Monday, January 30, 2012

Can Broadband Access be Segmented and Differentiated?

MetroPCS is among the few U.S. mobile operators that have embraced the idea of application-based charging, at least to the extent of offering plans aimed at light video consumers, heavy video consumers, and those in between.

Though it remains unclear precisely which new charging systems might gain favor, a survey of some 30 tier one service providers, sponsored by Tekelec and conducted by Heavy Reading, suggests several approaches are being considered.

Though the emphasis has been on simplicity and buckets of usage, there has been a change in thinking over the last two years, about the necessity of using differentiated charging mechanisms and plans to better manage and “monetize” mobile networks, in particular, says Mark Ventimiglia, Tekelec director.

“Usage problems and average revenue per user” are the main drivers of the new thinking, says Ventimiglia. But operating cost reduction also is part of the new thinking, especially as the dominant mobile service providers increasingly face upstart competitors willing to underprice existing tariffs.

“The higher end carriers can’t compete with ‘Free’ in France, for example, without innovating,” says Ventimiglia. Indeed, one has seen over the last decade an increase in segmentation in the French fixed network broadband business.

“Tunable networks” is one way to look at what marketing staffs want to create. But service providers also want simplicity, so consumes have clear value propositions and customer service personnel have an easier job supporting those offers.

The good news is that some marketing offers that might be more complex are not necessarily more complex “in the network,” says Ventimiglia. Lots of differentiated retail plans can be created that do not impose a new burden in terms of network managment complexity.

Some might say that if mobile or fixed network access providers do not want to be known as “dumb pipe” providers, then they just have to stop acting that way. And one way to do that is to tailor retail plans.

Even toothpaste and mouthwash now are sold to market segments with different lead values. There is no reason, in principle, why broadband access plans cannot be segmented the same way.

In any industry long accustomed to “usage-based billing,” it will come as no surprise that bandwidth caps prompt thinking about ways to offer temporary “overage protection,” for a fee.

More controversially, executives also are looking at application-based tiers, where customers pay based on the types of applications they want to use. Highly bandwidth intensive apps such as entertainment video or gaming might have one rate and usage quota, while email access and light web surfing might be billed at a different rate.

Plans that are optimized for social networking are another example of how retail plans can be tailored for users with different app profiles.

Speed-based tiers are common in the fixed line business, but might also find application in the mobile realm. Aside from different rates for faster and slower access, users might be offered various types of “speed boost” offers for users who only occasionally need high speed access, but most of the time can get by just fine with slower speeds.

Time-based tiers might charge more at peak hours and less at off-peak hours.

Family data plans of the sort now used for voice and messaging for multiple users and devices on a single account also are likely, allowing users on a single account to use multiple devices that share a single bucket of broadband usage.

One example might be a plan that supports each device with enough bandwidth to view 20 videos a month, with unlimited social networking and web browsing, and 200 hours of voice over Internet protocol calls per month, the study suggests.

In other cases, service providers might look at ways to create plans with “top ups” or “roll over” features on such family plans.

“Casual plans” that are easy to start and stop are another area where charging could change.

Services might mimic the out of home “hotspot” charging method, where users would be able to buy access for a day, for example.

Loyalty mechanisms also might be more common in the future, including birthday and service anniversary bonuses, free service top-ups twice a year, speed boosts, unlimited bandwidth during off-peak hours, or an extra five Gbps of data for six months with the purchase of a new tablet.

Special promotions to accelerate the adoption of new services or encourage
different mobile usage patterns might include unlimited access to a new application for three months, funded by advertisements, discounts on service tier upgrades, or unlimited services at certain times or days when the network is not congested.

Service providers might also want to “zero rate” some apps, while charging a premium for apps that require more bandwidth or will operate at peak hours.

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