New Mobile Services = Network Usage = Pricing Problems

The Wall St Journal had an interesting article about the downside of AT&T’s iPhone’s success: increased network usage.

While I won’t go into depth about  AT&T per se, this echoes comment from clients examining many bandwidth-intensive, new services.   Carriers are struggling to balance three imperatives of service

1)      Marketing imperatives: the service must be cool enough to attract and hold customers

2)      Network Engineering:  the network must be capable of delivering the service reliably

3)      Finance: the service must generate sufficient money to pay for the network

Looking from the sidelines, the network engineers remind me of the guy who buys a shiny new car, parks it in the garage, and washes it every day.  One day, his wife asks him if she can drive it to the store.  The guy looks at her incredulously, “Drive? This car is not for driving.  You might break it.”

What did network engineers think would happen when they build a fast network.  Marketing will find exciting ways to fill it up.  But this is unfair.  The flip side of this view is that Finance and Marketing have not worked effectively to put together a business model that pays for the use of the network.

alcatel-bandwidth-usage2As the article points out, if you look at the data intensity of various services, some of the newer services – e.g. web browsing, take much greater bandwidth.  One way to look at this is on a $/bandwidth basis (which is probably not the right way).  Email  service is pretty darn profitable as far as bandwidth is concerned.  It generates ~$10/month, but absorbs only 4% of total bandwidth.   And it is typically offered with an unlimited data plan.  For example, AT&T offers  Blackberry personal plan with unlimited data for $35/month. 

Wait.  Did someone say unlimited data?  Email was bundled with it back when folks were not using the network for much beyond email/SMS.    So they let the cat out of the bag.  Now they have to get the cat back in the bag before streaming video starts sucking up the network bandwidth, but generating limited incremental revenue.

However, there are many different ways carrier can and should be looking at charging.  In future posts, we will at ways different industries deal with the pricing and capacity.

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