FT : Mobile Data Bonanza

Friday, March 12, 2010

The problem with playing host is you can spend your whole time topping up people’s glasses and worrying the dips will run out.  Mobile phone operators know the feeling: they are hosting a mobile internet boom brought on by iPhones and internet dongles for laptops.  Global mobile data traffic rose 160% last year, according to equipment maker Cisco, and is forecast to double on average each year through 2014.  But far from enjoying themselves, operators are fretting their networks will buckle under the strain; AT&T in the US and O2 in the UK have already suffered high-profile problems.

This leaves operators in a pickle.  Improving network infrastructure is expensive and, while operators do make money from smartphones (AT&T says an iPhone customer’s net present value is double that of an ordinary one), the link between data traffic and data revenues is weak.  Indeed, non-SMS data revenue growth has slowed in Europe from almost 40% in 2007 to about 25% last year, according to BarCap.  So, to better monetise data use and smooth out the traffic, operators are considering a pricing overhaul.  Instead of the standard flat monthly charge for everyone, hungry peer-to-peer file sharers or video users could be offered higher or guaranteed bandwidth for a bigger fee.  Cheap “happy hours” may pop up in slow periods.  It could all get quite complicated.  Vodafone has already launched a “gold” service for business customers in Spain and Dutch operator KPN will trial variable pricing later this year.  Customers might revolt, of course.  And regulators could kick up a stink too, particularly if operators start charging content providers such as Google’s YouTube for better delivery over their networks.  This tempting revenue stream flies in the face of “net neutrality” rules – in the works in the US – that would make internet providers treat all traffic equally.  Expect mobile operators wanting regulatory leniency to ham up those network congestion woes.  It’s their party and they’ll cry if they want to.

Reference : http://www.ft.com/cms/s/3/9aaefeb6-2cee-11df-8025-00144feabdc0.html

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