It is currently results season, and as usual many operators have announced some interesting metrics for their specific businesses. But there are a number of universal truths which apply almost across the board. And one of the key issues rumbling on beneath the surface is the issue of monetising data services, as the industry continues to seek an effective way to use the ongoing growth in traffic volumes to generate a similar increase in revenue.
Much of the attention in the last couple of weeks has been focused on the US, with AT&T recently stating that it will cut the data speeds available to the top 5 percent of its “unlimited” data plan users. Here, the issue is less about generating more sales, and more about managing network utilisation. The company said that to be in the top 5 percent, a user would need to consume “an extraordinary amount of data,” although it has not provided figures for this. Unsurprisingly, there has been criticism that this approach lacks some transparency.
The move follows the introduction of tiered packages by Verizon Wireless, AT&T (for new subscribers) and T-Mobile USA. In fact, only Sprint is sticking to the true “unmetered” mantra, without additional charges or throttling for its heaviest users. Indeed, it is making something of a selling point of this.
But Sprint has introduced restrictions for customers of its Virgin Mobile brand services, which could be something of a toe-in-the-water, to gauge the reaction from consumers. And while for a long period of time Sprint was losing customers, somewhat mitigating the effects of growing data traffic on its network, the company is likely to encounter the same congestion issues as its rivals at some point.
The reason that this has caused so much comment is the feeling that industry-wide, operators are looking to impose a sustainable business model after the fact. In the initial rush to attract high-value subscribers, the flip side – that they will consume network capacity – seems to have been ignored. While new customers are now being offered plans with clear limits when they sign-up, customers joining during the gold rush were able to get a deal that no operator in its right mind would countenance now.
The fact that operators are armed with knowledge of the market and usage trends does not mean that the road forward is now straight. With devices being subsidised and vendors offering lower-tier handsets powered by Android, mobile data services are now a truly mass-market proposition. But this means that smartphones which function best with a data plan are reaching the hands of cost-conscious customers, who will naturally be looking for low-cost data services.
A number of operators have announced new tariff models in recent months, designed to enable the provision of mass-market data services in a cost-effective way. KPN in the Netherlands is an interesting example – not least because of the market in which it operates.
The Netherlands is a mature western European market that is also leading the way through the adoption of net neutrality – meaning that price differentiation based on service type is verboten. As far as charging is concerned, data is data. But this does not mean there are no ways to segment the market: bundles based on differing data allowances or speeds are still permitted.
KPN said its new tariffs, which are set to be introduced next month, mark a “structural step in moving the wireless portfolio from a voice to a data centric portfolio.” It said that the new packages are “differentiated by quantity speed and service with due observance of net neutrality” – and that “data volume pricing will increase within the proposition.”
This increase in data pricing will also be accompanied by an increase in the amount the consumer pays for a smartphone, because “these devices are becoming increasingly expensive.” By reducing its subsidy levels, KPN is looking to manage its customer acquisition and retention costs, in order to improve the profitability of its propositions.
When it announced its plans, KPN said that “consumers understand the structure and consider elements of the proposition positive.” In what is already a competitive market, taking steps which will increase the cost of data services could be seen as a bold move. But with the Netherlands seeing a strong growth in smartphone ownership, this realignment of prices seems a sensible move, with customers still able to select different options to suit their needs and wallet.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members