The dominos are starting to fall. Earlier this month, the beginning of the end for flat-rate mobile data started when AT&T announced the elimination of a flat-rate data plan option for new subscribers. Hot on their heels, O2 announced a similar plan change this week, paving the way for UK providers to make the move away from flat-rate. Orange and T-Mobile, Hutchison Whampoa and Vodafone are expected to follow suit.

The move to "pay as you go" plans is designed to keep 'abusive' mobile data users from causing network congestion problems - something AT&T in particular has come to know only too well. The overage charges for AT&T's plans may boost revenues for the provider, or at least stem some losses from no longer provisioning an endless amount of data for every user.

But plans like these also present some potential stumbling blocks for providers as they move to more tiered pricing policies. At Management World last month, I had the pleasure of leading a roundtable discussion amongst several global operator executives about the future of 4G networks and variable pricing policies. As the implication of providing more customized pricing plans became clearer, a few interesting concerns were voiced:

1. Personalization vs. privacy:
New pricing models must deliver true differentiation for customers while maintaining simplicity, predictability and high value. To provide that value, operators will have to personalize services, which will mean learning more about customers' activities, habits, etc. Operators, perhaps reassuringly, indicated they might not be comfortable knowing so much about all of their customers. How will the balance of privacy and personalization work in the new mobile world?

2. Data demand vs. supply:
With the growing availability of new and smarter phones and mobile devices, how will data supply ever keep up with demand? Data consumption is expected to double every year for the next five years, and if that's the case, how will 4G provide enough bandwidth to cope? For AT&T specifically, if current customers are allowed to keep their unlimited, flat-rate data plans for only $5 more per month, what long-term incentive is there for them to switch to one of the new capped plans?

3. A Google tax?
Do operators risk losing customers if they switch to a new model that may increase service costs? Operators are looking at ways to split the cost model up so subscribers aren't saddled with paying more. But if that's the case, who will pay more? Should the content providers shoulder the burden? Should there be a 'Google tax'? Should they try and create partnerships with the content providers that enable a new profit model?

4. Should net neutrality equal government subsidy?
4G networks are expensive, hence the switch to new pricing models that will solve the cost vs. revenue dilemma of flat-rate models. But at the same time, governments' push to keep network access free and open for the greater good is making many operators believe the government should be subsidizing the construction of networks that will bring that access to more people. Is a government subsidy in store for mobile providers?

-John Aalbers

 

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