Thursday, July 19, 2012

LTE Is Not Changing Mobile Service Provider Pricing Models?

Launching a new network sometimes can represent a chance to change retail packaging and pricing, and those changes can be quite significant. Fixed network service providers did not make much incremental revenue from dial-up Internet access services, with the exception of some additional line sales, as was the case for home fax lines or teenager lines.

The shift to broadband created a fundamental new category of consumer services essential for triple-play bundles, which Verizon says now are purchased by fully 70 percent of its customers.

Some have argued that new networks such as WiMAX or Long Term Evolution offer service providers a chance to create packages that are different, including "on demand" or "casual" pricing such as "service by the hour or day," for example.

Analysts at Ovum say mobile service providers selling LTE are "failing to deliver innovative pricing models."

That lack of new charging models  is a missed opportunity for operators, Ovum argues.

“We looked at the LTE pricing strategies of operators in Europe, Asia-Pacific, and theUS, and were disappointed with our findings," says Nicole McCormick, Ovum senior analyst.

“LTE provides operators with the opportunity to experiment with new and innovative pricing models, which allows them to find the best way of deriving revenues from the premium service," she says.
“However, most operators have not grasped this opportunity."

She points to "unlimited access" plans and "large buckets" as examples.

Some of us might disagree. Clearwire has offered access by the day, week or month, but not many seem to have bought it.

And now both AT&T and Verizon Wireless have reshaped wireless pricing by essentially offering consumers fixed prices for voice and texting (unlimited for domestic terminations), with variable pricing for mobile broadband.

One might argue that is a substantial change. Though some will object, the new plans, such as Verizon's "Share Everything," answer some crucial questions, such as how mobile service providers can earn money from voice and messaging features at a time when there are a growing number of alternatives.

One might liken the new Share Everything plan as turning the former voice and texting plans into a "network access" fee, with variable charges only for data consumption. Focusing too narrowly on creativity in "4G" models might miss those subtleties.

Giving consumers more options for data services is an arguably important area to explore and innovate around. But it also is important to avoid losing two other vitally important revenue streams, while innovating around retail broadband packaging. Share Everything does that.

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