Increasing Telco profitability by enhancing user experience.
Telcos have spent billions of dollars on wireline and wireless broadband networks. Understandably, the emphasis to-date has been on increased coverage, higher speeds, and larger traffic volumes. However, this has led to commoditization and low return on capital. We argue that in the next phase of broadband, Telcos should focus on profit and there is an ideal opportunity to do so. It requires that Telcos understand the different application types, their relative value to users, and the relevant network metrics that determine user experience. This will allow Telcos to make the next phase of broadband more profitable by optimising their networks for high-value applications and pricing services according to value and user experience.
To illustrate the point, we consider five major categories of applications – subscription video, free video, social media, conferencing, and gaming. Using publicly available data on the industry revenue generated by each of these application types in Australia, combined with data measured by Canopus Networks on broadband traffic volume attributable to these per household, we estimate the “value-per-GB” of each application type.
Our study reveals that gaming is a startling 167x more valuable than subscription video, and 42x more valuable than social media, on a per-GB basis.
The implications are profound – Telcos can begin to increase their profits immediately. But to do so, they need to de-emphasise speed, which benefits low-value applications (e.g. downloads), and instead tune their networks to maximise user experience on high-value applications (e.g. gaming) that demand low latency, jitter, and loss . Monitoring and enhancing user experience is vital to increasing customer satisfaction, loyalty, and retention, while creating opportunities for new revenues from premium services for high-value applications. With anticipated explosion in traffic from cloud gaming, virtual reality, and the Metaverse, Telcos can begin to claw back some profit.