Operators make u-turn on unlimited plans

Tony Poulos
24 Jun 2011

Rumors of the death of "all you can eat" plans may be a little premature, and the reasons for their imminent resurgence may surprise you. We all know that they were first introduced to encourage mobile subscribers to start using the data capabilities of mobile networks. We also know that the take-up of data service via mobile devices was a little tardy until the advent of 3G dongles connecting notebooks, and later by the introduction of the iPhone.

The iPhone effect cannot be understated. When AT&T offered the first iPhones to the market, it automatically bundled in an unrestricted data bundle, totally underestimating the take-up of the device and the subsequent data demands brought on by its brilliant ease of use and abundance if applications. It was the "black swan" of the telecom industry and no one could have forecast its disruptive effect.

The impact of data overloads on the AT&T network was well reported and the subsequent demise of the unrestricted plans and their replacement with capped usage plans was met with critical opinion from the market. The press was quick to report that the AT&T pull back would have a detrimental effect on its new subscriber take-ups and that the consumer market would look to other operators for its usage fix.

That was not entirely the case, firstly because AT&T had a monopoly on the iPhone for the US market and, secondly, because the capped plans it offered were well-priced and included more than adequate data volumes for "normal" users. However, it left the door open for competitors, keen to increase subscriber numbers, to offer their own unlimited plans solely for the purpose of attracting churning subs. That, with the introduction of other smartphones in the market, has proven to be a very successful model for the likes of Sprint and MetroPCS, in particular, in the US market.

At an Amdocs event in Miami last month senior executives from all three firms spoke on the effect that unlimited plans have had on their business and it was surprising to hear that offering capped data usage was not as attractive as the sheer simplicity of the all-you-can-eat plans. Both Sprint and MetroPCS offer simple to understand plans to customers who love them because they are so simple to understand. Those that offer unlimited plans are reporting a dramatic drop in customer service calls and better loyalty. It seems that simplicity sells, and saves money.

Capped plans involve a heavy back-end overhead in order to monitor, bill, inform customers of impending limits and offer overage options -- all in real-time. Added to this is the fact that calls to customer service tend to increase because customers cannot grasp the intricacies of capped plans and their constant fear of going over pre-subscribed limits, not to mention the increased possibility of bill shock.

Simple and cheaper

If you take all things into account, and probably employ the services of an actuary, operators may well discover that good network capacity planning and investment combined with attractive and simple unlimited plans with lower overheads may actually be more profitable than the alternative capped options.

So, it's no longer just a debate of simplicity vs complexity, especially if it really is cheaper and more profitable to invest in capacity and offer simple unlimited plans than to have to increase capacity and features of the business support and customer care systems. It may be too early to determine the best path, but it is definitely well worth thinking about.

Tony Poulos is a market strategist with the TM Forum and anchor for The Telecom Channel

This article first appeared as the Insider blog on TM Forum's website

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