Revenue today is largely disconnected from the cost model. Mobile subscribers, in particular, had long been encouraged to take up all-you-can-eat data plans to stimulate data traffic. Then along comes HSPA+ and LTE with acceptable connection speeds, dongles and the now ubiquitous iPhone and bang, suddenly everyone wants to connect.
In developed markets the idea of being able to connect anywhere/anytime has caught on big with users, many of which no longer bother to connect via their home Wi-Fi, cable or ADSL connections. In emerging markets, mobile connectivity is the ONLY way of accessing the internet and ‘critical’ social networking sites like Facebook and Twitter.
You’d think mobile operators would be jumping with glee at this traction, but in reality it appears to be quite the opposite. Not a day goes by without an industry report of a mobile operator bemoaning the effect on its network of over-zealous web-surfers, bit torrent exponents and peer-to-peer practitioners. Woe betide any successful marketing campaigns that attract even more of these “data leeches” when the realization sets in that there has to be considerable investment in new infrastructure to cope with the influx.
Bad user
The immediate response is for operators to clamber to provide value-added services to their portfolio in the hope of capturing some extra dollars from the budget-minded “data smugglers” using their networks purely as portals. This may generate some extra cash flow, but the jury is still out on whether the investment in things like application stores, syndicated content, games portals and electronic shopping malls will even be profitable. This is not the sort of business a communications service provider is necessarily good at anyway.
That leaves them with the option to stem the uncontrollable flow of cheap data or “throttle” it. For some operators this may be an unintentional choice when their network reaches capacity in some areas. However, in other markets it is used in conjunction with a fair usage policy, which is usually in small print on the customer’s agreement. Sure, it’s a better choice than cutting off the customer completely. But that usually generates a customer care call and an unhappy user unless they are warned and given the option to pay more.
We are already seeing flat-rate packages based on restricted speeds and charging according to traffic priority. Users opting for these plans appear willing to pay more for prioritized traffic and receive premium service. Operators are also moving to tiered or capped data plans, but their complexity and constant management requirements are not always popular with customers.
That still leaves the early adopters having experienced unlimited, high-speed accessibility at a set price, unlikely to agree to any alterations to their contracts. Will we see these users turning the hapless mobile operators into the dreaded big fat pipes we keep hearing about? Hardly likely.
Anyway, what’s wrong with being a big fat pipe? ISPs and fixed-line operators have been playing in this space for years and you don’t hear them complaining. Many of them charge a flat rate for unlimited usage, don’t they? It appears that they have calculated an optimum charging mechanism that accounts for both the over-users and under-users to work out an average. Presumably, they optimize the number of average subscribers, calculate a monthly rate and make money at that level. Of course, they also offer value-added services like IPTV, but for the most part they are simply big fat pipes.
Ah, but mobile spectrum is limited resource, I hear you cry. Yes, but it can also be managed sensibly. So many reports tell us that only a very small percentage of users are abusers, so why keep them as customers? Perhaps the best advice comes from Mark Liversidge, CMO at CSL in Hong Kong, when he said the biggest fear of any new LTE operator is that the industry will fall into the same trap as with 3G - devaluing the new service from day one.
People buying a Mercedes-Benz don’t go into a showroom expecting to pay the same price as a Hyundai, so why do we, as an industry, keep trying to convince our customers to think the opposite?
Tony Poulos is the BSS evangelist for the TM Forum and a regulator contributor to Telecom Asia