AT&T, the only US carrier offering customers Apple’s iPhone, has abandoned unlimited data plans and introduced a two tier pricing model as it attempts to shape the exponential growth in mobile data traffic which is threatening network quality and depressing returns. AT&T is not the first to introduce such a pricing model and indeed some markets have taken the next step, such as Singapore, Portugal and France where pricing is already based on the speed of connection. Re-establishing the link between revenues and bandwidth is essential if operators are going to make a return out of mobile data. Furthermore, if capacity is to data what coverage was to voice then in a capacity constrained world the operator with the greatest share of industry capacity may well capture the greatest market share. As spectrum is inextricably linked to capacity we can expect to see strong bidding for additional spectrum where the number of operators in a market exceeds the available spectrum on offer as is the case of the current BWA spectrum auction in India.
Coleago’s Mobile Broadband Pricing Report – An international review of mobile broadband pricing models and trends, June 2010 examined the pricing models for mobile data across a broad range of markets. The approach to dealing with bandwidth hogs varies across markets. The following approaches are typically used for out-of-bundle usage:
• A fixed price per out-of-bundle unit is charged, often at punitive rates (e.g. A1 Austria, up to 250x the in-bundle price per MB); in some cases, the total bill for extra usage is capped at a given maximum (e.g. StarHub Singapore, Orange UK).
• Access speed is reduced, but no extra charges are applied, thus respecting the principle of ‘unlimited’ usage and capped mobile broadband bills (e.g. France, Germany, Sweden, US).
• The user is automatically transferred to a higher bundle for the given period (e.g. PT/Sapo in Portugal).
• Add-on bundles are offered (e.g. Orange UK, Telia Sweden).
The study also revealed a proliferation of price plans within the sample countries reflecting increasing segmentation as the mobile data market moves out of the introductory phase and progresses through the growth phase towards maturity. In particular, Coleago’s observed the introduction of an increasing range of bundle sizes, and increasing prevalence of unlimited offerings, as well as the launch of micro-allowance prepay plans (e.g. 20 minute surf-time in France). Where mobile broadband is a relatively new offering unlimited offers are often used as a tool to achieve a “land grab” of mobile broadband users. However, in other markets more sophisticated traffic shaping pricing models are being developed. Coleago’s also observed:
• Weekend and evening plans (e.g. France).
• Home Zone offerings (e.g. Portugal and Germany).
• Converged offerings (e.g. Portugal, Singapore, Hong Kong, Sweden).
• Plans with multi-user shared allowances (e.g. Australia, Sweden).
• Differentiated plans based on headline speeds.
In some markets an even more direct link between revenues and network capacity and speed are being established. In markets where HSPA+ has been launched there has been a move to pricing packages based on access speeds, with considerable premiums being charged for the 21Mbps service. In Singapore the 21Mbps product is charged at a 130% premium to the 7.2Mbps product and 500% premium to 1Mbps. Further examples can be seen in Portugal (e,g, Vodafone’s ‘Top’ versus ‘Max’ unlimited plans) and in France (e.g. SFR’s ‘Unlimited Pro’ versus ‘Unlimited’ plan).
As there is a finite amount of available and appropriate spectrum for mobile operators and financial and practical limitations to number of mobile base stations that can be built capacity constraints will be encountered unless measures are taken to shape mobile traffic. Many markets have already begun to re-establish the link between revenues and capacity which de-coupled dramatically when mobile broadband went mass market.