Device Operators Want in on Mobile Revenue Pie
Mobile executives are considering new tiered-price content models as flat-rate plans prove a hindrance to revenue growth, according to a new study from the Economist Intelligence Unit commissioned by the Freshfields Bruckhaus Deringer law firm.
The study finds 48 percent of mobile executives expect to develop new pricing models in the next three years, with 55 percent agreeing tiered pricing is necessary to maintain revenue growth given the explosion in use of data-gobbling smart phones and the cost of funding expanded networks.
Such a move could affect net neutrality, analysts warn, if certain types of network traffic are prioritized over others, though Freshfields' Natasha Good says such a move is preferable to network providers utilizing data management tools to narrow the pipeline for heavy users of video, multimedia apps or social networking tools.
"The telecoms community is tackling a twin challenge: maximising revenue from existing services to protect profit margins and managing the increasing strain on the networks," she says in a press release. "Usage-based pricing is a logical solution."
More than 60 percent of respondents believe tiered pricing could mitigate the strain on networks caused by tablets and smart phones running high-capacity websites like YouTube.
"It is difficult to say whether it might be higher rates for certain sites, but that is a possibility," Good tells Publishing Executive Inbox. "It could simply be that we would pay more for more bandwidth-hungry applications we use, or [more generally for] availability of greater bandwidth."
The latter option suggests a range of flat rate prices could solve the problem, rather than higher prices for certain applications, especially as smartphones make up an ever-larger percentage of the mobile market.
"It is very possible that increased flat rates may be helpful, but the question seems to be whether this would be the best way forward or whether greater sophistication in tariffing is needed to keep all customers happy," she says.
Heavy data traffic caused by the explosion of multimedia use has led some European telecom companies to call for compensation from users such as Google, according to a recent article in the Financial Times.
"There is something totally not normal and contrary to economic logic to let Google use our network without paying the price," the article quotes France Telecom CEO Stephane Richard as saying.
The study predicts application downloads will exceed voice and video downloads as a revenue source for mobile providers in three years' time in "mature markets" (those with fully developed and modernized economic systems). In developing markets, basic voice and data pricing plans are perceived as commercially viable further into the future.
The study also found nearly 80 percent of mobile operators believe they should open their platforms to independent app developers; 45 percent believe they should open their own app stores.
The Mobile Challenges Survey queried 391 mobile industry representatives from 55 countries in June 2010.