New business models needed for mobile broadband success

The uptake of mobile broadband in Western Europe, spurred on by offers of free laptops and 'unlimited' data tariffs, have seen growth rates of between 200 per cent and 800 per cent. Astonishing numbers by any measurement.

While mobile operators are likely to continue to use innovative marketing to attract even more subscribers to these services--unconcerned at the impact on their HSPA-based networks that remain underutilised today--this model seems likely to come under increasing stress in the next 3-5 years as these unlimited data services risk commoditisation and may fail to offset the cost of delivering the traffic.

A new study by Parks Associates maintains these circumstances will reduce service profitability and limit the operators' ability to invest in networks and grow the service. Such models will also reduce the consumer appeal and their willingness to pay for the service, as carriers will have to restrict or redefine what qualifies as 'unlimited.'

One practice being adopted by European and US operators is to price their mobile broadband plans according to whether the user accesses the service using a smart phone or laptop. Park Associates believes this approach will become increasingly problematic as users will want the freedom to use the service with any device and in any manner they desire.

What is being suggested is that operators should base their mobile broadband pricing on services, not connectivity. One example would be to allow customers to pay a fee to send and receive a specific number of emails, ebooks or digital music. This could also be packaged with bundles of minutes for Internet access.

Failure to adopt more sophisticated pricing could result in a consumer backlash if operators impose harsh pricing models to reap an element of profit as mobile broadband traffic soars. Consumer expectations and behaviour should be conditioned to this impending change now, and not left hanging for some future date.

However, the worldwide economic downturn may delay the need for more intelligent pricing models. For the first time ever, online sales in the UK have fallen, and Internet traffic has dropped by 0.5 per cent between October 2007 and 2008. -Paul