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Optical/IP

Broadband Pricing All Over the Map

Powered by the availability of High Speed Packet Access radio technology, carriers are finally rolling out "true" wireless broadband services, offering speeds of up to 3 Mbit/s. But with that welcome development comes a dilemma: How should such services be priced?

The answers are all over the map, according to the new Unstrung Insider report, Mobile Broadband Pricing Strategies & HSDPA, which analyzes 78 price plans from 24 different operators in 17 countries. (HSPA comprises two versions: high-speed Downlink packet access and the Uplink version, HSUPA).

In general, operators are "looking to sell faster speeds at old prices," concludes the author of the report, Unstrung Insider chief analyst Gabriel Brown. "Very few operators have substantially altered pricing to reflect the improved economics of HSPA. I think this is a big mistake."

The first HSDPA services were launched at the end of 2005 -- two years after the first 3G networks were deployed -- by NTT DoCoMo Inc. (NYSE: DCM) in Japan and Cingular Wireless in the U.S. Almost 90 networks using HSDPA were launched in 2006, and a number of network upgrades are scheduled for 2007. Using advanced multiplexing and modulation techniques, the technology can increase end-user data rates to close to 3 Mbit/s, from peaks of 300 Kbit/s in conventional 3G networks. It also allows operators to support roughly six times more simultaneous users per cell than before.

As a result, says Brown, "this technology looks capable of re-casting the economics of wireless Internet services."

Those new economics have not resulted in coherent or consistent pricing schemes across the industry, however. Among the "dizzying variety" of pricing plans being rolled out or trialed by carriers are application-specific pricing with a premium voice-over-IP (VOIP) option, unlimited data plans, tiered service by data rate, bundled DSL packages, discounts for voice subscribers, and perhaps half a dozen others.

To take one example, Cingular offers an unlimited data plan for $80 a month plus a $50 modem fee, over a 12-month contract. Some so-called unlimited plans come with "fair use" restrictions that reflect the impossibility of supporting high-bandwidth, real-time streaming applications over wide-area mobile networks.

Though the industry has yet to come up with a clear strategy for pricing these high-speed services, Brown identifies an emerging sweet spot for mobile broadband: a 12- or 18-month contract with a data transfer limit of 1GB per month that includes a bundled modem card, for an average price of $66 a month.

While the urge to continue using yesterday's pricing for tomorrow's network is understandable, particularly in the face of declining average revenue per user (ARPU) figures, Brown concludes that this strategy will quickly become untenable as users grow accustomed to the power of HSDPA-based networks.

"It feels intuitively wrong that customers shouldn't see some of the cost benefits of mobile broadband technology," says Brown, "in the form of lower prices."

— Richard Martin, Senior Editor, Unstrung

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