Reading, Writing & Data Pricing

Wireless-data use is poised to skyrocket. Are you educating consumers about price plans?

Consumers aren't dumb. But when it comes to data pricing, they might need a little more information, particularly when they've been raised on all-you-can-eat Internet access.

The time is now. The number of people using wireless data will skyrocket from 3% of the U.S. online population to 78% during the next 12 months, according to a survey by Cap Gemini America and wireless-portal provider Corechange. Of those who'll start using wireless data this year, 52% said they'll use it for e-mail, personal data and business information; 24% will use it for e-mail and personal data; and 13% will use it only for e-mail.

Despite that growth, don't forget one of the biggest factors for potential customers: price. That means developing straightforward price plans and educating consumers about how wireless data is priced and what you can offer them for their money.

Piecemeal or All You Can Eat?
"As the industry starts to fold into this misty, obscure cloud that we call WAP, one challenge is how we charge for it," said Tom Williams, Logica Mobile Networks vice president of sales, Americas region.

Williams said that packet- or transaction-based pricing would benefit providers more than flat rates.

"As a consumer, I pay only for what I use," he said. "As a provider, I know that I have the revenue flow in sync with my technology and network requirements."

Dan Youmans, AT&T Wireless spokesperson, said that because of the prevalence of wireline Internet's all-you-can-use rates, consumers want flat-rate pricing for wireless data, too.

"If you charge by the minute or by the packet, you're having to make a purchasing decision for every minute that you're using that service," he said. "Instead of having people worry, 'How many minutes have I used? How many charges have I racked up?' they can focus on business."

As wireless devices evolve and incorporate e-commerce, people will want simple, flat-rate pricing, Youmans said. AT&T Wireless recently re-introduced its PocketNet service in Los Angeles, and customers can bundle unlimited data service with a Digital One Rate or other calling plans for $14.99 a month.

"(Flat-rate, all-you-can-use) is more a convenience issue and not having to make that purchasing decision," Youmans said. "It's a matter of recreating the same experience (consumers) have using the Internet at home or at work."

BellSouth Wireless Data offers another perspective: A little bit of everything will satisfy everyone. Janet Boudris, senior vice president of strategic marketing, said that pricing is a function of the service a customer selects. For its interactive-messaging service, BellSouth Wireless Data offers six price plans: five priced by the character and one all-you-can-use option.

"The challenge is to provide a range of options to customers who don't (yet) use the service," Boudris said. "People want different pricing options as a function of how they're going to use the service."

To determine rates, BellSouth Wireless Data uses focus groups and surveys, talks to customers and its sales force, and studies customers' traffic profiles.

"It became very clear to us that one size does not fit all," Boudris said. "What we don't want to do is eliminate options for people when they really fit into a lot of categories."

Network-Friendly Pricing
Logica's Williams said that providers can't afford to charge flat rates for data because technology and capacity requirements must match usage. With flat rates, he asked, how can providers protect themselves from all-you-can-eat's demand on the network?

His advice: clearly differentiate your markets, continue basic voice services on the more-for-less plans and segment your advanced data offerings so that high-network-demand services are priced by the transaction.

AT&T Wireless' network uses CDPD rather than circuit-switched, and Youmans said that many providers use per-minute charges for network and economic reasons.

"It's difficult financially to offer flat-rate pricing when you're using a circuit-switched network," he said. "That's a major disadvantage because a customer is tying up an entire circuit every time they make a call. (Providers) would be losing money when that circuit could be used for voice calls in which you still are charging people by the minute."

Boudris countered that network capacity isn't an issue, given the form factors: If you're carrying a wireless handheld, the screen size would determine the kind of information you access.

"You would not want to read a 150-page document on these screens," she said.

Fear of the Unknown
Educating consumers about data pricing can be a challenge because data and data pricing are relatively new concepts for most. Those used to all-you-can-eat Internet access might not understand why you bill by the packet or character. They also might not understand why unlimited wireless-data service costs $99.99 while unlimited wireline Internet service costs $20.

Boudris said that educated consumers will get good deals and understand the differences.

"Only in the past 18 months have we moved over to white-collar professionals for corporate e-mail, intranet access and sales-force automation," Boudris said. "In the past two years, we've finally got some offerings in the consumer marketplace. When you bring to market real choices and real services and not concepts, people begin to be educated and begin to make choices."

Flat-rate pricing plans make consumer choices easy, said AT&T Wireless' Youmans. "That's the beauty of flat-rate pricing; it's simple. Simplicity and the raw economics of it make it very attractive to customers, and the (simpler) the pricing method, the easier it is to communicate."

Logica's Williams gives consumers more credit.

"It won't be that difficult to explain to the average consumer that every time you access your stock with your phone, it's going to cost you x cents," he said. "What we need to do is allow that consumer better access to monitor what their costs are."

For instance, with WAP, it's easy to put an option on the phone that allows consumers to check their balances. Consumers don't fear big bills so much as being surprised by big bills. Most don't mind paying for a service if they're using it, said Williams, adding that providers also can apply prepaid status to data.

Boudris said that providers' different data-pricing models will require them to step up to sophisticated billing and provisioning.

"As you move into the wireless-data world, you want various kinds of billing for various types of applications, both bundling and de-bundling," she said. "This customer to me may be $9.95, but Fidelity may be paying for some usage and the enterprise may be paying for some usage. So the real value of the customer may be $80."

The real value for consumers, Boudris said, isn't necessarily the price plan but how the service works across multiple providers.

"How much would I spend with different service providers if I send 10 messages a day and receive 20?" she said. "That would help educate customers quickly."

Consumers aren't dumb, but most providers prefer ones who understand what data can do for them and how much it's worth to them. Only then will they be willing to pay for it.