We're ready for the App Economy, but are operators?

• Ericsson believes that broadband ubiquity is directly related to affordability
• Sees out-of-the-box thinking leading to smart partnerships to tap rising data usage

TO readers of Digital News Asia (DNA) the key takeaway from recent research conducted by Ericsson, via its Ericsson ConsumerLab, will come as no surprise: There will be strong growth in the smartphone and tablet markets in Malaysia (click to enlarge charts below).
 
Focusing its research on the estimated 63% Internet users in Malaysia (according to government data) and their stated interest to get a smartphone or tablet over the next six months, smartphone penetration has the potential to rise from 47% to 73% and tablet penetration from 14% to 48%.
 
And with some industry analysts already calling this the App Economy, Ericsson’s research showed that the top three app groups popular with Malaysian smartphone users were entertainment, gaming, and TV and video apps.
[ED: It was earlier erroneously reported that the three app groups were for tablet users] 

While these numbers look unusually high versus some other research that DNA has covered in the past, Ericsson is only looking at the portion of Malaysians who are already online, be it via fixed or of mobile broadband. Research done by other parties takes into account the entire Malaysian population of 28 million.
 
Afrizal Abdul Rahim (pic, right), head of ConsumerLab South-East Asia & Oceania for Ericsson, adds a caveat however. “While we ask them about a 6-month horizon, the reality is that the decision to buy or upgrade will likely be made over an 18-month period.”
 
The Malaysian portion of the results came out of an online survey of 500 consumers aged 16-60. This was part of a survey of 58 countries covering a total of 47,577 people carried out by market research firm TNS.
 
For a vendor that makes its money selling software and hardware to telcos which provide the services that smartphone and tablet users need, the data that Ericsson shared pointed to one inescapable mega trend:
 
As more powerful smartphones and tablets hits the market and more consumers adopt them, data usage will keep shooting through the roof, to the glee of vendors like Ericsson which provide the pipes, microwave dishes, base stations and software that power the networks that deliver this data wirelessly to a consuming group that is increasingly mobile.
 
As Steven Tai (pic above, left), head of Strategy & Marketing for Ericsson Malaysia & Sri Lanka states: “Telecommunications operators need to ensure that their networks are tablet- and smartphone-ready, delivering superior coverage, speed and reliability and able to handle the demands of continued strong mobile data growth.”
 
How can operators best capitalize on this fast-growing segment? “They need smart offerings – and a smart network,” says Tai.
 
Afrizal describes it as having networks that are smart, scalable, simple and with superior performance.
 
Picking up on this theme of superior performance, Tai feels that the networks in Malaysia are just not there yet in terms of quality. The recent Malaysian Communications and Multimedia Commission warning that it is considering imposing mandatory quality standards is seen as the clearest signal yet that the regulator is losing patience with operators too.
 
He shares that his own experience traveling to neighboring countries has seen him enjoy a richer experience on his smart devices with faster responsiveness. He attributes this to the stronger focus on quality in these countries.
 
“We have been telling operators here that they will lose out if they do not deliver, as the consumer has choice with Mobile Number Portability. The consumer will go to the operator that gives them the best possible experience.”
 
Tai elaborates that experience here means latency, throughput and even sensitivity of the network with the various devices. Operators must ensure their networks are smart device-ready, and are capable of delivering superior coverage, speeds and reliability.
 
“Smart networks, which are user-, service- and content-aware, call for a holistic approach to network architecture with policy control that enables differentiated services and optimization of network resources.”
 
The urgency for a smart network is even more pressing with LTE (Long-Term Evolution) on the horizon because, as Tai notes, “the experience of other markets shows that once you have LTE networks and ready devices, the data traffic literally doubles in the space of a few months.”
 
To Afrizal, smart offerings go hand in hand with these smart networks. In other words, the telcos can then offer consumers packages that are affordable, simple to use and relevant to them.
 
“I could just be someone who uses social networks. I don’t want to pay for anything else and don’t want your unlimited networks. As a mobile operator, will you be able to meet my needs?” He calls this sachet pricing.
 
Already one telco, DiGi, is offering a plan called Facebook Zero where it does not charge the consumer an Internet plan for any traffic to that particular social network site. Tai calls this an “acquisition strategy” as the consumer is wooed to try more services which they have to pay for.
 
This is an important concept because Afrizal and Tai both strongly believe that ubiquity depends on affordability, even in developed nations, much less developing ones. And a key factor to making mobile broadband more affordable is to make it smart – for example, via the concept of sachet pricing.
 
Innovative business models can also help to make broadband more affordable, they contend. “With online banking so popular, what’s to prevent a bank from partnering with a telco and offering to subsidize or pay fully for customers’ Internet usage,” poses Afrizal.
 
This would encourage Internet banking, which benefits the bank, and the telco gets its revenue, but in return offers a special package to the bank. No bank has done this yet, Tai says, noting that this requires out-of-the-box thinking by both banks and telcos.
 
Both men seem confident that such smart partnerships will happen sooner rather than later.