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About this report

Mobile tariffs have evolved significantly in the past few years as consumer demand has moved from voice minutes and SMS messages to data bundles that enable access to mobile content and apps. As mobile data prices and per-user spending on digital content decline, operators will need to consider innovative tariff structures to maintain ARPU and remain competitive.
- Application-based pricing (ABP) is defined as the inclusion of third-party content and services (that is, applications) as part of the tariff structure. In effect, it helps operators and over-the-top (OTT) players to further monetise consumer demand for popular applications on mobile devices.
- This report aims to analyse the opportunities that ABP creates for operators and vendors by:
- assessing the benefits of launching ABP for operators and OTT service providers
- examining best practices from around the world and matching them to different consumer profiles and contexts
- investigating business models and partnerships between OTT service providers and operators
- analysing operator–vendor engagement and qualifying vendors’ solutions for ABP in case studies.
- The report also provides recommendations for operators, OTT players and vendors.

Table Of Contents

The Application-based pricing: opportunities, business models and case studies
Table of contents
5.Executive summary
6.About this report
7.ABP needs to be mutually beneficial for customers, operators and OTT players to be successful
8.Customers are the key party in the value chain: OTT players need operators to reach them; operators need OTT players to gain more of them
9.ABP deployments are rather fragmented and usually linked to marketing campaigns, suggesting that operators are still experimenting
10.Vendors are not well integrated in the ABP value chain, which is frustrating for both operators and vendors
11.Recommendations for operators, OTT players and vendors
12.Recommendations for operators and OTT players
13.Recommendations for vendors
14.Understanding the benefits of ABP
15.Smartphone owners use on average ten apps each month, but only 13% of downloaded apps are paid for
16.The benefits of ABP are often unclear to consumers, who do not attach a financial value to apps
17.Operator benefits: capturing smartphone customers
18.Operator benefits: converting feature-phone users to smartphone users
19.Operator benefits: increasing smartphone ARPU
20.OTT player benefits: using operator assets to better monetise mobile usage
21.OTT player benefits: maximising service reach
22.The ABP opportunity varies by region
23.ABP business models
24.Business models vary in terms of which party pays and how much they pay, but ultimately customers must pay to sustain any model
25.Customers are the key party in the value chain: OTT players need operators to reach them; operators need OTT players to gain more of them
26.Deutsche Telekom and Spotify have a fixed-rate business model, in which the operator pays the OTT player, and acts as a reseller
27.Telefonica Digital's partnership with Aurasma is a rare example of a revenue-sharing business model in which an OTT player pays the operator
28.Operators and OTT players can enter into short-term exclusive agreements to bundle apps and services, but no money is exchanged
29.Operator case studies
30.Classification of case studies
31.OTT case study: Partnerships between Facebook and operators are mutually beneficial
32.OTT case study: Google Free Zone grants preferential access to Google services
33.OTT case study: Mobile partnerships could help Wikimedia sites to reach 1 billion people by 2015
34.Operator case study: Telkomsel Indonesia and Vodafone Qatar promote take-up of data services with Facebook offers
35.Operator case study: Telenor's partnership with Facebook drove its mobile Internet revenue in Thailand
36.Operator case study: Globe Telecom Philippines offers various daily tariffs in order to provide consumers with flexibility
37.Operator case study: Deutsche Telekom offers zero-rated access to Spotify Premium
38.Operator case study: Operators in the UK differentiate 4G services with OTT content and service bundles
39.Operator case study: Operators in the USA want to allow content providers to subsidise data usage, but may encounter regulatory issues
40.Operator vendor engagement
41.Vendors are not well integrated in the ABP value chain, which is frustrating for both operators and vendors
42.The overlap of leading policy management and RTC vendors shows the increasing interdependency between these two solutions for ABP offers
43.Policy vendors are moving towards more convergent and integrated 3GPP policy control and charging (PCC) architecture
44.Vendors should take a strategic role in helping CSPs make the transition from Policy 1.0 to Policy 2.0 use cases for revenue generation
45.CSPs and RTC vendors prefer the ‘pay-as-you-grow' licensing model for policy management
46.Vendor profiles
47.Alcatel-Lucent
48.Amdocs
49.AsiaInfo-Linkage
50.Comverse
51.Ericsson
52.Hewlett-Packard
53.Huawei Technologies
54.Openet
55.Openwave Mobility
56.Orga Systems
57.Oracle (Tekelec)
58.Redknee (formerly NSN)
59.Volubill
60.Definitions
61.Policy management use cases: descriptions and drivers [1]
62.Policy management use cases: descriptions and drivers [2]
63.Policy management use cases: descriptions and drivers [3]
64.About the authors and Analysys Mason
65.About the authors [1]
66.About the authors [2]
67.About Analysys Mason
68.Research from Analysys Mason
69.Consulting from Analysys Mason

List of figures

Figure 1: Overview of the application-based pricing value chain
Figure 2: Application-based pricing by type, as observed in operator case studies
Figure 3: Number of apps downloaded, used and paid for per smartphone respondent, selected European countries and USA, October 2012
Figure 4: Monthly spend on apps per smartphone user, selected European countries and USA, October 2012
Figure 5: Smartphone users who purchase apps, by monthly spend, selected European countries and USA, October 2012
Figure 6: Key factors other than price that would most attract respondents to their next tariff/contract, by device type, selected European countries and USA, October 2012
Figure 7: Smartphone penetration rate by region, 2013-2018, selected European countries and USA, October 2012
Figure 8: Smartphone respondents' self-reported data usage as a share of data allowance, selected European countries and USA, October 2012
Figure 9: Over-the-top fixed-to-mobile advertising revenue cannibalisation
Figure 10: Facebook's monthly active users and ARPU by region,
2Q 2010-2Q 2013
Figure 11: Overview of the application-based pricing value chain
Figure 12: Deutsche Telekom and Spotify's fixed-rate reseller business model
Figure 13: Telefonica Digital and Aurasma's revenue-sharing business model
Figure 14: The ‘no-one pays' business model
Figure 15: Application-based pricing by type, as observed in operator case studies
Figure 16: Facebook mobile products used in ABP
Figure 17: Operators that have supported Google Free Zone, August 2013
Figure 18: Operators that support free access to Wikipedia, October 2013
Figure 19: Examples of Telenor Group's application-based pricing initiatives
Figure 20: Globe Telecom's mobile service packages
Figure 21: Deutsche Telekom's Spotify offers
Figure 22: OTT content and services bundled with 4G tariffs, UK
Figure 23: Policy management market shares by revenue, worldwide, 2012
Figure 24: Real-time charging market shares by revenue, worldwide, 2012
Figure 25: Top-six PCRF and RTC vendors by market share, 2012
Figure 26: Changing landscape of policy vendors for 2013 as a result of mergers and acquisitions
Figure 27: The evolution of policy use cases
Figure 28: Application-based pricing description
Figure 29a-c: Policy management use cases

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