Verizon Wireless confirmed last week that it will dump its unlimited smart phone data plans. New smart phone customers will be able to choose from one of three options: $30 for 2GB, $50 for 5GB or $80 for 10GB, with an overage charge of $10 per GB of data. The mobile service provider will also charge $10 for 75MB per month for feature phone users. Verizon is the latest mobile service provider to switch from unlimited data pricing to a tiered price model for smart phones. AT&T started the trend last year and T-Mobile followed. Sprint Nextel is the only Tier 1 mobile service provider in the U.S. that has not made a move toward usage-based smart phone data price plans.
Yes, we all know why this would eventually happen. It’s a much-needed move due to the huge growth in traffic, which will only increase in the near future. I welcome this move. I happen to agree with Forbes blogger, Adam Thierer that most average consumers will do better under the new scenario. “With the average smart phone user using less than 500MB, they’ll easily qualify for the 2GB entry tier that most carriers offer for $20-$30/month…95 percent of current Verizon Wireless customers use less than 2GB a month.”
Let me be straight here. I’m quite happy that the era of ‘all-you-can-eat’ is over for two main reasons. First, I want to only pay for what I actually ‘eat’. Second, I’m also quite happy that, at last, everyone will begin to pay for what everyone is actually ‘eating’. In other words, once my current two-year contract expires next year, I’ll begin to pay for what I actually want and use. Nothing less, but also nothing more.
See, at the end of the day, Verizon, AT&T and T-Mobile are not doing anything different than any other utility company (yes, I’m aware I called them ‘utility’). In my building, we don’t subsidize what other residents consume in terms of water, electricity or gas by paying an unlimited high price for those services. We pay for what we use. So if my neighbor upstairs loves to take long bubble baths, good for her! But I’m not paying for her water. If my neighbor downstairs wants to have his air conditioner on all day long, so be it, but I’m not paying for it.
Why people think that communication services should fall under a special category just because we are so high-tech is beyond me. But I know that many of you reading this column will probably have a different view and, as always, I welcome your comments, but isn’t it time that we view the communications business like any other business?
This leads me to another point. An additional change soon to be announced in my opinion is something that has been cooking in Europe for a while. Some service providers are looking to charge content providers for delivering high-quality video content to end users, and others want to charge according to how much content is being pushed over their networks. Apparently, that’s a problem for many, and it’s linked to all this discussion going around on net neutrality.
I have expressed my opinion on the topic of net neutrality in an article published by TM Forum last year. I’m still sticking to what I said back then. It's not that companies like Verizon are the bad guys for trying to establish some sort of tiered access to the Internet, and those that defend net neutrality are the good guys that defend freedom of information and consumer rights. Those that defend net neutrality built their businesses on an open access to Internet model. Both sides are defending their own business interests. Nothing wrong with that, but let's set the record straight, it goes both ways. Everyone in the Internet business is there to make money.
Yes, we all have not so nice things to say about our mobile service or pay-TV provider at times (or most of the time), we all love to talk about the Netflix phenomenon, and some of you (not me) are in love with the Apples of the world. But let’s be fair, and here’s a reality very few are actually talking about. We have been living in an era of covered subsidies for way too long, where some have clearly benefited.
Mobile service providers have been subsidizing companies such as Apple for their smart phone business, or Google and Facebook for their content, some mobile consumers have been subsidizing other consumers for their network resource consumption (via the unlimited mania), pay-TV operators are subsidizing their OTT competitors via their contracts with the content providers and, we, the subscribers are subsidizing the content providers through our subscription fees, content that is then sold to the likes of Netflix at a lower price, which then the happy Netflix subscribers can consume on the backs of the pay-TV operators at a much lower price.
In other words, there’s an added pressure and cost being transferred to CSPs from the OTT business that would eventually need to be openly addressed. “With five out of every six people on the planet having a phone, subscriber growth is slowing – while competition is rising and new services are going ‘over the top,’ delivering cost, not revenue," said Keith Willetts, Chairman, TM Forum, in a blog he recently wrote for Forbes.
The other pressure is coming from a brand perspective. “Increasingly, the consumer is seeing Android or Apple as their telecom brand. Buy a Kindle and the network is bundled – you see Amazon, not AT&T,” said Willetts.
I also agree with Roman Friedrich, Michael Peterson and Alex Koster (and I have said the same myself in the past) that “customers are shifting their consumption patterns, and their loyalties, away from the traditional telecom operators and toward application and service providers such as Google, Apple and Facebook, as well as any number of smaller players”.
That’s true. Moreover, we’ve all been saying that communications service providers have been focusing on safeguarding their existing sources of revenue for too long, rather than working on generating new, innovative sources of revenue. We’ve all been calling for organizational changes and business models. And we’ve all been saying that communications services providers should understand their customers more and offer more tailored, personalized offerings.
All of it is true. Change for communications service providers is necessary and it’s urgent, and a lot of what’s going on has been part of the CSP business myopia and OTTs have only taken, wisely, business advantage of it.
But, isn’t it also time to look at the OTT business and start asking them, when are you going to stand on your own feet, without the benefits of the subsidies that both operators and their customers have been giving you, so that once and for all we can all stop playing the musical chairs game in the communications industry and begin to play a more fair game –for everybody?
The future is not about CSPs or OTTs; it's not a zero-sum game. It's about healthy coopetition, where both parties sit at the table to figure out how they coexist. So let’s put all the cards on the table and begin a new game.
(Source: Monica Zlotogorski, Vice Chair Latin American Advisory Board, and Editor Inside Latin America, TM Forum)
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