PRS booming, but bad news for networks

What did the O2 customer say to his friend? Nothing. Hopefully its a happy Friday for all you O2 users who lost connectivity this week. Hopefully everyone is back on line. What it shows is how reliant we are on mobile networks for our everyday lives. It also doesn’t bode well for O2’s much trumped 4G roll out. The outage comes hot on the heals of a nine hour breakdown of Orange France’s network in France last week. Ho hum.

Askar Sheibani, CEO of IT and telecoms repair company, Comtek, sums it up well: “O2 has failed to deliver a basic service to its customers in the past few no basic call connectivity nor the ability to send text messages. To have an entire network down is a poor show for the company, and does not bode well for an operator who plans to deliver 4G services in a year’s time. Mobile phones are an increasingly essential part of day-to-day life for consumers and businesses alike, and incidents such as this are simply un-acceptable.  This failure to deliver basic 2G and 3G services, indicates that O2 may have taken its eye off the ball – ignoring the maintenance of its existing service in the rush to deliver 4G.

“For too many businesses, simple practices such as repairing and maintaining existing technology gets overlooked, in favour of newer fads.  Unfortunately this ‘throw-away’ culture is not just wasteful and inefficient, but it is also detrimental to the service the consumer receives – as O2 customers have witnessed in the past 24 hours. Investing in innovation and developing new technologies is, of course, worthwhile; but it is absolutely paramount that companies continue to deliver the level of service which existing customers are paying for and relying upon.  Whilst O2 has paid the price this time round, other network providers following a similar path would do well to take heed of the warning signs, and ensure their existing infrastructure is up to scratch.”

Quite. Take note network operators.

But while this is bad news for MNOs, there is better news, however, for the premium rate industry with PhonePay Plus finding that the UK is the hub of the international PRS business, with consumers spending more per head on such services than anywhere else and with many international companies basing themselves here in the UK.

PhonepayPlus’ annual market review – Current & Future Market for PRS 2011 – published this week underlines how sophisticated and successful the UK PRS sector has become.

In its Annual Report 2011/12, PhonepayPlus, UK regulator of PRS, reveals figures for the first ever PRS industry-wide Registration Scheme. Out of almost 4,000 registered providers, 14% have headquarters located overseas, with providers based in 75 countries including Australia, Russia, China, India, Nigeria, Argentina and the USA.

The attractiveness of the UK PRS market for international providers and investment is underlined by research published in 2011 by PhonepayPlus that shows while the average global PRS revenue per capita (based on 20 bench-marked countries) was 4.57USD, in the UK it is 18.70USD. PhonepayPlus’ annual market review, Current & Future Market for PRS 2011, shows that some providers are capitalising on the ‘borderless’ reach of global sites, such as Facebook, by facilitating mobile payments across a range of international markets. In addition, many UK mobile aggregators are now part of international consortia.

And this is not only good news for the telemedia industry, but shows that there is still a great role for PRS to play in consumer’s everyday lives. While the usual premium rate services continue to generate revenues, the growth in digital interaction, entertainment, commerce and retail are all set to drive even more growth in the PRS sector – if we get it right. The borderless nature of mobile payments on sites such as Facebook and other social media is also offering a great and growing opportunity, especially for the youth market.

This growth in spending via global social media sites and the like is seeing mobile payments boom much as online payment tools – and later mobile pSMS did – around online adult services.

But today the opportunity is very much in the global mainstream and, as such, offers a vast potential revenue source. Using mobile as an easy way for the unbanked to buy through social sites – and commerce sites – quickly and easily is one opportunity. Extending this to more traditional retail is very encouraging.

There is no shortage of mobile payment offerings around, but this increasing keenness among consumers to use PRS for digital and entertainment services offers a huge advantage for retail and commerce. While no one technology for mobile payments has moved into poll position, PRS continues to be grow, as witnesses by the PPP study.

And this is something to rejoice. While PRS revenues always go up during a downturn – driven by the desire to be entertained out of the prevailing gloom, but not wanting to spend too much money – the growing use of PRS to pay for everything from entertainment to media, to goods and services, through social media or through ‘normal’ sites shows that the growth is something much more organic and needs to be capitalized on. So, tell your friends in the industry (except those on O2, they won’t get the call or the text) and we can see these PRS figures rise further still.

But with this good news come some words of caution. While an increasingly globalised and digitised mobile market place opens up new opportunities for business, consumers and the UK digital economy, it also poses new challenges for regulation that has to operate across borders. In December 2011, PhonepayPlus launched an investigation into the operation in the UK market of a particular premium rate malware that was active in 18 countries. The regulator subsequently took robust action to ensure that the malware could no longer operate through a premium rate mechanism and that those responsible for the fraud did not profit from UK consumers.

With an increasingly globalised digital market place comes the increased potential for fraud that operates across borders and in a number of countries simultaneously. Acting to understand and pre-empt such activity, PhonepayPlus will lead discussion about regulation in international markets when it hosts a summit of international regulators in October 2012.

Paul Whiteing, PhonepayPlus’ Chief Executive, says: “When we look at the map of PRS providers active in the UK market, we see a picture of a market that is increasingly global. However, this is a picture still in formation and the opportunities for the UK to lead the way in m-commerce and digital micropayments, such as PRS, are significant. To realise this potential, we need to ensure regulation remains fit for purpose, allowing business innovation to flourish while robustly protecting consumers. We need to do this with an eye, not just to the domestic market, but to a digital economy that is global and indifferent towards state borders.”