Recently mobile carriers have argued for staggered mobile phone data plans. Carriers say that smartphone users, who consume large amounts of data, should pay more and typical mobile phone users should pay less.
In other words, mobile carriers should base their cell phone data charges like utility companies. While this sounds reasonable to the carriers, many consumer watchdog groups and mobile users think that charging more is unfair.
The Case for Charging More for Mobile Phone Data Plans
Mobile phone data plans should reflect carrier costs, wireless spectrum scarcity and the benefits of increased download and upload speeds.
- Always-on Connection. Unlike other consumer electronics devices or utility services, smartphone owners are connected to the mobile Internet via cellular 24/7 unless they turn off their phones. While that’s also true of computers tethered to the Internet with bigger pipes, most people don’t use their computers around the clock.
- More expensive to deliver. Unlike Africa, India and other developing nations, fixed broadband Internet is already in place. Cable and DSL operators have invested in fiber optic cable, but the cost per megabyte is considerably lower than cellular carriers that continue spending millions on cell phone towers, antenna boosters and other RF equipment.
- Increased speeds create greater usage. As wireless carriers roll-out faster 3G and 4G networks, handset manufacturers will release more data-intensive devices that demand greater bandwidth from carrier networks. This increases carrier costs.
- Scarcity. The demand for mobile data will always surpass the availability of the carriers to deliver it. By early 2011 five BILLION mobile phones were active on the planet and another five BILLION wireless devices (machine-to-machine, e-readers, GPS, tablet computers) had cellular connections creating bandwidth scarcity.
- Equity. It’s only fair that those who consume more wireless data pay higher fees than those who consume less. The analogy is similar to utility customers who use more electricity, gas and water.
The Case for Charging Less for Mobile Phone Data Plans
Mobile phone data plans should be simple to understand. Carrier’s will benefit from additional revenues and economies of scale.
- Many smartphone customers today are using Wi-Fi connections reducing the load on carrier’s cellular networks.
- Simplicity and Smartphone Growth. Although iPhone users consume five times as much data as BlackBerry users, mobile phone plans should be kept simple and encourage smartphone growth. Carriers will benefit from additional revenues as well.
- Phone Call Traffic Down. Mobile phone owners, in general, are using fewer voice minutes as they migrate to smartphones. Data plans should reflect carrier savings on lower voice call costs.
- Economies of Scale. By the end of 2010 50% of mobile users in the U.S. will own smartphones. The carriers will eventually achieve better network performance as they generate higher data revenues from their customers. Carriers should lower data charges as they scale up.
- Off-Peak Usage Discounts. Charging less during off-peak usage decreases network congestion. The carriers, to some extent, have already implemented a lower pricing strategy on the voice side (charging customers less for voice calls during off-peak). Charging less for off-peak data usage seems reasonable.
- Loyalty Programs and less churn. It’s taken the wireless industry years to realize the lifetime value of the customer. Churn-and-burn strategies are shifting to reward programs, something the carriers should have learned from other consumer-focused companies years ago. Sprint, for example, now offers its premiere customers $150 off a new phone each year if they’re on a two-year plan. Carriers should discount data plans for customers who commit to two-year plans as part of their loyalty programs.
Clearly, the reasons for paying more or less for mobile phone data plans overlap. (Scarcity and off-peak usage are related, for example.) But there’s a compelling case for both “pay more” and “pay less.” Mobile carriers should continue adjusting data plan pricing that offers tangible value to customers while producing a reasonable ROI. If they do, customer loyalty will improve.