Moving From Flat-Rate to Tiered Pricing Models

Jay Klein, CTO July 2010

Outline
Broadband data revolution and giving a different g g meaning to a Byte Network visibility & manageability key for new tiered schemes Solution Sol tion tools & Pop lar Use Cases Popular Insights, tips & Market Education Net Neutrality Dangers and Potential Innovation

Users spending more time on Data

Subscriber Behavior Shift

Unlimited Invites Over Topping

Source: Morgan Stanley The Mobile Internet Report 12/09

Subscribers (Millions )
T-Mobile Telenor America Movil China Telecom Telefonica Moviles / O2 Vodafone China Mobile Skype ! 0
5

200

400

600

All animals are created equal but some animals are more equal than others i l l h h
George Orwell Animal Farm

How much is a Byte?

Estimated costs to deliver : 1.5 cents per MB (HSPA), 0.5 cents per MB (LTE) 1 SMS (100 Bytes) = 5 cents of revenue 1 MB (representing 10,000 SMSs) = 500 Euro 1 minute of a voice call (100 KB) = 10 cents of revenue 1 MB (representing about 10 min.) = 1 Euro

Over the top, losing twice

Service S i

Typical T i l length (min) 3 4 4 30

MB per Minute 1 1 5 8

OTT Revenue (Euro) 1.00 1.50 1 50 3.00

Cost to C tt Deliver, LTE (Euro) 0.02 0.05 0 05 1 .00

VoIP OTT MP3 Song Web Clip TV Episode

0.15 to 1.50 0.015

Its ith It either a revenue potential or the cost to deliver t ti l th t t d li Charging model doesnt have to be dumb quota (MB) Charging model doesnt have to be per item, could be also by enabling the capability

Is All-you-can-eat a good approach? Only if Traffic managed effectively

Consumers are willing to pay $25 to $30 more per month for plans that offer unlimited usage over 2GB/month usage cap
60% of t i l wireless f typical i l broadband purchase decision is based on: a) service price ) p b) monthly usage caps its better to offer unlimited usage and manage traffic via realtime, network intelligence-based g solutions like DPI and policy enforcement

You can buy it in any color you choose as long as its black h l it bl k
Henry Ford (Statement regarding the T Model)

Mobile Broadband Drivers & Necessities

Growth in number of oadba d Broadband subscribers Growth in percentage of active users New applications with higher bandwidth and quality demand

Online policy management is a key enabler for mobile broadband revenues

Network Intelligence with Subscriber, Subscriber application , network and device awareness

Mobile Networks weren't designed with the Internet Era/Generation in mind

Most applications which interest users are Over-the-top (OTT) pp p( ) Need to transform dumb pipes into smart pipes
Before Unmanaged After Visible & Managed
P2P Upload P2P Download VoIP WebTV Video Conferencing Gaming email

Allot provides traffic and policy control solutions that transform the internet user experience
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The Challenges & Allot Value

Market Challenge Mobile Broadband Growth Allot Value
Usage Graphs Trend A l i T d Analysis

Congested Network

Network Awareness Fair Usage Policy

Over the Top Content Lost Revenues

Control Application Usage Online Charging Device Awareness

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Intelligent Policy Control and Charging

Access Networks Policy and Charging Network Services

OCS

PCRF

Mobile Fixed
Internet

Cable
PCEF Services

1. 1 2. 3.

Intelligent PCEF (Policy Enforcement) Superior Policy Control and Charging Services Gateway

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Policy and Charging Mobile Architecture

Charging & PCRF (Partner)
OCS
Web Portal

Mediation

PCRF
PCRF

SPR

AAA RADIUS

Gy

Gx

SOAP

Services
UMTS RNC NodeB SGSN

PS Core

GGSN

SMP SG IMS NX

PCEF
Internet

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PCEF Solution Components: Allot Service Gateway Sigma y g

Online Policy & Charging Enforcement Leading Performance
Over 60Gbps throughput Up to 40 million connections p Up to 2 million subscribers Up to 800,000 PDP sessions

Industry-Leading Core DPI Value-Added Services Topology Awareness

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Industry-Leading Core DPI Services: Network Visibility

Extensive signature library g y State of the Art DPI behavioral recognition Identification of over 800 Protocols Seamless build-in automated Protocol Updates P t lU d t Dedicated hardware offers scalability & upgradability

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Popular Mobile Use Cases

Tiered & Quota Services

OTT VoIP Control & Reports

Cell Congestion Management g g

Fair Use Policy Web Analytics

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Mobile Broadband Use Cases Example #1: Fair Use Policy p y

Description
When a subscriber with unlimited data services plan exceeds normal usage of NW resources a policy is triggered reducing subscriber bandwidth in real time

Service Plan Pre-Paid All plans Post-Paid 250kbps Post-Paid 500kbps Post-Paid 1Mbps

Rule

QoS

Initial QoS 500kbps Downgraded QoS 128kbps Initial QoS 250kbps p Downgraded QoS 128kbps Initial QoS 500kbps Downgraded QoS 128kbps Initial QoS 1Mbps Downgraded QoS 128kbps

Value V l
Attractive data services for subscriber Control over network utilization for operator to preventing saturation and service degradation for subscriber

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Mobile Broadband Use Cases Example #2: Tiered & Quota Services p
Service Plan Web-Simple Speed 750kbps Details 512kbps guaranteed for Web Surfing 128kbps limit on all other activity 256kbps guaranteed for VoIP g aranteed 128kbps limit on P2P 1.5Mbps guaranteed for P2P p g 512kbps guaranteed for streaming media
Tailored Packages to meet different internet-usage profiles

Web-Voice

1.5Mbps

Web-Media

3.0Mbps

Service Plan Swift Basic Swift Extra Turbo Basic Turbo Extra
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Speed 750kbps 750kbps 1500kbps 1500kbps

Daily P2P Quota 5MB 15MB 5MB 15MB

Quotas can be enforced daily or monthly, globally or per application

Cell Awareness (CellWize with Allot)

Monitor & Control RAN Backhaul B kh l Real-time and long-term monitoring subscribers and protocols per cell Automated enforcement of predefined QoS policies in congestion cases integration with PCRF

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Cell Awareness With PCRF

1 - Subscriber session started usage aggregated per cell \ network entity 2 - All t PCEF detect usage above cell Allot d t t b ll threshold and notify PCRF cell is congested 3 - PCRF update session with matching policy. ** Allot PCEF updated once congestion is cleared.
AAA RADIUS

PCRF

SPR

Gx

3
Cells capacity thresholds

PCEF

1
Gi RAN GGSN

Internet

Allot Service Gateway y Subscribers

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Right gear at the core enables more

Device awareness plans as device doesnt have to be a phone eBook readers (hidden mobile charge) Misuse detection (phone as a modem) Charging flexibility as data doesnt mean a monthly plan Many users are discouraged by long-term and expensive commitments Add services Clean Pipe, Accelerate Media Meaningful Quota as most users dont understand MB, enforce through layman terms (movies, MP3s, etc.) or Quota-less services (Facebook)

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Right gear at the core enables more cont.

Meaningful Rates Surprise! most users dont understand speeds but will understand Superior Video Package Real time response Propose more before blocking if quota reached Offer alternative services (e.g., off-load, VoIP) Transparency offer & User self control Billing shock notifications (extraordinary events) Real time billing reports Control gear (turbo button, plan control)

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Market Education

User sensitivity to operator actions Control, Block, Shape (throttle) Replace words by new offerings: Choose (your plan) Personal (Im a gamer) Opt-in (Y O t i (Yes, I want to see some ads) tt d ) Reward (Another movie download due to network issues)

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Net Neutrality
Market confusion leading to service providers paralysis solidifying the dumb pipe approach What it is about? Application discrimination, pp , transparency What it isnt about? Everything else even including isn t else, user privacy (thats a different topic) Network resource optimization and new pricing N t k ti i ti d i i models arent synonymous with net neutrality violation Regulations do depend on geography and on specific operator licensing scheme (e.g., OTT VoIP)
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Net Neutrality cont.

Indirectly, Indirectly Net Neutrality will drive innovation as identical regulation for all SPs within a given region Transparency will encourage more personalized choices reflected in various monthly plans h i fl t d i i thl l The ability to react to real time user demands and network congestion considerations will allow the operator to adjust dynamically to any new situation

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Summary
Its all related - Relieving the strain on network infrastructure and increasing revenues from data services with the same tools Mobile broadband calls for innovative considerations for pricing - Forget fancy voice minutes and SMSs packages To put out a fire with flammable materials - All-you-can-eat models are not sustainable when delivering value added services The importance of price differentiation setting the right levels o t e g t se ces and the g t crowd t the g t devices for the right services a d t e right c o d with t e right de ces Market education by new offerings with less techno-lingo Net Neutrality: Paralysis by Analysis Net-Neutrality: Paralysis-by-Analysis is the real danger, instead be creative, fair and transparent

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