Consumers are increasingly purchasing mobile content and apps, but most of this spending is with non-operators. This report discusses the potential that direct carrier billing (DCB) has to enable operators to insert themselves into the value chain and capture a significant proportion of this revenue.

1. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps
Research Report
Direct carrier billing could help operators to capture
consumer spending on mobile content and apps
June 2013
John Abraham, Justin van der Lande and Ronan de Renesse

2. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps
Contents [1]
5. Executive summary
6. Executive summary [1]
7. Executive summary [2]
8. Recommendations
9. Recommendations [1]
10. Recommendations [2]
11. Market definition
12. Direct carrier billing is only one of many mobile payment options but
offers the best opportunity for operators to generate mobile revenue
13. Direct carrier billing provides another payment option at checkout
14. Process flow between the entities involved in direct carrier billing
15. DCB has to support a multi-channel delivery ecosystem that is changing
rapidly driven by technology, economics and regulations
16. Business environment
17. The business environment in 2013 is encouraging mobile operators to
develop new value-added service revenue
18. Mobile payments are set to grow as the world continues to move to
mobile devices – 400 million European users will pay for mobile content
in 2016
19. In developed markets, operator revenue from voice and messaging is
declining, as is their share of revenue from mobile content and apps
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20. The potential market for DCB addresses not only the ‘unbanked’, but all
users of smartphones worldwide
21. Half of respondents aged 18–34 spend money on apps, of which 28%
spend more than LCU5 per month
22. Operators should initially target contract customers because they are
more likely to have smartphones and margins are better
23. More than half of respondents with a smartphone have never bought an
app
24. DCB has much lower drop-out rates than other payment methods, so
although settlement rates are lower, overall revenue can be higher
25. Direct carrier billing opportunity outlook
26. Unlike traditional payment methods, DCB allows operators to capture a
proportion of customer spend
27. Different national regulations present challenges to DCB implementation
28. Operators’ DCB revenue will grow significantly during the next 10 years
and will replace PSMS as the payment option for operators
29. Market drivers and inhibitors
30. Slow growth in mobile revenue increases the need for operators to
access OTT markets – and DCB can help
31. DCB alleviates consumers’ concerns about the security of payment
systems, while addressing their preference for a single bill
Slide no. Slide no.

3. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps
Contents [2]
32. Difficult economic conditions, the prevalence of credit cards and online
banking, and the limitations of DCB offerings hinder growth …
33. … as do the cost, lack of awareness among consumers, lack of
standardisation, and policy and legal challenges
34. Use cases
35. Virgin Media offers direct carrier billing as a means to pay for digital
content
36. SFR implements direct carrier billing as a means to generate revenue
from the burgeoning mobile apps market
37. Non-operators such as Facebook and Skype also offer direct carrier
billing as a payment option
38. About the authors and Analysys Mason
39. About the authors
40. About Analysys Mason
41. Research from Analysys Mason
42. Consulting from Analysys Mason
3
Slide no.

4. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps
List of figures
Figure 1: Operator revenue for direct carrier billing, worldwide, 2012–2023
Figure 2: The mobile payment ecosystem
Figure 3: Segmenting mobile money
Figure 4: The entities involved in DCB process flow
Figure 5: Typical DCB process flow
Figure 6: DCB ecosystem relationship
Figure 7: Mobile handset content and apps subscribers by region, Europe,
2011–2016
Figure 8: Messaging revenue by type and its share of total mobile revenue,
Western Europe, 2009–2017
Figure 9: Monthly app spend and number of apps bought per respondent by
age group
Figure 10: Smartphone ownership by pricing model
4
Figure 11: Monthly app spend
Figure 12: Share of respondents who purchased an app, by level of monthly
spend
Figure 13: Publisher revenue, credits cards versus direct carrier billing
Figure 14: Revenue splits for direct carrier billing
Figure 15: Revenue splits for traditional payment methods
Figure 16: Operator revenue for direct carrier billing, worldwide, 2012–2023
Figure 17a: Direct carrier billing market drivers
Figure 17b: Direct carrier billing market drivers
Figure 18a: Direct carrier billing market inhibitors
Figure 28b: Direct carrier billing market inhibitors

5. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps
Direct carrier billing provides another payment option at checkout
 In order to better understand the mobile money market, we
have split it into three segments according to customer points
of sale, types of payment interfaces encountered and
methods of payment.
 The customer point of sale is the environment encountered at
the time of making the payment through a mobile device.
 Payment interfaces are the entities that the customer
interacts or communicates with at the time of making a
mobile payment.
 The payment methods are the different means through which
a consumer can make mobile payments. DCB is a payment
method.
 Premium SMS has been around for quite a while as a form of
making payments through carrier billing. In this report, we
have excluded premium SMS from DCB. The main reason
for this is that premium SMS is a large market with significant
worldwide revenue and dwarfs the nascent but steadily
growing DCB market.
Figure 3: Segmenting mobile money [Source: Analysys Mason, 2013]
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Customer point of sale
Apps
Application stores
Near-field communication
(NFC)
Web portal
Payment interface
Mobile wallet
Application stores
Web portal
Payment method
SMS
Mobile wallet
Direct banking
Credit and debit cards
Direct carrier billing (DCB)
In-app

6. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps 30
Driver Description Effect Timeframe
Slow growth in mobile revenue The slowing growth in revenue from the core
mobile services and falling margins thanks to
competitive pricing pressures have made
operators look beyond traditional service
offerings to generate additional revenue.
Operators are increasingly interested
in using their advantages to be part of
the value chain in smartphone
ecosystems.
Experiments since 2011, significant
revenue generation is expected from
2014 onwards.
Access to OTT markets DCB enables operators to access the OTT
market.
Opportunity to offset falling revenue
and margins.
Ramping up from 2012 onwards
Support from handset
manufacturers
Handset manufacturers’ application stores
that offer DCB are helping to promote the
service, which is beneficial to operators.
Helps build greater awareness for
DCB.
Significant value from 2014 onwards.
Access to unbanked members of
the population
Segments of the population that traditional
payment methods cannot reach such as
teenagers and people in poor regions of the
world represent significant revenue
opportunities.
Huge revenue potential. Policy challenges remain. DCB is
expected to generate value in
emerging markets from 2014.
Proliferation of mobile devices The world is moving to mobile connected
devices, smartphones and tablets, providing
increasing demand for mobile payments.
DCB will offer huge revenue potential
when it is mature.
Wider adoption is expected during the
next 2–3 years.
Slow growth in mobile revenue increases the need for operators to
access OTT markets – and DCB can help
Figure 17a: Direct carrier billing market drivers [Source: Analysys Mason, 2013]

7. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps 38
Executive summary
Recommendations
Market definition
Business environment
Direct carrier billing opportunity outlook
Use cases
About the authors and Analysys Mason

8. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps
About the authors
John Abraham (Analyst) is a member of Analysys Mason’s Telecoms Software Research team and contributes to
the Revenue Management, Service Fulfilment and Customer Care programmes. He has more than 5 years’
experience in the telecoms industry. He has worked for a global OSS vendor and implemented revenue
management solutions for Tier 1 telecoms operators in Europe, India and the Middle East. John joined Analysys
Mason in early 2012. He holds a bachelors degree in computer science from Anna University (India) and an MBA
from Bradford University School of Management (UK).
Justin van der Lande (Senior analyst) leads the Revenue Management programme (formerly Billing), which is part
of Analysys Mason’s Telecoms Software research stream. He specialises in business intelligence and analytics
tools, the functionality of which cuts across all of the research programmes in this area. He also provides project
management for large-scale projects within our Telecoms Software research. Justin has more than 20 years’
experience in the communications industry in software development, marketing and research. He has held senior
positions at NCR/AT&T, Micromuse (IBM), Granite Systems (Telcordia) and at the TM Forum. Justin holds a BSc in
Management Science and Computer Studies from the University of Wales.
Ronan de Renesse (Principal Analyst) is the lead analyst for Analysys Mason’s Mobile Content and Applications
and Mobile Broadband and Devices programmes. His primary areas of specialisation include rich media
applications and services on mobile, application store forecasting, mobile broadband, tablets and smartphone
adoption. Ronan has been analysing the telecoms and media industry since 2003. Prior to joining Analysys Mason,
Ronan was a Senior Analyst and the Head of Mobile at IHS Screen Digest, where he had overall responsibility for
the Mobile Media Intelligence service and all related activities. For the past 5 years, Ronan has led the conception
and development of various mobile media and technology forecasts, including those for mobile video, mobile music,
mobile games, mobile apps, mobile broadband and smartphones. Before becoming an industry analyst, Ronan was
an academic researcher at the Centre for Telecommunications Research at King's College London. He holds a PhD
in Telecommunications from King's College London.
39

9. © Analysys Mason Limited 2013
Direct carrier billing could help operators to capture consumer spending on mobile content and apps
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Direct carrier billing could help operators to capture consumer spending on mobile content and apps
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Direct carrier billing could help operators to capture consumer spending on mobile content and apps
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Direct carrier billing could help operators to capture consumer spending on mobile content and apps
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