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Guest Post: Dynamic Price Plan Innovation

This is a guest post by John Giere, SVP Products & Marketing, Openwave Systems, covering some of the latest creative mobile data pricing approaches, and solutions to bring them to market faster. It includes options from basic tiered plans to broader ‘shared-wallet’ and micro-segmented data plans, and builds on some of the pricing innovation themes we reported in our recent research note Mobile Broadband Economics: LTE ‘Not Enough’, and which we will be discussing in the upcoming Best Practice Live! free online virtual event, 28-29 June 2011.

Openwave pricing plan options June 2011.png

Source: Openwave Presentation, Telco 2.0 EMEA Brainstorm, May 2011

In the world of the Web, innovation happens quickly. Start-ups spring up like wildflowers. A few succeed; most die, but almost all add to the collective momentum that drives progress faster than any other industry. Witness the disruptive power that digital commerce, digital publishing and digital music have unleashed in such a short period of time. The Web is fertile ground where creativity and risk are encouraged, iteration is more important than perfection, and where the value of ideas lie in how fast they can be put into action.

As the Web has gone increasingly mobile, its convergence with a far more mature telecommunications industry not only highlights a clash of cultures, but it draws sharp contrast between the pace at which the two industries advance. The telcoms space is comprised of larger, more cumbersome entities that tend to move slower and are more resistant to change. While these characteristics may lend a certain stability to the essential services provided, the last few years have seen agile competitors from the online world successfully capture value and revenue from the incumbent carriers. From Skype to YouTube to Facebook, over-the-top providers of popular services have a distinct advantage over the network operators: they innovate quickly. Four years ago there was no such thing as an app store; today the top app store has served over three billion apps.  

If mobile operators want to provide value above and beyond data access and transport they must take a page out of the Web playbook while still focusing on their core strengths. A perfect starting point is pricing.

With the right solutions, and more importantly the right mindset, mobile operators can emulate their Web partners/competitors to quickly build, test, launch and monitor creative pricing plans that empower the end-user and deliver value to all their different user segments.

Operators have a proven billing relationship with their customers and they are uniquely positioned in the network to handle the complexities of low-cost, high-volume micro transactions (pay-per-text, overage charges, etc.). Up to now though, mobile operators have barely scratched the surface. The bland, volume-based pricing tiers that exist now are blunt tools that present very little value to the end-user.

Tiered pricing takes into account time of day or specific content type when processing data. Operators can enable pre-pay subscribers to monitor their own use of mobile data, while pay-as-you-go data plans include a variety of time-based options, such as hour-, day- and week-long plans. Another option is to provide customers with custom speed access to their favorite websites. Ultimately, this type of micro-segmentation is rich with customer service and traffic reduction possibilities.

As the mobile ecosystem matures, we will get better at figuring out what content and services consumers are willing to pay for. Data plans that target certain user segments with premium content (e.g. HD video) present a huge opportunity for suppliers as they offer more choice for consumers, and more revenue for operators. However, it wouldn’t be fair for Operator X to charge HD Video Provider Y more to ensure that its premium content loaded faster, but it is fine for Operator X to offer a higher-priced plan to consumers for better delivery of all HD video services. We believe consumers will pay if they see the value.

Unlimited data plans will become the most expensive option while a variety of tiered micro-segment service plans will become the norm. Multiple operators now offer unlimited access to Facebook and other social networking sites within volume-delimited services and waive data volume metering in off-peak periods, e.g. at night. Some operators offer “shared wallet” services, in which allocations are shared across different devices or family members, for example, one operator lets customers choose five Internet sites or URLs and get unlimited access to them.

Today, more than twenty operators around the world are testing and implementing new pricing strategies in an effort to support the market need for even more segmented data traffic plans against the declining voice based ARPUs. We will therefore see a lot of development in this space over the next year.

Transparency is also as important as flexibility when it comes to operators’ creating and marketing their data plans. People look to the carriers when they need a data plan because there aren’t any other options. However, instead of competing with each other on price, they should compete with each other on value and customer service. For example, Carrier Z could partner with an iTunes competitor to offer a premium long-form video for a set monthly plan. The operator differentiates itself from iTunes through easy billing, clear service level agreement and proactive user engagement when network conditions change.

As the transition to more creative pricing plans continues, operators shouldn’t miss the opportunity to grab market share by positioning these service tiers as a way of opening up choice to customers, instead of a complex minefield of hidden charges. This will demonstrate how valued their custom is and that they are striving to make their network experience as complete as possible.

You can see more on Openwave’s pricing solutions on their site here.

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