Vodafone warns of data pricing war; smaller rivals could benefit short-term

While expressing confidence in Vodafone's new tiered charging model for data traffic, CEO Vittorio Colao admitted that smaller operators in Europe might offer price cuts to win market share.

The company has taken the decision to charge subscribers according to their data consumption and what type of service they require. Colao said that this new pricing model would be "conducive" to boosting the monthly ARPUs, as long as users consumed more data over time.

However, the CEO admitted last week at a Morgan Stanley investor conference in Barcelona that smaller rivals could use the chance to cut data tariffs. "Of course there could be spoilers here and there but in the long run the economics of data are hard to be spoiled tactically."

With Vodafone being one of the top two leading operators in three of its four core European markets (in the UK, it is the third largest operator), Colao maintained that the economies of scale would provide them with a competitive advantage over smaller rivals.

Colao also confirmed that its US partner, Verizon Wireless, was already building its LTE network with more finely adjustable controls over the speed available to users, for which it intends to charge proportionally. He also pointed to Vodafone Germany which has implemented a regime where once an LTE user exceeds their data cap they would be relegated down to 3G speeds.

Elsewhere in the European operator community tiered data tariffs are becoming the norm. O2 has already dropped its unlimited smartphone tariffs in favour of something more granular, and 3UK has taken the route of throttling back certain P2P apps at peak times where there is congestion that could impact other users.

Orange has taken a different route by offering a low-cost data plan with the Samsung Tablet, with an additional 1GB of data every month that can only be used after 16.00--an innovative scheme that will likely be copied by others.

For more:
- see this Financial Times article
- see this The Register article

Related Articles:
E-Plus low-cost data tariff could trigger German price war
E-Plus to build German mobile data market with cut-price offers
Rumour mill: E-Plus future in doubt
E-Plus trials HSDPA for rural broadband
No operator consolidation necessary in Germany, says regulator

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