Is data pricing the next battleground for operators?

[1]Among the nation's Tier 1 operators we have seen little fluctuation in the pricing of broadband data. In fact, it's remained fairly stagnant. However, I think this will soon change. Why? Because broadband data pricing is the last frontier where operators can do battle with pricing.

After all, voice has become a commodity. Over the past few months unlimited voice calling plans have sunk to an all-time low of $40 per month from the likes of MetroPCS and others.

Likewise, we have seen the price of smartphones drop to the $99 range. In June, AT&T reduced the price of its iPhone 3G to $99 [2] when it introduced the iPhone 3GS. And earlier this month Verizon Wireless reduced the price on most of its smartphones to $99. [3]

If carriers want to continue to grow their business and attract new customers from other carriers, they are going to have to start innovating on their broadband data pricing. During a webinar yesterday on wireless trends and directions, sponsored by Mobile Ecosystem and hosted by FierceWireless (to view an archive of this event click here [4]), David Barden, managing director at Bank of America Merrill Lynch, said that he expects data revenue to continue to rise--making up about 36 percent of operators' revenues in 2010. In the United States, data revenue currently accounts for about 25 percent of operators' revenues. However, for that to happen he thinks carriers will have to become more aggressive on the data pricing front. "This is where differentiation has to occur," Barden said.

Who will be the first innovator? Barden isn't sure but he thinks it could be either Sprint Nextel or T-Mobile USA because they need to deal with rising churn. "These guys are losing 2.5 percent of their customer base every month," Barden said. "They have to change their business."

Of course, some of the broadband data pricing innovation has come in the form of bundling with wireless-enabled netbooks. The most recent offering comes from Sprint and Best Buy [5], which introduced a Compaq Mini 110c-1040DX netbook for 99 cents with a two-year Sprint contract for mobile data. However, John Jackson, vice president of CCS Insight (and another participant on the webinar) said that while connected netbooks have been somewhat of a success, he doesn't believe they will sell in breakout volumes.

Nevertheless, I agree with Barden. One of the Tier 1 operators will introduce an innovative data pricing plan soon, perhaps in time for the holiday season. You may not be able to gift-wrap a two-year broadband wireless data subscription, but if the price is right, I'm sure consumers can be enticed to buy. --Sue [6]