Apt pricing will see mobile data rule

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The mobile data industry has evolved rapidly over the past two years with the impact of the growing 3G penetration, lower cost smartphones and USB laptop dongles, together with the popularity of mobile applications and flat-rate data plans. This has resulted in a huge growth in data traversing operators' networks. The market has now reached a chaotic and critical point with network congestion being felt by operators and consumers alike.

In response, telecom operators are introducing a toolkit of network resource management strategies that will reduce costs and improve economies of scale by balancing traffic requirements across networks and implementing real-time usage controls.

Policy control, data traffic offload, evolution to 4G, and network optimization will reduce data delivery costs by more than 60% over the next three years. A holistic approach that takes into consideration traffic growth, subscriber behavior, and application trends is vital for the long term success.

Policy Control?
How, when and under which circumstances subscribers can access networks, applications and services ? These things will contribute cost savings of over 10%, equating to over $15 bn in savings by 2013 in the US market alone.

"Policy control provides real-time network, application, and subscriber policies that allow operators to manage mobile data growth and deliver personalized services on a far more refined level than was possible in the past. It helps operators prioritize traffic based on an individual users' subscription. So effective is the policy control in reducing traffic peaks that data throughput in the busiest times can be reduced by 15-20%," according to Chetan Sharma Consulting.

Shifting data traffic off a congested mobile network and onto another access technology fundamentally changes the economics of delivering that data. Offload is being implemented by operators globally to manage the total data throughput with, typically, two flavours: offload to Wi-Fi and offload to femtocells. In some regions, WiMax deployments are also crucial to an offload strategy.

Operators deploying a data traffic offload strategy, using service control to ensure transparent and secure subscriber access, can expect annual network cost savings of about 25% per annum by 2013.

"Infrastructure evolution to 3.5G (HSPA) and 4G (LTE) lowers the cost-per-bit for data throughput on the network, thereby reducing overall costs. Network cost is lowered dramatically with each incremental technology deployment, with the evolution to HSPA and then LTE savings just under 20%," according to Chetan Sharma Consulting.

Innovative Service Models

Service models are evolving in a data-centric mobile world as a result of massive growth in data throughput. Flat-rate data plans are unsustainable for the heavy-usage users and innovation is inevitable:

Speed-rated: These plans offer operators the ability to increase revenue from the heavy-usage users by placing these subscribers on the most expensive tariffs, implemented through an effective policy control on the consumer side
Time based: Telecom Italia Mobile has successfully deployed time based mobile data plans. The model implements tiered pricing based on the number of minutes a user spends on the data network
Bandwidth usage and application specific: Next generation policy control solutions enable operators to implement controls and pricing based on the bandwidth usage or specific traffic types. Operators can flexibly charge for heavy bandwidth services such as video or peer-to-peer in real-time. SmarTone-Vodafone, for example, is delivering tiered services in Hong Kong based on the bandwidth usage and time as well as applications on-demand.
Time of day : Operators in the mature markets have seen a clear time-of-day usage pattern emerge for mobile data. Similar to other utilities, they can charge more at peak time according to the network capacity, or conversely, offer consumers incentives to download during quiet network time. Underpinned by policy control, dynamic and transparent pricing enables operators to effectively manage peak loads
Location based service models: Traffic patterns over the past two years demonstrate that the most congested cell sites are in the urban centers. Implementing charging models based on the congestion is common. For example, London's congestion charge zone. Can operators implement a similar model on their mobile networks if guaranteed quality of service is the outcome?
Quality of service models : Guaranteed QoS comes at a cost to operators, especially in mobile networks where bandwidth is necessarily a shared resource. But, the emergence of 'bandwidth boost' models whereby a user is offered a short term increase in the bandwidth for a set fee, for example, provides the opportunity to implement service level agreements
Ad-funded solutions: Mobile advertising is beginning to emerge as a revenue source for operators. With subscriber data privacy concerns now being addressed, mobile advertising can create new revenue streams for the operator, personalized offers for the consumer, and more brand awareness for the advertiser
Mobile commerce driven : Japan offers insight into a commerce driven mobile data market, with an open ecosystem driving the adoption and consumer spending on services. Leading mobile Internet players, including Yahoo! Japan, have developed a viable market for content, services and mobile advertising in partnership with mobile operators

Cost reduction is only one side of the equation. Operators are now creating new service models that move away from unsustainable flat-rate plans towards tiered and usage based pricing underpinned by subscriber, service, and policy control.

Flexible, dynamic, and personalized pricing models that reflect subscribers' preferences and context, bandwidth and application usage, and network conditions are the wave of the future.

Comparative cost reduction strategies when placed alongside the new service models, now being introduced, aid the development of sustainable business models for the mobile industry.

But, pricing models will ultimately determine the future success and growth in the sector. Unsustainable all-you-can-eat data plans will evolve to include flexible pricing models based on the time-of-day, individual usage patterns, casual usage, application preferences, and location.

It is ultimately the responsibility of mobile operators to introduce these models with the quality of service guarantees that are based on users modifying their behavior. After that only, we can get rid of the mobile data chaos.

David Sharpley
The author is senior vice president, Bridgewater Systems
vadmail@cybermedia.co.in

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