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Tuesday, July 29, 2008

Why the obsession with monthly billing for mobile services?

I've just been reading this post from SMS Text News about remote-wipe capabilities for handsets. This has been something that's been discussed for years, especially in the context of enterprise-issued devices like BlackBerries or other smartphones.

But while I agree in principle with the idea, I don't agree with the notion that this would best be provided as a service for (say) two pounds per user per month.

Why? Because I perceive this as a sort of insurance policy. And insurance to me is not something that is "worth" a monthly fee, because on a monthly basis nothing is done by the provider. I have an annual car insurance policy, and annual home insurance policy, and (because I travel frequently) an annual travel insurance policy. Each year the premium and the fine-print conditions are renegotiated, and I expect to be able to shop around between competing providers.

... and if and when I actually need to make a claim, I accept that there may be an extra "per event" charge (the excess) involved. And in the case of car insurance, a whole range of extra factors are taken into account to determine my risk level (garage, where I live, job, traffic offences etc) and price the premium accordingly. And for each year that I don't claim, I get a discount on the next year's premium (which is transferrable to a competing provider too).

Now, I understand why mobile operators are focused on monthly billables. They are measured on monthly ARPU by their management and investors. And typical mobile contracts are of variable lengths, 12/18/24 months, so an annual insurance / remote-wipe policy doesn't fit so well.

But some of the work I've been doing recently for a billing & OSS client (Highdeal) has made me think about the lessons that could be learnt, and practices adopted, across industries. In this instance, I think the mobile industry could learn quite a bit about charging for insurance policies. Annual fees make sense, as does some form of recognition of relative risk for individual users. The mix of fixed and per-event fees makes the customer perceive value - even if they don't have their phone stolen and wiped.

It should also be possible to have 3rd-parties providing the insurance, to ensure competition in terms of both price and features. The operator could even act as "insurance broker" in this regard, representing many different device-management providers, and still take a commission and conduct the billing. This would also act as an advantage for those handsets sold through the operator's own channel, as they could be pre-configured correctly. But equally, it needs to be (easily) possible for me to select a totally independent provider (or self-manage the devices if I'm an enterprise) if that makes more sense.

There are plenty of other examples of mobile services for which the current bi-polar choice of "per event" or "per month" are both poor fits with user preferences. To be fair, we are moving to a few "per day" or "per week" options for things like data plans, and some promotional tariffs and linked prices. But there's still a heavy monthly billing-cycle cloud overhanging even innovative pricing methods.

I had an interesting recent example of this: I renewed my main personal mobile contract with O2 via Carphone Warehouse, which had actually been running for a year longer than the original 12-month term. I negotiated an upgraded handset, and a different tariff plan, including a new flatrate data allowance. But could it start immediately? No, not even for a longstanding customer. I had to wait until the next month for it to kick in, before which data was still charged at the prior ridiculous levels. So naturally when I got my shiny new phone, I switched off the 3G to stop myself accidentally racking up huge charges, and made sure not to use the new operator services on it until next month's cycle comes into force. Now, I'm pretty sure that most users' behaviour with a new phone's capabilities is set in concrete by their first week's experience with it. Counterproductive for operators wanting uptake of new services, eh?

So.... I think in general there needs to be much greater flexibility in how mobile services are priced and billed, rather than just using the current lazy catch-all monthly rating mechanisms. There needs to be flexibility on matters like annual billing. And some things need to take effect immediately, not sometime next month.


Ew4n said...

Wholly agree with you Dean.

Anonymous said...

Hi Dean,

Keep your eyes on www.slingshot.com. Its a U.S. based company that has wholesale agreements with multiple carriers. They are pushing pay per use. Let's hope they succeed. I'm tired of the annual contract b.s..

Dean Bubley said...

Thanks "Shawn"

In principle Slingshot looks interesting, as I agree that prepay use of Internet is important. (It's certainly not new either - I've been using it for at least 10 years). However I see that Slingshot hasn't put out a press release on its website since 2003, and that actual hard detail is hard to find. It'll be interesting to see how you handle international roaming, especially on wireless.

It's also interesting that a colleague of yours, "Kelly", posted within 6 minutes of you on another thread of mine.

To me, this together with the URL in the comment hints of low-quality SEO tactics. In general, my view that any company prioritising SEO over, say, talking to press & analysts, needs to be viewed with wariness.