Operators are facing a double-edge sword over the increasing demand for video services, according to research.
While video acts as a major driver to increase the demand for mobile broadband services, it also consumes a large amount of network capacity, putting strain on the network.
New research across Europe from broadband data management company Tekelec and Strategy Analytics suggests that many consumers are unhappy with byte-based plans.
The research found that 50% of consumers would rather pay more on top of their data plan in return for unlimited mobile browsing but limited video services.
Meanwhile, 60% would accept restrictions on video usage in exchange for a £5 reduction to their monthly data plan.
Up to 50% would be happy to pay an extra £3 per month for live TV and video-on-demand services provided it did not count against their monthly data allowance.
Speaking to Mobile at Mobile World Congress, Randy Fuller, Tekelec’s director of strategic marketing, said: ‘In our view, following the consumer research we’ve just done, byte-based pricing structures are not popular with users and this causes problems. This is partly because people just don’t understand bytes and what they translate into in terms of usage.
‘Very few people realise that they are using between 200 and 500 times more bandwidth when they are watching video online compared with just viewing a web page – hence bill shock,’ he said.
Fuller observed that a year ago few consumers knew what their data limits were. Now 60% to 70% understand that there is a limit, but they are afraid of what happens if they exceed it. The researchers also noted that if there is a penalty, consumers would immediately curtail their usage to avoid exceeding their data limit.
The problem for operators is managing peak demand and knowing where they need to add extra capacity. Fuller said that the problem with a monthly data cap based on bytes is that until the user hits the cap, it doesn’t help the operator control usage. Users are, after all, fully entitled to consume as much data as they want, when they want, until they reach their cap. So carriers need to find ways to persuade consumers to use up less bandwidth, especially in peak times, he added.
Fuller said: ‘There is no one solution, but we think that a good proportion of consumers prefer a rate plan based on the services they can use, rather than the amount of bytes they are allowed.’
The Tekelec Mobile Video Consumer Survey highlighted three different approaches to controlling bandwidth growth:
• A discounted data tariff that limits or restricts video consumption, which would allow operators to market low cost video services to a large segment of consumers and keep network infrastructure costs at a minimum. Over 40% of subscribers indicated that they would be willing to sign up to a limited video service if their data plan was reduced by £3 a month.
• Premium options available to the operator include a service bundle that would offer more value to the subscriber, a lower cost to the operator with a higher ARPU. This plan comprises unlimited browsing, but limits the amount of video usage. 50% of consumers stated that they would be willing to pay an additional premium at £3 per month for this service.
• The third and final option is a monthly plan costing £3 for live streaming and VOD services in addition to basic mobile broadband. In this case the video usage would not count against the user’s data allowance. Over 40% of consumers stated that they would be willing to sign-up for this service for £3.
Fuller commented: ‘From an operator’s standpoint these options are good, as they lower costs and have higher ARPU, while the consumer stops worrying about incurring penalties or how may bytes they are using. It’s a win win.’
He added that more complex tiered data pricing plans are now emerging in Europe. ‘We’ve seen a wider range of tariffs emerging in Eastern European countries such as Poland and Hungary where consumers are being offered unlimited off peak usage, but controlled usage in peak times.
‘The trend in the USA, Eastern Europe, Portugal and Spain is that operators are going for prices based on services. But it is not being done in the UK because Three is a disruptive force with its flat unlimited data plan,’ said Fuller.