Mobile consumers are increasingly downloading books, streaming
movies, watching videos, and listening to cloud-based music services
such as Spotify and Pandora. Growing use
of internet voice services like Skype and Google Voice and text messaging
alternatives such as iPhone messenger and now Facebook messenger consume mobile
data AND directly eat into wireless operator voice and text messaging revenues.
Consider some of these Mobile Statistics:- 600M YouTube video views each day from mobile devices
- 2.6B mobile applications were downloaded in March 2012
- 8.5% of all internet traffic is now from mobile devices
- 15% of all ‘search’ traffic is from mobile devices
- 70% of Pandora’s listening hours are from mobile devices
- 54% of Facebook’s 901M users access Facebook from their mobile device each month
Clearly, wireless operators don’t want to simply provide the
bandwidth for everyone else to profit from and they are looking for ways to
capitalize – particularly as traditional voice revenues continue to drop and even
as their own cost to transmit data (on a per GB basis) continues to decline. The
first step, already playing out, is the move away from unlimited data plans.
Verizon and Comcast End Unlimited and Capped Data Plans
Yesterday, a Verizon executive made a statement that mobile customers
that currently have unlimited data plans would have to move to a tiered usage-based
data plan if they wanted to upgrade to a 4G LTE device. Verizon, like AT&T before it, no longer
offers unlimited data plans to new subscribers and has no doubt been thinking about
the best time to cease unlimited data plans for existing customers as well.
Not
surprisingly, Verizon received a backlash of negativity from customers and as
of this morning seemed to be backing off the statement – instead indicating
that they are reviewing pricing plans and will announce them well in advance of
implementing them.
Coincidentally, Comcast announced yesterday that they were
ending their ‘hard cap’ of 250GB for home internet subscribers and were now running
trials where customers were given a nominally higher data allowance (300GB) with
$10 overage fees for each additional 50GB of data consumed.
Both moves are further evidence that unlimited data plans
will inevitably be replaced by usage-based data plans.
Beyond Unlimited and Usage-based Data Plans
From a wireless operator perspective, much of the rest of the
world has already adopted usage-based data plans, so Verizon’s intentions aren’t
without precedent. That said, the simple “data usage” model is likely to
evolve to better reflect how mobile consumers are using their mobile devices.
These “consumer pays” models are also likely
to be supplemented with more creative – and lucrative - “shared cost” and “sponsored
cost” models allowing wireless operators to charge content providers for using
their networks or for prioritizing their data traffic.
A few directions wireless
operators could explore:- Capped 'best-effort' plans - which would allow basic email, internet, downloads without a guarantee on bandwidth quality and speed and with max monthly data limits. Streaming video usage would be 'best-effort' and in certain instances blocked if there was network congestion.
- "Premium" plans that would have faster speeds and better quality video by prioritizing data consumption by these users above the basic 'best-effort' plans. e.g. my streaming video always works but yours may be blocked when there is network congestion. As Comcast is doing on the wireline side, these plans would likely have upper thresholds on monthly usage with overage charges.
- “a la carte” fees where users could be asked to pay extra fee for specific services, e.g. for streaming video - either unlimited video for a premium fee or a certain amount of streaming video for a lower price. This might even by charged per GB if you aren't on the 'unlimited' video plan.
- Ditto for over-the-air “app store” downloads and cloud-based storage services like iCloud
- Given mobile social media consumption, I could see operators offering plans similar to unlimited text plans. $5/month for unlimited access to Facebook, Google+, etc.
- Striking deals with Apple, Google, Amazon, Netflix, Hulu, YouTube etc. to subsidize users wanting to download or stream content (apps, music, video) over the operator network. This could range from simple licensing fees, to variable fees based on usage to getting a piece of each individual item 'purchased' - e.g. they get $.05 of each $.99 song or app downloaded over their network to asking for a piece of advertising revenue these companies are collecting over the operator network.
- Seeking the right to inject or overlay their own ads into the content so they can generate their own additional advertising revenue.
- Striking similar licensing deals directly with Facebook, Twitter, Google+ etc. to 'prioritize' or 'subsidize' use of these networks over the operator network. Why wouldn't wireless operators ask the social networks for a piece of ad revenues generated on their networks?
- Seeking profit-share relationships with Retailers. Amazon handled more than $2B in mobile transactions in 2011, eBay more than $4B. Why not ask for 1% of m-commerce revenues that their networks facilitate? In exchange, wireless operators could prioritize bandwidth for access to a retailer’s website and/or related video content.
The move away from unlimited data plans has been coming for
a while, but you can be sure that once they are gone, wireless operators will do whatever they can to
capitalize on their role as a critical gateway to the internet for mobile
consumers.
Comments below, email me at todd@mobile-perspectives.com, follow me ( @toddshingler ) on Twitter or reach out via our website.
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