Tuesday, May 26, 2015

Zero Rated Content Consumption Obviously Shapes Usage; So Do Other Policies

When prices for any desired commodity decline, demand increases. It therefore stands to reason that subsidizing data usage would boost consumption. It does.

In Germany, mobile operators allow customers to use branded mobile operator owned video streaming services and affiliated apps without counting usage against monthly limits.

Perhaps not surprisingly, over data consumption in Germany is lower than in Scandinavia.

On average, Germans used 410 megabytes per month in 2014 (up from just 280 megabytes per month in 2013). Finns, by comparison, used 5.1 gigabytes a month, according to Rewheel.

At the same time, data tariffs are higher in Germany than in Scandinavia. Some will suggest that consumers are rational and therefore use the zero-rated services rather than others which would incur charges

“If you have a lot of data you don’t care about zero rating,” Pal Zarandy, a Rewheel senior partner said. “But if you have half a gigabyte or even two gigabytes you can’t stream video. You hit your monthly cap in half an hour. Zero rating in those countries makes a huge difference.”

Either demand or supply could explain the disparities. One might note that consumption preferences (demand) also might exist, irrespective of the pricing incentives.

The difference in cost per gigabyte between European Union countries is two orders of magnitude, a Rewheel study finds.

Rewheel argues those operators with the most restrictive volume caps, and charge the highest prices for incremental usage, tend to most aggressively favor their own volume-heavy internet content, such as mobile cloud storage and movie streaming services, by zero-rating their gigabyte consumption.

Rewheel believes zero-rating plays a big role in shaping consumption.

While €35 buys about 2 Gbytes in the German, Italian, Spanish, Belgian, Austrian and Portuguese markets,  in the Nordic and Baltic countries about 19 gigabytes could be purchased for that amount in the first half of 2015, Rewheel argues.

U.S. prices are about €5 ($6) per gigabyte, about the high German rate, Rewheel says. Some would contest the notion that U.S. data prices are at the German level. Consumption of 2 Gbytes in the U.S. mobile market, using Rewheel’s own figures, would be less than €5 ($12).

U.S. data consumption might be “low,” compared to Scandinavia. Recently, U.S. consumers have been consuming 1.8 Gbytes a month. But that is mobile network data. If Wi-Fi accounts for 40 percent of total mobile consumption, U.S. mobile consumers are using about 4.5 Gbytes a month.

If Wi-Fi represents 80 percent of total consumption, U.S. consumers use about nine gigabytes.

No comments:

Sales Friction Creates Barriers to Buying Behavior

Sales friction occurs when a sales process is: too long (the line at the grocery store) too complicated (working with real estate agents) a...