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Critical policy mechanisms will play a pivotal role in enticing subscribers to adopt new services and as such, policy needs to be a critical component of real-time BSS solutions.

Because policy means different things to different audiences, let's first look at what we mean by policy management. Policy management encompasses the rules that CSPs can set that enable subscribers to consume predefined services based on their profile; become eligible for select services while roaming; and set usage and service policies for others, such as employees or children.

Policies defining bandwidth allocation for particular services are critical to policy management because they help CSPs effectively manage and optimize their network resources. Effective policy management will provide CSPs with the tools to differentiate their services, be more creative in their service offers and enable them to protect their own interests by distributing and controlling their network resources more effectively.

Growing demand, diminishing returns and a more treacherous competitive climate should naturally lead operators to move beyond flat-rate business models as soon as possible in an effort to differentiate and remain viable.

Yet in fiercely competitive and mature markets like North America and Western Europe, the reality is that service providers are hesitant to introduce differentiated pricing models that may dissatisfy subscribers who have grown accustomed to a simple commodity service package. This hesitancy stems from the fact that although a number of new service models make sense in theory, most service provider's are unsure of the best way to build out the charging models in practice.

Further complicating the picture is the fact that NGN architectures such as IMS and the adoption of new service delivery platforms promise to change the dynamics of bandwidth allocation and management. Bundled services or individual services such as rich media content, mobile TV, video-on-demand, gaming and other next-generation services will need higher bandwidth allocations, which will significantly impact IP network resources. This will further the imperative for operators to adopt tiered service models and more nuanced bandwidth management techniques to avoid being relegated to bit pipes, as well as achieve a reduction in operational costs.

Especially in mature wireless markets, service providers can increase their profitability by putting visibility and control mechanisms in the hands of users to create a personalized experience. Additionally, operators can introduce intelligent bandwidth caps that control subscriber usage (thus conserving and properly allocating network resources) in a way that is sensitive toward maintaining a high-quality user experience. For example, operators believe that allowing subscribers to view and enable thresholds/spending limits gives subscribers peace of mind in terms of curbing overspending, and hence, should be an important policy management criterion.

Policy management is designed to both overcome the challenges on the network side and reconstitute offerings on the service side. Customizable policy management solutions allow for the implementation of real-time rules that service providers can set, enabling subscribers to consume predefined services based on their profiles. Operators can also define bandwidth allocation for particular services, giving operators the tools to differentiate their services, be more creative and protect their own interests by distributing and controlling scarce network resources more effectively.

At the same time, operators can focus on greater targeting of service tiers to drive new revenue. Capitalizing on the enhanced intelligence and control that policy management and deep-packet inspection afford, operators can personalize service tiers and revenue models to speak to particular customer needs and, in doing so, closely align services with revenue.

Yankee Group sees two major developments as the foremost drivers in pushing mobile operators toward policy management solutions.

• The proliferation of smartphones will increase subscribers' appetite for bandwidth-intensive services. Smartphones vastly improve the web surfing experience and increase consumption of media and content-based services. Without effective policy controls, smartphones will overtax the network and as a result, users will endure a poor network experience.
• The speed and capacity of 3G networks will enable adoption of media- and content-based services. In our survey of network operators, respondents across the board pointed out their focus on the plethora of new consumer services made possible due to the greater speed and capacity of 3G networks. Wireless operators strongly believe that consumer-directed multimedia services, data access packages, contactless payments and multiuser gaming services will prove to be keys in maximizing the revenue opportunity among mobile subscribers.

If a flat-rate model is truly unsustainable, then what model should take its place? Intelligent bandwidth caps may provide an answer. By intelligent bandwidth caps, we mean allocations that can be set by the subscriber or the operator, are customizable in real time and can be adjusted based on factors such as the parameters of the application in use, roaming conditions and network congestion levels. This type of bandwidth cap solution can achieve the cost and bandwidth savings that operators sorely need, while avoiding subscriber backlash by constructing bandwidth allocations in a manner that is conducive to creating the highest possible customer experience.

Based on a global survey conducted by Yankee Group last July, the table to the left reinforces the fact that operators indeed have the customer experience at top of mind when assessing bandwidth cap implementations.

Intelligent bandwidth caps can also be instrumental in preventing subscribers from accruing unexpectedly inflated bills. This concept has gained steam lately because it is closely tied with the notion of heightened customer satisfaction: bill shock can result in customer service complaints, customers turning off advanced services to curtail data usage, and ultimately, increased churn. Despite demand in theory, however, our survey results indicate operators are still unclear about the required components for an anti-bill-shock solution. This presents an opportunity for policy management and billing vendors to undertake targeted market education to inform operators about the best tools to prevent this problem. Yankee Group thinks that real-time usage visibility and notifications are logical places to start.

Ari Banerjee is VP of next-generation software systems at Yankee Group