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Summary:

Even as three European carriers last week argued that Google and Apple should pay them for transporting content to their wireless data subscribers, operators there are exploring plans to charge users based on time of day and type of application used. This may be the future.

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Even as three European carriers last week argued that Google and Apple should pay them for transporting content to their wireless data subscribers, operators there are exploring plans to charge users based on time of day and type of application used. These innovative pricing plans could help operators control the amount of data on their networks while boosting profits by delivering services like Facebook and Twitter to customers.

Carriers are already implementing pricing plans that are enabling them to recoup their investment in their networks, but most of those plans don’t actually address the issue of congestion; they only address the carriers’ efforts to get more money for delivering their bits.

For those who are really concerned about congestion, the solution isn’t hitting up Apple or Google for more money; it’s in congestion or dynamic pricing that charges people more to access content at times when the network is congested or incentivizes customers to shift their usage to times when the network doesn’t have a lot of traffic. For example, some operators offer “Happy Hours” when they don’t charge users for data during certain hours, say between midnight and 6:00 a.m. A clever user could, therefore, download movies at that time for later consumption when the networks are more congested.

Different Plans for Different Data Services

Most carriers actually have a hard time getting new smartphone subscribers to use data at first, and some are currently trying to deliver plans that exploit a desire to access certain applications as opposed to the Internet as a whole. “It’s no longer about the bits and bytes; it’s about the application and the issue of what the consumers wants to use as opposed to the operators or the content providers['] choosings ” says Jonathon Gordon, a marketing executive with Allot Communications, a Deep Packet Inspection (DPI) vendor that helps service providers implement such plans by tracking what type of applications are running over their pipes.

Gordon envisions carrier plans that can provide unlimited access to certain applications such as Facebook or text messaging apps as opposed to a bucket of megabytes or gigabytes. By using DPI filtering, that becomes a reality. As much as I believe people should have access to the whole Internet on their phones, the idea of paying $5 a month for a Facebook plan makes sense for people who might otherwise balk at paying $25 for a data plan just to use Facebook and little else.

However, much of the web’s appeal is that one part leads to many other parts of the web.  So someone with an application-specific plan might find themselves unable to follow link recommendations to the wider web, or worse: rack up extra charges for doing so. There’s also the idea that as someone becomes comfortable using data on their phones, they tend to graduate to other apps or new uses, making such plans something that many might adopt and then discard. Rather than erecting application-specific fences or set buckets of minutes with overage charges, operators might do well and follow the example of Orange, which has tried to take the gigabyte bucket plans and make them accessible, while still controlling data usage.

Innovative Pricing Plan Examples

As carriers go, Orange is optimizing pricing plans in exactly the manner Gordon described. The operator, which has customers in nearly three dozen countries, offers up to nine different pricing plans in certain regions that are modeled (and named) after different animals. For example, Orange sent me an email explaining that it has a Panther plan for heavy users that costs £25 ($39.40 USD) for 10GB of mobile data and voice a month and a Dolphin plan for £15 a month that offers an hour of unlimited surfing at a time of the users choosing. Under the plan, customers can pick a so-called ‘Happy Hour’ from the following; 8:00 a.m.-9:00 a.m. (the morning commute), 12:00-1:00 p.m. (lunch break), 4:00 p.m.-5:00 p.m. (late afternoon) or 10:00 p.m.-11:00 p.m. (late night).

Orange has taken this process to its logical conclusion and is now testing personalized pricing plans for subscribers with multiple mobile devices, whereby a customer service rep will work with individuals to figure out a charging structure, said Olaf Swantee, head of global mobile services at Orange. In a plan that’s more highly tailored than that of Rogers, which Kevin covered earlier this week, Orange works with subscribers in Austria to provide multiple SIM cards for multiple devices, such as a tablet, laptop, smartphone, e-reader or whatever else someone wants to connect to a mobile broadband network.

The plan, called Smart SIM, allows one phone number and one rate plan for up to five devices, and the minutes and data can be shared on all devices so customers don’t need to keep track of each balance or view different bills. The plan charges a one-time activation fee per smart SIM, a basic fee for the first SIM card, with the second SIM being free, and subsequent SIMs costing € 2 ($2.67 USD) per month.

Carriers Need to Face Reality

Essentially, carriers will have to adopt some of these, or other, pricing shifts in order to get people onto their data networks while balancing out their usage with network capacity. Such plans don’t have to be the end of profits, since many options could actually lead to higher margins. Unlimited, anytime data on wireless phones doesn’t make a tremendous amount of sense owing to network restraints, but neither does bullying Google or Apple to pay up for delivering the content that makes those networks worthwhile in the first place. As long as the market is competitive, the plans are transparent, and the consumer can easily switch carriers, the pricing issues should eventually settle out. However, those are still big ifs in the U.S. Maybe that’s why U.S. wireless carriers aren’t talking about charging Google and Apple just yet: They still can milk their subscribers for some hefty charges.

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  1. app aware charging will likely appear, typically if
    1) apps start to “signal” their data profile ( ususal average consumption, average network reliability required, etc …) which drastically differs from an app to another

    2) operators can integrate this to their own price plans and start to subsidize some as a cheaper way (cheaper than handset subsidy) to keep some subscribers. Imagine if you could get Netflix on your iPad but all consumed data free of charge (against few more months of loyalty).

    I think it would work really if it comes to subsidy rather than trying to take more money from subs on particular apps…as the DPI vendor is trying to set.
    Also, generally speaking, DPI would be useless in this scenario as apps would simply provide their profile explicitly. No need for complex “guessing” on which apps a subscriber is using.

    last, all these data restrictions …mean just there is a crucial need for innovation on the pure network side to come with other types of digital transmissions over wireless spectrum. This point does not seem to be addressed anywhere today …

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  2. [...] the tide of other operators who are trying to both manage network congestion and squeeze out more profits from subscribers itching to consume gigabytes of mobile data. Readers may recall that 3 was one of the first to [...]

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  3. [...] written before about how European operators are using innovative pricing plans to charge users based on their applications and the time of day. In almost every conversation I’ve had with the companies that enable such pricing, network [...]

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  6. for th ekey to whether such a pricing model would be acceptable is that the current big data buckets available across Europe not be eliminated when the new ‘application limited’ ones get releases.

    give the option of a 10GB or larger monthly bucket at a reasonable price or let users save a bit with a cheaper but more limited plan. as long as the big bucket don’t go away or get more expensive i don’t have a problem with it.

    but also about things like VPN or SSH tunnels? will there be a ban on finding workarounds to get full data from the limited plans?

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  7. [...] is frightening enough that the industry is trying to find new ways of building out their networks, selling new data plans and even pushing forward with open standards in an effort to keep their networks afloat. Even if [...]

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  8. [...] is frightening enough that the industry is trying to find new ways of building out their networks, selling new data plans, and even pushing forward with open standards in an effort to keep their networks afloat. Even if [...]

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  9. [...] also making sure they don’t go crazy while using them. To that end I’ve written about personalized pricing plans being introduced in Europe as well as the promise of congestion-based pricing [...]

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