is another important requirement for de the development of the
eco system. In this information age, internet access can rightfully be consider a fundamental human right.
A low cost no frills package that is affordable for nearly everyone has to exist . Such a service can only exist
if there is a wide range of premium value added services that will subsidise such a basic package. In order
to create these levels of differentiation, operators need the capabilities to enforce different service levels
and monetise them, just as any other business.

5. The fair treatment of all stakeholders in the eco system, consumers, content providers and network
operators alike, is another vital requirement in a constrained resource. Especially as it is inevitable that
demand outstrips supply and consumers continuously contend for more capacity than is available. The
only way to deal with this is to apply fairness principles. Is it fair that some people take the lions share of
available bandwidth just because they are smarter internet users? Should someone who has been
watching video’s all day be treated exactly the same as someone who is just logging on? Clearly not.

6. Transparency and accountability of operators towards consumers and regulators is the bedrock of a
successful content eco system governed by sustainable net neutrality principles. Given the importance of
information and internet access in today’s society, mal use by any party in the content eco system, be it
certain consumers, content providers or operators, has to be avoided. Operators and content providers
should equip themselves to provide these levels of transparency and accountability to any party who is
rightfully requesting such information.

26

8. Seizing the Opportunity in Mobile broadband
It is difficult to overestimate the impact of the mobile broadband challenges outlined previously. Current data
consumption levels are already causing network congestion and seriously impacting the Quality of Experience. The
majority of growth is, however, yet to come. The investments in core network and backhaul capacity required to
deliver acceptable Quality of Experience levels will therefore be very significant indeed. As backhaul cost alone
typically represents 30% of operator OPEX, these investments could fundamentally undermine the mobile
broadband business case.

The challenges in Mobile broadband cannot be solved by simply throwing more network capacity at it. Even if it
were possible to create such capacity levels in the Radio Access Networks and core networks, the investment
levels alone would destroy the business case. A more comprehensive and broader approach that addresses all
essential areas is therefore required.

In order for Mobile broadband providers to establish a sustainable business model with a healthy profitability
level, Acision believes the following business priorities are essential.

Grow ARPU by enabling a differentiated service offering

Increasing revenue per subscriber is achieved by increasing the perceived value of the broadband service, enticing
consumers pay a premium. Our research shows that consumers want
value added services and are willing to pay additional fees for it. The Consumer
Segment
need for a personal Quality of Experience is clear demonstrated. The
Price Speed
ability to target different segments by differentiating the service and
Tiered
providing value added services is essential in achieving this. Especially Packages
Priority & Location
the mobility aspects of mobile broadband provide a rich set of possible
Pricing
differentiation parameters to be deployed. This requires a step change
Application Time
in operator capability in terms of controlling the service. If higher value
segments are created, it is essential that the agreed Quality of Bundle

Experience levels of these premium services are met.

Decrease cost by maximising network utilisation

The required network capacity to handle peak concurrent users is the single most important factor in determining
cost levels in mobile broadband. With oversubscription ratio’s significantly lower than in fixed broadband, mobile
operators need to find ways to spread the limited capacity much more efficiently over the customers using the
service at any given point in time.

Operators therefore need to control traffic levels at certain peak times, locations, service types and specific
individuals to free up capacity. By making more efficient use of the network and spreading the freed up excess
capacity over other users, the network cost per user can be brought down. In essence this is a matter of
maximizing network utilization, ensuring network demand is spread out evenly over the day and the number of
concurrent subscribers that can be supported is maximised.

27

Control QoE by managing relevant service aspects

In such a constrained environment, Quality of Experience is evidently under pressure. Acision’s global consumer
research confirms this is clearly the case in every country and region. QoE issues are not exclusively related to core
access service aspects as coverage, connection stability and speed. More importantly, the QoE of services running
over these networks are at stake. Video is a case in point where considerable issues exist in key video QoE aspects
such as time to screen and video stalling. These issues are widespread in all regions worldwide, ranging from
growing economies such as Brazil to highly developed and densely populated countries such as Singapore.

In addition to increasing network capacity, ensuring a fair distribution of available network resources will be
essential in raising Quality of Experience levels. A capacity constrained environment can only provide high levels of
QoE by enforcing fair distribution of the limited resource between the many users of the service.

In the end, however, it is all about the actual service itself. It is services such as video, VoIP, browsing and gaming
which consumers are enjoying, not ‘megabits per second’. Only if operators are able to optimise the relevant
aspects of these services, taking into account variables such as identity, device, location, service and congestion
level, will they be able to deliver personal Quality of Experience levels for each individual customer. This again sets
requirements on operators far beyond today’s capability levels.

Enable value driven engagements with content providers

The net neutrality debate is as much a potential threat to operators as it is a great opportunity. Operators should
actively participate in this debate and seek new ways to create value by working closely together with
stakeholders such as content providers, creating differentiated types of services. In addition, operators can start to
compete on reputation in terms of openness, transparency and accountability in the internet eco system. To
achieve this, operators need to become conversant with a new set of stakeholders, especially regulators and
content providers. They need to provide full transparency on the types of interventions they undertake and
provide full accountability to individual consumers as well as regulators. In delivering content to consumers,
operators can play a crucial role by mediating the most appropriate content based on available network capacity
and device capability. This would enable a truly pro-active content delivery approach, matching source content
with available capacity and capability at the receiving end of the value chain. Imagine the impact of such an end to
end delivery approach on future service offerings and quality of experience levels.

Most importantly it is clear that consumers want the operator to address bottlenecks in the content eco system.
Our research shows that consumers expect operators to optimise their content on their behalf. For some the
driver is improving QoE in areas such as video stalling and time to screen. For others it is about saving money by
compressing all content so their bundle lasts longer. In any case, when operators take a proactive role in the
content eco system, it will be a substantial benefit to all stakeholders involved.

28

Required capabilities – the mobile broadband investment agenda

To achieve the business priorities outlined above, a step change in operator capabilities will be required. In order
to achieve maximum network utilisation and a differentiated consumer offering which is underpinned by accurate
and effective fairness policies, unprecedented levels of control are necessary. Additional capability is required in
three main areas.

Data Enforcement - Provides high performance and reliable components that handle all network traffic. As a
result the Data Enforcement Solution needs to scale very efficiently in order to support hundreds of Gbps of traffic
at cost effective levels of investment. Its key capabilities include traffic insight into consumer, service and network
behaviour, deep packet inspection,
traffic shaping and flow control.

Content Optimisation - Provides fit
for purpose components which are
needed to optimise specific
content services such as video or
browsing. These types of
components provide a highly
specialised and dedicated
capability which handles all Quality
of Experience aspects of the
specific service. The Content
Optimisation Solution also reduces
data traffic peaks at a minimum
hardware footprint, while maximising Quality of Experience. It provides key capabilities such as video flow control,
video optimisation, web optimisation and content detection.
Policy Management - Provides highly intelligent components that are required to enable real-time, complex and
rich decision making. These capabilities allow the Data Enforcement and Content Optimisation capabilities to be
applied intelligently based on a wide range of criteria such as customer type, usage to date, available allowance,
time of day and many other potential variables. A Policy Management Solution is essential in enabling the
flexibility required to determine a targeted approach for each individual consumer, service and network event. It
contains a wide, integrated set of capabilities including policy control, quota management, event notifications and
location management.

29

About Acision
Acision (For more information, visit www.acision.com)

As a world leader in mobile data, Acision powers innovation and profitable growth in mobile data services. As the
pioneer of mobile messaging, Acision’s real-time mobile data solutions enable customers worldwide to drive new
revenues with innovative services while controlling, optimising and monetising data traffic.
Acision's proven products and services, experienced people and service innovation allows organisations to meet
the challenges in today’s converging telecommunications market. Acision is at the heart of its customers’ strategic
business services, working together to achieve profitable and sustainable growth. Acision’s recognised expertise
extends across a portfolio of propositions, products and services and is based upon a global track record, business
insight and leading edge technology platforms.

In Mobile broadband, Acision provides the following specific benefits to its customers:

Network independent position and vision – Acision is the only network vendor independent end to end
provider in mobile broadband, able to deploy its solutions in any type of mobile, fixed or converged
network.

Global mobile data leader and track record – Acision is a world leader in mobile data and has been
delivering real time mobile data solutions for over 15 years. All solutions within the Acision Broadband
Mobility Suite are carrier grade products which can be integrated and deployed immediately.

End to end, pre-integrated and tested – The Acision Broadband Mobility Suite is fully pre-integrated and
tested in our live reference installation. All our deployments are validated before shipment and
deployment. This significantly decreases the risk of integration and ensures at a business level that all use
cases are fully supported after deployment.

Single operating environment – Most mobile broadband solutions consist of disparate loosely integrated
components all operating under different operational regimes. The Acision Broadband Mobility Suite is
unique in providing a single operational environment for all the components it integrates into a holistic
solution.

Carrier class scale and execution – Scale and reliability at affordable levels of investment are essential
prerequisites for any viable mobile broadband solution. Our mobile data services solutions have over the
past 15 years adhered to these fundamental principles. Acision Broadband Mobility Suite is unique in its
low hardware footprint, availability levels and maintainability.

1
http://www.guardian.co.uk/technology/2009/oct/14/finland-broadband
2
Cisco, Visual Networking Index (VNI), 2011
3
http://www.telecoms.com/20933/o2-data-cap-protest-will-help-out-o2/
http://news.cnet.com/8301-17938_105-20006534-1.html
4
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