Business Model, Not Technology, is Key to Mobile Substitution for Fixed Net Internet Access

As much as platform capabilities underpin mobile substitution for internet access, fundamental changes of business model are more important. In the U.S. market, for example, the packaging is quite different.

Mobile broadband is priced according to usage, generally in the form of buckets of use. Fixed internet access is priced based on speed (faster speeds cost more), but usage allowances are big enough that usage effectively is “unlimited.”

In other words, mobile retail packaging is based on usage, while fixed access is packaged on “speed tier.”

That poses a key problem for mobile service providers who want to encourage users to substitute mobile access for fixed access: packaging has to replicate what consumers presently expect. That means a shift away from “usage-based pricing” and towards “speed-based pricing” to a large extent.

Some glimmers of that already can be seen. As the tier-one mobile operators move to encourage consumption of video services on mobile devices, they increasingly are exempting data usage. That effectively “levels the playing field” where it comes to video entertainment service data charges.

When consumers buy a fixed network video service, they do not expect to be charged separately, and additionally, for bandwidth. They buy content, and use of the network is allowed. That is the new model mobile operators are moving towards. There are two different angles of that expectation.

When users consumer Netflix, Amazon Prime, Spotify or Pandora content over a fixed network, they do not worry about the impact on their data usage, as the fixed network plans are abundant enough that this is not a concern. So usage allowances that eliminate the need to worry about data usage are foundational.

Mobile operators provide that same sort of assurance by simply allowing consumption of some video services without imposing data usage charges.

Where mobile data might cost about $9 to $10 per gigabyte (GB), fixed access might cost as little as 15 cents per GB.

The point is that, as important as platform innovations are, the retail packaging is even more important.
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