Press release

24 Apr 2018

Telecom operators looking for new ways to monetize traffic and infrastructure

  • Forty-six percent of Moscow residents connect to the Internet via Wi-Fi when traveling by public transport, twice as frequently as residents of London, New York, Sydney or Hong Kong
  • Smart cities and IoT can create new revenue streams for operators, with new expansion areas including software development, system integration services and platform design

Wireless broadband access is becoming increasingly popular in Russia with smartphone ownership on the rise, according to EY’s newly released survey Wireless Broadband Access (WiBB) for the Digital Economy, which focuses on the current market environment.

The key drivers of WiBB growth cited in the survey include advanced high-speed network coverage scale-up, available and affordable smartphones, attractive tariffs, digital literacy among users and available content.

With increasing demand for traffic, operators are facing higher mobile network load and significant capital expenditures, having to look for new opportunities for monetization. They are offering new service packages and tariff plan configurators, testing advertising models based on customer data usage, and abandoning pay-for-subscription tariffs to meet evolving customer preferences.

Mobile Internet competes with Wi-Fi technology, and Moscow is one of the global leaders in terms of the latter’s availability and convenience. According to the survey, public transport passengers in Moscow use Wi-Fi to connect to the Internet twice as frequently as residents of London, New York, Sydney or Hong Kong, with 46% of respondents in Moscow saying that they used Wi-Fi during their last trip on public transport. Only 29% of respondents in New York and 28% in London did the same. The number of Wi-Fi sessions in the Moscow Metro exceeded 1.2 billion in 2017, up 32% on the 2016 level, according to MaximaTelecom. Over 1.1 million unique users connect to the Moscow Metro's network every day, with the number of registered devices estimated at 20 million.

Most respondents using Wi-Fi to go online own devices that can alternatively connect to 3G/LTE networks. The Wi-Fi popularity is due to the fact that such users have become used to a free and readily available Wi-Fi connection in their city.

Compared with respondents in other cities, Moscow residents use Wi-Fi much more frequently when eating out or traveling. Public Wi-Fi networks are more popular and reliable in Moscow compared with other cities participating in the survey. Moscow Wi-Fi is the most convenient one — ¾ of users easily connect to the network comparing with 40-50% in New York (52%), Honk Kong (45%) and London (40%).

Anton Ustimenko, EY Partner, CIS Technology, Media and Telecommunications Leader, comments: “As scale is critical to success in this business, Wi-Fi in Moscow has big potential. Advertising models can enable its successful monetization, though they entail certain risks and some inconvenience for users due to the requirement to register and input their mobile phone numbers. An optimal combination of advertising and paid subscription models may be achieved through a study of customer preferences.”

On the whole, experts believe that Moscow today surpasses many global cities in terms of mobile and fixed WiBB coverage by a number of parameters. However, the content usage profile demonstrates that there is enough room for growth in paid subscriptions and more traffic-consuming content.

According to experts, Wi-Fi has good potential for application in new business models brought by the digital economy, e.g. in smart cities, in selling service subscriptions, or in successfully targeting advertising. In respect of municipal authorities and telecom operators recovering costs on the deployment of Wi-Fi networks, experts name several options. Firstly, a significant part of costs may be covered by ad sales. For this purpose, there must be a city network connecting at least 250 access points located in public places. According to MaximaTelecom, it has to be an extensive network serving not less than 200,000 connections per day to generate sufficient revenues from ads.

Small towns may cooperate with an aggregator to reach critical mass required for the advertising model to work. Secondly, costs may be recovered by sales of additional paid services, e.g. an operator may offer users a higher connection speed or an ad-free mode for a small daily or monthly fee.

Finally, to cover costs it makes sense to redirect traffic to Wi-Fi networks and share network infrastructure with mobile operators only in places that draw large crowds of users, e.g. at airports or large sports venues. Telecom operators can provide their customers with reliable roaming in the Wi-Fi network by cooperating with aggregator companies.

Anton Ustimenko comments: “To successfully monetize Wi-Fi it is no longer enough just to sell ads. Today operators have to adopt a balanced approach that offers corporate clients and end users a package of services they need, such as marketing analysis (including using user location data), big data analytics, mobile traffic redirection to fixed networks in highly congested areas, etc.”

According to the survey, billions of new IoT devices using Wi-Fi and/ or mobile network connections to transmit data will be connected within the next five years. It is a great opportunity for mobile operators to boost traffic and their customer base. Wi-Fi is more suitable to connect a number of IoT devices (that are not critical, e.g. smart home sensors) than 3G/4G networks, as it can support the transfer of a large amount of data at a relatively low price. While 5G implementation is on the way, and expected to appear in 2020, many requirements are still addressed through both 3G/LTE and Wi-Fi.

The availability of free Wi-Fi during an international trip is a critical issue for all travelers: the higher the number of public Wi-Fi access points and the faster and more reliable the connection, the more attractive this destination is for tourists. To Moscow, which is one of the 2018 World Cup host cities, this is a perfect opportunity to demonstrate the high quality of its digital infrastructure and preparedness to host major events.

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, our clients and our communities. EY works together with companies across the CIS and assists them in realizing their business goals. 4,500 professionals work at 19 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Rostov-on-Don, Togliatti, Vladivostok, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Tashkent, Tbilisi, Yerevan, and Minsk). 

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