Operators are poised to move away from flat rate mobile tariffs in line with predictions that application downloads will become a major revenue source by 2013, according to a survey commissioned by international law firm Freshfields Bruckhaus Deringer.
Almost half of international mobile executives (48%) surveyed predicted that operators will focus on developing new pricing models over the next three years, with 55% agreeing that tiered pricing is the way forward in mature markets.
Meanwhile, 47% of those surveyed argued flat rate ‘all-you-can-eat’ data tariff plans are damaging their ability to increase revenue.
The cost of funding next-generation networks and ensuring adequate backbone capacity for future traffic loads were also identified as critical challenges. More than 60% believed pricing mechanisms will solve or mitigate the strain on the networks caused by data hungry devices such as internet-connected smartphones.
Meanwhile, in mature markets, 37% anticipated application downloads will be a main revenue source in three years’ time, exceeding voice (36%) and video downloads (32%).
Natasha Good, co-head of Freshfields’ mobile group, said: ‘Mobile providers are remodelling their pricing strategies to sweat their assets whilst tentatively looking at new product offerings.
'The telecoms community is tackling a twin challenge: maximising revenue from existing services to protect profit margins and managing the increasing strain on the networks. Usage based pricing is a logical solution. It will ease current capacity issues by capping demand, contain capital expenditure requirements and potentially increase revenue.
‘Pricing models tied to data consumption may be welcomed by regulators, who are increasingly scrutinising how internet traffic is managed. By squeezing demand for bandwidth through pricing, mobile operators are less likely to opt for traffic management tools such as choking the pipeline for users, perceived by some regulators to violate so-called net neutrality objectives.’
Meanwhile, almost a third (31%) agreed that network sharing with other operators is the single most effective way for mobile operators to achieve cost efficiencies.
Good added: ‘Sharing masts and even the radio access network spreads some of the biggest cost centres across two or more operators. However, sharing mobile operators must be careful not to limit the competitive independence of one another.
'Regulators will take a dim view of network sharing that goes so far as to impinge on real freedom to compete, especially at a service level.’