Usage-Based Pricing Actually is Better for End Users

The most economically consumer friendly retail payment model for end users might actually be "usage based" billing, even though people rather instinctively prefer "unlimited" or flat fee models. 

And many consumer advocates think usage based billing inherently is unfair to end users.

To be sure, there are advantages to flat rate pricing. Flat fee means users know what to expect, which helps with budgeting. 

And flat rates mean no danger of bill shock, as could happen, and does happen, when users are roaming, or using streaming video.

But flat rates are not the same as "unlimited usage" plans. These days, pricing is moving to "banded" ranges, or "buckets of usage" that have usage and pricing roughly correlated within some ranges. 

So some modified way of rating usage, using "buckets" rather than actual per-byte usage, arguably is better for buyers than unlimited flat rate pricing.

There are issues, even from a service provider perspective. There always is a tension between operational simplicity and sophistication in retail customer packaging and network management. Simple approaches often are cheaper, but at the cost of forfeiting creation of more-nuanced subscriber plans.

Likewise, policy management tools that can prioritize and shape bandwidth consumption can help service providers alleviate congestion and provide higher end user experience, where regulators allow such tools to be used. But there appear to be lots of trade offs.

Most executives would agree that flat-rate billing for unlimited use is a difficult and likely unsustainable retail packaging model for broadband access, especially in the mobile services realm. But what should be the replacement? That seems to be a tougher question.

As a corollary, executives must weigh “pricing by value,” or “pricing by application,” which means more complexity for consumers, or some simpler “pricing by consumption” approach.

Likewise, methods for managing mobile networks to avoid peak-hour congestion arguably can be viewed with circumspection. And the issue there similarly seems to be a mix of concerns about imposing more overhead on operations, irritating customers and adding complexity to the marketing and billing process.

Mobile service provider executives say they prefer to charge subscribers for data based on tiered usage plans, rather than by application, an on-line survey of some 300 mobile service provider respondents suggests, according to Connected Business Research.

For example, a large number of operators were considering changes to billing plans in 2012, but a substantial number of executives also are concerned that market perception and competitive considerations might prevent them from adopting their preferred billing schemes.

Retail billing preferences have to be balanced against market realities, in other words.

Mobile Payments Surge on "Black Friday"

A huge surge in mobile payments seems to have occurred on the U.S. "Black Friday," the day after the Thanksgiving holiday that historically marks the start of the Christmas and holiday shopping season. 

Somehow, it doesn't seem surprising. IBM analysts estimate that mobile shopping activity rose about 21 percent on Black Friday, year over year. But mobile purchases also surged on Thanksgiving day itself. 

At some point, reporters and analysts will stop noting such occurrences, and that's when we'll know mobile commerce (shopping and payments) simply has become another form of "e-commerce," like online shopping, which largely and justifiably is considered unremarkable these days. 

But some would say there is little correlation between the size of sales on Black Friday and overall sales during the crucial Christmas and holiday shopping season. So there's even more reason not to get worked up over the size of Black Friday sales. It is not actually a very consistent predictor of ultimate seasonal sales volume, as it turns out. 

Can Microsoft Become an Ad-Supported Technology Company?

Traditionally, Google has been the primary and leading example of a technology company supported by advertising. But others are at least thinking about what could be possible. Ad-supported tablets might be one example. 

Perhaps more common is ad-supported software ad-supported software, with most people thinking of mobile apps, perhaps, though there also are examples of business software supported by advertising. 


Microsoft has been looking at ad-supported software since at least 2005. And some say Windows 8 will mark an expansion of that effort, integrating advertising into the operating system itself. 

Some think that could lead at some point in the future to ad-supported versions of the operating system, possibly a freemium model, for example.

Up to this point, software has been the type of product most readily adapted to advertising support, one might argue. 

In addition to Google, Facebook, Pandora, Yahoo and AOL have had predominant ad revenue models.

For Microsoft, the "Office" suite has driven about 30 percent of revenue. 

How Many Broadband Access Market Positions are Possible?

Most large and mature markets develop segments. And one wonders when and if this could happen in the communications business, which historically has organized around "enterprise" and "mass markets," a rather undifferentiated approach, compared to automobiles, for example.

The opportunity for much more significant differentiation would seem to be enhanced by "big data" driven segmentation, by the proliferation of devices, applications, usage modes and even network suppliers. Specialized machine to machine networks could provide one example.

Large mature markets are susceptible to disruption, in part because their large size means an attacker could hope to create a meaningful business by taking some market share. 

And it always is possible, in a big market, to offer a product that offers the "same features, at a lower price." That possibly raises the question of whether discrete segments could be created in the broadband access business, beyond the speed tiers or mobile or fixed distinctions that already exist.

At least at first, though, disruptive attacks emphasize "lower price." Less common are "free" services. And though it long has seemed impossible to offer high speed Internet access for free, those barriers are permeable. 

Free public Wi-Fi now has spread from hotels to coffee shops to bookstores, restaurants, airports and some parks.

Those are "spot" deployments that do not necessarily challenge the 'home access' or "business access" markets. But at least some wireless ISPs merchandise some connections "for free." A provider might give one tenant free access in return for using a site as a network access point to feed service to other paying customers.

The issue is how many more scenarios might be possible in the future, as additional spectrum and additional potential competitors emerge. We already see potential new national providers such as Dish Network, Globalstar and Lightsquared attempting to monetize new swaths of spectrum. 

White spaces spectrum is expected to be commercialized in the United States and United Kingdom in the coming couple of years. The Federal Communications Commission is looking at spectrum sharing between commercial and government users. 

And additional spectrum from reclaimed analog broadcasters also is expected to be auctioned, at some point. Of course, increased supply should lead to lower costs. 

Beyond physical levels of supply, there is the matter of revenue models. And ad-supported or commerce models might be among the biggest potential avenues of attack.

In fact, the most dangerous new potential competitors would seem to be firms that have huge installed customer bases, alternate revenue models, recognizable brand names and plenty of cash. Apple, Google, Microsoft, Amazon, and possibly Facebook come to mind.

Google and Microsoft are rumored to be actively exploring how to use white spaces spectrum in the United Kingdom market, reportedly to offer free Internet access.

The angles are simple enough. Google might provide free Wi-Fi style access for all devices running Android, while Microsoft might try and do the same for users of its devices. That would create product differentiation for Microsoft or Android devices, while enticing users to use apps more, which will increase potential ad views.


New competitors might also try and attack the operating cost side of the business model. More providers might try to compete with a “data only” and e-commerce approach that minimizes overhead and operating costs to dramatically lower the retail pricing for mobile broadband.

In addition to the "free" approach, some providers will use those advantages to occupy a "lower cost" segment of the market, especially when relying on a "data only" model.

Other models exist as well. Firms such as Google can dramatically change end user expectations about the nature of access products, using a “high value for reasonable cost” approach that upends end user expectations about "typical" product attributes.

When Google sells symmetrical 1-Gbps for about $70 a month, that creates new expectations on the part of consumers about what the “normal” value-price relationship is for fixed high speed access.


Google hopes to force competitors to react, as widespread, ubiquitous, reasonably priced broadband is an underpinning for its advertising revenue model. 

European Mobile Operators Embracing “Over the Top” Faster than North American Ops

Necessity might be the mother of invention where it comes to adoption of carrier-owned over the top applications. Orange (France Telecom) has created and now is supporting “Libon,” an over the top calling and messaging app that operates in a “no incremental charge” “peer to peer” manner when used by people who have downloaded the app.

In joining Telefonica and T-Mobile in sponsoring a branded over the top voice and messaging app, France Telecom has concluded that “joining” the OTT voice app trend is wiser than fighting it. 

That still is not the choice in North America, where firms such as AT&T and Verizon seem to have concluded they are better off not doing so, at least for the moment.

Libon allows users to make free calls and texts to other Libon users around the world, using a “freemium” model, and joining Skype, Viber and WhatsApp, TU Me and Bobsled in embracing an over the top business model for voice and messaging.

The iPhone version is “live” in the Apple iPhone App Store now, with an Android version will  be released early in 2013.

The free version of Libon includes free calls, instant messages and voicemail services, with a premium version costing £1.99 a month through a subscription on iTunes. That includes one hour of international calls to landlines or mobiles in 31 countries, unlimited greetings for voicemails, transcript of voicemails and recordings of voicemails included in notification emails.


For mobile service providers, the fundamental problems with over the top voice and messaging services have to do with the business model, for obvious reasons. Ovum says increased use of social messaging applications had cost mobile operators $13.9 billion (£8.8bn) in lost text messaging revenues in 2011 alone, for example.

But incremental “gains” from OTT voice and messaging, for service providers, might be quite modest. In 2012, global mobile VoIP service revenues might be about $2.5 billion. But mobile voice revenue overall could be in the range of roughly $1 trillion.

In other words, even if they succeed, carrier over the top voice and messaging will not produce all that much revenue.

In fact, mobile VoIP is still worth less than 0.5 percent of overall mobile voice revenues, according to ARCchart.

At some level, the determination is simply that Orange needs to remain relevant as a supplier of communications services, whatever the danger of cannibalizing at least some of its own voice and messaging revenue. T-Mobile and Telefonica taken a similar approach.

U.S. FCC Examining Resiliency of U.S. Mobile Networks

The Federal Communications Commission will convene a series of field hearings in 2013 to examine challenges to the nation’s communications networks in the wake of Superstorm Sandy, and make recommendations to improve network resiliency. 

Issues to be examined include backup power, ways to increase levels of sharing between networks and resources during emergencies, and other ways to increase overall resiliency during emergenices. 

By some estimates, 25 percent of mobile cell sites were knocked out in areas affected by Superstorm Sandy.  Others mobile network resiliency, though. 

White Spaces in U.K. Will Have to Operate as a Managed Network

White spaces networks using former broadcast TV spectrum in the United States and United Kingdom are intended to be used on a non-licensed basis, with a new twist. 

Today's unlicensed spectrum allows devices to register and use the network, but without any admission control, as a private network would do, or frequency coordination, as a mobile network must do. With the Wi-Fi router model, the user can configure some elements of the access. In the U.K. white spaces case, the network will do all of the configuration. 

So in the United Kingdom, it appears mild forms of admission control and frequency coordination will be used, essentially turning the white spaces spectrum into what is effectively a managed network of sorts. A white spaces network therefore will more nearly resemble a cellular network than a local Wi-Fi network. 

U.K. devices operating in white spaces will have to consult with an online database for usable frequencies, and check back regularly to ensure nothing has changed. That makes a white spaces operation more a managed "network" than has been the case in the past for "networks" using unlicensed spectrum. 

The reason is that white spaces networks will have to sense which frequencies are usable in any given location. In some cases, those frequencies could change over time. What isn't so clear yet is whether a data base entity will be able to monitor which frequencies are currently in use by other devices and then adjust device transmission power automatically, a step that would further prevent interference and optimize total network performance. 

Devices which cannot contact a data base administrator immediately on seeking admission to the network can use their "remembered frequencies" list, but have to check back every hour, Ofcom says. 

Device manufacturers will have to pay entities running the data bases, as well. The point is that white spaces networks in the United Kingdom will use non-licensed spectrum, but will operate in ways that are more like a managed network, in a few ways, than a traditional non-licensed Wi-Fi network. 

The networks apparently will operate as "best effort" entities, but the network itself will take some steps, or might be able to take some steps, to manage radio resources in ways that provide better user experience.