Telecoms operators or carriers have long accepted the reality of diminishing returns of their voice business and have turned to data as a new revenue stream. However competition and intensification of competition from Over The Top (OTT) players have also forced operators to drive down their pricing for data bandwidth even as they offer faster connection and data rates at lower packages to keep subscribers.
In the quest for new revenue streams, operators have realized that two key assets of the network operator are its network and its billing relationship with the end user. According to Juniper Research Direct Carrier Billing (DCB) opens up the possibility of generating a revenue stream which may at least deliver revenue streams which equal, or even exceed, mobile network operator content revenues pre-storefront.
A new study from Juniper Research has found that carrier or operator billing will generate $9 billion annually for mobile operators by 2022, a threefold increase on 2017’s figure of $2.9 billion.
Figure 1: Total operator revenues from carrier billed goods and services, 2022 ($9 billion)
Source: Juniper Research
The researcher suggested that the implementation of carrier billing has the potential to benefit a raft of players across the value chain, including content developers, content publishers, aggregators and the consumers themselves. It also has the potential to increase the monetization opportunities for the providers of virtualized goods (such as tickets) and physical goods.
Opportunities and challenges
The study titled, Direct Carrier Billing: Forecasts, Player Strategies & Emerging Opportunities 2018-2022, noted that growth is increasingly being driven by bundled content such as Spotify (across Europe) and Netflix (in markets including the Philippines and Mexico).
It also new opportunities for carrier billing in sectors such as ticketing and physical goods purchases, citing the recent deployment by Amazon in Japan as a potential game-changer. However, it also stressed that for operators to compete effectively with card payments and players such as PayPal, they would need to accept a lower revenue share, reducing their cut from 15% or more to the single digit range.
The research also argued that operators needed to be more proactive in promoting carrier billing, but were currently being hampered by limited resource from their marketing departments, which were overwhelmingly focused on smartphones and package differentiation.
Juniper additionally claimed that even where carrier billing was in place, usage was often constrained by low spending limits designed to limit exposure to fraudulent purchases, an issue that could be addressed by implementing improved reporting platforms.
Juniper argued that by using carrier billing for acquisition, OTT content providers can reduce marketing costs by leveraging the brand name of local mobile operators.
Most significant underdeveloped revenue stream
Juniper argued that carrier billing was the most significant underdeveloped revenue stream for operators. According to research author Dr Windsor Holden, ‘The customer billing relationship is one of the mobile operator’s greatest assets, but consumers are often unaware they can use their phone bill to pay for a wide range of goods and services.’
The Juniper whitepaper, Maximising Sales Through Carrier Billing, predicts that gaming will account for 51% of digital content revenues billed via carrier billing for operators, with the mechanism accounting for 26% of all digital games revenues in 2022.
However, it downplayed the significance of revenue derived from ticketing and physical goods as responsible for just 2% of all operator revenues from carrier billing, and blames this on regulatory issues around carrier billing for such purchases.