Flat rate models unviable in 4G world: IBM

Caroline Gabriel/Rethink Wireless
14 Jul 2010

Flat rate pricing will be untenable in the world of all-IP LTE and Wimax, says IBM Global Business Services, in a new research paper geared to telcos.

The paper looks ahead to the next five years of the wireless business model, and predicts that carriers will have to embrace over-the-top services like Skype and create formal partnerships with them. But they will have to make up for the loss of voice minutes by introducing tiered data plans, as some like AT&T already have.

“If people value connectivity then they must pay for connectivity,” says Ekow Nelson, global leader for the communications sector at the IBM Institute for Business Value. “With all-you-can-eat models there's going to be no way for carriers to compete. This will be an adjustment because most users have been conditioned to enjoy unlimited access to over-the-top services for free.”

As reported in Network World, IBM outlines four possible scenarios for the mobile industry in 2015. First, declining consumer spending leads to revenue stagnation and further operator consolidation within the industry. Second, market fragmentation, accelerated by efforts to bring broadband to underserved areas. Third, large providers joining together or merging to compete aggressively with over-the-top service providers, and fourth, the collapse of barriers between over-the-top services and carriers “as regulation, technology and competition drive open access.”

The last two are the most attractive to carriers as they can keep market share and adapt to OTT rather than losing to it. The most successful are likely to be the operators with the ability to create "inter- and intra-industry alliances", and/or those with a more open access infrastructure that can support third party applications incorporate OTT apps in a basic set of services.

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