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Wednesday, May 11, 2011

Another reason why app / service based pricing for mobile broadband will fail

Imagine, if you will, that you are the CEO of a mobile operator that's just launched a new tiered-pricing model for mobile data on laptops and smartphones. It's based on differential pricing and QoS for different data/Internet applications. You've bought a ton of DPI and policy boxes to detect and enforce traffic, and you've proudly announced a new "menu" of pricings.

$10 per month = email, IM, basic web browsing
$15 per month = adds in social networking & mapping
$25 per month = adds in low-quality video & selected cloud services & basic VoIP
$35 per month = adds in high-quality video & high-quality VoIP

You've nicely defined all the different web services into the different buckets, and set up the T's and C's and the policy boxes appropriately.

Now this morning, you've woken up to find that Microsoft has bought Skype. So now Microsoft has extra IM, VoIP and video-calling, as well as its own way of doing WiFi offload via the Skype/Boingo relationship. There's likely to be a whole host of mashed-up applications, launched over the next couple of years - some fixed, some mobile, some consumer, some business, some free, some paid.

So how exactly does that fit with the carefully-crafted pricing model and network policy setup? What's the business process for evaluating what has to change? What are the technical implications? What are the legal implications? How does it fit with partnering deals? How will users be informed? Does Microsoft have VPN services? What happens to stuff Microsoft / Skype does in the cloud? Does everything look the same on different devices & OS's? And how fast can any updates be made?

The list of headaches is endless. The scope for messing up is huge. And it's all highly dynamic & will change continually.

For me, this is yet another example of why app-specific pricing & policy is doomed to be limited to a few niches (eg anti-virus, throttling P2P uplink). Never mind the Net Neutrality legal debate - it is practical problems like this that make service-specific tariffs and so-called "personalisation" service menus irrelevant at best, and outright damaging at worst.


Tim Panton said...

I agree. The only way it works is to take the kindle model, where the app publisher includes bandwidth in their subscription price to the end user. They then buy bulk bandwidth from the operator . I'm not sure how much the operators will like this :-)

randy said...

True, true! But isn't the bait and switch pricing of mobile operators the whole way they make money on subscribers? For example, we have PAYG account and the "Internet Max" plan is x per month. It forbids IMAP, POP, SMTP, "p2p" and "VoIP". (Is Skype VoIP for them?) Then the email and IM are further monthly options. They've changed these every few months and manage to catch a lot of subscribers when a change comes.