Tiered pricing sparks vendor turf war

Susana Schwartz
13 Oct 2010

As mobile broadband becomes more sophisticated, so too will tiered pricing, which will evolve to offer more than just variations on "x megabytes for y dollars." Different customers want different things, and operators will learn how to use tiered pricing as a means to create sustainable business models, where networks are relieved of traffic burdens, and intelligent and lucrative consumption of services will replace the current unabated consumption allowed to attract users.

Tiered pricing will also be a way to encourage the consumption of more third-party content, which can help operators go deeper into the long tail, either directly or indirectly. That will help them transcend their role as merely "pipes" as they will become trusted providers or "enablers" in the delivery of innovative, customized services in two-sided business models.

It is clear that Asia has already leap-frogged its Western counterparts when it comes to tiered pricing, with operators in China, Malaysia, Singapore, Korea, Japan and India already moving ahead quickly. As Asian operators continue to move toward 3G, and ultimately 4G, products and services, the pricing around volumes, speeds and even applications will continue to grow in sophistication. As that happens, they will ultimately hit a point where major investments in billing functions will have to be made.

"Much of what the Asian operators achieve is done with billing systems, which are sufficient today for handling different prices for different volumes," notes Randy Fuller, director of business planning at Tekelec, which is known for signaling, and metering and controls for broadband services via its Camiant acquisition.

But that won't always be the case, as operators will inevitably face a capacity crunch if they activate too many customers without adequate policy control to support tiers of service.

Though billing is "hanging in there for now," said Fuller, it won't be able to handle dynamic bandwidth services or "throttling." If operators are to influence revenues and customer behavior through tiered services, they have to be able to reach into the network. But billing is simply not suited for that, as it cannot pull metrics about performance and latency from networks, as most systems have been built around metrics for voice.

To gain visibility into complex data services operators will have to invest in databases that will reside in networks.

"Operators have to consider what goes into real-time charging and billing and what is needed for future policy management before making major investments," said Peter Mottishaw, principal analyst with Analysis Research. "At the same time, they need to figure out how the two complement each other so that once bandwidth demands overwhelm networks, they have a plan."

He notes that operators will reach a point where they need to understand individual subscribers and their preferences, their demands and expectations. "You want to make sure the quality of experience is truly better for those who paid a premium as compared to those who didn't," Mottishaw added.

For that to happen, there has to be mechanisms that sit in the network, not only for real-time bandwidth management, but also for enforcement of rules or policies relating to each tier of customer.


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