Bye-bye all-you-can-eat mobile data, but what’s next?

As service providers ruminate about getting more creative with mobile data plans and tiered pricing, they know two key factors will be at the core of differentiation and keeping customers happy: price and the perception of value in how services are bundled. There’s a delicate balancing act in knowing exactly how to find the right fees for price-sensitive customers while at the same time catering to the perception of “value” for more time- and quality-sensitive customers.

Connected Planet talked with Guy Hilton, product marketing manager for the vendor’s revenue management products, about the different types of pricing options that may emerge and how they’ll likely drive customer decisions, loyalty and churn.

CONNECTED PLANET: Why is now the time to think about this? It’s only recently that announcements about tiered pricing have started to emerge.

GUY HILTON: As North American operators think about LTE and 4G, and how to monetize data plans and get off the “unlimited highway,” customers will start comparing packages and making choices based on their perception of what is valuable: time, money, quality of service, etc. It’s better to allow these trends to guide your choices in how you build your infrastructure.

CONNECTED PLANET: What factors will make customers loyal or disloyal?

GUY HILTON: Customers either churn because they find a better price or what they perceive to be a better service bundle elsewhere. When you look at data sub-segments and micro-segments, you see a low-end that just wants the cheapest deal. For them, you either compete on price or choose not to compete at all if [those customers] aren’t profitable. The other end of the spectrum comprises customers that want personalized and customized packages that enable them to conduct the type of usage they want. You want to do what you can to retain high-value customers by offering “best rates,” which doesn’t necessarily mean the “lowest” rate but instead finding the rate that best reflects the innovation and interest by the consumer in that service.

CONNECTED PLANET: What are some of the options in terms of how pricing will evolve?

GUY HILTON: There will be many different flavors of the “general” options I detail, but I think most pricing and bundles will filter into these general areas:

· “special-area rates,” where prices correlate to where services are being consumed—in the home, on a college campus, at a business.

· “stepped rating,” which comes from voice but is applicable to data plans as well. During a session, the more you send, the less each packet costs past certain thresholds…the more you surf, the less you pay per megabyte.

· “cross-service rating,” where customers of certain bundles are charged differently. If data services are coupled with voice, then offer better rates on the data plan if the person talks more than 200 minutes per month.

· “time-of-day” rating,” where people are incentivized to use a data plan during off-peak hours, for which they are rewarded with better prices or free downloads. If operators understand in real time what the congestion is, they can send an SMS, for instance, saying “If you wait five hours to download that movie, we’ll give you 50% off.” Or they can go a step further and offer “dynamic pricing,” where offers are based in real time on utilization of the network; for example, a “turbo button” can be offered at times where there is low traffic on a certain cell. If an SMS (is sent that) offers HD for 99 cents for the extra bandwidth during that time, there is a chance for more revenue for the operator and a better experience for the customer.

· “hybrid models,” where you don’t have to be a postpaid subscriber on all services; you can choose to be postpaid on voice and prepaid on data where you get a monetary allowance and a chance to recharge once a threshold is reached.

· “best package,” where customers are offered the optimal rate plan based on their usage and consumption behaviors. If they have a range of targeted offerings for bundling data with other services, there is more chance for stickiness. For example, bundle regular Internet access with five hi-def movies from Netflix, or offer different pricing for HD packages, or P2P or QoS packages.

· “loyalty plans,” where you target loyalty promotions to what you know about subscriber segments (as opposed to “blanket promotions” that end up treating all users the same). There can be time-based incentives that reward users for the duration of time they remain with the carrier. For example, for someone completing a two-year contract, offer incrementally cheaper prices for the services as time goes on. Or offer rewards, like free data usage or premium data packages, or a free iPad, or something commensurate with the time the person has been a loyal customer.

· “referral rewards” are another incentive for friends to bring in friends. Data allowances can be increased or prices lowered as more friends are brought in via referrals.

CONNECTED PLANET: Of all these options, how viable are they really today?

GUY HILTON: Some options like special-area rates, stepped rating and cross-service rating can happen today, but only if a CSP has a truly flexible charging engine and a business-oriented product catalog in place.

For the hybrid model, there will be a need for a unified charging platform capable of rating any type of event. Then you can have postpaid voice on one event and data as prepaid on another.

As operators move into data monetization, they will need more policy capabilities and they will need to analyze more information from the network through advanced business intelligence.

I think most components are “there” in some capacity already in CSP environments, but few [operators] have actually managed to tie them all together. Today, there remain silos of elements that ultimately they’ll want to move into one structured process.

CONNECTED PLANET: Are we talking about massive “transformations” again?

GUY HILTON: No, tiered and creative pricing doesn’t have to trigger a five-year project and an enormous investment. The capabilities are there, so now there just has to be a bridging of gaps, so that marketing, for example, can access what the network people know; you don’t have to reinvent infrastructure, you just have to move it around a bit.

It’s just a matter of stepping back and reassessing your resources, finding the gaps and then bridging them. For example, charging may already have elements of policy within it, so once you have the logic you can extend it to enhance the understanding of the network; it should be easily adaptable.