Commentary 4Mobility - Wireless Data Pricing - 25 February 2002

Andrew Seybold’s www.outlook4mobility.com

Wireless Data Pricing

Good News! Or at least I think it is. Over the past few weeks, both AT&T Wireless and Cingular Wireless quietly dropped their prices for wireless packet-data services and Verizon has stated that it will soon have additional pricing models to unveil. Is it possible that well get come realistic pricing for wireless data this year?

The Changes

Cingular Wireless reduced the price of the first megabyte (MB) of data used on its network from $50 to $6.99 and subsequent MBs from $70 to $30 per MB. The price for the first MB is reasonable now although the pricing for additional kilobytes (KB) of data ($0.03, which translates to $30 per MB) is still outrageous and I suspect this pricing model is designed to be this lopsided because Cingular isnt ready to handle lots of data users sending and receiving lots of data. The fine print explains that if you roam to another network youll be charged roaming charges, including applicable kilobyte and/or per-minute airtime charges and interactive message charges.

In order to help potential customers figure out real costs, Cingular has published a list of common tasks on its Web site and the approximate number of KB used for each. For example, in order to check the price of SBCs stock you will spend 6 KB. If you have not yet used your first MB of data this will count as toward it, but if you are in an overage situation you will spend $0.18 for this information. If you want to access and read travel directions it will cost you about 10 KB, or in an overage situation, $0.30.

AT&T Wireless also changed its pricing model from that first published and its pricing is beginning to look like pricing for voice---there are so many options that my head is spinning just trying to figure it all out. Heres what AT&T is saying today.

If you sign up for a Mobile Internet Plan plus voice you get 1 MB of data included in your monthly charge and overage is billed at $0.0075 per KB, which is, as is stated over and over again on the site: less than a penny! In fact, its 3/4 of a penny per KB. If you roam outside of your home coverage area you still get data at these rates if youre on the AT&T Wireless GPRS network. However, if you roam onto another network, you will be charged $0.05 per KB or $50 per MB! If youre a heavy data user, you can sign up for the following data plans:

At least with this plan the more you use the cheaper it is. But neither Cingular Wireless nor AT&T Wireless pricing is easy to figure out nor is it something that a corporate IT manager could budget with any degree of accuracy. Of course, you could stick with AT&Ts CDPD system, which right now provides better coverage than its GPRS system at data speeds that arent that much lower than GPRS speeds. CDPD service is free if you have a voice contract or its offered at two different flat-rate prices: $6.95 per month and $14.95 per month. It certainly will be interesting to see how AT&T describes the differences between GPRS and CDPD. As far as I can tell, the difference is that you can access only the Internet or AT&Ts back-end services using CDPD and with GPRS you can also access your own corporate information stores.

VoiceStream

So far, VoiceStream (T-Mobile) with its iStream service seems to be the leader in the pricing wars. I still think well end up with flat-rate pricing (see below) but until then iStream pricing takes into account the type of device thats being used. This is smart since a device with an alphanumeric keyboard enables customers to send and receive more data than when using a PDA with pen input or a smartphone with a numeric keyboard for data entry. IStreams pricing is as follows:

Roaming outside of the iStream network costs a flat $10 per MB no matter which device is being used.

The pricing for add-on MBs of data is too high for smartphone users and doesnt really make sense. I can generate a lot more data traffic with a notebook than I can with a smartphone and yet pay a whole lot less. Go figure.

Verizon is offering a single price plan since it is supporting only laptops and PDAs. It costs $30 per month and then a per-minute charge. As I mentioned in an earlier commentary, in my case this works out to $0.16 per minute in addition to the $30 that I must pay each and every month. Im anxious to see what other pricing models Verizon will develop over the next few months.

Pricing Models

As you can see, pricing for wireless data services is all over the map. Its obvious to me that several things are happening: First is the network operators apparent belief that data users will be willing to pay a premium for data services. Second, while the operators that are offering data services want data business, they dont want to have to worry about data becoming so successful that it will threaten the quality of their mainstay voice traffic. Third, theyre letting their bean counters have a say in their pricing models. These folks are want to price services to be able to realize a return on investment in the shortest possible time. Finally, I think the operators believe that Wall Street isnt as thrilled with the prospects of data services as a year or so ago and entering the data market with caution seems to be the watch word. The sad part is that if those waiting to make use of data---early adopters who drive all new markets---are scared off by the high prices, those they influence wont enter the market either.

My Pricing Model

Okay, what should the operators do about pricing? Here are a few of my thoughts, which arent based on an instant return on investment but rather on building a data market. Each type of device needs to be priced somewhat differently. The more data that can be sent and received over the network, the more the user should pay. Laptop users need an incentive to use wireless data services and many of these folks dont travel each and every month. I think that pricing by the KB or minute is the wrong approach. My view is that there should be unlimited flat-rate pricing as well as pricing for the occasional user. Heres what I came up with:

I would require each user to have a voice account as well as a data account in order to maximize my income per user. Smart operators would then begin offering additional content that customers may want to purchase on a per-transaction basis over and above their monthly rate.

I would also offer flexible corporate rates that take into account the total number of devices in use within a corporation, permitting the company to mix and match devices. I would also permit a single user to operate over my network using one or more devices. I would offer special pricing for such individuals to use their phones to be notified of data waiting and then to fire up their notebooks and retrieve it.

These are my thoughts on how to price data to encourage its use. I would like comments from those of you who want to make use of wireless data, and I would like comments from those within the wireless operator community about this type of pricing structure. I really believe that price points along these lines would go a long way toward growing the number of wireless data users on each and every network.

Any takers?  Email me at aseybold@outlook4mobility.com.

Copyright 2002 Outlook4Mobility