The Mobile Broadband Data Pricing Conundrum

from the encouraging-data-usage dept

While this article paints a somewhat simplified view of the state of the Japanese mobile phone service market, it is accurate in stating that US mobile operators should be watching carefully how things are changing in Japan. Last year, as it was struggling to get subscribers to its 3G data service, NTT DoCoMo moved to offer flat-rate data offerings, which helped the service finally take off. However, competitive pressures have driven the price of service down -- to the point that it's cheaper than voice, encouraging users to use more data than voice to communicate with people. This has cut into revenues for the Japanese mobile operators, and DoCoMo has even said they wished they never introduced flat-rate pricing, even though it's questionable if the company would have been able to keep signing up as many new subscribers without it. The situation in Japan is only going to get trickier, now that up to three new entrants are expected in the market -- with one being Softbank, who shook up the broadband market in Japan with its very cheap YahooBB service. So, how will this impact the US? The mobile operators here have a standard pricing scheme they like to use -- with early offerings costing a prohibitive $80/month -- but that price drops as other services get more competitive. With more offerings about to hit the market, it's likely that Verizon, Sprint and Cingular will all be forced to drop their prices on wireless data somewhat -- and the situation may eventually mimic the Japanese one. Of course, the flip side of this, is that operators have a fine balancing act that they need to figure out. They want to encourage more usage, with cheaper prices, but they also don't want to overload capacity constrained wireless networks with too much usage. So, the operators are likely to try to lower prices slowly as they make sure their networks really can handle the usage. Unfortunately, once they offer flat-rate pricing, it's tough to back down -- and the amazing thing about high speed mobile data networks, is that people will come up with applications and services for them that no one ever expected. There's a good chance those apps will be bandwidth intensive and that could be a real problem for mobile operators who just can't handle the traffic, but promised it with their flat-rate "unlimited" data plans.