Mobile Data Prices Need To Come Down

[Nurhisham Hussein]

<div class='os_post_top_link'><a href='http://www.infoworld.com/article/06/12/04/HNmobiledataprices_1.html' target='_blank'>http://www.infoworld.com/article/06...taprices_1.html</a><br /><br /></div><i>"Mobile operators need to rethink how they price their 3G data plans to better compete with fixed-line broadband services, according to the top executive at Singaporean operator MobileOne (M1)...Mobile data services based on 3G technology are generally expensive to use, partly because operators charge for data using a per-byte or per-minute pricing model similar to voice. As a result, 3G data services primarily serve business customers who can afford the premium charges, rather than the average mobile user. 'We've got to look to the future,' Neil Montefiore said. 'We've got to be competitive with current fixed broadband prices.'"</i><br /><br />As someone who uses a 3G data line regularly, all I can say is...Amen Brother! The single biggest hurdle in the adoption of 3G and other wireless technologies like WiMax is quite simply the cost/benefit ratio. 3G compatible handsets and data cards are still at the high end of the cost spectrum compared to GPRS/EDGE hardware, and so are subscription rates. At the other end of the scales is the actual bandwidth you get for your hard-earned money...which is way behind wired broadband at the same price points. HSDPA and HSUPA will help a great deal with that, but that's going to take even more time (and money) to roll out, not to mention the fact that we'll need compatible phones to take advantage of these technologies. Beyond the purely monetary assessment of 3G adoption, QOS and coverage is still patchy as well, at least where I live.<!><br /><br />Telcos will tell you that the capital expenditure to fully upgrade their networks to 3G is expensive, and they need to recoup their investment somehow - but that neglects the requirement that you actually have to have a market for your product to get any revenue at all. I still get a kick out of the fact that Celcom, Malaysia's largest telco and mobile operator, has a customer care department that still thinks that 3G is 'video calling' :rolleyes: What a great way to sell your services!<br /><br />I'm going to get a bit technical here. Basic economic theory says that even for monopolies the point of maximum profit is not where prices (average revenue) are highest, but where marginal cost equals average cost i.e. the point where average cost is the lowest. Since telcos tend to have very high capex and thus fixed costs, the mathematically correct profit-maximisation solution would be to maximise your customer base to the point where the cost of adding extra customers exceeds the revenue gain, thus spreading all that fixed cost over a bigger number of customers.<br /><br />Which in turn implies you lower prices as much as possible even up to the point where you're only covering running expenses, as this will give the highest level of profit - a point that seems to be lost on Wall Street and telco management with their preoccupation with average revenue per customer. Case in point - the most successful telco in Malaysia is Digi, who've made a name for themselves by offering cut-price services for voice and data. We've also seen many times in the technology age where widespread consumer adoption of new technologies only occurs when prices come down to the point where it makes sense to the man on the street.<br /><br />So the solution to gearing up 3G adoption, and thus utilisation of 3G services such as video calling and TV on demand, is we need better quality services at much lower prices than we have today. Unlimited flat rate plans on the model of broadband subscriptions help - if they're truly unlimited &lt;cough>fair use policies&lt;/cough>. Second on the list is having big enough pipes to handle the load. We're not there yet with either - but M1's example is pointing to the one way that'll guarantee the greatest chances of success.

[unxmully]

When I switched from Orange pay-as-you-go to a contract, I got three months of free unlimited data as a trial - though as you say, that came with a cap of 1GB per day which to me does not mean it's unlimited.

I made good use of that data, though nowhere near 1GB per day, but as soon as the trial ran out, I stopped using it because it wasn't worth enough to me as a casual user to find the cost out of my own money.

Interestingly, I just looked at the Orange web site and it's so well set up that I can't even find what unlimited data would cost me. It seems I can't possibly have a 3G phone already and have to go through the process of ordering one to find out what data costs.

Edit: Looking at Orange Help and Support, it's £88 per month for unlimited data subject to a fair use limit of 1000MB per month, not 1GB per day as I'd assumed. That looks to me to be around 30MB per day which really isn't anywhere near what I'd see as an acceptable limit.

[Nurhisham Hussein]

Edit: Looking at Orange Help and Support, it's £88 per month for unlimited data subject to a fair use limit of 1000MB per month, not 1GB per day as I'd assumed. That looks to me to be around 30MB per day which really isn't anywhere near what I'd see as an acceptable limit.

That's mind-boggling, and maybe I shouldn't complain so much - I'm paying the equivalent of £18 with no fair use limit. But that does illustrate nicely the point I was making.

[lanwarrior]

T-Mobile Web 'n' Walk have a data add-on that cost £8 / month, unlimited (with "fair use").

Even for their pay-as-you-go, it's £1 cap / day IF you use it, theorotically costing you only £30 / month max for unlimited usage.

[Mark Laudi]

The Philippines apparently has the record for most SMSes sent per day: 12 for every man, woman and child. And this in a country of 80 million people!

SMS became so prolific because the telcos' billing systems initially couldn't handle charging for them (!) so SMSes were free for a while.

Now that the telcos updated their billing systems, they can (and do) charge for SMSes. You can even transfer pre-paid credits from one subscriber to another using SMS.

The point of this is two-fold:

1. I agree with you that datacharges should be as low as possible - even free - to encourage take-up.

2. I disagree with you that once charges start to kick in that people will stop using data on their mobiles. This becomes a function of value over price. If the data services you were getting were very valuable, you *would* pay. The fact that you discontinued using the data services once your data allowance was used up is testament to the probable fact that the services you were using were "nice to have", not "must have".

Would you agree?

[Jason Dunn]

I see this myself all the time - friends of mine are willing to drop the $400 on a Smartphone or Pocket PC, but when I tell then they need to dish out $75 a month for a data plan PLUS more for a phone plan...suddenly they're no longer interested. Data rates are far too expensive - I think almost everyone would pay $10 a month to get their email and browse the Web, but not $75+...

[Mark Laudi]

Hi Jason

I don't disagree with you.

My point was, though, that it's a function of value.

To take the extreme example: $75 sounds a lot for unlimited data but $75 would sound extremely cheap if you wanted to buy, say, a car or a computer.

The question becomes: what content or services can be offered that would make people say, "Wow! $75! Is that all?!"

And this leads me to the point I was making in my previous posting: it's not the data that's valuable but the content or services. Data is intangible and is of little perceived value to the end user. Telcos would be better off providing data free and making money off content and services.

Happy to keep discussing this, if you wish.

[Jason Dunn]

My point was, though, that it's a function of value...The question becomes: what content or services can be offered that would make people say, "Wow! $75! Is that all?!"

Most people I know don't even pay $75 a month for their phone service - my wife pays around $60 - so the value of the additional data services would have to be as great as the value of the phone itself (voice + sms + games + calendar + music + whatever else people do with their phones). Are there services out there that people would be willing to essentially double their monthly mobile phone bill for? Perhaps...but I have a hard time thinking of any. ;-)

[Nurhisham Hussein]

I might be luckier than I thought - I'm paying the equivalent of $35 for unlimited data (the price is the same for GPRS, EDGE and UMTS), and about $15 for voice and messaging (also unlimited). And this is considered expensive where I come from. There's one telco in Malaysia that offers unlimited data for about $25 with very good coverage, but it's unfortunately EDGE only.

[disconnected]

Sprint data is beginning to look very cheap.

I have an old voice plan -- 85.00 family plan for two phones and 2000 shared minutes, and a 40.00 unlimited phone-as-modem option (EV-DO) on my phone.

I just went to the Sprint website and went part way through the order process as a new subscriber. I chose one phone -- the WM Treo. The voice plans for that phone ranged from 29.99 for 200 minutes to 99.99 for 2000 minutes. Unlimited web access can be added (to even the cheapest voice plan) for 15.00.

I need the phone-as-modem plan because I'm not converged (still have an iPAQ 4700 for the large VGA screen). This option can also be used with a laptop, although I've never gotten around to trying it; my laptop has bluetooth, so I really should at least check it out.

For some reason Sprint doesn't allow you to choose both the unlimited web access option (on the phone) and the phone-as-modem option, which doesn't bother me but could be a problem for some people that want data on both the Treo and a laptop.

SMS options are extra -- from 5.00 for 300 SMS text messages to 15.00 for unlimited text messages. I've never sent a text message, so know nothing about that. :oops:

I think Sprint is starting to roll out their next generation of high-speed data, so I suppose they'll adjust the prices upwards. :(