Carriers should tread cautiously with family data plans

The introduction of the family data plan could be a big boon for operators. It’s a consumer-friendly service, which could potentially allow customers to save a lot of money while encouraging them to connect more devices to the mobile network. It could also help operators recover from the public relations blow of eliminating unlimited data plans in favor of caps and metering.

But family data could also backfire, turning into another public relations fiasco, if carriers aren’t careful. What I mean is that consumers tend to think of data fundamentally different than operators. They likely see family plans as a way to pool a large amount of megabytes and distribute them among their devices and family members. They’d probably be willing to pay a slight premium for the privilege, but they might not be willing to pay what operators would likely have to charge.

Let’s look at it from the two perspectives:
- As aconsumer, I want to consolidate my data usage into a single plan. I’m frustrated that I pay $15 a month on each of my wife’s and two children’s iPhones. Data charges total $60 a month plus overages, yet I only get a combined 800 MB of data each month. Yet there’s an attractive 2 GB at the next rung, which only costs $25 a month and $10 a gigabyte if I somehow exceed it. If I could subscribe my entire family to that single plan I could save an enormous amount of money. I’d even be willing to pay a premium fee for the service--$5, even $10 a month. At the end of the day I pay only $35 a month—a $25 savings—and my family gets more than twice the data we collectively had before.

- As an operator, I want to offer my customers more flexibility, I want to keep them from churning, and I want to encourage them to sign their kids up for data plans and purchase multiple connected devices. The family plan is the perfect solution. For a family of four with four iPhones, I would charge them for each device $10 a month for basic data connectivity and even toss in 100 MB a month for each device. Then I would allow them to subscribe to a bulk data plan of 2 GB for $20 a month. The final monthly bill is the same, $60, but those customers wind up with three times the amount of data. They can add an iPad or any other device to the same family plan for just another $10 a month and so forth.

No matter which way you look at it, the family saves money buying in bulk. I’m just not sure they’ll save the kinds of money most consumers are envisioning. The discrepancy lies in how consumers perceive the costs of data. They see—and have been trained by the carriers to see—data plans as pure traffic carriage fees: I pay for megabytes I consume and if I buy those megabytes in bulk I get a discount.

Meanwhile, operators are charging for both carriage and access—the cost of provisioning and maintaining a persistent connection to a device that moves constantly through a city and across the country. Unlike say a home broadband connection onto which a customer hooks multiple home devices, operators have maintain separate connections to each mobile device. They have to take in a constant stream of signaling traffic that lets the network know where the device is and what services are available to it. They have to support application signaling and traffic, requiring the network to constantly set up and tear down data calls, taking a big toll on network resources without actually consuming much data. They have to scale their home subscriber server (HSS) and home location registry (HLR) to track those individual devices and they need to evolve their OSS/BSS infrastructure to manage and bill for all of these shared plans (CP Contributor Alex Leslie wrote an excellent analysis of the impact of shared services on OSS/BSS.)

Those access and network fees are built into the data plans themselves and therefore lost on most consumers who think they’re just paying for a bucket of megabytes. Unless operators tease those access charges out of the overall data plan fee and then educate their customers on those charges, they may only make their customers angry when trying to sell them a family plan designed to save them money.

Ultimately family plans will be great for the consumers and for operators, driving the adoption of even more connected devices. But operators need to tread lightly among their customers, who are already upset that operators are taking away their precious unlimited plans. Operators have to make them understand they’re selling connections, not just capacity. Otherwise consumers may just view family plans as a money grab.