While the headlines are filled with the data sharing aspects of the new pricing structure announced by Verizon Wireless yesterday, I think the key change is more subtle. Verizon’s new plan finally finishes admitting that basing its business model on overcharging for voice and messaging bits while complaining about how expensive it is to build out bigger data pipes was distorting the market to its own detriment.
With unlimited voice and messaging services on all plans, Verizon takes some of the wind out of OTT sales by placing the value of its offering more on the delivery of bits rather than the applications processing them. Note that Verizon gets paid the same under its share everything plan whether you use their voice/messaging or not.
Carriers have for too long tried to make wireless data cheap while treating voice and messaging like giant, entitled cash cows. But in reality, data is not cheap and pretending that it was has allowed OTT offerings to undermine both voice and messaging with cheaper (or free) IP-based alternatives. A dumb pipe is only a bad thing when it’s sold too cheaply. And allowing its customers to worry about a single aggregate usage takes some of the anxiety out of today’s mega-multi-device family data consumption.
A good sized chunk of the wireless economic conundrum faced by carriers has derived from the basic fact that the delivery of big data was underpriced, while carriers sought to defend their overall revenue by preventing users from using that cheap data to replicate other services for less. Instead of using the last mile gatekeeper role to tell people what they can or cannot do, just shift things around to charge more for the big, dumb, valuable pipe and less for the applications.
If it’s priced correctly, who cares how it’s used? Bandwidth hogs become what they should have been in the first place: one’s best customers. Of course, it remains to be seen if consumers will think it is priced correctly, and whether the competition follows suit. In the long run though, as long as there is enough competition then the winners of the future will be the ones who can provide big wireless data pipes for less money and not on whose app lets which customers use too much data to make it worthwhile.
I just can’t figure out what took them so long to ditch the old way. The next shoe to drop will surely be the 1-800-style structure, with content providers effectively paying consumers’ wireless data bill in order to be excluded from caps. Put it all together and you see the carriers’ plans coming together. Now we’ll just have to see what the other side thinks of all this.
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Categories: Internet Traffic · Wireless
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I definitely agree about the bundling approach as the best way to “hide” a rebalancing of voice & data pricing. However, the question remains as to whether users’ perception of value from basic telephony & SMS remains the same. I can see the pricing of bundles continue to fall.
An additional complexity is how all that gets reported in the operators’ financial accounts as well, and whether investors expect overall profitability to continue at historic levels.
I completely disagree about the 1-800 concept. Sounds sort-of OK in broad principle, but it won’t work practically. I’m currently writing a report on 10 Reasons Why Tollfree Data is a Bad Idea
Dean Bubley
Disruptive Analysis
@disruptivedean
I look forward to the article!
FWIW, I think the toll free data concept needs fleshing out before judging. Surely it could be done very badly and be detrimental, but I’m not sure it’s right to dismiss it outright at this point.
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aka Clearwire