As mobile broadband access continues to become an increasingly important portion of their total and data revenue streams, wireless service providers around the world are trying to develop plans to effectively monetize data traffic on their networks. Many carriers including AT&T, Verizon, T-Mobile and Metro PCS in the US, Vodafone, Orange and Telefonica/O2 in the UK, Vodafone and KPN in the Netherlands, are implementing tiered pricing plans for data access on smartphones and other mobile Internet access devices like media table and notebooks.
Consumption based tiered price structure gives carriers a tremendous amount of flexibility to respond to changing market conditions. Carriers can tailor the pricing structure from cost based pricing to demand based pricing as tiered pricing becomes the industry norm, allowing carriers to respond to market needs with an elastic pricing policy. Tiered pricing will give consumers more options, with entry level pricing plans attracting new data users, and larger data plans catering to heavy data users. Furthermore, it will allow operators to implement shorter contracts with no/limited device subsidies. IHS iSuppli firmly believes that tiered pricing is one of the critical elements of a strategy that operators will implement in an effort to transition their mobile broadband networks from “dumb pipes” to “metered smart pipes and eventually to “smart pipes.”
In the longer term, tiered pricing plans will allow operators to take advantage of and become relevant players in the new paradigms of the mobile broadband internet driven by cloud storage, cloud computing and the Internet of things. For example, tiered pricing plans can be developed that allow content from preferred service provider partners to be exempt from the monthly data caps. Consequently content providers would prefer to deliver their content to customers in partnership agreements with service providers—as opposed to though independent portals or third part providers—because from a consumer perspective this becomes the most economical option.
But tiered pricing is not without its risks. In a broadband environment where consumers have become accustomed to all-you-can-eat data plans—especially for fixed broadband access—tiered pricing can be confusing and difficult to accept. Also tiered pricing leaves the door open for competitors to tout unlimited data plans in efforts to capture market share of broadband subscribers.
IHS iSuppli believes that as mobile broadband data and video traffic continue to grow at exponential rates almost all of carriers around the world will migrate to subscription services that will be based on tiered pricing for data access. Simultaneously, carriers will explore opportunities for use based access fees for content downloaded on devices like eBook readers and short term daily and month-to-month contracts for data access on media tablets and notebooks.
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