Mobile Service Providers Might Like Value-Based Pricing, But There are Obstacles
Differentiated pricing for use of different applications or pricing by end-user perceived value are pricing methods some mobile service providers have been thinking about as a way of matching value to prices and also as a way of creating incentives for users to regulate their own use of scarce bandwidth resources.
One approach is to offer lower pricing for users who do not want to watch YouTube (News - Alert), for example, or lower pricing for users who will do so during off-peak hours. Some also are looking at store and forward methods for delivering entertainment video.
The point is that under a charging scheme that doesn’t vary pricing by demand, time of day, type of app or value of app, service providers have few ways of creating incentives for end users to modify their behavior in ways that lessen congestion.
On the other hand, many service providers still believe usage-based pricing is preferable because it is simpler to administer.
Given service provider concern about the danger of becoming “just a dumb pipe provider,” that poses a challenge. On one hand, service providers would prefer to be seen as suppliers of high-value, differentiated services, with retail plans and offerings that reflect sophistication.
On the other hand, simplicity also is important.
Likewise, policy management tools that can prioritize and shape bandwidth consumption can help service providers alleviate congestion and provide a higher end user experience where regulators allow such tools to be used. But there appear to be lots of tradeoffs.
Most executives would agree that flat-rate billing for unlimited use is a difficult and likely unsustainable retail packaging model for broadband access, especially in the mobile services realm. But what should be the replacement? That seems to be a tougher question.
As a corollary, executives must weigh “pricing by value,” or “pricing by application,” which means more complexity for consumers, or some simpler “pricing by consumption” approach.
The issue there similarly seems to be a mix of concerns about imposing more overhead on operations, irritating customers and adding complexity to the marketing and billing process.
Mobile service provider executives say they prefer to charge subscribers for data based on tiered usage plans, rather than by application, an on-line survey of some 300 mobile service provider respondents suggests, according to Connected Business Research.
For example, a large number of operators are considering changes to billing plans in 2012, but a substantial number of executives also are concerned that market perception and competitive considerations might prevent them from adopting their preferred billing schemes.Retail billing preferences have to be balanced against market realities, in other words.
Although mobile operators are generally satisfied that their billing methods extract maximum value from different customer segments such as techno-savvy and business users, the survey reveals a strong preference by operators to charge subscribers for data based on tiered usage plans.
Other billing schemes, such as charging by type of application or service, either based on bandwidth intensity or latency requirements, do not seem to get much support.
Still, it is hard to see how mobile service providers can provide more value, and manage bandwidth consumption, without moving to more-sophisticated retail packaging. Differentiated charging would seem to be essential over the long term.
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Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.Edited by
Rich Steeves
