Wireless Data Pricing
By Andrew M. Seybold
25 February 2002
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:
Monthly Service Charge
$29.95
$39.99
$59.99
$99.99
Megabytes Included
Up to 5
Up to 10
Up to 20
Up to 40
Additional Per-KB pricing
$0.0070
$0.0050
$0.0040
$0.0035
Price per MB
$5.99
$3.99
$2.99
$2.50
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:
Smartphone
$2.99 per month including 1 MB of data and then $10 per MB
PDA
$19.99 per month including 5 MB of data and then $5 per MB
Laptop
$39.99 per month including 10 MB of data and then $4 per MB
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:
Wireless Phone with Browser
$9.95 per month unlimited use
$ 0.10 per transaction for occasional users
Smartphones
$19.95 per month unlimited usage
$0.12 per transaction for occasional users
PDAs/BlackBerry-type devices
$39.95 per month unlimited usage
$0.15 per transaction for occasional users
Laptops
$49.95 per month unlimited usage*
$0.20 per transaction for occasional users
* Laptop users should be permitted unlimited usage unless they want to download a single file that
is larger than 2 MB. In this case, they should be charged a transaction fee over and above their
monthly fee.
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. |
