CEO & Industry Blogs

What do unlimited 4G data plans mean for the industry?

With two US operators announcing their new unlimited 4G data plans within a matter of hours of each other in the last few days, it would appear that the rumours of the death of the “all-you-can-eat” data plan have been exaggerated. But what are the reasons behind this apparent reversal and is it really the best way forward?

The reasons for the seeming come-back of the unlimited data plan for the operators are clear: differentiation and simplicity. Offering an unlimited data plan is an easy way of standing out from the competition. There is the general view that tiered data plans based on MB or GBs are more difficult for subscribers to understand, whereas “all-you-can-eat” plans are undoubtedly a more simple way of charging in comparison.

However, are these new unlimited 4G data plans really going to threaten mobile operator giants, AT&T and Verizon, with their tiered-data plans and is it the best way for mobile operators to monetize mobile data?

Recent history has shown that meeting the demand for mobile data on 3G is costly, especially with the ever- growing popularity of mobile video. There was a reason mobile operators originally steered away from unlimited data plans – it was simply unprofitable to supply mobile data and manage the network on this basis. So is repeating history with these 4G data plans a wise move?

The introduction of 4G means that currently there is plenty of bandwidth for mobile operators to fill and it costs operators a tenth of the amount per MB to provide than 3G. As a result the reintroduction of the unlimited data plan on 4G is a viable short-term option and will not immediately have a negative impact on operators’ abilities to meet data demands.

However, unlike the early days of 3G, LTE bandwidth will be quickly filled by subscribers as they use their unlimited plans with increasingly capable devices for connected services and stream endless videos and games. Before operators realize the average data consumption per user will sharply rise and the runway they thought they had in LTE will soon disappear along with the low cost of providing the unlimited data plans.

So how can mobile operators differentiate and simplify their data charging, without risking their profits and their ability to deal with growing data demands using a finite spectrum?

One model which could simplify the way mobile operators charge for mobile data, but also ensure subscribers pay fairly for the data that they consume, is through application-based mobile data plans. These provide an easy to understand, flexible solution for consumers – as they are charged per service rather than through MB quantity – while at the same time monetizing data usage for the operators.

Few mobile operators have yet explored application-based data charging, so this provides operators an immediate opportunity to differentiate themselves now. Beyond that, the future scope of differentiation of services through application-based charging holds great potential, with the ability to appeal to various subscriber segments – from the occasional email and Facebook checker to the YouTube and video addict.

The bottom line is that the “all-you-can-eat” 4G data plans have a limited position in the market. Instead mobile operators need to find a way of differentiating themselves from the competition with simple plans which can generate sufficient revenue – and as a few operators are beginning to discover, application-based charging could just be the answer.