PwC warns of costs of unlimited data plans

Telecom carriers should avoid unlimited mobile data plans as the proliferation of smartphones, tablets and other devices can congest networks and impact profit margins, research and consulting firm PricewaterhouseCoopers (PwC) says. “In the course of our research, we did find international operators (in the U.S. and Europe) who were in the course of changing their business models away from all-you-can-eat as the explosion of data consumption far exceeded original estimates,” Evan Kelly, PwC’s partner and Canadian leader of its communications practice, said via email. In a PwC report released late last year, titled “Be Careful What You Wish For...” the firm said that increasing data usage and the proliferation of smartphones could spell trouble for carriers offering all-you-can eat plans. “As users proliferate, so too will the costs of serving them, to the extent that the cost of mobile data outstrips the ability to charge at a rate that consumers are willing to pay,” the report said. PwC forecasted that 39 per cent of mobile Internet subscribers will connect through smartphones by 2014 compared to 13 per cent today. “We are again seeing operators returning with all-you-can-eat models, albeit that there are often significant differences in what is included in ‘all inclusive’ packages,” Kelly wrote. “PwC's 2010 North American wireless survey found that 60 per cent of responding companies said they had all-inclusive packages, but of those only 67 per cent included web surfing in the all-inclusive package, and only 33 per cent for email, video, and music respectively.” New wireless entrant Wind Mobile is one of the few Canadian service providers offering unlimited data plans. The carrier currently offers unlimited data access plus an Internet stick for $58 for two months. Company president Ken Campbell said in an interview that Wind’s “friendly usage” policy can curtail customer data access if necessary. Under the policy, if a user exceeds 5 GB per month, the carrier may manage the customer’s bandwidth. “Your speed may be slowed down,” Campbell said. “It’s usually peer-to-peer type usage that results in that.” Campbell said Wind isn’t concerned that high data usage could congest the network and hurt the company’s bottom line. “We have a green-field operation, an all-IP, brand-new network. We have way more capacity than the incumbents would have with a smaller customer base ... We built this network believing that data over time could be 50 per cent of usage,” he said. Bernard Lord, president and CEO of the Canadian Wireless Telecommunications Association (CWTA), said spectrum is “a finite resource.” During the former Conservative government’s consultation toward a national digital economy strategy, one of the CWTA’s main recommendations was that the government make more spectrum available over the next 10 years so that the industry can plan for its availability and raise the capital necessary to purchase it. PwC said in its report that carriers should focus on applications and content. “If they cannot find a way to monetise content and applications across their networks, will they follow the fate of many landline operators, simply becoming commoditised infrastructure providers that struggle to find ways of extracting additional value from their customers?” the report said. Lord said different carriers have different customer strategies, and not all carriers are going for the same customers. “You can see some are taking steps to be the best provider of the pipe, if you will, and others are adding media capacity and bundling other services along with the wireless service that they provide,” Lord said. PwC added in its report that it expects carriers to change their business practices. “Business models are going to have to become more collaborative ... We are likely to see the emergence of a creative coalition between operators and OEMs that will enable developers and content providers, such as games companies, to easily produce applications and content for all phones and markets.” That could mean carriers become more involved in the application development process to help developers format their software for multiple networks and platforms. “Operators may well therefore need to consider incorporating the costs of conversion into their revenue-sharing arrangements with developers,” the PwC report said. Last year, Bell Canada Enterprises Inc., Rogers Communications Inc. and Telus Corp. joined the OneAPI initiative, which encourages common application programming interfaces (APIs) for all carriers, allowing app developers to easily access any mobile operator’s network capabilities, such as payment functions, messaging systems and location features. Those involved say common programming interfaces would help reduce the costs of developing applications across multiple networks. Kelly said the OneAPI initiative was not part of PwC’s study, “but from an operator perspective, anything that can help alleviate the demands on the network of data traffic would probably be helpful, provided it is aligned with the smartphone handset manufacturers and their operating systems.” He added: “Additionally we need to consider that if the OneAPI initiative stimulates even more exciting and consumer-adored applications for consumption on smartphones and tablets, then the operators will also need to factor this additional demand into their data plans.” Carriers should also tailor their services to individual customers, the PwC report said. “Personalisation, location-based services, and timeliness are all long-touted differentiators in the mobile content world, but these are intrinsically factors on which the operators can capitalise better than most. By using the wealth of information that they already have about their customers, they can begin to offer more personalised and customised experiences, such as creating personal application bundles and monetizing user data through merchandising.” Kelly added that social media could also play an important role in carriers' relationships with customers. “Sites such as Facebook and YouTube are being increasingly accessed from mobile (some even more than on desktop machines). We are suggesting that the operators should look at social networks and see how they can leverage their share of this phenomenon,” he wrote. “If a client simply logs onto the Internet via their mobile browser and goes to an external social networking site, we feel the operators are potentially missing an opportunity to leverage the typically long standing relationships they have with their clients, and a trusted billing relationship.” Kelly added that he encourages operators to look at the seven questions posed at the end of the paper. “Amongst other things, operators need to balance demand and revenue to reflect many parameters (such as price, speed, and download limits) to take account of the exponential growth and popularity of smartphones and new tablet devices (amongst others), as well as looking to the future with challenges such as broadcast mobile TV.” news@thewirereport.ca

PwC warns of costs of unlimited data plans

News | April 18, 2011

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us