This blog is by Leslie Shannon from Nokia Siemens Networks.
There were two trends that really jumpstarted the use of mobile data. The first was all the app-loaded smartphones such as the iPhone, and the second was unlimited data plans on fast 3G+ networks. With no worries about running out of data, smartphone users all over the world gobbled bits with wild abandon and discovered all the wonderful things out there on the web.
However, after luring customers with unlimited data plans, operators soon discovered the downside for their networks: more congestion. This eventually led to a worldwide shift away from unlimited data plans, particularly with the introduction of LTE, which many operators used as an opportunity to pull back on these plans.
But not everyone. There are still three categories of unlimited data plans out there:
1) Looks unlimited but isn’t. T-Mobile USA’s recent Value Plans are just the latest example of their long-standing use of this approach. The current Value Plan contains “Unlimited Talk + Text + Web” – but the web offering is limited to 500 MB of “high-speed data” (in this case, either HSPA+ or LTE), after which data speeds drop down to 2G speeds. Even the “unlimited” data add-on, which costs an additional $20, may be throttled after 5GB. What T-Mobile means by “unlimited” data, then, is that they never shut you off entirely. This is a clever way to market what is, in essence, a throttled data plan.
2) Looks unlimited and is. This the approach that the third or fourth operator in a market typically takes, for example, Sprint in the US, and most recently, LG U+ in Korea. While LG U+ offers several “unlimited” plans that do, in fact, set limits on the amount of data that can be consumed on a daily basis, they also offer “LTE Ultimate Unlimited 124”, a $110 package with no brakes at all. These offers are meant to attract new customers quickly. As one CTO from an operator taking this approach told me, “It’s all about the timing. Our LTE network is pretty empty in these early days, so why not bring customers in by giving them what they want? We’ll have plenty of time to modify the offer later.”
3) Unlimited data with varying speeds. This approach is mostly seen in Europe, where operators such as Swisscom and DNA Finland offer truly unlimited data, but at different speeds on different tiers. Swisscom, for example, offers four tiers of unlimited data, available at speeds of 1, 7.2, 21, and 100 Mbps. There is no fair usage policy; the operator relies on data speeds (or, the lack thereof in lower tiers) to restrain wild usage levels. The top plan, with speeds of 100 Mbps, costs $180 per month, so premium pricing to be able to download whatever and whenever at top speeds. DNA Finland offers a similar unlimited data package with speeds of 100 Mbps, but charges only $51 for it.
So how do these plans look from the network point of view? The “Looks unlimited and isn’t” type of offer is no problem, as it’s fundamentally a throttled rate plan with a sexy headline. The “Looks unlimited and is” type of offer is more problematic. It’s really a game of taking the network right to the brink. Operators offer unlimited data until their network reaches the breaking point and then end up having to reduce the quality of experience, either by reducing network speed or by imposing data limits after all. Bad news for everyone.
And those unlimited speed tiers? It seems that varying speeds do little to slow data consumption when unlimited data is on offer. Swisscom has stated that data use by customers on their unlimited speed plans jumped by 121% in the first quarter that the plans were available. Looking across the industry at the LTE networks we run and the LTE rate plans we’ve analyzed, it’s a network with a speed-based rate plan like Swisscom’s that has the highest average data volume per cell.
Bottom line: Subscribers love using data, and offering unlimited plans is a tempting strategy to build customer loyalty. But unless operators are throttling data or doing something more powerful to protect the network than simply relying on speed tiers, consumption will grow like mad, and the resulting congestion will cause the romance to fizzle.
Happily, Quality of Service Differentiation can really help here. The key is to think in terms of ‘deprioritizing’ a select few rather than throttling everyone – or no one. Dropping network priority for subscribers over a certain threshold – but only in times of congestion – is common in all of the networks in Hong Kong, for example, and has the advantage of delivering full network speeds when there is no congestion. Alternatively, operators can deprioritize only the highest-usage customers after they reach a set limit, so in practice throttling only those subscribers who cause the most network grief.
As these experiences show, the potential for revenue leakage is high when data volumes are not tied to price. The word to the wise is to proceed with caution. When the temptation of unlimited data strikes, Quality of Service Differentiation is an effective safety net for protecting both networks and revenue.
What do you look for in a data plan?
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