New US mobile player Dish Network talked a lot about dynamic pricing recently, hailing the strategy as key to its 5G plans and promoting a vision of a revolutionary operating model.
But why is Dish Network so keen on dynamic pricing and how can it be used by operators?
Dynamic pricing refers to the concept of adjusting the cost of goods or services based on changing market conditions, for instance raising prices when demand is higher, a long-time strategy of airlines, hotels and more recently taxi-booking services.
Jennifer Kyriakakis, founder at BSS vendor Matrixx Software, and Strategy Analytics executive director Phil Kendall told Mobile World Live (MWL) the idea of using dynamic pricing isn’t new within the mobile industry: indeed, a quick review found references to the concept in IEEE literature stretch back at least two decades.
However, both noted the model hasn’t been widely adopted by operators for a variety of reasons.
Kyriakakis pointed to limiting factors within 4G networks and IT stacks, while Kendall highlighted challenges related to how operators position dynamic pricing against dominant offers in the market, noting more complex pricing models tend to lose out to simpler, low-cost pricing, and many customers “value convenience and predictability over a highly optimised, dynamic option that could potentially save them a little”.
So what is Dish Network thinking?
A company representative told MWL its interest is primarily focused on generating revenue from network slicing for enterprise customers based on their specific service requirements. For example an agricultural company using the network to track assets would likely not have the same latency or bandwidth requirements as a healthcare provider performing remote surgery.
Dish Network recently tapped Matrixx Software to deliver a converged billing system the operator said would be a foundation of its slicing strategy: the representative said this will “help us ensure we charge customers based on their services and not simply on unlimited or family plans”.
But there are a number of ways to implement dynamic pricing beyond what Dish Network has in mind.
Kyriakakis said Matrixx Software’s platform is capable of implementing dynamic pricing “at device level, location level, slice level”. It can show pricing and usage rates to consumers and business customers “in real-time before a service is purchased/consumed and during consumption, if those rates were to fluctuate over the course of consumption, such as hourly”, with the final decision placed in operators’ hands.
Kendall said any operator implementing dynamic pricing will face a few key challenges winning over customers, including addressing negative attitudes to surge pricing.
“People regularly feel like they are being ripped off with surge pricing”, he said, explaining consumers “can perhaps rationalise” this for taxi-booking services but questioning if “they like the idea that their carrier regularly runs out of capacity so has to put up prices to manage demand”.
Customers might also balk at the idea of having to think about pricing all the time, noting “they probably don’t want to have to check their phone before every interaction to check whether the next gigabyte is going to cost $0.50 or $5”.
Conditioning customers to think about price constantly could also backfire for operators if subscribers start to wonder whether they could get a better deal elsewhere, he added.
But, he noted “pricing can be dynamic without it necessarily being constantly changing surge-pricing”.
“It can also be dynamic in the sense of responsive, automated pricing as new services in new network slices are brought online.”
Kendall acknowledged there is “more potential for modular pricing elements that bring in 5G features/benefits (latency, slices, et cetera) in the B2B market”, but added “simplicity is often key” when dealing with the consumer segment.
Kendall explained dynamic pricing might be used to provide consumers with flexibility to manage how allowances and features are shared on family accounts or allow them to change certain plan elements in real time, for example activating a temporary speed boost when needed.
For operators in saturated or developed markets, he said dynamic pricing for consumers will likely be used “less as a means of offering dynamic capacity-based pricing and more about empowering the customer to control elements of their price plan”.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.Subscribe to our daily newsletter Back