By Mark Windle, Head of Marketing at OpenCloud
Despite the successful launch of the iPhone 6 and iPhone 6 plus, and with the latest iPads unveiled on Thursday evening receiving an underwhelming media response, it is becoming increasingly clear that handsets are no longer a decisive factor in consumers’ choice of network.
According to recent research conducted by IDC, smartphone shipments in Europe and the US are slowing and may even have peaked; upgrading to the latest handset model is no longer a priority for consumers.
Consequently, the demand for SIM only contracts has increased as consumers no longer have any great urgency to renew their devices. Reflecting on the iPhone 6 launch, Tim Cook admitted that Apple was impressed by the number of phones bought directly by “end customers” as opposed to those sold through mobile operators.
The potential for operators to leverage exclusive handset deals as differentiators has greatly diminished. The key point is this: relying on other parties to act as your source of differentiation simply isn’t an effective strategy.
It’s time for operators to break the mould of competing on exclusive handset or content deals, and equip themselves to start competing on the services that they deliver to their customers; innovating in voice and video communication services in order to differentiate effectively.
For too long operators have been dependent on others to provide the differentiation, the X-factor, that might attract subscribers, such as signing up for the latest iPhone or Samsung device, or exclusive access to Spotify or Sky Sports.
The truth of the matter is that the device manufacturers and content providers don’t really want to be restricted to a single operator, or select group of operators. An exclusive agreement with an operator, no matter how big, restricts the addressable market.
So when such deals are struck with the operators, they will be expensive and only exist for a relatively short period, after which the device or content provider will be free to offer to all subscribers on all networks.
Exclusive deals deliver ineffective differentiation for operators and it’s not what the device and content providers want: it’s a lose-lose situation. Operators must look to other areas to gain the competitive edge.
It seems that people can go without the latest device but they can’t go without a mobile connection. It’s difficult to turn marginal differences in coverage and speed of that connection into a valuable long-term differentiator, however it’s not the connection itself that gives subscribers value: it’s the things they can do with that connectivity that counts.
It’s not just what the phone and its apps can do, but also the telecoms services provided by the operator.
Operators have decades of experience in delivering such services but they’ve hardly changed since their creation. There is ample scope for creating valuable innovation within dedicated solutions for business customers and more mainstream applications for consumers.
Operators turned to device manufacturers and content providers in attempts to differentiate through exclusive deals, however they have also become heavily dependent on others for service innovation.
Typically, telecom services are defined by the service control points and application servers supplied by network equipment providers, and the pace and direction of innovation is controlled by those vendors.
Consequently, an innovative idea coming out of an operator can be implemented but it will be subject to costs and a timeframe set by the vendor. This stifles innovation and can delay time to market.
Furthermore, just like device manufacturers and content providers, the equipment providers want to sell the same product set to every other operator in the industry.
In short, relying on equipment vendors, handset manufacturers or content providers to provide a differentiating factor is weak because those providers want to deliver the same things to all competing operators.
Instead, operators must create and own the differentiators themselves if they are to become more competitive. In order to do this, operators must acquire the capability to deliver service innovation independently without having to rely on third parties.
To out-perform the competition you need to do something different. To protect your lead you need to do something unique.