Unlimited offers – New plan or new business model?

Much has been written about $99 unlimited voice plans recently announced by Verizon, AT&T and T-Mobile. The hype is deafening; these plans are “game-changing,” a “flat rate revolution,” a “fundamental shift,” a “new era in wireless,” “an unlimited industry.” You get the picture.

Late last week, Sprint chimed in with its own unlimited plan, adding data, messaging, e-mail, web access, TV, music, navigation, push-to-talk – everything but the kitchen sink – for… you guessed it, $99. They missed their chance to recapture lagging market share, and instead stayed with the pack. They should have gone where the customers are.

The fact remains that 99% of mobile customers don’t need $99 unlimited voice or kitchen-sink plans. The Sprint $99 plan offers more -- more features than most users need or will ever use. The fact is that nearly half of wireless subscribers are clustered at the other end of the usage scale, many on $39.95 “bucket plans” which, after taxes and fees, approach $50. Nor do most users surf the web on their mobile. Sprint CEO Dan Hesse confirmed that the number of people spending $99 today is in the “low to mid single-digit percentage” range of subscribers.

All of these $99 plans are really just the latest gimmick to sell users more than they need, while averaging up carrier ARPUs in the process. This is less a revolution than a ploy to bring people into the stores, which apparently is working.

PT Barnum was right!

The fundamental shift now underway is not from portion-controlled buckets to expensive all-you-can-eat plans, but rather from the Telecom Service Model to the Internet Service Model. Under the old Telecom Service Model, a carrier, handset, plan and features are selected and a long-term contract signed. The Internet Service Model replacing it includes always-on high speed data, flat-rate (non-usage sensitive) pricing, voice, data and a world of applications all running on an open platform, and a range of devices available. If this sounds like Open Access, you are right; the Internet Service Model is the platform, and flat rate pricing a big first step.

If the price is right, flat rate plans can make a huge difference. This can already be seen in mobile data. Start with a well-priced unlimited data plan, add a great device for web browsing, like the iPhone, and usage skyrockets. According to AT&T, 95% of iPhone owners surf the mobile web, more than six times the roughly 15% of all mobile users who browse. Google says iPhone users make a staggering 50 times more searches than users of other mobile devices. T-Mobile in Germany said that iPhone is driving up mobile data usage to levels as much as 30 times higher than other handsets. And in the UK, O2 observed an “unheard-of level of mobile Internet usage” on the iPhone bundled with an unlimited data plan. Blimey!

Until now, only one “killer rate plan” really changed the game for mobile – AT&T’s Digital One Plan, introduced 10 years ago. So successful that AT&T had trouble keeping up with demand, it turned out to be a killer plan in a more profound way; it ultimately killed the domestic long distance industry. By eliminating roaming and long distance charges, Digital One rendered location and distance irrelevant.

Unlimited voice plans can also change the game, eliminating usage from the equation much like Digital One eliminated location and distance. But they only change the game -- and move us closer to the Internet Service Mobile -- if The Price Is Right. Mobile customers are clustered at the other end of the scale, and that’s where unlimited plan prices must go – where the customers are.

Whitey Bluestein, a 25-year telecom veteran, is a strategic advisor and dealmaker who helps young companies develop strategies and win key deals with important companies. Bluestein currently works with clients in telecoms, entertainment, clean tech, and mobile apps, including MSPs, virtual reality, LBS, social networking, games and a range of voice and data applications. More info available at www.whiteybluestein.com or contact him at whitey@whiteybluestein.com.