By Rich Karpinski, Senior Analyst, Yankee Group

The first wave of the mobile revolution is over and the time has come for mobile operators to choose between one of two paths.

Either build a business around delivering a full suite of mobile, digital lifestyle services or focus on being the very best value provider of mobile devices, services and content.

2013 is the year that every mobile operator must choose between these two business models.

To be clear: either strategy is valid, but each is ruled by different business dynamics. That means there will be winners and losers in both camps.

Winners will focus on being a best-of-breed provider. It won’t be enough to dabble in either strategy – winners must go all-in.

Losers will lose their footing following one of two paths: too timidly and belatedly placing their bets or by trying to play both sides of the fence, a mix-and-match approach doomed to failure.

Let’s take a moment to look at each business model in detail:

Digital lifestyle provider: Characterized by a focus on delivering a collection of ARPU-enhancing mobile services (or in some notable cases entirely new, standalone businesses) built on top of simple, yet premium-priced data plans, this path is also sometimes termed “smart pipes” to set it apart from the dreaded “dumb pipe” approach.

A group of mobile operators – primarily large, global players with multi-play voice, data and video (including both wireless and wireline) service networks – are best positioned to pursue this strategy, which positions the mobile network as bare minimum table stakes necessary to enter an even more profitable game of delivering a suite of lucrative value-added mobile services such as home automation/security, e-health, multiscreen entertainment, connected cars, big-data-fueled marketing services and more.

This isn’t a new idea, but it is a concept whose time has come, with operators including AT&T, Verizon, Telefónica, Orange, Softbank and others making clear investments in and bets on digital lifestyle businesses they expect to become billion-dollar stand-alone entities in a matter of years.

Such operators won’t spend time squeezing out every last cent via complex mobile data pricing; instead they’ll build premium-priced shared data “platforms” (much like those already offered by AT&T and Verizon in the U.S.) that encourage customers to put more and more devices onto the network, in the process creating a broad mobile “platform” upon which they’ll build a slew of new revenue streams.

Value bit provider: Centered on offering customers value-oriented mobile data connectivity, these operators offer plans priced affordably and at times by the bit, via a full spectrum of prepaid, postpaid and on-demand offers – whatever the customer prefers and demands.

T-Mobile USA and France’s Free may be the best examples of this disruptive approach – T-Mobile with a strategy built around unsubsidized devices and cheap data plans and Free with an even more radical and market-moving take on low-cost mobile services.

Such operators will target consumers looking for the lowest total cost of ownership for their devices and plans and absolutely no bill shock.

To wring more revenue out of such cost-conscious users, value bit movers must constantly make real-time, interactive offers that are so compelling customers choose to bite, such as turbo-boost or time-of-day-passes or one-time access to specific content or services.

But ultimately the business model revolves around driving marketing, subsidy and operational costs out of the business and attracting customers with affordable, good-enough mobile data services.

Beyond that, the best value bit providers will be those that develop the most creative approaches to generating incremental revenue; even a few dollars of extra ARPU makes a difference in this business.

The key for mobile operators as we enter 2013 is to place a stark bet on one direction or the other.

In the short term, that may mean a bit – and in some cases, significant – pain. But it’s the only path forward.

If you as an operator aren’t aggressively choosing one of these two paths forward – your competitors are. And that spells trouble.

Providers that don’t figure out “what they want to be when the grow up” and instead try to maintain the status quo and drive new business on the back of old ideas and legacy strategies will lose big.

Pic: © Lucian Milasan -

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