It was with a certain amount of alarm that AT&T mobile services subscribers reacted to reports in December that AT&T was considering modifying its lucrative smartphone/ iPhone data service plans to no longer offer unlimited usage for a flat monthly fee.
The Associated Press surfaced the news following an investor conference featuring CEO Ralph de la Vega of AT&T Mobility and Consumer Markets.
An interesting statistic regarding AT&T's network usage was revealed: 40 percent of network capacity is consumed by just 3% of its smartphone subscribers.
The problem for AT&T is that a large percentage of its customers could be experiencing poor service quality, depending on location, time of day, etc.
Since the available network bandwidth is essentially fixed, improving the customer experience for those subscribers calls for reining in the usage by the heavy hitters that make up the 3%.
One means to do so: Change the data service pricing to dis-incent the unbridled use of services such as streaming audio & video, and similar bandwidth-intensive data services.
While the pricing plan is the ultimate tool to change behavior, the softer step - just taken - is to simply begin making subscribers aware of their usage and the effects on service quality.
Not only does awareness of wasteful usage tend to reduce it, but the subs will become familiar with the amounts of their data service consumption.
Then, when the proposed pricing tiers become visible, the subs will understand where they fall and what "usage-based billing" really means to them.
It is interesting to watch this issue unfold for the mobile operators because they are suddenly found to be standing squarely in the shoes of the broadband Internet service providers of about ten years ago.
At the time, it was primarily the cable MSOs such as Time Warner Cable (TWC) who were noting with dismay that their network service quality was being significantly impacted by a few percent of subscribers who were particularly active with gaming services and video.
But DSL fell into the same camp, and AT&T's de la Vega commented on his company's prior experience with wired Internet subscribers.
The difference today is that, while the mobile data services (such as audio and video streaming) require much lower bandwidth than PC-oriented services of a decade ago, so too are the pipes for service delivery much smaller! Over the past decade, all major US terrestrial service providers have invested in fiber networks, running glass to increasingly farther points in the network, and in some cases even to the home (FTTH).
Their capacity limitations relieved, the usage-based billing alternatives have not seen light of day (in consumer markets).
A transition to usage based billing after years of unlimited, flat-fee service plans is a very tricky one to navigate.
It's obvious from the reaction to the AT&T announcement that subscriber sentiment would be tough to influence in a positive way; a long, measured approach to explaining the changes and positioning the new plans as a positive development will be needed.
(Indeed, the comments by AT&T's De La Vega indicated the need for education and informational approaches.
) But internally, technical infrastructure and business process changes can be equally daunting considering the scale of the network operations and the robustness required of any billing-related infrastructure and support.
Although there is no need to distinguish the types of data services consumed, that consumption must be metered at the individual subscriber level.
The network equipment, the billing mediation (a software layer between the network infrastructure and the billing software) and the billing system itself all must be enabled to support the usage-based pricing plans.
If this sounds like an awful lot of time & expense & aggravation just to bill the heavy users for their overachieving appetites, it's because that's not the point! The point is that that small group of users is negatively impacting the service quality and customer experience for everyone else in those areas.
Negative publicity about slow performance can be the deal-breaker for prospective new subscribers.
Furthermore, the subscriber churn rate (the percent of current subscribers ending their services in a given period of time) is a key factor in service provider profitability because the cost of subscriber acquisition (advertising, promotions, direct marketing, etc.
) can take months to recover.
For the time being, most services are being delivered under fixed-term contracts (typically two years), but the service providers' grip is going to slip with time due to regulatory and competitive pressures.
In future articles, we'll isolate the individual issues and examine them in detail, seeing what we can learn from history in the broadband world to predict what we'll see in mobile.
© 2010 Valley Tech Consulting, Inc.
The Associated Press surfaced the news following an investor conference featuring CEO Ralph de la Vega of AT&T Mobility and Consumer Markets.
An interesting statistic regarding AT&T's network usage was revealed: 40 percent of network capacity is consumed by just 3% of its smartphone subscribers.
The problem for AT&T is that a large percentage of its customers could be experiencing poor service quality, depending on location, time of day, etc.
Since the available network bandwidth is essentially fixed, improving the customer experience for those subscribers calls for reining in the usage by the heavy hitters that make up the 3%.
One means to do so: Change the data service pricing to dis-incent the unbridled use of services such as streaming audio & video, and similar bandwidth-intensive data services.
While the pricing plan is the ultimate tool to change behavior, the softer step - just taken - is to simply begin making subscribers aware of their usage and the effects on service quality.
Not only does awareness of wasteful usage tend to reduce it, but the subs will become familiar with the amounts of their data service consumption.
Then, when the proposed pricing tiers become visible, the subs will understand where they fall and what "usage-based billing" really means to them.
It is interesting to watch this issue unfold for the mobile operators because they are suddenly found to be standing squarely in the shoes of the broadband Internet service providers of about ten years ago.
At the time, it was primarily the cable MSOs such as Time Warner Cable (TWC) who were noting with dismay that their network service quality was being significantly impacted by a few percent of subscribers who were particularly active with gaming services and video.
But DSL fell into the same camp, and AT&T's de la Vega commented on his company's prior experience with wired Internet subscribers.
The difference today is that, while the mobile data services (such as audio and video streaming) require much lower bandwidth than PC-oriented services of a decade ago, so too are the pipes for service delivery much smaller! Over the past decade, all major US terrestrial service providers have invested in fiber networks, running glass to increasingly farther points in the network, and in some cases even to the home (FTTH).
Their capacity limitations relieved, the usage-based billing alternatives have not seen light of day (in consumer markets).
A transition to usage based billing after years of unlimited, flat-fee service plans is a very tricky one to navigate.
It's obvious from the reaction to the AT&T announcement that subscriber sentiment would be tough to influence in a positive way; a long, measured approach to explaining the changes and positioning the new plans as a positive development will be needed.
(Indeed, the comments by AT&T's De La Vega indicated the need for education and informational approaches.
) But internally, technical infrastructure and business process changes can be equally daunting considering the scale of the network operations and the robustness required of any billing-related infrastructure and support.
Although there is no need to distinguish the types of data services consumed, that consumption must be metered at the individual subscriber level.
The network equipment, the billing mediation (a software layer between the network infrastructure and the billing software) and the billing system itself all must be enabled to support the usage-based pricing plans.
If this sounds like an awful lot of time & expense & aggravation just to bill the heavy users for their overachieving appetites, it's because that's not the point! The point is that that small group of users is negatively impacting the service quality and customer experience for everyone else in those areas.
Negative publicity about slow performance can be the deal-breaker for prospective new subscribers.
Furthermore, the subscriber churn rate (the percent of current subscribers ending their services in a given period of time) is a key factor in service provider profitability because the cost of subscriber acquisition (advertising, promotions, direct marketing, etc.
) can take months to recover.
For the time being, most services are being delivered under fixed-term contracts (typically two years), but the service providers' grip is going to slip with time due to regulatory and competitive pressures.
In future articles, we'll isolate the individual issues and examine them in detail, seeing what we can learn from history in the broadband world to predict what we'll see in mobile.
© 2010 Valley Tech Consulting, Inc.
SHARE
