Mobile data charging: The move towards the consumer empowerment cycle in the post-unlimited data era

The end of unlimited data packages is the first step towards effectively addressing the mobile broadband paradigm but is a temporary fix rather than a definitive solution. David Knox, Global Product Marketing Manager, Mobile Data Charging, Acision, outlines the need for operators to roll out alternative pricing strategies which will generate new revenue streams for them and deliver an enhanced end-user experience.
 
Flat-fee failure
The explosive growth of mobile data services and applications has been one of the defining industry trends of the past 12 months. While the increased uptake of mobile broadband has created a new revenue stream for mobile operators, it has also presented them with the added headache of increased mobile network congestion, as well as declining ARPU resulting from having to provide increasingly competitive flat-fee data packages.

In recent months, there has been a flurry of developments in the mobile data space, with the British government announcing spectrum auctions for 2011 and ABI Research revealing that between now and 2015, mobile data usage in Western Europe and North America is set to increase at a compound annual growth rate of 42% and 55% in the respective markets. Both of these announcements highlight the principal challenge with which operators are currently faced: how to realise the revenue potential of mobile broadband uptake in the face of network bandwidth under ever-increasing strain. 

While the recent scrapping of unlimited mobile data plans by several of the world’s leading operators has undoubtedly been a positive step towards trying to overcome this challenge, it could also be viewed as somewhat of a u-turn, in that it indicates a return to the volume-based pricing plans which previously caused consumer confusion over mobile data charges and hindered initial uptake. It also fails to address the fact demonstrated by the flat-fee era that a ‘one-size-fits-all’ approach to mobile data services charging is counter-productive for both operators and subscribers.

An alternative model: the cycle of consumer empowerment
Operators’ key priorities when charging for mobile data services are stimulating subscriber growth, ensuring competitiveness and securing ROI from network investments.1 In terms of charging, operators have tended to rely upon three principle pricing strategies: volume-based, speed-based and time-based. While all three models provide tangible benefits, each one also has distinctive flaws which highlight their unsuitability as a charging model for mobile data. 

With volume-based pricing strategies, understanding what constitutes a megabyte is problematic and over complex for the consumer; speed-based pricing strategies pose difficulties in terms of the inability to guarantee advertised speed levels (e.g. variation at peak/off-peak times); finally, the transparent nature of time-based models make rival operator packages easily comparable and encourage the ‘race-to-the-bottom’ culture which has prevented mobile data from becoming a lucrative revenue stream.

These disadvantages reinforce how a ‘one-size-fits-all’ approach to mobile data pricing is ineffective. As the mobile data market continues to evolve, pricing strategies need to evolve with it to reflect the growth of the differentiated services that will drive future mobile data profitability.

Central to revolutionising mobile data charging and enabling the level of differentiation that mobile users require is to introduce a cycle of consumer empowerment which will provide subscribers with greater flexibility to tailor their data packages as their needs change, while providing operators up-sell opportunities and drive economies of scale.

This cycle incorporates the following core elements:

1. Control & Choice
Consumers must currently choose from broad tariff packages which do not take into consideration the variation of individual users’ needs. There appears to be little awareness of the potential add-ons that can provide users with enhanced value and in turn, benefit operators’ bottom line. For example, if subscribers had the capability to provision and adapt their service offerings as and when their needs evolve, this in turn could provide operators with additional revenue streams at different stages during the life-cycle of a subscriber’s contract. 

2. Trust
Consumers have limited control over their awareness of spend and their trust is eroded by bill shock. Subscribers want to pay for what they get value from, as opposed to merely for a megabyte. This is particularly true in relation to roaming charges: research  conducted by Acision last year illustrated that 50% of subscribers said that having a real-time indication of their spend would encourage them to spend more. Therefore, the introduction of more transparent pricing models could turn the fear of bill shock (which tends to discourage subscribers from accessing mobile data services when outside of their home zone) into an additional revenue-generating opportunity.

3. Targeting & promotion
By providing a range of packages add-ons that appeal to specific market segments, and charging per usage of applications and services instead of per megabyte, operators can drive more value from their customer base and increase customer satisfaction. Effective targeting also extends to the rapid creation of rewards and promotional campaigns, which not only increase customer loyalty, but also drive new revenue streams.

Charging into the future
The move towards a cycle of consumer empowerment which will engender greater choice, control and trust among subscribers and create new revenue opportunities for operators is essential to developing and delivering mobile data pricing strategies which are more compatible with the services being provided. Only through the introduction of more targeted and flexible pricing strategies can operators fully realise the true potential of mobile data services, whilst at the same time building a loyal subscriber base and ensuring customer satisfaction.

1. Informa Telecoms & Media, 2008