In Europe, the 4G battle is underway, as operators roll out their 4G networks. Competition remains fierce as they look to sign up consumers to new superfast networks and make a return on their spectrum auction investment. However, a recent survey by YouGov SixthSense found that around a third of consumers can’t see the point of upgrading to 4G networks. And why would they? There isn’t anything new being added to the service, just faster internet access – more of the same. If operators are going to make a faster return on their investment, they have to differentiate their offerings and take control of their services roadmap to show consumers that there is additional value in signing up to 4G.

15 years ago, operators in Europe were the pioneers of telecoms innovation. They built their own telecoms equipment and created new services to meet the insatiable demand for mobile telephony. However, over time they have gradually lost their capabilities for innovation, in favour of standard equipment from network equipment providers (NEPs), who are notoriously slow at implementing change, and who charge operators a fortune in the process. That mode of operation persists. With the deployment of 4G, innovation is still being stifled because operators continue to buy undifferentiated products from a limited number of those traditional suppliers.

Exclusive access
As brand merchandisers, operators now differentiate themselves by offering exclusive access to the latest Apple or Samsung devices. The exclusive arrangement is often short-lived, however, as device manufacturers don’t want to restrict the availability of their latest products. The same rule applies to operators offering exclusive content bundles – consumers may gravitate towards a particular network to take advantage of the offer – but eventually the content provider will replace exclusivity with distribution deals to all of the networks.

In order to compete effectively in the 4G marketplace, operators need to offer consumers something new, something they value, and something unique to, and owned by, the operator’s brand.

Internet brands, such as Google, already take this approach. Google offers many free services to its customers and innovates continuously, providing incremental updates or developing new services at no extra cost. This applies to a range of web-based services that many people now take for granted, email, shared documents and even a translation service. Users don’t expect to pay for these services but do use them routinely, adding value for the consumer and strengthening customer loyalty with the brand. It’s no surprise then to learn that Google invests a whopping $6.8 billion on R&D, which equates to 13.5 per cent of its revenue – according to a recent report by Booz & Company.

Vodafone on the other hand spends £304m on R&D, which equates to 0.65 per cent of its revenue – according to the company’s 2012 financials. When you compare the two, it becomes clear why customer loyalty lies with Google rather than the operator. Google continues to add value for its users so they keep coming back, and that helps Google increase revenues from its core services. Operators must replicate this model and put more effort into innovation to increase and strengthen customer loyalty. Adding further value to their communication services could be the differentiator that operators need to win market share.

Core service
While voice still accounts for 60 per cent of operators’ revenues, generic mobile data connectivity is now regarded as the primary core service. The initial launch of data-only 4G confirmed this. However, communications (voice calls and messaging) are where the differentiating value can be added. Modern bundling deals with practically unlimited call minutes and messages go some way to countering the apparent “free” use of Over-The-Top (OTT) alternatives – but those alternatives have more to offer than operator services. One key OTT advantage is that their services work across multiple types of device: the mobile smartphone, PCs, laptops, tablets, games consoles, and so on.

Operators are soon to launch voice and video calling over 4G/LTE (VoLTE) and that will be based on a new all-IP network: the IP-Multimedia Subsystem (IMS). The transition to all-IP will make it easier for operators to consider extending their own communications services beyond the smartphone and onto other devices – in fact this multi-device concept is woven into the IMS design.

However, the VoLTE solutions on offer from the operators’ traditional vendors are built around a limited functional scope – simply recreating the service we already have on our mobiles – and do not add anything substantially new or provide any additional value to the consumer.

Add value
Operators need to get off the fence and decide how they are going to differentiate in this extremely competitive 4G market. Do they focus on the access bit pipe model and rely on other service providers to drive usage and network traffic? Or are they going to rebuild on their heritage and deliver communication services that add value for the end user? If it’s going to be the latter, they need to start innovating, and they need to do it fast.

For consumers it’s a simple question of value. If operators don’t want to just compete on price for 4G, they will need to add this value. The best way to do this is by continually adding new value from sources they own – their own intellectual property. Google does it and now operators need to take a leaf out of their book, and rediscover the value of taking ownership of service innovation.

Mark Windle is head of marketing at OpenCloud