MULTIMEDIA Messaging Service (MMS) is considered by many to be the long-awaited 'killer application' for GPRS. A host of MMS services are now establishing themselves in the mobile data mainstream, bringing new opportunities to subscribers and operators alike.
Consumers of MMS are excited by the possibility of communicating with other users through graphics, pictures, sound and video. As they become more familiar with the uses of the new technology, their demands will grow and they will look for more applications, more content and fresh ways to gain value from and have fun with MMS. Operators will want to feed that demand with premium content and experiment with new sources, services and deliverables.
The market is changing quickly, and it will continue to evolve as user demand grows and innovative new services are introduced by third party content boutiques. Bringing this new content to users and reacting to their demands will require operators to integrate new resources into their content offerings and to provide differential pricing.
However, hand-in-hand with the revenue potential that MMS promises for operators comes the complex task of pricing services for optimal profitability. The combination of high expectations for MMS and the enormous investment in GPRS infrastructure that lies behind it serves to make this a daunting challenge.
Ovum underlines the challenge by describing MMS pricing as 'dangerous to get wrong, difficult to get right'. It is clear that we don't yet have all the answers to what pricing subscribers will understand and accept, nor do we know precisely how to set the pricing relationships between the various 2.5/3G data and messaging services. Despite this, operators must develop strategies now that ensure they are able to meet the evolving competitive demands of the MMS market.
TWO MARKETS, ONE SERVICE
In analysing charging requirements for MMS, it is helpful to think of two distinct applications: user-to-user and network-to-user.
User-to-user applications refer to any MMS where users create and consume their own content, such as picture messaging. These applications are personalised, visual and instant. In the second half of 2002, user-to-user applications began to garner a great deal of attention and excitement in Europe and North America. Interest in multimedia messaging in these regions has been driven largely by the recent introduction of mobile phones with MMS and digital picture technology. Meanwhile in Asia, operators have been competing to offer messaging users the most advanced full-motion video handsets.
Network-to-user applications, also referred to as machine-to-user, allow the operator or a third party to offer and deliver content to users via MMS. This content can either be pushed, as with an advertisement or graphical coupon, or directly requested by the user, as with a screen background, a map or a movie preview. Network-to-user applications offer operators significant revenue opportunities.
The charging and pricing strategies for user-to-user MMS and network-to-user MMS promise to be considerably different. Operators need to have capabilities to handle both in order to maximise their MMS revenues and return on investment.
In the case of user-to-user services, most operators will follow a pricing strategy that reflects inter-operator roaming agreements. The ability to roam with MMS service will be as important to its success with users as it is for SMS or voice services. Roaming is also important to operators, as there are interconnect revenues that can be earned through inter-carrier roaming agreements.
Operators may choose to price user-to-user MMS based on a flat transaction rate or on a tiered rate related to data volume (as recommended by the GSM Association Billing Accounting and Roaming Group). As standards evolve, operators will need to ensure that they have the infrastructure and processing ability to charge for user-to-user MMS services at the retail, wholesale and interconnect levels.
Pricing of network-to-user services offers an opportunity for more creativity and differentiation by the operator. For these services, operators are in a position to manage the customer interface, transport and billing, and therefore to 'own' the customer. This gives the operator flexibility in setting pricing and discounting strategies and establishes a broad base within the content delivery value chain.
Clearly, it would be disadvantageous to use the operator's position in a way that would stifle development of content by other parties. Rather, it is in every operator's interest to encourage content innovation. Certainly, operators will need the appropriate systems to allow them to securely identify users; to define, categorise and bill for content; as well as to provide reports and reconciliations to content providers.
CONTENT CHARGING CRITERIA
While some network-to-user services may be priced on the basis of data volume, this is an unlikely choice for the vast majority of premium and content-based services. There is little perceived relationship between the value of content within a message and the number of bytes transmitted. Data volume is, therefore, both abstract and irrelevant to a user receiving content. Arguably, this non-alignment between bytes and value is a perception grounded in fact: for example, it is difficult to imagine a consistent per-byte scheme that would properly price both a rich-text message and a video clip. Data volume pricing also suffers from a lack of transparency.
A more suitable pricing scenario for these types of messages is transaction or subscription pricing as they are more content-sensitive. The fees charged are more closely related to the perceived value of the particular content. It is important to bear in mind that what the operator is selling is not bytes, but content. Similarly, users perceive that they are consuming content and make their purchasing decisions based on the cost-benefit of that content, not on its magnitude.
Operators that are able to develop and offer effective pricing strategies in which the price of the service or content closely reflects the value received by the user will have a significant and measurable market and revenue advantage. In order to offer this type of pricing, operators will need a thorough understanding of the perceived value of content and users' pay thresholds as well as being able to differentiate between existing and new content in order to charge subscribers incrementally and reconcile accurately with multiple third-party content providers.
CONTENT CATEGORISATION
Operators with superior methods of identifying and categorising content will have advantages both in user-to-user and network-to-user messaging. For those offering premium content services, the ability to quickly add new content from a third party and to accurately cost, bill and reconcile for that content will be critical. This requires a strong marketing plan and an effective strategy for attracting and contracting for quality content. In addition, it means having technology-independent and location-independent methods for bringing new content online and to provide OSS/BSS support for that content.
Operators will need flexible and easy ways to accommodate new content sources and introduce personalised content charging into their billing stream. A flexible charging infrastructure should be capable of identifying the supplier of each element of content with little or no impact on the content provider's systems; of allowing for both sender-paid (MO) and receiver-paid (MT) charging in real-time; of supporting reconciliation reporting to the content provider; and of supporting user dialogue where necessary, for example in providing Advice of Charge.
The ability of an operator to identify and categorise message content, and to accommodate flexible pricing structures which reflect the variety and source of content, will directly impact an operator's business. These capabilities will determine the range of content that can be offered and have a significant impact on the revenue potential from incremental content services.
Underpinning all of the above will be the system infrastructure and MMS pricing software chosen by each operator. While some architectures are suited primarily for volume-based user-to-user messaging, others require sophisticated system integration between the operator and third party content provider that may be difficult to implement and inflexible in dealing with market changes. The choice of technologies and platforms will therefore have a significant impact on each operator's ability to be, and remain, competitive as the MMS market evolves.
CHARGING FOR MMS-WEB SERVICES
