Blog Digital Transformation

4 Challenges Facing Mobile Network Operators

Aria Systems

7 July 2016

Life for mobile network operators (MNOs) used to seem pretty simple. Usage-based service plans for voice and text messaging looked to provide a limitless stream of recurring revenue. Then came the smartphone and data. The onslaught of data usage when the iPhone was first released nearly tanked their networks, but the revenue from data plans made the billions of dollars in network upgrades worth it. Usage patterns have again changed and WiFi is ubiquitous, so voice and data revenue has flattened and providers are scrambling for new sources of revenue. Challenges like IoT, Over the Top communications, customer service, and new networks may also provide new revenue opportunities.

The Internet of Things

The IoT and the machine-to-machine (M2M) communications that enable it pose significant challenges to MNOs. None have shown a clear path to monetizing M2M connections or IoT services, but all the providers know that massive infrastructure changes will be required to make it work. Despite this dichotomy, a report by Intelligence reflects some unusual optimism among operators—over 62% are confident about being able to monetize IoT by 2020. This confidence may be correlated to the fact that 62% of them also think that IoT cannot exist without the networks that they own. Security concerns with competing technologies like low-power WiFi and long-range Bluetooth lend some credence to the industry’s confidence, but the chance is high that they will be usurped if they let their guard down. Consider what happened to cable companies that thought they had communications and content distribution locked down—until OTT and digital service providers like Netflix and Amazon yanked the rug out from under them while piggybacking on their networks.

Speaking of OTT

MNOs have rightfully seen “Over the Top” communications, or the delivery of audio, video, and other media over the Internet without the involvement of a multiple-system operator, as a threat. As mobile operators face dwindling voice and text revenues, OTT is taking an even bigger bite out of the pie as people use apps like Skype and WhatsApp to call and text over WiFi instead of racking up voice and data charges with mobile carriers. But their animosity towards OTT is turning into opportunities as operators are more open to partnering with OTT providers to monetize their services. A recent survey revealed that 97.6% of mobile operators will potentially enter into an OTT communications partnership. Goes to show how enemies can make the best of bedfellows.

Poor Customer Service

To be nice, people are nonplussed with the service provided by their wireless carriers. To be real, wireless carriers have long been residents of the bottom of the customer service barrel. This threat from within is very real—A 2014 J.D. Power and Associates study found that the likelihood that a customer will switch carriers jumps to 30 percent when a service call lasts 15 minutes or more. And poor service likely strengthens the desire to find workarounds (like OTT) to get some comeuppance. How can they improve it? First they have to make self-service portals better and allow most if not all plan changes to occur easily there. The monolithic, MC Hammer-era BSS systems they use for billing are part of the problem. In order to make self-service better, mobile carriers need to upgrade their business systems to work at digital-era speed. This could be a $100 million+ proposition, but adding an agility layer to existing systems can help them serve customers better and take on new business with much less investment.

Adding Mobile Network Capacity

Mobile network operators (MNOs) are facing massive data growth (70% growth in mobile traffic in Q3 2015) but revenue growth has almost dried up, according to With 5G service on the horizon, where will operators find the revenue to invest in new infrastructure? There will most certainly be room to grow revenue in the projected $19 trillion dollar IoT market. The wireless transactions that happen between machines will certainly happen over mobile networks and the potential for IoT partnerships services are endless. Wireless carriers also have unique access to customer data, but they have yet to take full advantage of it. The data can be used to create targeted offers and new services, sold to third parties, or monetized in myriad ways. And improving customer service can help build loyalty with the customers they already have.

The telecom industry is nearly unrecognizable from the days when the landline was king, and it’s hard to say what they will look like in 20 more years. But addressing these immediate challenges will make the next few years very interesting indeed.

Aria Systems