Brett King

Telcos need to think about different mobile pricing

In Mobile Banking, Retail Banking, Technology Innovation on June 15, 2010 at 11:24

The greatest competitive differentiation a mobile operator can give me today is an always on data plan across devices. Right now I have an iPhone, a Blackberry, an iPad and a Mac and I effectively have to manage different data plans for each device. This sucks. I also maintain a broadband connection at home, although I would abandon that gladly if my wireless data deal were better.

Not only does multi-device connectivity cost me more than I believe it should, but I actually have different plans with different providers for different devices. Some are monthly WiFi deals, others are mobile data deals that actually limit my downloads on a monthly basis, and others are pre-paid deals that I pick up when I am visiting other countries.

My best deal is a great 3.5G solution through CSL in Hong Kong, where I pay around US$50 a month for 21Mbps access speeds and unlimited downloads. Unfortunately when I am working in the United States, UK and Australia on my iPhone or iPad, I can’t get a deal even remotely close to this sort of value for money. Firstly, 21Mbps isn’t available on AT&T, Telstra or many of the UK providers.  Secondly, unless you are Sprint 4G in the US, there’s not one provider who gives an unlimited download deal.

In the US, UK and Australia on my mobile plans I am restricted to downloading between 6 Gb and 10 Gb per month. You might think that sounds like a lot, but I’ve recently been conducting webinars and Skype teleconferences frequently, and I can chew through 1 Gb of data in a single day. If you exceed the monthly download limit, then that’s where you start to singlehandedly make an sizeable direct contribution to the profits of the telco themselves. Normally this manifests itself as overage charges that resemble the budget of a mid-size multinational.

Plans need to be for access, not data

I understand the need and right of an operator to make margin from their business. To some extent with fixed line business I understand the cost of running cable and the fact that as a user of the infrastructure I must pay a penalty. But let’s face it, when it’s wireless data of the 3G or 4G network, essentially the operator is providing this over cell tower infrastructure that was installed in most cases over 10 years ago, and has just undergone successive upgrades of antenna and firmware to operate at the new frequencies. Unless you are a VNO (Virtual Network Operator) the data is costing you nothing.

In any case, the cost of the infrastructure is a sunk cost, and regardless of how much data I suck down the pipe, I should be paying for the size of the pipe, not for the data because the operator most certainly isn’t paying for the data.

To illustrate the great digital divide let’s compare the more progressive countries with US, UK and Australia based on 12 month contracts.

The great digital divide

Pricing plans should get cheaper a lot faster than they do

You’ve heard of Moore’s Law right? Well there’s a law for the telecoms sector in respect to bandwidth too. It’s called Gilder’s law. Gilder’s law effectively states that the capacity of a pipe to carry data will increase by at least 3 times Moore’s law. Moore’s law says that computing capacity/power will increase at 200% per 2 years, so that means bandwidth will increase 600% in carrying capacity every 2 years.

So the cost of data over a 7Mb Next-G modem, if it is $50 today, should be $8 in 2 years time for the same deal. From my experience, this is extremely unlikely.

So what is happening is operators are getting increasingly cheaper pipes, and are maximizing the profit of those pipes over more years than they need to. If South Korea can provide 1 Gbps broadband in the home for the same price as Australia charges for a 2.5Mbps connection, you know something has to give eventually. So what is the great equalizer?

4G – Herein lies the problem

The next generation of mobile standards (4G) allows for much faster download speeds, infact, when 4G taps out the upper end will allow 1 Gbps download speeds. The problem is that when Australian, UK and US providers move to the next generation of technology, capping downloads with limits just won’t make any sense whatsoever. What would you cap it at? 100 Gb?

It gets a little ridiculous. I could download a DVD quality movie every day and still not exceed my download limit. But more importantly, once in place, the whole benefit in 4G is the fact that I become permanently unwired as a consumer.

To understand where we are going means that we will move from one device to another seamlessly. This is already happening with the iPad, iPhone and your HD TV. I am looking for a data provider that allows me access to connectivity as a bundle, not by Mb.


In a Wired article back in 1993 George Gilder predicted that Bandwidth would eventually be free. I believe that bandwidth will eventually be so cheap that it is effectively free, but right now operators need to understand that charging for the pipe, and not the data is how they can both enable business and future revenue.


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