Regulators act on mobile broadband speed claims

Operators are looking to increase revenues from mobile broadband by introducing new pricing models. However, as the simplicity of charging models is crucial, tariffs that are tiered according to speed are attractive to operators as they are a well understood fixed broadband tariff model. 

 

Mobile broadband marketing that promotes unrealistic “peak speeds” is attracting the ire of advertising standards bodies and regulators. In Innovative Tariff Strategies for Mobile Broadband, we argue that it is time for operators to begin playing an “honest broker” role by promoting more realistic “average or typical speeds.” In some markets, operators will oppose such a move as they differentiate themselves on high peak speeds. However, operators may not have a choice for much longer as regulators around the world are beginning to act. For example, the Singaporean regulator, the Infocomm Development Authority (IDA), recently announced that it was working with operators to define “typical speed” methodologies for operators to use in advertising.

 

Tiered pricing based on speed is one of the most common pricing models for mobile broadband as it provides operators with an upselling opportunity, especially if the lowest tier is attractively priced. This type of pricing aims to keep customers loyal, but it will need to include data usage caps so that operators can extract extra revenues from additional data usage. 

In Hong Kong, other operators have followed CSL’s lead by offering speed-based pricing, and in Indonesia, Indosat has also seized this opportunity. However, all of these charging schemes are tiered according to peak speeds rather than average speeds.

 

 We urge operators to take the initiative and introduce plans that promote average speeds rather than peak speeds. In Malaysia, Digi has taken this step by marketing the “likely average speed” of its service alongside the peak speed. This move differentiates Digi from its rivals by positioning it as the “honest broker.”

 

There is an excellent opportunity for operators to remove unrealistic speed claims, “unlimited” usage caps that aren’t actually unlimited, and hidden clauses and usage charges in fair usage policies. There will still be a problem as to how different operators define “average speed”, but at least these advertised speeds will be far closer to reality. 

 

In some countries, such as New Zealand, operators are banned from advertising speed claims of any sort. One way to circumvent these regulations could be to offer a different device for plans that offer different speeds. For example, a 3.6Mbps dongle could be offered to tier-one users, while a 7.2Mbps dongle could be offered to tier-two users. 

 

Not all operators will want to abandon the marketing of peak speeds as they can be a key differentiator between operators, especially in developed markets. However, consumers are sick of actual speeds not living up to advertised theoretical speeds, and regulators are taking their complaints seriously. 

 

The IDA in Singapore is leading the charge, introducing new regulations that require mobile broadband operators to publish “typical download speeds.” The IDA also plans to work with operators to determine the methodology for calculating typical download speeds, and it will determine guidelines for how the new speeds should be published. It expects operators to start publishing typical download speeds from early 2012.

 

UK regulator Ofcom has proposed similar guidelines for fixed operators, but these are only voluntary guidelines, unlike the IDA’s which will be enforced. Ofcom says that a typical speeds range (TSR) – which it defines as the range of speeds actually achieved by at least half of customers (around the median) – should be used when advertising broadband speeds. It states that if a maximum or “up to” speed is advertised then the TSR must have at least equal prominence in the advertisement. In addition, a theoretical maximum speed must be actually achievable by a material number of customers.