Let the fat pipes sing

Tony Poulos
15 Apr 2011

Revenue today is largely disconnected from the cost model. Mobile subscribers, in particular, had long been encouraged to take up all-you-can-eat data plans to stimulate data traffic. Then along comes HSPA+ and LTE with acceptable connection speeds, dongles and the now ubiquitous iPhone and bang, suddenly everyone wants to connect.

In developed markets the idea of being able to connect anywhere/anytime has caught on big with users, many of which no longer bother to connect via their home Wi-Fi, cable or ADSL connections. In emerging markets, mobile connectivity is the ONLY way of accessing the internet and ‘critical’ social networking sites like Facebook and Twitter.

You’d think mobile operators would be jumping with glee at this traction, but in reality it appears to be quite the opposite. Not a day goes by without an industry report of a mobile operator bemoaning the effect on its network of over-zealous web-surfers, bit torrent exponents and peer-to-peer practitioners.  Woe betide any successful marketing campaigns that attract even more of these “data leeches” when the realization sets in that there has to be considerable investment in new infrastructure to cope with the influx.    

Bad user

The immediate response is for operators to clamber to provide value-added services to their portfolio in the hope of capturing some extra dollars from the budget-minded “data smugglers” using their networks purely as portals. This may generate some extra cash flow, but the jury is still out on whether the investment in things like application stores, syndicated content, games portals and electronic shopping malls will even be profitable. This is not the sort of business a communications service provider is necessarily good at anyway.

That leaves them with the option to stem the uncontrollable flow of cheap data or “throttle” it. For some operators this may be an unintentional choice when their network reaches capacity in some areas. However, in other markets it is used in conjunction with a fair usage policy, which is usually in small print on the customer’s agreement. Sure, it’s a better choice than cutting off the customer completely. But that usually generates a customer care call and an unhappy user unless they are warned and given the option to pay more.

We are already seeing flat-rate packages based on restricted speeds and charging according to traffic priority.  Users opting for these plans appear willing to pay more for prioritized traffic and receive premium service. Operators are also moving to tiered or capped data plans, but their complexity and constant management requirements are not always popular with customers.

That still leaves the early adopters having experienced unlimited, high-speed accessibility at a set price, unlikely to agree to any alterations to their contracts. Will we see these users turning the hapless mobile operators into the dreaded big fat pipes we keep hearing about? Hardly likely.


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