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More tiered pricing - will it mean tears for the industry?

POSTED BY Global Administrator
Not so many moons ago, we lived in a world of walled gardens. Data pricing was – as per Stella Artois lager in the old and much lamented campaign – reassuringly expensive, and with the added bonus of being quite remarkably opaque: if you’d had the misfortune to use the Internet on your phone for any length of time, your bank balance would take (to quote the immortal Bjorge Lillelien*) “one hell of a beating”. The upshot was that the end-user consumption of data remained at levels which did not unduly trouble either the operators’ 3G networks or their coffers. Then – you may recall – we had this business with Apple and a rather nifty consumer smartphone; in return for iPhone exclusivity, Apple demanded unlimited data bundles so that people could surf the Internet without their hand trembling as they opened the monthly bill; the operators gave in; consumers surfed like there was no tomorrow. So, finally, those 3G networks started to see a bit of action. And the next thing you know, those same 3G networks – optimised for data – couldn’t cope. So, after Ralph de la Vega had warned us that AT&T would have to give “incentives” to heavy users  so that they would “reduce or modify” their usage (“incentive” used here euphemistically to denote “penalty”), they – and a raft of other operators – began opting for tiered pricing from June onwards. In the US, AT&T ended its $30 unlimited data plan, replacing it with a $25 plan which offered 2GB of data: users exceeding the cap will pay an additional $10 per MB. In the UK, O2 introduced data caps at 500MB, 750MB and 1GB (contemporaneous with its launch of the iPhone 4); at the same time, Vodafone UK introduced charges for its monthly data bundle customers of £5 per 500MB that those customers used over their initial 500MB allowance. Given – as I have pointed out on numerous occasions – no one has the faintest idea what a MB represents, this is not an ideal policy to pursue, in that just as operators are trying to sell us devices that are more and more data-hungry, they’ve suddenly reintroduced a pricing system which may as well as been designed to disincentivise the purchase of said products. However, the majority of operators seem set on this approach: a survey of nearly 400 mobile industry representatives conducted for the legal firm Freshfields Bruckhaus Deringer has found that “55% agree that tiered pricing is the way forward in mature markets and 47% argu(e) flat-rate ‘all-you-can-eat’ data tariff plans are damaging their ability to increase revenue”. So we are presumably likely to see more of it in the future, much more: I would also venture to suggest that it will act as a deterrent to those who might otherwise of bought the aforementioned data-hungry devices (particularly the iPads) secure in the knowledge that they could browse and stream pretty much as and when they pleased. It may be that the deterrent effect is such that we then reach a tipping point when one of the operators goes, “Hey, chaps, I’ve got this neat idea: why don’t we introduce unlimited data bundles?” At which point the operators will presumably have their LTE networks in place and they (and good old WiFi) can sustain unlimited data bundles for a little longer before those operators begin to fret about network capacity again… *Lillelien was a Norwegian football commentator who, on witnessing Norway’s victory over England in 1981, came out with perhaps the most entertaining spontaneous jingoistic diatribe in the history of the sport.