Saturday, July 2, 2011

Pricing A Gig For Data

How to price a gigabyte of data is a dilemma confronting India's mobile operators as they steadily build up their 3G subscriber bases.
They are not alone in this dilemma. Operators worldwide have been scratching their heads for the past decade in an attempt to decide the optimal pricing model for data.
The consensus seems to be that they still haven't got the pricing right. CEOs such as Vodafone's Vittorio Colao remark with frustration that heavy data usage congests networks with users often paying less than their monthly voice and SMS contracts.
To put things in perspective, let's look back a decade when many of us were looking to justify the very high prices of 3G licences in Europe and North America. We produced models showing 3G subscribers would pay around $10 to watch a football or cricket match on their tiny 3G handsets (which barely existed then). What a load of nonsense that proved to be.
But that period of frenzied financial modelling started a pricing debate which is still raging today.
A decade on, we now have a range of versatile and powerful devices from which we can enjoy data and video. In addition to the 3G mobile handset and laptop, we now have the broad range of tablets, led by the iPad, which are fuelling data growth.
Instead of watching streamed football matches, we are now watching video on demand via YouTube and accessing practically any Internet site in the world at a time of our choosing.
For the operator, the download of bandwidth intensive data can congest networks which, as users in the likes of Mumbai and Delhi know, are often clogged at peak times just with voice and SMS traffic.
The rollout of 3G infrastructure over the past year by India's leading operators has helped alleviate congestion somewhat but as the rate of 3G subscriber growth accelerates, networks will start to become congested once more.
Thus the dilemma facing operators price a gigabyte of data to attract subscribers and stimulate usage but not to the extent of clogging networks.
Today in India, the 3G players seem to be pricing 2GB of data per month at a price of around 750 rupees ($17). This rate seems reasonable in the UK for example my data tariff with Vodafone is £12.50 per month ($19).
In Hong Kong a very mature and highly competitive market it is now possible to obtain an unlimited data package for US$14 per month.
There are differences between the UK/Hong Kong and India 3G markets though. The UK market is mature, with around 36 million 3G subscribers as at April 2011. Hong Kong had 6 million subscribers at the same date. India's 3G market only started in early 2011.
Here is where the dilemma kicks in. The UK and Hong Kong operators should theoretically be aiming to cool off usage through edging up data tariffs whereas their Indian peers should be stimulating usage. Yet the tariff packages are broadly the same.
These prices are for domestic data usage. When travellers want to use their devices on overseas travel, data tariffs can be incredibly high similar to international voice charges 20 years ago.
As an example, I was surprised to have been charged £25.50 ($39) per day by Vodafone for a maximum of 500MB of data when on a recent business trip to South Africa. And this was over VodaCom Vodafone's 65 percent owned subsidiary.
So Vodafone are probably underpricing me in my home market but grossly overcharging me when I travel overseas.
India's operators are busy analysing relatively mature 3G markets internationally for pricing guidance. But as the above example shows there are still substantial inconsistencies in supposedly mature markets.
The message for potential 3G subscribers in India is get signed up now. Network operators want your business and tariff levels compare reasonably on an international basis.
Be careful though when using your device overseas for mobile data as your bill for daily usage will dwarf your domestic monthly bill, at least for now.
The writer is the global head, telecoms, media and technology at Standard Chartered. The views expressed are the author's own.source

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