The great martial artist and philosopher Bruce Lee offered this advice on conflict and life: “Be like water.” Telcos should adopt this advice – literally and figuratively – as they try to figure out where mobile data pricing should go.
Yesterday, Amdocs released results of a survey conducted with Heavy Reading that addresses global operators’ plans for and approaches to mobile data services and pricing. You can find more details from BillingViews partner Light Reading on the Future of Data Services survey here.
The most compelling data from this survey emerged when operators’ were asked what types of data plans they have launched or are planning to launch in the next 18 months. As you can see from the chart below, their answer was – generally speaking – “we’ll try everything.”
Source: Amdocs, Heavy Reading
It’s pretty rare to find results in a survey where such an overwhelmingly large percentage of respondents reply in the affirmative to so many different aspects of a question. What does it mean?
It says that operators don’t yet have a clue about which mobile data pricing schemes will resonate with customers. Such uncertainty usually breeds hesitation. In this case, however, there is so much urgency to bring new services and pricing models to market that Telcos are willing to throw things out there and see what happens.
If telcos actually do this, it will tell us a few other things. First, it would be a sign that BSS infrastructure has actually arrived at a point where operators are comfortable with their ability to introduce and retire pricing plans and product models pretty rapidly. If they’ve really reduced the time and cost to get new services into and out of the market, then it might be realistic for them to take this experimental approach. (Or it might be a sign of pure desperation to block out chunks of the market; don’t underestimate that possibility). This, figuratively, is like water – as Bruce Lee intended. Telcos would, ideally, adapt and respond to the needs of the market and demands of the moment. The IT guys would deserve a solid back slap for that.
There are real dangers associated with this flexible approach though. What happens if the market falls in love with a pricing model (as with unlimited plans…) that turns out to be a money-loser? Telcos risk setting false expectations with customers and paying the price of swimming back upstream…again. Also, when you introduce plans, get decent but not quite enough uptake on them, and then try to retire them, they don’t vanish. In such cases, Telcos end up supporting a bunch of plans that are grandfathered in. They might not offer them anymore, but it’s tough to take them away from customers who already have them. And finally – okay, you try everything and end up completely confusing and irritating customers in the process. That costs Telcos more in care, retention, and re-acquisition costs than is ever intended. Oops – history repeats itself.
The overriding message in all of this is that onlookers have been screaming at telcos for years now to sell value, not connectivity or intangibles like gigabytes. That means baking data into services. New pricing concepts take a step in that direction. Plans “based on cooperation with partners/OTT players” or “zero rated plans” where, for example, an online retailer covers the data cost for visits to its storefront are closer to the mark. But they still aren’t as slick (ugh, bad pun) as water.
The U.S. bottled water segment of the beverage market generated more than $11 billion in sales in 2011 on more than 9.1 billion gallons of H2O. Pretty much every home in the U.S. can get water out of a tap more or less for free. So, people are paying for value like the convenience of a bottle; distilled, purified, or natural spring water; water with vitamins; or for a high end brand like Evian. If you’re buying Coca-Cola, Coffee, or Tea, you’re basically buying flavored water. You’re paying for the flavor; the water is just “baked in.”
This is an object lesson for telcos. Data is becoming a commodity. It’s like water. People can get free data via WiFi in many public places these days, just like you can get water out of a tap or water fountain. And sure, people pay for data mobility, but they’re steadily paying less for more. Think about it – As 4G/LTE enters the market, data pricing hasn’t changed all that much on a per megabtye basis when you look at actual cost per usage. Unlimited plans were really a sham for most people; few users actually consumed more data than tiered plans now offer at equivalent or lower prices. But consumers are doing much more with both 3G and 4G data than they did just a year or two ago.
The water industry, however, shows that people will pay significant premiums for perceived value. Fancy bottles; flashy colors; tasty flavors; liquid vitamins; and caffeine all crank up the multiples. When we, as consumers, buy these added values, we aren’t buying water so much as we’re paying for some other value that brings water along with it. In the U.S., people can buy a gallon of purified water in a nondescript jug for 99 cents. And right next to it, they’ll find – and buy – a sexier brand in a fancier bottle for $3 per liter.
So, let’s go back to the chart. Heavy Reading asked operators if they planned to roll out data plans to deal with network congestion; to boost bandwidth; to share data across devices, networks, business groups, and families; and to offer QoS – or more “speed” – for a premium. There’s some value here, but it’s still selling data at a price per megabyte. Even zero rated data subsidized by a partner or sponsor rotates back to selling megabits.
The missing question here is: Telcos, what’s your version of the fancy bottle? How do you pull a Starbucks and sell hot water for $2.50 a cup because it’s been run through some ground up beans? I’m not sure anyone knows the answer to that yet, and I’m not yet convinced that the next wave of convoluted data pricing schemes will come up with answer. I do know this – I spend more on bottled water, coffee, and Diet Coke in a month than I do on mobile data, but I never thought about the fact that I was basically burning money on tastier water until I wrote this article.