4G and the rise of subscriber-optimized charging
June 14, 2011 - Openet
When everyone is super, then no-one Is
If you've ever seen the film The Incredibles, you may remember a line from the arch villain Syndrome: "When everyone is super, then no-one is."
Heavy stuff from a kid's movie, but a good analogy for marketing 4G on network speed and price plans alone. It's fine at the start to attract new subscribers, when competition is not rife and speed is a major selling point over 3G. But what happens when most operators in a country have 4G networks? Then operators need a significant differentiator other than network speed to attract subscribers. Price is the easy way to go, but operators don't want a price war, as they'll need to recoup the investment made in LTE.
So if network speed will not be a long-term differentiator, and having the lowest prices is an unsustainable model, then what's the strategy to attract subscribers to 4G, retain them and stimulate usage?
According to recent research from Telesperience, price is not the most important attribute in a consumer's decision when selecting a mobile operator. Instead, mobile subscribers ranked "met their needs" and a sense of fairness as being most important. What this means for operators is that understanding subscribers' needs and matching the offer to their behavior is well worth the effort in terms of improving satisfaction ratings and loyalty. To keep subscribers happy, the operators must regularly analyze usage and behavior, and promote the plan that best meets their subscriber needs.
Understanding subscribers' needs means that operators should be principally concerned with usage, behavior, context and network experience.
Current 4G offers take into account usage and network speed in an effort to provide a variety of pricing models, which include:
- Tiers based on a combination of usage volume, download and upload speed
- Tiers based on usage volume with no speed restrictions until usage threshold is hit, then speed is throttled back
- Tiers based on download speed with no volume restrictions
- Unlimited usage subject to fair usage
Can these methods of pricing deliver value to subscribers? If the subscribers are on the plan that best fits their individual usage, behavior and expectations (e.g. a decent network speed for the applicable service/content type), then the answer should be yes. With 4G, many operators are charging overages, for example, $10 for an additional 1 GB usage over plan. If a subscriber is using a lot of data-heavy applications such as video, then they could quickly use up their monthly data plan allowance and rack up a hefty bill.
Operators need to guard against churn of new 4G subscribers and bill shock needs to be avoided. Several operators are throttling back speed when a subscriber reaches their data cap. This can be to speeds as slow at 57 Kbps. In this case, subscribers can buy data top-ups –- but if a subscriber uses up their plan allocation in a couple of days and can't afford to buy data top-ups, then having a 4G service providing speeds as slow at 57K does not bode well for the overall user experience. This could lead to churn and subscribers may well switch to the unlimited 3G plan that some operators are providing.
The danger is that operators could actually lose customers after spending money to entice them onto 4G, if the service does not deliver value and the network experience that the subscriber is expecting. The takeaway should be to monitor usage and communicate to the subscribers -- keep them informed and don't deliver any nasty surprises.
Most traditional mobile phone plans are tiered on usage. With 4G network speed also becoming a dominant pricing variable, understanding the subscriber and ensuring they are on the right plan involves looking at the subscribers' volume of usage and what they are primarily using 4G for –- e.g. heavy data usage, video or online gaming, as well as the context in which it's being used.
Understanding a subscriber's usage, behavior and network/service expectations are important for operators to provide a 4G service that delivers value to each subscriber. What and how subscribers pay for 4G service will contain more variables that standard 2G or 3G pricing. Analyst firm Yankee Group recently described the Holy Grail of mobile broadband pricing as convergent, personalized and dynamic.
This could lead to a natural progression in the business support systems (BSS) of mobile operators and the introduction of subscriber-optimized charging. Such an approach to charging involves understanding how a subscriber is using the 4G service, including an analysis of services, devices, context and overall network experience to provide plans and make offers that subscribers will value as they are personalized and/or dynamic. An example of such an offer could be upselling a "speed boost" direct to the device, just as a subscriber has selected to download a video. This is an example of using subscriber intelligence in real-time to offer a triggered service which enhances the subscriber's network experience and creates additional revenue for the operator.
To provide subscriber-optimized charging requires delivering the optimal network experience by dynamically allocating bandwidth, providing real-time charging capabilities for any payment mechanism, and having a single view of the subscriber. This is a significant advancement on traditional charging platforms used for 2G services. 4G subscribers' needs will be more complex than, say, 2G or even 3G, so having the technology in place to deliver services that meets these needs will be required. These functions for 4G can co-exist on an adjunct basis with existing 2G and 3G IN platforms and billing systems, thus protecting an operator's investment in 2G and 3G BSS.
Winning and retaining 4G customers while stimulating usage needs a strong marketing proposition. As research has shown, the ability to understand subscribers' needs and provide compelling plans or offers is key when looking to attract and nurture subscribers. With 4G there will be more variables in the subscribers' needs and meeting these needs will require an in-depth understanding of subscribers -- delivering what they want, when they want it and how they want it. Having subscriber optimized charging in place will play a significant role in the effective delivery of 4G services and enhanced experience that subscribers want and makes them feel valued. If subscribers feel a sense of value then they may also feel just a little bit like they've got a superhero on their side.