Mobile broadband tariffs on the market in early 2009 were generally constructed as a mixture of three charging elements: time, volume or speed. Time and volume were by far the most popular ways to measure mobile broadband use but there is evidence of operators, particularly in the Latin America region, using speed to differentiate between plans.

The three charging elements can be, and are, combined in a number of ways to build a mobile broadband pricing plan. The table below shows some example use cases of how these combined elements can be found in the market in 1H09.

Respondents to Informa Telecoms & Media's Mobile Pricing Industry Survey 2009 indicated that the most popular way to charge for mobile broadband was overwhelmingly by traffic volume. The preponderance of volume-based charging illustrates two things: firstly, that most mobile broadband plans are postpaid plans, and secondly, that postpaid plans tend to charge by volume.

Informa Telecoms & Media's mobile broadband pricing tracker shows that 87% of mobile broadband plans available in 1Q09 were available only with postpaid subscriptions. The high ratio of postpaid to prepaid mobile broadband plans is partially a reflection of the real-time charging and billing capabilities of those operators, partially of the legacy of mobile broadband as a premium service and partially of the availability of fixed broadband. Mobile broadband was initially marketed as an enterprise service, and so was sculpted as a postpaid product and has retained that image in the minds of many operators. Operators also combined the idea of mobile broadband as a premium service with an early decision to try to set it up as a direct competitor to fixed services, and priced it accordingly.

Why do postpaid plans tend to charge by volume? Postpaid plans are traditionally associated with volume bundles in the mobile voice world and so, first of all, it made sense to operators to build plans for postpaid mobile broadband using the same structure - a structure that their OSS/BSS systems are used to and that customers understand. The reason postpaid mobile broadband plans tend to bundle by traffic rather than by time is, again, because that is the way fixed broadband is measured. Also, broadband in general is measured in KB, MB or GB simply because it easier for operators to keep track of the load on their network that way. An hour of reading e-mails does not equal an hour of streaming video when it comes to the strain put on the network, hence operators needed to know how much data was being used at any one time rather than how long data connections were being used for.

The influence of fixed broadband models is again illustrated by responses to the survey. Of all respondents to the survey, 61% indicated that the principal method they use when determining mobile broadband pricing was to look to what competitors were offering in both fixed and mobile broadband. No respondents indicated that they used fixed competitor prices only but this is to be expected, except perhaps in markets where there are no other mobile operators offering mobile broadband and have only fixed operators with which to compete.

What is surprising, and perhaps telling for the future profitability of mobile broadband, is that only 16% of respondents took the cost of providing mobile broadband services as the principal benchmark when setting prices.

The relatively minor proportion of respondents to the survey that indicated that the cost of mobile broadband was their first concern when setting prices for mobile broadband may well be explained by the answers to another question, which sought to understand the objectives driving approaches to mobile broadband pricing. When asked to list their top three priorities when pricing mobile broadband, 67% of respondents indicated that their first priority was to increase the subscriber base, whereas just 5% indicated that return in network investment took precedence. Return on investment (ROI) attracted a greater proportion of responses at second and third priority level than it did as a first priority, but still ranked lower than other motivations: increasing market share, consideration of competitor pricing and encouraging traffic growth were all ranked higher than ROI as a second priority; and competitor pricing matched ROI as a third priority consideration.

It may be argued that concentrating on subscriber growth will bring with it a subsequent growth in revenue that will deliver ROI of its own accord. But subscriber growth brings extra traffic onto a network and revenue growth is only profitable if that extra traffic does not require extra investment to support it. Anecdotal evidence from operators, vendors and industry commentators alike points to the data traffic levels becoming a problem within a fairly short time frame, if they are not already. The majority of respondents to the survey - 53% - considered unlimited volume tariffs to already be an unsustainable approach to pricing mobile broadband due to the amount of data traffic they contribute to the network.

This piece of analysis is part of a wider report on Mobile Pricing and has been taken from Informa Telecoms & Media's Intelligence Centre. For more information on the Intelligence Centre visit: http://www.intelligencecentre.net).

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