Dynamic Pricing Rankles Some, but it is Just Supply and Demand

SideCar, a peer-to-peer instant ride-sharing app, plans to double its suggested donations for drivers on New Year’s Eve, effectively instituting “surge pricing.”

Uber, a similar service, used dynamic pricing in 2011, on New Year's Eve. The practice will bother some, but in principle it is simply a way of matching supply and demand. Some will say it borders on price gouging, or is, in fact, price gouging.

It's hard to say where the boundary between "gouging" (with its implication that a supplier is taking unfair advantage of buyers) and "supply and demand" (the price of a scarce commodity will rise when demand rises and supply is fixed) lies, but supply and demand fluctuations are a reason why prices for virtually any product tend to shift up or down.

Communications service providers tend not to have such flexibility, in part because regulators will only tolerate so much fluctuation, in part because users tend to prefer fixed and known pricing, even when their usage might vary, and in part because the ability to dynamically price communications products at the retail level is not always possible (rating systems or billing systems might not be able to do so).

Up to this point, service providers have used a simpler "differentiated" pricing scheme, the perhaps-classic example being pricing of voice calls on mobile phones. International calling is most expensive, domestic calling tends to be modestly priced while calling during off-peak periods (evenings and weekends) can be nearly or virtually "free."

Some might suggest that "congestion" pricing (bandwidth becomes more expensive at times of high demand) is a similarly beneficial way to match supply and demand on broadband access networks.

"Value" pricing is another concept that incorporates supply and demand dynamics, but also seems to provoke opposition from some who think it is another form of gouging.

Any number of observers have speculated or argued for "innovative" pricing models for broadband access services, with some arguing for  "value-based" pricing. Some might argue mobile service providers are using Long Term Evolution to shift in that direction.

Based on a survey of 65 mobile operators offering LTE services, about half "have used the deployment of LTE as an opportunity to introduce a new form of pricing for mobile broadband services."

The new strategy, which supersedes the earlier unlimited data model, uses download/upload speeds as well as data allowances to differentiate on price, says Wireless Intelligence.

The speed-based tariffs are most common in Europe, where 90 percent of mobile service providers surveyed offer them. These tariffs are less popular across the Middle East, Asia Pacific and Africa, and least prevalent in North America and Latin America.

That’s a step in the direction of using tariffs that match service features in a more-differentiated way, even if not such a major step towards dynamic pricing.

Malaysia to Subsidize Smart Phones for Youth to Encourage 3G Use

One basic "rule" of economics is that consumption of any product or service for which there is demand can be increased by lower prices. And that is what Malaysia will do to encourage younger users to ditch their 2G feature phones for 3G smart phones.

The Malaysian Communications and Multimedia Commission, as part of its "Youth Communications Package," will subsidize  (MYR 200 or ($65 US) purchases of 3G smart phones costing no more than MYR 500 ($163 US).

The idea is to encourage use of mobile broadband and encourage youth in rural areas to get connected.

The rebate is available for buyers earning less than RM 3,000.

According to the MCMC, 89.6 percent of users polled earn less than RM 3,000. And some 87.3 percent of mobile users surveyed are still using basic or fearture phones without smart phone capabilities.

The rebate is also only allowed for Malaysians between the ages of 21 and 30.

Internet is Splintering, Irrespective of ITU Decisions

Is the Internet splintering? The question has been relevant for parts of the last decade, and some observers might argue there are reasons why a fragmentation of the Internet could happen, or has already happened.

One recent development--an International Telecommunications Union conference that many see as leading to government censorship of content--illustrates the issue.

Some argued strongly that allowing governments to control and censor content could spit the Internet into two parts: One free and open one, the other closed and censored, depending on which country you are in.



But such legitimate concerns also have other somewhat more logical drivers as well. One might argue that even when any human being can communicate with any other human being, the original and still most-powerful value of the Internet, as a practical matter, users are functionally self-segregated, most of the time, by shared language, culture, economic relationships, friendships, application preferences, devices, operating systems and so forth.

In fact, one might argue that the formation of communities, which does not conflict with the "any to any" nature of the Internet, itself creates practical and self-chosen "islands."



In other words, although it is important that "anybody can connect with anybody else," as a practical matter people communicate and share with a fragment of all Internet users. And there are powerful commercial reasons for doing so, as the notion of an "Internet platform" suggests.

That does not mean a free and open Internet is incompatible with use choices to self segregate. The former is the capability that allows the latter. The point is that legal (de jure) Internet freedom has the logical corollary of a tribalized (de facto) use of that fully open resource.

Yes, the Internet should remain an "any to any" medium. But people will naturally form communities on a voluntary basis. Formal limits on the "any to any" communications function are harmful.

But on a practical level, people will voluntary fragment their use of the Internet. In that latter sense, the Internet will inevitably lead to "fragmentation," in the sense of people forming voluntary communities.

Dish Challenges Softbank Purchase of Sprint

As expected, Dish Network is raising public policy questions about the wisdom of the Federal Communications Commission approving the SoftBank investment in Sprint. 

The raising of such objections is not unusual whenever a material event occurs that one or more contestants believes will be, or could be, harmful to its own financial interests, irrespective of any larger public policy interests. 

In the case of Dish, which plans to launch its own Long Term Evolution fourth generation (4G) network, the SoftBank purchase of Sprint allows Sprint to create its own LTE network faster, and to use much more of Clearwire's spectrum assets. 

A stronger Sprint means a stronger competitor to Dish, which will need to get traction in the highly-competitive LTE and mobile markets rather quickly, and will likely face Sprint as a major competitor in the "value" segment of the market.  

Dish wonders in a formal filing to the FCC whether a foreign company should "control more spectrum below 3 GHz than any one other company in the United States?"

Dish asks whether Sprint staggered its acquisition of Clearwire "in two steps in an effort to avoid  meaningful Commission review?" 

Dish also raises the question of whether the FCC needs to look at the competitive implications of the changed spectrum ownership. 

Some of the potential objections are procedural, some relate to evaluating the impact of the merger on market competition and some raise "foreign ownership" or broader "fair trade" issues.

The filing of such comments is a normal and expected part of the review process. A similar flurry of comments and questions were raised by competitors who objected to AT&T's bid to buy T-Mobile USA. But virtually every proposed FCC action will have consequences for contestants in some section of the communications business, and that always leads to filing of comments.


Even apparently "operational" issues, such as the accuracy of maps, can be the subject of serious filings with the Commission. The reason is that those maps play a role in helping the FCC determine where to allocate support for rural broadband. 

Contestants who want to stave off funding for competitors will try to point out that a particular area is in fact not "under-served," and therefore the local telephone company does not need more support. Telcos, on the other hand, have a vested interest in proving an area is under-served, and furthermore that the telco is the best recipient of the funding. 

By 2015, 1/3 of Consumer Brands Will Integrate Payment Into Their Mobile Apps

By 2015, 33 percent of consumer brands will integrate payment into their branded mobile apps, according to Gartner. 

That illustrates the evolution of mobile apps from a variety of information and communication purposes, consumer support or experience enhancement, to transactions. 

This the will be more pronounced for brands with retail outlets, such as those in the fashion, food and drink, grocery and entertainment sectors, Gartner says. 

Data released by IBM shows that mobile traffic to e-commerce sites in 2012represented an average of 26.5 percent of all site traffic (up from 15.8 percent in 2011) and sales from a mobile device are now at 14.1 percent of total site traffic, according to iconnect. 

Gmail Domestic U.S. and Canada Voice Calls Free for 2013

Users of Gmail's calling features in the United States and Canada will continue to be able to make free domestic calls through 2013, Google says.  

Gmail's voice feature was introduced in 2008 and was said to support such free calling for an introductory period, and has been extended every year, about this time, since late 2008. 

Since Google incurs real termination costs for delivering those calls, there cannot be any assurance that the policy will continue indefinitely. 

Nor, apparently, does Google necessarily think providing voice services is necessarily a great way to make money. Voice generates lots of traffic. It is a very "sticky" application. Voice usage adds one more dimension to a social graph. 

Knowledge of how voice gets used makes it easier to understand a user's social context and interactions. Given the huge value advertising, especially targeted, personalized advertising and marketing has for Google, voice therefore has strategic value. 

Google arguably is not interested in providing "unified communications" as such. But Google might be very interested in mining the relationships, circles and interactions between people who use Gmail. 

For most companies, that would not be a value great enough to essentially give people "free calling" services. But Google is not like "most companies."

South Korean Mobile Ops Launch “joyn”

SK Telecom, KT and LG Uplus in South Korea are launching “joyn” services to combat inroads being made by over the top messaging services. At first, each carrier will operate joyn as a service available only to users of its own network, but interoperability between the three carriers is expected in 2013.

Joyn, the brand created to support  Rich Communication Services (RCS), allows customers to make Internet-based voice calls and video calls and send chat messages as well. Joyn supports individual and group messages of up to 5,000 characters,, Yonhap news service reports.

In South Korea, KakaoTalk is among the rival services mobile service providers must contend with.

The service is initially available on 22 different types of Android phones, and can be downloaded from each operator’s app store for free. SKT says it will announce extended Android support and an iOS version early in 2013.

Messages to non-users will be sent as text messages, as is the case with Apple’s iMessage service, while a PC-based version is slated to launch in Korea in the first quarter of the new year.

SKT says the service will be free for users of its flat-rate 3G and LTE tariffs. For all other customers, chat and text messages will be charged at 20 won ($0.02) and video calling upwards of 0.6 won per second (that’s circa $0.03  per minute).

Some think joyn will face major obstacles. KakaoTalk has more than 70 million users worldwide and, in its native Korea, is installed on more than 90 percent of the country’s smart phones.

Smartphone messaging apps are hugely popular across Asia. Alongside KakaoTalk, China’s WeChat (near-300 million users) and Japan’s Line (85 million) have grown massively in 2012. Of course, the issue is less the installed base of apps but the volume of WhatsApp messages being sent and received by mobile users.

But not all mobile service providers seem to think joyn is the more profitable way to compete in the messaging market. The logic is simply that the OTT apps already have achieved such large installed base and scale that any new entrant will have trouble dislodging users.

Indonesian carrier Telkomsel in fact has partnered with Kakao Talk, rather than participaing in the joyn effort. But it would be fair to argue that most service providers will try joyn.

In Spain, Movistar, Orange and Vodafone, Spain's three leading mobile service providers, have launched "Rich Communication Services" using the joyn brand.

Spain has been the first country in the world to offer a fully interoperable carrier-owned over the top voice and messaging app, meaning that any customers of any of the mobile service providers can communicate with each other.

In Germany, Deutsche Telekom and Vodafone both support joyn, and the leading South Korean mobile operators appear to be following that approach as well.

The idea is that joyn will allow mobile service provides to create a very large community of users, with access to "rich" voice and messaging ("rich" generally implies support for video) features. That scale effect might ultimately be crucial for joyn success, as well as the ability of mobile service providers to blunt the over the top messaging app attack.

There are about three or four different ways mobile service providers globally can react to over the top messaging.

About half the options are hostile or unfriendly to the consumer. Carriers can block use of over the top apps, or charge extra fees for people who use the generally free apps. Neither of those approaches are especially desirable in competitive markets where another provider will avoid blocking or charging.

There are two approaches that are less surly ways of approaching the problem. Joyn is one way of competing with a carrier-owned alternative intended from the start to be a "third party" brand.

In other cases, carriers have created their own branded OTT apps. The level of competition in a given market tends to suggest whether mobile service providers should offer their own OTT apps, or avoid doing so.

In markets where voice and messaging revenue already is sharply declining, competing might be the only choice. In other markets, where there is less pressure, service providers generally will resist jumping into branded OTT voice and messaging apps, to avoid cannibalizing carrier voice and messaging.

In other cases, as with Verizon Wireless, carriers simply offer unlimited domestic calling and texting as a basic network access fee, to undercut the value proposition of the "free" OTT apps.   That arguably works best where there is a very-large internal calling market.