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Data pricing plans around the world

This article reviews of some of the innovative pricing strategies that are in use today, mostly for voice calls by wireless ISPs operating in different parts of the world. These pricing schemes can be broadly classified as fixed pricing, i.e., data plans which have predetermined charges based on the usage, and dynamic pricing, in which the fees vary dynamically in response to traffic conditions, etc.

1) Fixed Pricing: ISPs have traditionally used different pricing schemes that charge according to a predetermined rate, which we refer to as fixed pricing models. These pricing plans include variations of “metered”, flat rate, and cap then metered (i.e., “usage based”). Flat rate pricing plans have become increasingly unviable with the recent explosion of bandwidth demand. Bandwidth heavy applications, such as streaming, have become increasingly prevalent recently, with Netflix taking up more bandwidth than any other Internet service in the United States. A recent variation on this flat rate plan, introduced by T-Mobile in the United States, charges users a flat rate, but slows their data speeds above a certain cap. Other metered pricing, which charges in proportion to the usage, aims to achieve the same objective of reducing data usage, but using pricing as a lever instead of imposing an absolute cap. Another variation is a tiered pricing plan that AT&T and Verizon are following, in which users of different classes pay for different caps on bandwidth usage. Beginning in May 2011, AT&T has limited regular DSL users to 150 GB of data used per month, while U-verse Internet DSL users have been capped at 250 GB. Users will be charged $10 for every 50 GB beyond the caps. Verizon offers three different data plans for their wireless subscribers, charging either $10 or $30 for every GB above a cap of 1, 3 or 5 GB.

In a similar vein, Orange, an European provider, created a Panther plan for heavy users that costs £25/month for 10 GB of mobile data and voice, and a Dolphin plan for £15/month that offers an hour of unlimited surfing at a time of the users choosing. Many operators also implement a traditional two-period “time of usage” pricing in which users are charged differently during daytime and nighttime (or weekdays/weekends). Additionally, pre-paid and post-paid options are offered, each with a different price structure, penalties, and overage caps.

2) Dynamic Pricing: Much of the pricing innovation in recent years has occurred outside the United States. Network operators in highly competitive and lucrative markets, e.g. in India and Africa, have adopted innovative dynamic pricing for voice calls. Popular dynamic pricing schemes include congestion-dependent pricing and dynamic tariffing. The African operator MTN pioneered “dynamic tariffing,” a congestion-based pricing scheme in which the cost of a call is adjusted every hour in each network cell, depending on the level of usage. Using this pricing scheme, instead of a large peak demand around 8 am, MTN Uganda found that many of its customers were waiting to take advantage of cheaper call rates, thus creating an additional peak at 1 am. Uninor also launched a similar congestion and location dependent pricing scheme for voice calls in India. It offers discounts to its customers’ calls based on the network traffic condition in the location of the call’s initiation (i.e., location-based tariff). Tango Telecom for Airtel Africa and Telcordia also offer real-time charging and dynamic pricing solutions to mobile operators in India for voice calls based on factors, such as cell load, time of day, location, and traffic patterns.

We are witnessing a truly transformative period of growth in bandwidth demand and how ISPs around the world are preparing to move from the old days of flat rate pricing of data to more innovative schemes.  At the heart of it lies the search for a viable way for ISPs to manage congestion on their network while offering cost effective choices to their customers.

For a more complete survey of pricing and data plans, visit: http://newamerica.net/publications/policy/an_international_comparison_of_cell_phone_plans_and_prices

~Soumya

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