iPhone SE highlights the need for new value-added propositions for operators

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this post, Ted Woodbery, VP, Product Strategy and Corporate Marketing at Synchronoss Technologies, highlights some of the broader implications of Apple’s latest smartphone to the global operator community.

Apple recently launched the latest addition to its smartphone portfolio. The hype machine was in a slightly lower gear than usual, but it still probably didn’t escape your notice. With its marriage of top-end specs and a much-loved heritage design, the iPhone SE addresses a sizeable market of consumers who want a smartphone with a smaller form factor without having to compromise on speed and functionality. It has been positively received by pundits and is sure to be yet another sales success for Apple.

But the announcement on 21 March contained two elements that should be cause for concern for mobile network operators.

First, there was the news that Apple will again offer customers the option of buying the new iPhone on its own operator-agnostic monthly subscription plan. Introduced last year, the subscription model is Apple’s response to a changing market as more and more consumers choose to buy mobile devices outright – often direct from the manufacturer, rather than through an operator – and enter into separate rolling non-contract connectivity agreements with operators, rather than committing to long-term contracts in exchange for operator subsidies to the cost of the handset.

Subscriber loyalty to operators has been tested by this shift, with manufacturers jostling to take over customer relationships that previously were the preserve of networks, whose stores were a one-stop-shop for consumers. Now, those consumers want greater flexibility than networks have traditionally offered as they chase the best value for money and quality of service.

A number of US operators have already reacted to these changes in consumer behaviour and the challenges posed by manufacturers’ evolving direct sales models by phasing out traditional two-year fixed-term contracts in favour of ‘early upgrade’ programmes offering greater flexibility and increasing the affordability of, and access to, the latest flagship handsets. Around a quarter of post-paid customers of the four major US operators – AT&T, Sprint, T-Mobile, an Verizon – currently participate in such programmes.

As the landscape continues to shift, operators will need to identify new ways to add value for existing and prospective subscribers, keeping them ‘sticky’ and reducing churn rates (and, by extension, the higher costs associated with new customer acquisition). And the solution may actually be pointed to in the second cause for concern in Apple’s iPhone SE announcement: storage capacity.

The entry-level iPhone SE ships with just 16GB of non-expandable onboard storage (of which only around 12GB is actually available to the user, once OS and default apps are accounted for). It’s a practice that is common throughout the smartphone industry – and that has come in for considerable criticism, particularly as flagship devices continue to boast bigger and better features designed to satisfy consumers with an increasingly voracious appetite for creating and storing their own content using those devices, from high-resolution photography and video recording to music files, work documents, and more.

With storage capacities largely failing to keep pace with this content explosion, many consumers will at one point or another find themselves having to manage the content on their devices. Typically, this will mean deleting something to make room for something else. And this is only going to become more frequent as a problem as devices become capable of creating richer, weightier content.

That makes it surprising that almost half of smartphone users have no off-device storage in place at all, despite the availability of a wide variety of cloud storage platforms for personal use (Apple, for example, has consistently pointed critics of the low storage capacity of its entry-level models in the direction of its iCloud service).

Offering consumers access to a personal cloud storage and content management platform is therefore a massive opportunity for operators to keep those consumers engaged and tied to their services. Locking subscribers into their ecosystem by helping them manage their spiralling volumes of data could be much more effective than established incentives such as faddish special offers on tickets or bundled streaming services as loyalty to operators starts to waver.

There is a lot of competition on the market already to provide subscribers with personal cloud services – notably from the ‘big beasts’ of consumer technology in the form of Google Drive, iCloud, and Microsoft’s SkyDrive, as well as the likes of Dropbox and Box – but the cloud has the potential to be much more than simply a “me too” offering for operators.

Cloud services can, rather than just working to reduce churn, be a viable revenue generator for operators in their own right. In particular, they offer operators the opportunity to build meaningful brand partnerships and expand their ecosystem of services through third parties working with open APIs and SDKs.

And the benefits of cloud for operators extend beyond direct monetisation: there are considerable productivity and profitability benefits to be found by both reducing time spent in-store on device-to-device content transfer, freeing store staff up for other sales activity, and not needing to install and use cable-based content transfer boxes that are slower and less efficient.

Operators shouldn’t approach the opportunities of cloud services provision with trepidation. It’s important, of course – especially in the current climate of heightened awareness around issues of privacy and security – to work with an experienced vendor with a strong track record. But operators are actually in a stronger position than they may realise when it comes to preparedness for launching cloud services: they are in the business of providing connectivity and security of data, after all.

Ted Woodbery is VP, Product Strategy and Corporate Marketing at Synchronoss Technologies, a leading global provider of operator branded personal cloud solutions and software-based activation services. Prior to joining Synchronoss, Ted was formerly VP, Consumer Cloud Services at AT&T Mobility.