April 18, 2010 Getting What You Pay for on the Mobile Internet By KEVIN J. O'BRIEN NY Times
http://www.nytimes.com/2010/04/19/technology/internet/19iht-tiered.html?ref=technology&pagewanted=print BERLIN — When TeliaSonera, the Nordic telecommunications operator, switched on the world’s fastest wireless network last December, customers quickly ratcheted up their consumption of mobile data tenfold. Besides reaffirming the soundness of the operator’s investment in the new technology, called Long Term Evolution, or L.T.E., the data smorgasbord confirmed another truism: the days of flat-rate mobile data rates are probably drawing to a close. All-you-can-eat plans — as they are known in the industry — were introduced when the mobile Web was in its infancy and demand was profitable and manageable. But with traffic booming, reflecting the growing popularity of smartphones, social networking and downloading music and video, network operators fear that flat-rate plans will eat into profits or even fail to cover costs. The result is likely to be higher prices for consumers. “Finding a way to make mobile profitable in the medium and long term is one of the industry’s big priorities,” said Mike Roberts, an analyst at Informa Telecoms & Media in Chapel Hill, North Carolina. “We are now at the early stages of figuring out a way forward.” Even before it spent 500 million Swedish kronor, or $70 million, to switch on its L.T.E. network last year, TeliaSonera began introducing pricing plans with download limits as advances in the third-generation technology that preceded L.T.E. led to an explosion in traffic. “In 2009, the mobile data on our network in Sweden increased by 200 percent but the number of subscribers increased just 60 percent,” said Anna Augustson, vice president for communications mobility services at TeliaSonera in Stockholm. “Clearly, it was not a sustainable model from a business perspective to have a single, flat rate.” Last year, TeliaSonera began selling a series of 3G mobile broadband data plans with monthly limits ranging from 2 gigabytes to 20 gigabytes a month, for 39 to 319 kronor. TeliaSonera is selling an introductory L.T.E. network plan with unlimited downloads for 4 kronor a month. But by July, the operator plans to limit downloads to 30 gigabytes and charge 599 kronor for the service, almost twice the cost of its 20-gigabyte 3G plan. In exchange, TeliaSonera’s L.T.E. users will get download speeds of 20 to 40 megabits a second, about 10 times those on its 3G network. “We feel it is important for our customers to have a choice,” Ms. Augustson said. Instead of all you can eat, the new industry mantra, she said, is: “You get what you pay for.” At least one major operator is doing likewise. In Spain last November, Vodafone, the largest European carrier, introduced Calidad Oro — Gold Quality — a premium plan for business users for €49, or $66, a month that guarantees fast service without monthly limits on downloads. The advent of tiered pricing for mobile broadband is new, but, in a sense, it is also a throwback to the early days of the technology, when operators imposed often unrealistically high download fees that scared off consumers and delayed the development of the mobile Web. Eventually, operators began selling all-you-can-eat plans, first in the United States and then in Europe, to ease consumer angst about running up big bills. The plans attracted users and helped speed the technology’s development. Now, some operators are moving toward sophisticated forms of metered pricing based on speed and consumption, striving to balance profitability and consumer satisfaction. Soon, the biggest operators are likely to follow with plans that redefine how most consumers purchase wireless data. Top executives at AT&T, Verizon Wireless, Vodafone, Deutsche Telekom and Telefónica have all recently called on the industry to move away from flat-rate data plans, although only Vodafone so far has attempted a tiered pricing plan. At AT&T, the No.2 wireless carrier in the United States, after Verizon Wireless, the use of mobile data surged 5,000 percent from 2007 through 2009 after the operator became the exclusive U.S. seller of Apple’s iPhone, which has helped popularize the mobile Web. But it has also strained AT&T’s wireless network at peak times in urban areas in New York and California. “In light of the limited natural resource of spectrum, we have to look at the ways of conserving spectrum,” said Mark Siegel, an AT&T spokesman in Atlanta. “We have had to invest billions in our network to keep ahead of this demand. This may also require a different way of looking at pricing on the part of the industry.” Operators do not disclose whether their mobile data services are profitable, although analysts say they are and point to the industrywide move to build L.T.E. networks, which are essentially mobile broadband networks, as the future for a business where revenue from voice services will play an ever-shrinking role. Mobile data traffic levels are expected to continue climbing as the use of bandwidth-eating smartphones increases and operators around the world follow TeliaSonera’s example and install their own L.T.E. high-speed networks. The number of mobile broadband users worldwide is forecast to increase 55 percent this year, to 437.8 million from 282.5 million in December 2009, according to Informa, the telecommunications research firm. By the end of 2014, the number of mobile broadband users is projected to reach 2.1 billion. Over the same period, the level of mobile data traffic on the networks of the world’s carriers is expected to rise 22 times, to 15.1 billion gigabytes from 674 million gigabytes. But without changes in pricing, operator revenue will rise 12 percent a year through 2014, according to Informa, just a fraction of the 49 percent projected annual increase in subscribers or the 86 percent annual increase in data traffic. Operators are just beginning to link the price of a service — in this case mobile broadband — to the costs to a mobile network, said Kenneth Frank, the president of solutions and marketing for Alcatel-Lucent, a network equipment maker. “There is going to be so much creativity about pricing. We are only seeing the beginning,” Mr. Frank said. Steve Smith, an analyst at Coda Research Consultancy in Guildford, England, said unlimited flat rates would not disappear but would become much more expensive. “Operators will have to work hard to get their tiers ‘right,”’ Mr. Smith said. Over time, consumers will have many options for buying customized wireless broadband plans, said Pat McCarthy, a vice president for global marketing at Telcordia, a maker of bandwidth management software for operators based in Piscataway, New Jersey. Those may not mean higher costs for the average user, but heavy users may face higher bills. “The problem with mobile broadband so far has been most of the revenue it has generated has gone to over-the-top Internet content services, not to the operators,” said Mr. McCarthy, who is based in Galway, Ireland. “That’s what they are trying to change.” -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu _______________________________________________ Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
