What impact will the cancellation of data roaming have on telecom operators?

With the development of economy and society, the number of people in inter-provincial mobility is increasing, so there is a strong call for the cancellation of mobile network traffic roaming charges. It is also necessary for telecom operators to follow this trend.

1. The three major telecom operators all seem to have a good start in 2018

Judging from the business operation data for January 2018 released by the three major telecom operators, it can be said that the start was “good”.

China Mobile: The total number of mobile business users reached 891 million, with a net increase of 3.843 million in January; of which the number of 4G users reached 655 million, with a net increase of 5.242 million in January. In terms of wired broadband business, the total number of users was 117 million (the number of users is close to that of China Telecom, the industry leader), with a net increase of 4.076 million in January.

China Telecom: The number of mobile users increased by 5.06 million in January, and the number of 4G users increased by 5.73 million, reaching 255 million (including about 188 million 4G users, and 4G penetration rate reached about 74%). The number of wired broadband users increased by 1.03 million in January, totaling about 135 million. The number of wired broadband users of its parent company China Telecom Group Co., Ltd. was 21 million, and the total number of wired broadband users was 156 million (compared with China Mobile's limited broadband user growth, its position as the industry leader in the first half of this year is worrying).

China Unicom: The number of mobile account users increased by 2.872 million in January, reaching 287 million in total. The number of 4G users increased by 6.415 million in January, reaching 181.3 million in total. The number of wired broadband users increased by 501,000 in January, reaching 77.04 million in total (the gap with China Telecom and China Mobile is widening).

From the perspective of key business data development, China Telecom and China Unicom have made significant breakthroughs in the development of mobile users under the effect of the full network access policy and unlimited traffic policy that they vigorously promoted since 2017. However, China Mobile has widened the gap with China Unicom and narrowed the gap with China Telecom in wired broadband business by relying on price, tariff and content combination. The three telecom operators are each taking asymmetric offensive means to seize market share.

In 2018, the business got off to a "good" start! However, with this good start, we are faced with the challenge of new and arduous tasks! This makes 2018 destined to be a new stage for telecom operators to find joy in suffering.

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2. From the Ministry of Industry and Information Technology to the State Council, the cancellation of data "roaming" has long been actively planned

As early as February 6, 2018, before the two sessions of this year, there was news that the Ministry of Industry and Information Technology will promote the cancellation of data roaming fees this year, which is the focus of the Ministry of Industry and Information Technology's work on speeding up and reducing fees in 2018. Previously, the Ministry of Industry and Information Technology made speeding up and reducing fees a key task for the new year at the 2018 work conference, and planned goals such as "increasing network speed-up and fee reduction efforts", "further improving 4G network coverage and speed, and further reducing average mobile data charges".

On the morning of March 5, 2018, the first session of the 13th National People's Congress opened in Beijing, and Premier Li Keqiang delivered a government work report. In this nearly 20,000-word report, the contents related to telecom operators include:

We will increase efforts to speed up the network and reduce fees, achieve full coverage of high-speed broadband in urban and rural areas, expand the scope of free Internet access in public places, significantly reduce the usage fees of home broadband, enterprise broadband and dedicated lines, cancel traffic "roaming" fees, and reduce mobile network traffic charges by at least 30% within the year, so that the people and businesses can truly benefit, and provide support for the construction of a Digital China.

From this we can see that after the Ministry of Industry and Information Technology promoted the cancellation of domestic roaming charges for mobile phones last year, the issue of data roaming charges was the most strongly reflected in online comments at the time. Therefore, the cancellation of data roaming has long been actively planned as a key task in 2018. For industry insiders, this prediction has long been made. During the widely watched two sessions, it was clearly put forward in the form of a government work report. For the majority of users, there may be a sense of "happiness comes too fast". In particular, the whole society's dependence on the Internet, especially the mobile network, and the new requirements for speeding up and reducing fees for basic telecommunications services have won widespread applause from the masses.

However, if we try to look at it from another angle, this is undoubtedly a heavier task for the telecom operator team, especially the grassroots team. If the operator team, especially the grassroots team, cannot be fully, timely and effectively motivated in this process, the morale of the entire operator team will be significantly affected. In this case, as the pressure on the entire network system continues to increase, the task of speeding up and reducing fees since 2015 will gradually become clear as to whether there will be a more solid business operation foundation.

What impact will the cancellation of data roaming charges by operators and the reduction of mobile network data charges by at least 30% have on data operations? What impact will it have on the business management innovation of telecom operators? This is something that telecom operators and related stakeholders need to study amidst the applause.

3. Differentiating between local traffic and national traffic, operators and users cannot reach a consensus

Why is there a roaming fee for mobile network traffic? Why is there a distinction between national traffic and local (province or city) traffic? This is a commonplace topic. The explanations given by operators or some professionals can be summarized as follows:

1. The operator system is huge and is managed in accordance with provincial administrative regions. Therefore, there are regional differences in operation. Each province has its own actual situation in specific operation and management, which provides flexibility to give priority to local services. There are also regional differences in the provinces and cities below, and some of the differences are very large. Therefore, we can usually see the distinction between national traffic and provincial traffic, and at the provincial level, there is also a distinction between provincial traffic and city traffic.

2. Regional differences lead to differences in direct network construction costs and operating and management costs. If pricing is based on cost, price differences are inevitable.

3. The most direct regional difference is the level of disposable income and consumption capacity in different regions. This also provides the most basic conditions for traffic differentiation. This is just like general commodities will be differentiated according to the target population, and different products and pricing principles will be provided to different groups of people.

4. The internal business assessment model of telecom operators determines that the assessment is based on provinces. When users move between different provinces, the resources of the mobile network equipment used belong to different provinces, and there are problems in the internal distribution and settlement of income for providing services. In addition to general packages, solving the problem through roaming fees is one way. Telecom operators may continue to use the long-distance billing model for re-call services, and thus adopt this additional roaming fee method for cross-provincial roaming of mobile network traffic.

5. Other specific internal management reasons, such as marketing management, to prevent mixed products and avoid problems such as mixing of mobile phone cards from different regions.

In short, from the perspective of telecom operators, no matter what the reasons are, in the eyes of the majority of users, they are mainly caused by the internal management of telecom operators or the customary methods used in history. Fundamentally speaking, they are caused by the relatively backward management model within telecom operators. It is a typical example of non-user-centered business design. In addition, for a long time, everyone has the so-called monopoly status of telecom operators. Therefore, no matter what real problems telecom operators give, they can never be recognized by the majority of users.

We can see that after the announcement of the policy of canceling long-distance mobile phone calls in September last year, there were few positive comments from netizens, but it triggered a wave of condemnation of mobile network data roaming charges. After the opening meeting of the first session of the 13th National People's Congress on the morning of March 5, during the second "Minister's Channel" interview of the two sessions, Minister of Industry and Information Technology Miao Wei said, "We recently conducted a survey, and the majority of mobile phone customers have strong opinions on the billing method of distinguishing local and national mobile data traffic, so the Prime Minister proposed to cancel the roaming charges for mobile data traffic this year, and there are other measures to increase speed and reduce fees. Obviously, the opinions on data roaming have been accumulated for a long time since September last year. Since the long-distance charges for mobile phones can be canceled, why can't the roaming charges for mobile network data traffic be canceled? Obviously, there is a lack of a strong decision to promote it!

4. Cancel the time expectation for mobile network data roaming

We often say that some things are not technically problematic, but it is difficult to make a decision on the adjustment of interests. In fact, after the decision is made, the technical implementation is still a problem. And technical implementation takes time. Therefore, after the government work report announced the good news of canceling mobile network data roaming, when it can be realized and the time point are generally concerned. We all hope that it will be the best immediately.

As the saying goes, you can’t eat hot tofu in a hurry. In terms of time, there are at least three reference dates: the first is before the 2018 World Telecommunication Day, which is May 17, 2018, which means that telecom operators have less than 3 months to prepare; the second is before July 1, 2018, which means nearly 5 months to prepare; the third is based on the time point when long-distance and roaming charges for mobile phones were abolished last year, which is September 1, 2018.

Judging from the positive statements of the three major operators on canceling mobile network traffic roaming, it is very likely that they had already made preparations long before the government work report, so it is very worth looking forward to around July 1 this year.

If we look at the time of nearly 5 months, the three major operators need to complete the upgrade and transformation of the billing system, adjust the impact on the income and assessment of each province, and coordinate with the relevant system support parties. The time is still very tight. This is also the main difficulty for telecom operators in canceling mobile network traffic. Of course, the most important thing is the impact and countermeasures on the business goals that have been determined this year, which is more urgent.

5. Impact of the new round of speed increase and fee reduction on the operation and management of telecom operators

The policy requirements for speed increase and fee reduction in 2018, from what has been determined, are that speed increase is mainly for the preparation of 5G pilot projects, while fee reduction is the main theme of 2018. This requirement is obviously a mixed feeling for telecom operators. Therefore, I personally think that the impact of the new round of speed increase and fee reduction on the operation and management of telecom operators is first and foremost the morale of the operator team, especially the morale of the grassroots team. Therefore, while actively implementing policy requirements, it is one of the most urgent tasks to do a good job in internal publicity, education and incentive support, which involves the stability of the telecom operator's workforce. Under the influence of the wave of resignations of telecom operators in the past few years, I believe that the new round of topics of whether to leave or stay will be more common in the chats among telecom operators. Will "Are you still there? When are you leaving?" become a high-frequency greeting for everyone?

Judging from the impact, the cancellation of mobile network traffic roaming and the reduction of tariffs by at least 30% will have the greatest impact on China Mobile. On the one hand, China Telecom and China Unicom have already mitigated this impact in advance by significantly reducing the prices of unlimited traffic packages last year. On the other hand, China Mobile is cautious about unlimited traffic, but under the new requirements of speed increase and fee reduction, it will have to take this opportunity to follow up. However, whether it can fight back in this way may be a problem of overdoing it. Therefore, in terms of mobile business, China Mobile faces a greater test. Of course, China Mobile itself relies on super-favorable low prices to grab market share in the wired broadband business, and the impact in this regard is relatively small, mainly China Telecom.

Of course, if we look at China Unicom alone, the mixed-ownership reform of China Unicom has been deeply promoted. The new round of speed-up and fee-reduction work has brought considerable pressure on the "betting performance" of employees who have completed the mixed-ownership reform in basic telecommunications services. This is bound to lead to the bankruptcy of China Unicom, which has taken greater steps in its comprehensive cooperation with Internet companies.

Furthermore, for the proposition of traffic management proposed in 2013, especially since the three major operators have not yet made large-scale traffic backward management business, the traffic backward management business has not yet entered the innovation dividend harvesting period, but has been squeezed and closed by the pressure of too fast traffic tariff reduction. Therefore, the proposition of traffic management may have lacked foundation. It was also mentioned in the previous article that with unlimited traffic packages as a transition, it actually quickly moved towards the most popular monthly package model. Under the monthly package model, the competition is the network's carrying capacity, coverage capacity and service capacity. In fact, there is no more room for price wars.

During the two sessions, Minister Miao Wei of the Ministry of Industry and Information Technology said that in the past three years, through a number of measures such as increasing speed without raising fees, not clearing traffic, and canceling long-distance and roaming fees for voice calls, the charges for telecom users in various aspects have continued to decline. Over the past three years, the unit price of broadband users has dropped by 90%, and the unit price of mobile communication customers has dropped by 83.5%. No matter how users ignore the facts or are dissatisfied with such results, these are real data. From these data, we can see that with the rapid development of basic communication services and the upcoming trial commercialization of 5G in 2020, in the next two to three years, we will be able to enjoy high-speed network services at a lower rate in basic communication services. For many consumers, consumption in basic communication services may be negligible. In the future, information service consumption will mainly be based on content consumption. The core of content consumption is the consumption of high-quality content based on copyright protection. Therefore, for telecom operators, in terms of pan-IP content consumption, whether it is self-operated or through cooperation, joint ventures, etc., it is key to have more capabilities in the consumption of more copyrighted high-quality content. In this regard, judging from China Mobile's practice, Migu's investment in content is worth emulating. Therefore, this will be the key to determining the new profit source of telecom operators.

The latest statistics show that during the 2018 Spring Festival, the country received 386 million tourists, a year-on-year increase of 12.1%; the number of Chinese citizens traveling abroad reached 138 million, and the expenditure reached 115.29 billion US dollars, ranking first in the world. During the Spring Festival Golden Week, the sales data of retail and catering enterprises nationwide reached 982.6 billion yuan, a year-on-year increase of 10.2%. From this set of data, I can also see that with the development of the economy and society, the scale of our inter-provincial mobile population is constantly expanding, so there is a strong call for the cancellation of mobile network traffic roaming fees. It is also necessary for telecom operators to follow this trend.

The "2018 Spring Festival Travel Analysis Report" recently released by China Unicom Big Data shows that the five most popular tourist provinces in China are Yunnan, Hainan, Jiangsu, Shanghai and Fujian, and the corresponding popular scenic spots are Lijiang Ancient Town, Sanya Yalong Bay, Nanjing Confucius Temple, Shanghai Disneyland and Xiamen Gulangyu. Therefore, major operators have differentiated network enhancements for popular tourist cities and attractions based on their own big data, which is an important reference for guiding telecom operators to improve their services.

In short, the cancellation of mobile network traffic roaming and the new round of speed increase and fee reduction (mainly fee reduction) have the greatest impact on telecom operators in terms of business model adjustment. In addition to making a fuss about the diversity of package rates, more efforts should be made to increase premiums by diversifying the cargo on board in faster and cheaper channels.