Buckets of Mobile Data: Finding the Right Plan

July 23, 2011 - Openet

As more and more wireless users are picking up multiple devices, operators are beginning to ponder whether it’s time to bring out pooled data plans.

Just a couple years ago, the average wireless subscriber was likely to have just one device: a cell phone. Roll the clock forward to 2011, and while many customers still own just a handset, others may have a smartphone, tablet, eReader and a USB modem, to name a few.

With new connected devices coming to market every month and sales of tablets alone expected to more than quadruple by 2015, according to Gartner estimates, it won’t be long before the one-device-per-subscriber model becomes a thing of the past.

Right now, subscribers are charged separately for data on each of their devices. Unlike bucket plans for voice, where several different phones on an account draw voice minutes from a single pool, no such plans exist for wireless data – but indications show that could change, possibly soon.

This spring, top executives at both AT&T and Verizon Wireless indicated the companies were considering adjusting their pricing plans to keep pace with the new multiple device paradigm.

Speaking at a Barclays investor conference in May, Verizon Communications CFO Fran Shammo said: “You know, our customers are already stating ‘Look, I have a tablet, I have a dongle for my laptop, I have a smartphone. Is there any way I can pool my minutes together and just buy one plan and use that data plan for all my devices? I think, logically, we will get there at some point in time.”

AT&T Mobility CEO Ralph de la Vega made similar remarks at the AllThingsD D9 conference in June. “Once you have so many devices that you’re carrying, you may want a shared plan,” he said of how the company charges for mobile data service. “The more focus groups that we do, the more that we think that may be the way.”

Sprint, too, has not shied away from the idea of bucket plans for mobile data, though its unlimited plans make implementing the “bucket of bits” concept a tricky proposition, since an unlimited bucket plan could result in subscribers consuming massive amounts of mobile data.

“Unlimited is still a big part of our message, so the motivation to pool data plans today is not there as much, but we want to have customers carry their experience, their persona with Sprint, regardless of which device they’re with,” says Scott Rice, Sprint’s vice president of customer care and billing services. “We understand that the industry is evolving. Somehow, we want to bring all these devices together as a single persona.”

Rice says Sprint already has the billing systems in place to roll out bucket plans for mobile data. AT&T and Verizon declined to discuss specifics of their billing systems, but given the sophistication of the charging systems they use for the iPad, it’s likely they too already have the technology in place.

For operators with the right billing systems, it’s just a matter of waiting for the right time to offer the option to their customers.

With tablets flooding the market and more subscribers picking up smartphones every day, it seems that now is as good a time as any to roll out bucket plans for data. After all, the country’s top three wireless operators already have the necessary technology in place and are seeing the number of customers with multiple devices rising every day.

However, as with any change to pricing, there are several things operators have to take into consideration before allowing their customers to pool their mobile data use on the same account.

Perhaps the most basic factor is the portion of an operator’s customers who own multiple devices. Although the percentage of subscribers with two or more wireless devices is rising, it has yet to reach critical mass.

Rice says that right now, Sprint “hasn’t seen many” customers owning several different wireless devices with the company. The operator has a robust line of smartphones and four tablets, but doesn’t offer the iPad, which continues to dominate the tablet market.

Like other operators, Sprint probably won’t consider plans that allow customers to pool their data usage across devices until a shift in their subscriber base demands it.

“We always think through what is the best way to allow value, and if that’s having one persona with many devices that share data, we’ll move in that direction,” Rice says.

Operators also have to weigh the benefits of offering bucket plans against the possibility that such offerings could cannibalize existing data revenue.

Right now, customers have a separate account for each of their devices using wireless data. Some subscribers may not use up their data allotment for the month, so they end up paying for data they never used. However, the pricing structure of pooled data plans, like bucket plans for voice, would be more efficient than the one-plan-per-device model, since subscribers are less likely to pay for unused data service.

Wireless data is already less profitable than voice, and bucket plans could exacerbate that. For instance, Verizon Wireless’ mobile data plans currently start at $20 for 1 GB per month. Under a bucket plan allowing connectivity for four different devices, Verizon would have to charge $80 to get the same amount of revenue it would glean from four separate plans.

Customers are likely to expect some sort of volume discount from signing up multiple devices with the same carrier, and may balk at such a price tag.

On the other hand, it’s logical to assume that customers with several different devices on a single plan would be less likely to switch to another operator, given the hassle of replacing their devices. Bucket plans could help improve customer loyalty, but may result in lower revenue per device, potentially cannibalizing an existing source of income.

While bucket plans offer some benefits in terms of customer loyalty, carriers must determine whether those benefits will outweigh the potential impact on data revenue.

“When carriers first look at this, they’re going to ask ‘Isn’t that going to harm our revenue streams?’” says Brent Iadarola, program director for Frost & Sullivan’s wireless group. “There are some arguments to be made that it’s difficult to integrate this because they see that those revenue streams that are a bit more siloed, if they integrate them, it could cause a revenue shortfall.”

Iadarola expects the ability of bucket plans to increase customer loyalty will ultimately outweigh operators’ concerns about revenue.

“We’re at a very high penetration rate. Right now, it’s about the ability to retain customers and inspire customer loyalty, so anything that creates a more sticky atmosphere within the installed base is going to be attractive to carriers,” he says. “The carriers that will be the first movers in creating a more convenient way for customers to manage those devices are going to have an advantage in terms of customers’ loyalty and retention.”

Iadarola also predicts that the complexity of creating individual pricing plans for each new form factor that comes to market will eventually become such a hassle that operators will have no choice but to move to bucket plans for mobile data.

“Creating data plans for every single form factor becomes an enormous headache for the carrier,” he says.

Jim Dunlap, president of Cycle 30, agrees with Iadarola. Dunlap says operators will be forced to make their plans more flexible as subscribers bring increasing numbers of connected devices onto the network.

“Really what we’re talking out is complexity of data usage,” he says, calling flexible billing a “prerequisite” of being an operator today. “No one is going to an all-you-can-eat plan across multiple devices.”

Rolling out bucket-of-bits plans involves more than just strategic decisions. Operators must also make sure they have the right billing systems in place to support the plans.

Wireless operators working off legacy billing systems probably won’t be able to roll out bucket plans with their existing charging platform. Many new types of billing plans, such as bucket offers and the various offerings for the iPad, require real time charging capabilities.

It’s not too difficult to implement bucket data plans if operators already have software in place that can charge for data use in realtime, but legacy systems for postpaid services tend to only support after-thefact billing.

Mike Manzo, chief marketing officer at Openet, explains that legacy charging systems using afterthe-fact billing don’t count subscriber’s data usage against their allotment while a call is in session.

Subscribers place a call, and after that call ends, the system collects information on who they called and how long the call lasted. That information is then sent through a rating engine that applies the usage against the subscriber’s account, tallying up voice minutes and data usage after the session ends. The actual charging happens after the session, not during.

With prepaid plans, the system needs to be able to charge in real-time, cutting subscribers off if they go over their allotted minutes. The charging happens as data and voice minutes are being used, not after the subscriber ends the call.

This real-time charging capability is one of the most important components needed to support bucket plans, along with the ability to provision use and set policies for different devices. With this technology in place, customers with a bucket plan would be able to allocate certain amounts of data to different devices.

Updated billing systems are good for more than just bucket plans. They can be used to give subscribers greater control over their data usage.

For example, a parent might want to limit their child to 200 MB under the family’s shared data plan. To make that happen, the back-end billing system would need to charge for that data usage in real time, and grant the parent policy controls for data use on different devices, capabilities that may be lacking in legacy systems. “People are increasingly using real-time charging to deploy new services and new business models,” Manzo says.

Manzo knows a thing or two about how billing systems can help bring new products and services to market: Openet’s billing technology is used for the iPad by two unnamed Tier 1 North American operators.

Manzo says operators don’t have to “forklift” out their existing billing systems to support bucket plans, but they will need to do some upgrades.

“We never recommend a forklift of an existing system, you just introduce too many risks,” Manzo says. Instead, Openet recommends operators add new billing capabilities as an “adjunct” to their existing solutions, phasing out redundant capabilities so operators can use a single platform for real-time charging.

CSG Systems marketing director Monica Ricci agrees. “You don’t necessarily have to uproot your old billing systems. It’s a complicated process, it’s tied in directly to your business – you don’t want to do that. What you need to do is add capabilities,” she says. “Your billing system has to evolve to understand you’re putting price plans at a user level versus a device level.”

At first glance, bucket plans for mobile data seem like a logical step for the industry. However, wireless operators have a lot to mull over before offering the plans to their subscribers, from basics like getting the right systems in place to high-level strategy considerations.

Even with all these complicating factors, however, the proliferation of connected devices may make such plans inevitable.

So when will you be able to dip into the bucket of bits? De la Vega says “soon.”

“I can’t give you a date right now,” he said at the D9 conference, “but it will be soon.”


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