Changing Mobile Handsets

Apple’s launch of the iPhone to Verizon in January and Sprint in August of 2011 helped grow its market share to 29% of U.S. smartphones. Android’s operating system (OS) share of smartphone sales grew to 53%. While Android and Apple saw gains in 2011, Research in Motion’s (RIM) Blackberry market share slipped from 25% in 2010 to 10% through October of 2011.

Malware on Smartphones Reaches New Highs

Since July, Juniper Networks found that Android users have seen a 472% increase in malware. These malicious applications target communications, location, or other personal identifying information. Another popular attack uses SMS Trojans, which operate in the background without the user’s knowledge sending SMS messages to premium rate numbers owned by the attacker. The identities of premium rate numbers are usually anonymous, and the money is not recoverable. With this in mind, employers that have not placed any controls on mobile expenses will experience bill shock from rising costs for mobile service expenses in 2012.

End of Unlimited Data Plans

Last year, carriers saw greater demand from customers’ use of wireless spectrum. However, the explosion in data traffic did not produce corresponding gains in data revenues for operators due to unlimited data plans. In 2011, Verizon acted to address this issue by following AT&T’s strategy of eliminating unlimited data plans for new customers. Most organizations have corporate plans that protect them from immediate increases in mobile data costs, but the carriers will now be seeking to raise prices for heavy users of data services including mobile web surfing, e-mail, and other mobile applications. Organizations will also see rising costs for mobile data charges in 2012, as employees replace their Blackberry devices. This can have a significant impact on data consumption because Android and iPhone smartphone users consume four and a half to nearly four times more data compared to Blackberry users.

Planning for 2012 with Wireless Expense and Mobility Management

Managers need to meet these three trends of growth in employees using Android devices and iPhones, the elimination of unlimited data plans, and smartphone malware with new tools to monitor data usage and mobile spending. TEM reports for wireless services provide dashboard reporting that highlight spikes and variances in charges. TEM programs can also distribute usage reports directly to employees and their managers to help augment security and policies designed to limit malware. In 2012, organizations will need to add new controls to prevent runaway mobile expenses.

• Raising prices by and eliminating unlimited data plans
• Adding more customers that pay to use their mobile data network
• Throttle users that consume too much bandwidth
• Offload customers to Wi-Fi networks and hotspots

Enticing More Subscribers to Use the Network with Data Pooling

Verizon CEO Lowell McAdam comments at the UBS Global Media and Communications Conference, confirm that Verizon will offer data plans for multiple devices in 2012. In June, AT&T CEO Ralph de la Vega also confirmed that they are developing a shared data plan. And, Sprint CEO Dan Hesse believes that shared data plans are the next trend in wireless and are looking to add them as well.

Having one bill for each customer is more efficient, and carriers ultimately have relationships with customers rather than devices. However, the main reason carriers are doing this is that they want more revenue from customers that use their mobile data network. Carriers may lose some revenue from customers that consolidate multiple plans, but will need to switch to plans with larger data allotments as they consume more bandwidth, which are more expensive and offset some of the carriers’ losses.

This will lead to increases in spending for wireless services at most organizations. Organizations must develop strategies and implement programs to address changes in mobile data plans. Most organizations do not have accurate information or reporting on employee data consumption due to data plans being unlimited until recent months. Many corporate contracts allow managers to have a false sense of complacency with protection from these changes.

When the contracts end, managers will face changes that require accurate information on employee mobile data usage. Determining if employees are abusing data plans or their devices and applications are data hogs requires accurate inventories of devices, knowledge of employees’ data plans, reporting on data usage and analysis; all things that good TEM program can provide. Wide variances in usage should lead managers to determine if the types of devices and applications that employees are using are causing spikes in usage for some employees. Change is coming for corporations’ mobile data plans. Be prepared.

The SEC Division of Corporation Finance stresses that its cybersecurity risks and cyber incidents disclosure obligations are its own views, and not an official regulation from the Securities and Exchange Commission. The Commission calls for timely and comprehensive disclosure of the information if it is important to an investor’s decision about the company. Although existing disclosure requirements do not refer specifically to cybersecurity risks and cyber incidents, a number of disclosure requirements may impose an obligation to disclose such risks and incidents.

The guidance draws attention to the need for organizations to focus on data security. With 43% market share, Google’s Android operating system is an attractive target for cybercriminals. Part of the problem is that the Google Market does not screen developers or applications for malware. According to Juniper, most of these new malicious Android applications target communications, location, or other personal identifying information. Another popular attack are SMS Trojans, which operate in the background and often without the user’s knowledge. The Trojans send SMS messages to premium rate numbers normally owned by the attacker. The identities of premium rate numbers are usually anonymous, and the money is not recoverable.

Organizations should examine their policies regarding mobile devices. The move to Bring Your Own Devices (BYOD) to work and a shift away from corporate liable programs where employers make employees responsible for managing their devices may be premature. While it may not be possible to limit employees to one device, it also does not make sense to allow employees to connect any device to the corporate network with the increase in malicious attacks.

Want to learn more on the topic of corporate mobile policy? Signup for our December 7^th webinar titled Settling the Great Debate: BYOD, Employee Liable and Corporate Liable. You can sign up HERE.

Instead of simply transferring the funds and having the telecom carriers change the line item for the fees that it collects, the FCC has approved a new fee that will start at $0.50 cents a month and go to $2.50 in the future for the Connect America Fund. This seems strange, but the FCC probably thinks that people are used to seeing the Universal Service Fund fee and that they will not notice a new line item for 50 cents on their phone bills. This new program seeks to spread access to broadband, for 18 million American households that the FCC thinks do not have high-speed Internet service.

A few days later on Tuesday, November 1 the House of Representatives passed the Wireless Tax Fairness Act of 2011. The legislation, (H.R. 1002), will place a five year freeze on any new state, local taxes, or other fees imposed on wireless consumers’ monthly bill. It is not clear if the federal government has the authority over 60,000 State and Local tax jurisdictions. The US Senate has not approved similar legislation so there is no timeline for this freeze on taxes for wireless bills.

According to TaxFoundation.org, the average U.S. wireless bill contains 16.26% in taxes and fees. Approximately, 11.21% is from state and local municipalities. Many states including Nebraska, Washington, New York, Florida, and Illinois, have between 20-24% in federal, state, and local taxes.

These taxes are confusing so make sure you have an automated Telecom Expense Management solution in place to validate your bills and flag any tax exemptions.

Growth in the use of text messaging reveals an opportunity for organizations to use text messaging to update inventory records for mobile devices. With acceptance for text messaging growing, organizations can now use this medium to determine which service plans are active. Failure to respond to a few text messages can help an organization quickly pinpoint service plans and devices to disconnect. It may still be necessary to make a call to avoid disconnecting an executive’s mobile device, but now text messages can narrow the list much faster.

Overall, the survey found that both text messaging and mobile calls have leveled off for the adult population. Text messaging users send or receive an average of 41.5 messages on a typical day, with the median user sending or receiving 10 texts daily. In addition, cell owners make or receive an average of 12 calls on their cells per day, which is unchanged from 2010.

How does this compare with your company? Most managers at organizations report that their wireless expenses are rising. This is due to several factors. First, as the economy began to improve earlier this year, many organizations started to shift employees from individual liable employees paid their mobile bills to corporate liable with employers picking up the tab. Second, while voice and text use is leveling off, data consumption is rising. Employees are sending larger files, accessing the internet more, using mobile applications that require connectivity and it is becoming more difficult to get unlimited data plans for employees. In addition, companies are seeing growth in purchases of mobile applications for business. Finally, spending on mobile devices is growing as employees demand particular devices and the cycle times for replacing devices continue to shrinking.

These trends provide some guidance in ways to manage wireless expenses. The consumption of mobile voice and text messages leveling off, organizations have an opportunity to spend less time optimizing their plans for voice services and text messages. It is time to shift resources into right-sizing data plans because this is where growth in consumption and spending will be. In addition, organizations need to look at fundamental things like mobile policy. Policy can set expectations for devices, data consumption, and evaluation of which employees should receive mobile connectivity.

Many network managers at organizations are working multiple assignments and they simply do not have the time to manage wireless expenses. Unlike fixed services where savings often come from billing errors with historical audits that recover costs from funds spent, most wireless services savings come from optimization and future cost avoidance. This can include optimization of service plans and elimination of charges for unused, orphan devices where employees no longer work for the organization.

The Fallacy of Eliminating Corporate Paid Wireless Services

Another common mistake related to inaction comes when executives decide to eliminate corporate paid wireless services. Organizations often believe they can simply cut this expense and any costs associated with managing mobility charges. This approach may appear to work, but often managers simply begin submitting wireless charges and receiving reimbursements through expense reporting. This leaves organizations with the worst of all worlds. They are incurring the expense, but they no longer have visibility into the charges. In addition, there is no opportunity to benefit from volume purchases. Finally, there is no oversight of the charges because the folks that process expense reports do not have specialized knowledge of wireless expenses or automated software to manage this expense.

Changes in Wireless Billing and Services Require Oversight

Carriers are introducing new service plans with the elimination of unlimited data and the likely introduction of data pooling among other innovations. With these changes and higher speeds to send and receive data, the opportunities to waste money by failing to optimize service plans for usage are greater than ever. With these changes, it pays to update mobile policies and establish chargeback reporting. Also, consider new applications for smartphones and other wireless devices. These applications can enhance employee productivity, but they may also increase data plan consumption.

A Dollar Saved, Is a Dollar Earned

A dollar spent managing wireless services will usually produce a significant return because savings accumulate over several months. Evaluation of the plans and usage of employees that consume more than their peers will produce savings. Make sure you have the technology in place to aid your quest for the greatest wireless savings. A dollar saved, will go right to your bottom line.

First, consider battery life. When batteries die, it is a sure way to get employees to stop talking and surfing the web with their mobile device. Even before the battery dies employees start conserving energy and reducing their time talking, sending text messages and using their mobile device on the web. As the battery life of mobile devices improves, consumption of mobile data and minutes of use will increase. Also, the amount of video viewed on mobile devices will grow as battery life and processing power advances. So start preparing today for batteries that last longer with reports that track voice and data usage. Rate plan optimization is also critical to ensure that employees are on the right plan for their current consumption of these services.

Second, mobile devices increase an individual’s contact time with the network, and this increased contact time will lead to an increase in overall data usage and minutes of use per user. Not all of the increase in mobile data traffic will be due to traffic migration to the mobile network from hard-wired networks. Many unique mobile applications including location-based applications and the type of services are increasing in popularity.

Third, consider mobile network connection speeds. As these speeds increase, employees will substitute fixed or hard-wired services with more convenient mobile services. In addition, greater average mobile network connection speeds will lead people to send and receive more data through mobile devices. Large attachments are just the start for this trend. Mobile video and even high-definition video will be more prevalent. The proportion of streamed content that your employees view will increase.

These three trends require you to update mobile policy. Organizations need better reporting for wireless expenses and mobile services to manage and control spending.

Some analysts believe that Motorola’s patents (17,000 patents plus 7,500 pending patent applications) drove this deal because Apple, Microsoft and others have been suing Android licensees for patent infringement. Others believe that Google is integrating vertically with software and hardware, matching the strategies of Apple and RIM, to compete better and gain more control over manufacturing and launches of its consumer electronics. There are others reasons for this acquisition, but this posting will examine what it means to managers of telecom expenses and the TEM market.

Although Android has a large share of the smartphone market, many organizations do not support Android devices. Most U.S. based organizations are just beginning to transition from solely supporting RIM’s Blackberry devices to supporting other devices starting with the iPhone.

Security-minded enterprises were not encouraged by the news on March 1, that the Google’s Android Market had posted 58 applications that 260,000 devices had downloaded, which allowed malware to gain root access or control over infected devices. With this security breach, enterprises are unlikely to begin supporting Android devices.

One big question mark is what this acquisition means for Microsoft and Nokia. Nokia’s market share has collapsed as people await Microsoft’s new Windows Phone 7 operating system. Microsoft could also gain as other handset makers dedicate more resources to developing devices with this new operating system to protect themselves from competing directly with Google/Motorola.

As the market sorts things out, managers should be careful not to take free devices with operating systems that will be discontinued as carriers unload this inventory. It now seems likely that the market will settle on four major operating systems. This will be good, but it will take some time before Microsoft and Android have the security features that RIM and Apple offer. With this in mind, managers will need to continue placing limits on the devices that they support. In addition, Wireless Expense Management reporting can help ensure that managers have the reporting to monitor spikes in data consumption from malware.

According to a memo signed by William Huber, president of IBEW, Local 827, Verizon seeks to tie pay increases to performance review, require union workers to contribute to health-plan premiums, freeze pensions at the end of the year, cut in half the sickness disability benefits from 52 weeks to 26 weeks, reduce sick time and eliminate the death benefit program.

Verizon indicates that these changes are necessary due to pressures its landline business faces, with a 2.2 percent decline in the first quarter, and a 0.3 percent decline in the second quarter as customers switch to e-mail communications, wireless and Internet-based phone services. Verizon has a business continuity plan, with management employees, retirees and others who will temporarily fill the roles of its union wireline employees who are not working.

Enterprises Must Protect Themselves

This post is not taking the side of Verizon or its unions. Instead, we offer advice and strategies for enterprises to deal with this strike. As part of the negotiations, both sides appear to have hard positions. The last strike in 2000 lasted for 18 days and it is difficult to predict how long this strike will last. It is important that enterprises prepare themselves accordingly.

• Managers should submit all requests for Moves, Adds, Changes, and Disconnects (MACDs) now before a backlog builds.
• If you have a new facility that is opening, request new services now. (There may be some delays in new service installations, but this is new revenue, so it will be a top priority.)
• Expect delays in responding to disconnect requests.
• Get commitments in writing from Verizon to acknowledge your disconnect requests and honor the requested dates on its billing regardless of when it completes your work order.
• Document the impact of delays in responding to service order requests particularly on billing.
• While network disruptions from the strike are unlikely, enterprises should establish network redundancy plans with other telecom carriers.
• Get billing records and contract information organized, today
• Expect delays and data entry errors, which will produce billing errors 2 to 6 months after the start of the strike.
• Allocate more resources and time to validate all billing.

If you do not have software or resources to deal with extra documentation to track MACD activity, asset management and billing issues that are likely to arise, you’re at an increased risk of billing errors as a result of this strike. Take proactive measures to ensure you’re not overspending for telecom services.

Measuring One Gigabyte of Data Consumption

Verizon and AT&T’s data plans use MB and GB abbreviations that refer to megabytes and gigabytes.  Unlike voice services that are measured based on the number of minutes that are used, data consumption is more difficult to track and estimate. One issue is that data usage varies by device.  Blackberry devices use the least data while devices with the Android and iOS based devices use more data. In addition, the average size of a file attachment, web page, social media post, application download, music file, and video stream varies.

Estimating usage and making comparisons between AT&T and Verizon are nearly impossible.  The table below shows that data calculators from Verizon and AT&T websites do not allow for “apples-to-apples” comparisons of devices and networks.

1 Gigabyte of Data Consumption: Verizon (Android Device) vs. AT&T (Average Smartphone), respectively

• Text e-mails no attachments sent or received per day: 1680 vs. 3571
• Web page views: 25 vs. 190
• Streaming music: 52 minutes vs. 70 minutes
• Streaming video: 5 minutes vs. 17 minutes

AT&T and Verizon now offer ways for subscribers to monitor their wireless data usage with text message alerts when their data usage crosses thresholds of 50 percent, 75 percent, 90 percent, 100 percent and 110 percent of their data plans’ monthly allowance. This is a good start, but it is a reactive approach. It does not allow managers to control consumption for a large enterprise.

Organizations need to begin to monitor employees, devices and applications to get a better handle on wireless data costs. Determining if employees are abusing data plans or their devices and applications are data hogs will be difficult and requires detailed reporting and analysis. The wide variances for usage listed above should lead managers to question how carriers will accurately bill for data consumption. A Wireless Expense Management (WEM) solution will allow large organizations to tackle these challenges before the costs spiral out of control.