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Daryl Schoolar |
Mobile operators have a love hate relationship with mobile broadband. They love it because it helps to grow service revenues. They hate it as they don't feel they are fully monetizing it. You can't go to a decent wireless conference these days without seeing a graph depicting the disconnect between revenue and data growth. In response to this mobile operators have been pushing capped data plans, saying unlimited data services are unsustainable and cost too much. Here in the U.S. both AT&T and Verizon Wireless are now pushing "data buckets" to be shared across multiple devices. However, not every operator in the U.S. market has followed this strategy.
T-Mobile recently reintroduced an unlimited mobile data plan. And, by true I don't mean one of those disingenuous plans that say "unlimited" but throttle the customer's connection when they reach a certain limit. By true unlimited I mean T-Mobile allows its subscribers to use as much data on its HSPA+ network as possible each month.
Unlimited data offerings, while posing network-challenges, can be used as a defensive measure by an operator who is trying to stem market share erosion. Obviously this type of offering is better suited to an underutilized network. But, as unlimited data can reverse subscriber losses and even grow the user base, unlimited data services can also degrade performance on the network due to congestion. So the question is how can T-Mobile, and other operators, sustain what we have all been told is unsustainable?
One of the more obvious ways to sustain unlimited data services is to increase network capacity. This includes network upgrades; going from HSPA+ to LTE and eventually to LTE-A. Also falling under the increased network capacity umbrella are small cells and HetNets. But these steps come with a steep price tag and can be very complicated to implement. In fact the cost of adding capacity using these methods is the main reasons operators say unlimited mobile broadband is unsustainable. The costs are greater than the reward. So this got me thinking what are some alternative solutions operators can take to sustain unlimited data services beyond new infrastructure investments? Following are a few of the ideas that came to mind:
- Limit unlimited marketing – I know it sounds kind of silly to limit ones marketing, but for unlimited data service offering it could key to maintaining the network. Don't start offering it with the idea of overtaking the largest competitor in the market. Instead use it to slow churn and return to manageable growth. The operator should carefully manage how aggressive it gets with marketing campaign, and de-emphasize it before the network gets congested. The operator may also want to put conditions on who qualifies for the unlimited data service plan to limit demand for it as well.
- Time shifting – Time shifting isn't a new idea when it comes to telephone services. It has been used in the past for voice service, with calls made at off-peak time periods being charged at a lower rate than those during times of peak usage. There is nothing stopping an operator from doing the same with data. Here is something to remember the next time you see a statistic about monthly mobile broadband usage. That statistic shows consumption. The network problem is about capacity. Spreading out consumption over more hours lessens the strain on capacity. Operators can design tariffs so that a minimum percent of monthly data consumption has to take place during off-peak hours. If use falls below that minimum the operator can apply a financial penalty on the next bill or even threaten to throttle the user's connection in cases of network congestion during network peak hours. It goes without saying that to implement this type of traffic shaping the operator would need to provide the user with the tools necessary to measure their network data consumption during peak and off-peak hours.
- Reward low usage – For some service subscribers, unlimited plans provide peace of mind. They aren't looking to download some three-hour epic movie by David Lean. They just want assurance that their bill will look basically the same each month; they don't want bill shock that comes with going over a data cap. For these types of subscribers an operator should consider offering end of year or end of term rebates for low data consumption. I have seen similar things with auto insurance. If you don't make a claim during the policy, the insurer will offer a discount on the next policy. There is nothing to keep mobile operators from doing the same. Sure they can offer unlimited plans, but for those users who aren't excessive users, give them a break. An operator could easily set different discount rates for average monthly usage over the course of a contract. This way the operator can sell unlimited while at the same time rewarding its users for not taking advantage of the service. The discounts may negative impact average revenue per users, but could lead to overall revenue growth thanks to an increase in the number of subscribers.
Although I have avoided discussing infrastructure investments in this column, certainly network optimization can help sustain unlimited services. Video compression, increased base station sectors, new antenna technologies, traffic offloading, and moving content to the network edge can all help wring extra capacity out of the macro network. But, unlimited mobile broadband service, no matter what the operator does, will be very difficult to sustain. Operators may want to offer the service periodically to stem subscriber churn or to give their user base a quick bump, but offering it indefinitely to everyone seems like a very challenging prospect.
Daryl Schoolar is Principal Analystof Wireless Infrastructure for Ovum. Daryl's research includes not only what infrastructure vendors are developing in those areas, but how mobile operators are deploying and using those wireless networking solutions. Contact him at [email protected] and follow him at @DHSchoolar.