Carriers desperately seeking higher mobile data prices

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It’s tough out there for carriers. After years of charging people 25 cents to sent a few kilobytes of data via text messaging, they’re suddenly dealing with folks that want to watch YouTube videos on their mobile phones and pay a mere $50 for an unlimited plan. The economics don’t work, and as proof we only have to look at the death of the unlimited plan.

Today only 13.5 percent of operators offer a “true” unlimited plan, while 25 percent offer an unlimited plan in name only (but with caveats such as throttling or even an undisclosed cap), according to data gathered by Allot Communications, a network optimization vendor. Allot surveyed 100 operators to discover how they price mobile broadband and discovered about 80 percent had already moved to some form of volume-based pricing (think buckets of bytes) while 35 percent were trying to charge based on the applications used. The percentages don’t add up because some operators offer both types of plans.

The end game for operators is to figure out how to get people to use less data or pay more for the privilege, while also steering users to content that makes users happy without straining the network. So maybe they offer unlimited Facebook and charge more for Netflix. After all, the last thing they want to do is to scare people from signing up for data plans for fear of expensive overage fees.

What’s so interesting about Allot’s data is how far apart different regions are when it comes to newer types of pricing, and how much trust an operator has to build with consumers to make this sort of pricing work. Jonathon Gordon, the director of marketing with Allot, said that operators willing to give up on the “telco mindset,” were faster to adopt the level of transparency required to guide customers to these pricing changes without a lot of backlash.

For example, if an operator offers a customer an all-inclusive Facebook plan, what does that mean for users who might click on a video in someone’s news feed, only to end up watching a video on YouTube? Does that data cost more? If it does, how does the operator convey that to the customer? In the U.S. such ambiguities are a continuing source of distrust because carriers still see them as a chance to put one over on the customer — just look at Verizon’s sneaky placement of a web access button on feature phones that led to customers inadvertently racking up data charges and to the FCC launching an investigation. Verizon later paid out a $25 million fine.

The point here is that as operators try to change the way they charge, because the current models aren’t economically sustainable for them, consumers have to believe the deal is reasonable. That’s why I’ve been a proponent of measures such as data happy hours or other plans that incent users to use the network during non-peak times. Doing so helps manage congestion, and can still generate revenue for carriers.

Some of the more interesting findings from Allot are around the regional differences in the adoption of application specific plans and the types of applications operators are trying to build new pricing around. Regionally, Asia, Europe and Latin America are the leaders at figuring out how to charge for value as opposed to volume.

Gordon attributes this to their more competitive mobile data markets, a lack of fixed line infrastructure in the case of Latin America and more permissive regulatory environments. For example, in the U.S. uncertainty over how network neutrality will affect mobile broadband charging efforts is one reason that operators in the U.S. are sticking with the conventional gigabyte/volume plans.

However, Gordon is optimistic that in a quest for higher average revenue per user and a need to manage congestion on their networks, U.S. operators will shift their pricing and in doing so will start to think less like a telco and more like a company that will have to keep customers happy. As he says, “They’re very slowing being dragged into a subscriber way of thinking and they’re evolving.” I’m not sure I share his optimism on that, but I am pretty sure I’ll be paying more for mobile broadband in the near future.

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