TeliaSonera Develops New Mobile Data Model

As operators worldwide change their mobile data pricing strategies from all-you-can-eat to pay-for-what-you-use, Telia Company is looking for another, more advanced way to charge for mobile data.

The operator, which runs the world's first Long Term Evolution (LTE) networks in Sweden and Norway, is considering a new mobile data pricing model that would bundle the network usage charges with the cost of the mobile content consumed into a single tariff. So, rather than paying for a certain volume of data, users would pay for the content (video clip or streaming music) and network resources they consume.

TeliaSonera calls this model "value-based" pricing.

"We would like to go into some sort of value-based pricing," said Håkan Dahlström, president of mobility services at TeliaSonera, during the operator's recent second-quarter results press briefing. "If you buy a movie, you would have the price of the traffic for that movie included in the price of the movie." (See TeliaSonera Reports Q2.)

Similarly, if a user is listening to online, streamed music content, said Dahlström, the price paid would include the cost of using the network as well as the actual content.

Dahlström did not specify when TeliaSonera might implement such a pricing model for mobile data, although he indicated that this is the next step for the operator. It's not entirely clear, however, how the model would be implemented and whether it would replace users' monthly contracts.

While the value-based approach is a future scenario for TeliaSonera, the carrier currently bases its mobile data charges on bandwidth speed and volume. For example, 30 GBytes of mobile data on the carrier's LTE network costs €36 (US$47) per month, while 20 GBytes on the 3G network costs €32 ($41) per month.

Dahlström said that, while charging for mobile data according to speed and volume is a model that could be around in the industry for a long time, he does not see it as the "end game." That would be his value-based model.

But until new ways of charging for mobile data are introduced, TeliaSonera president and CEO Lars Nyberg favors the pay-for-what-you-use model.

"It's logical. If you use more capacity and higher speeds, you pay more than somebody who uses less," said Nyberg. "That's why long-term for this industry, flat fee doesn't work. The industry will have to have a pricing model where you actually pay for what you use."

Getting the mobile data price model right is critical for operators because it can help to manage network usage and control the cost of network capacity upgrades. (See TeliaSonera Tips Hat to Mobile Data Caps.)

In fact, Nyberg identified pricing as the key "tool" that enables operators to control traffic volumes.

"It's very important for the operators that we have a tool so that we can regulate how much traffic you're going to put on our networks," said Nyberg. "Because the moment you put on more traffic than the network… can handle, that's when you get the disaster they had in Manhattan at AT&T Inc. (NYSE: T) when you couldn't make voice calls anymore."

— Michelle Donegan, European Editor, Light Reading Mobile

joset01 12/5/2012 | 4:28:37 PM
re: TeliaSonera Develops New Mobile Data Model

That's pretty much how Amazon & Sprint do it, no? The cost of the download is swallowed in the cost of the book.

Stefan Zehle, Coleago 12/5/2012 | 4:28:34 PM
re: TeliaSonera Develops New Mobile Data Model

I presume the term “value” in value based pricing relates to how much customers are prepared to pay. The problem with value based pricing is that in most cases value is inversely related to volume.  Take the example of a SMS.  The price users are prepared for 160 characters in terms of $ per Mbyte is huge. For emails which also have a low data volume (e.g. Blackberry), operators also mange to charge quite a bit in terms of $ per Mbyte. In contrast for video, which gobbles up network resources, operators will be able to charge very little in terms of $ / Mbyte.  This is diametrically opposed to charging customers for what they use i.e. making them pay for occupying network resources. The latter is easy to understand because revenue relates to cost. I wonder whether “value based pricing” will produce a higher return on capital employed for mobile operators. Stefan Zehle, Coleago Consulting

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