No Jitter is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Keeping Ahead of the Wireless Pricing Curve

The evolution of wireless services is proceeding as fast, if not faster, than any other area of IT services, and it is matched (if not exceeded) by the head-snapping speed at which the prices available to Enterprise buyers are changing.

New kinds of rate plans, with the focus moving from voice to data, coupled with new complications such as "BYOD", make keeping on top of the latest trends in enterprise wireless pricing as complex as ever. Here is a look at pricing trends in the coming year.

Shared Data Plans will become the norm in 2013
While Sprint and T-Mobile continue to offer enterprises unlimited data plans for smartphones, AT&T and Verizon Wireless have continued their crusade against unlimited data allowances. In 2012 Verizon Wireless effectively declared war on unlimited data plans, and during negotiations is aggressively seeking to remove smartphone plans with unlimited data from enterprise customer contracts.

Giving up unlimited data plans can feel like a backwards step, but savvy customers have realized that as of 2013, average business user smartphone data volumes are relatively moderate. For the many large enterprises for which TC2 has performed detailed wireless usage analyses, almost all have an average usage for BlackBerry users of less than 100MB per month, and even for more advanced iOS and Android devices, the average usage is only a few hundred MB per month.

Moving from unlimited data plans to plans that provide a few gigabytes of data will not (at least in the short term) suddenly lead to large bills due to many users exceeding their data usage allowance. Knowing this, smart customers are trading unlimited plans for other pricing concessions, including lower-priced smartphone plans. In the longer term, as data usage continues to rise (see discussion of 4G/LTE usage below), usage levels will need to be more closely monitored against usage allowances.

Another option that customers are examining as part of giving up unlimited data plans is the availability of "shared" (or "pooled") smartphone plans, where data allowances are shared across all users. The key benefit of such plans is that power users who exceed their individual data usage allowance have access to other users' un-used allowances instead of incurring data overage charges.

Given the fact that enterprise users' smartphone data usage is not (at least currently) particularly high, why are wireless carriers so anxious to eliminate unlimited plans? Perhaps the withdrawal of unlimited plans looks good on Wall Street. In the alternative, the carriers expect average data usage to increase dramatically as users migrate to smartphones with devices that can operate on 4G/LTE.

Network studies already show that users with the latest 4G/LTE-capable smartphones exhibit substantially higher average data usage than users with older 3G devices. Such trends tend to be exacerbated by the fact that the users who seek out the latest devices and who want 4G/LTE speeds are typically already big data users. TC2's data for 4G/LTE air cards (including mobile WiFi or MiFi devices, and USB modems) also demonstrates significantly higher average usage than by 3G users. A parallel pattern of users increasingly using MiFi and smartphone tethering capabilities, instead of separate air card and MiFi devices, is also driving smartphone data usage upwards.

Shared data plans for air cards have already made significant inroads into enterprise wireless contracts, and shared data plans for tablets are also becoming more common. In competitive procurements, the pricing for such shared data plans is very close, if not equal, to traditional un-shared data plans.

Shared data plans for air cards and tablets offer some key benefits over traditional un-shared single-user plans:

* Avoiding data overage charges--By putting all users on shared plans, the overage charges incurred by certain users who from time to time exceed their individual data allowance is avoided, as long as the overall shared data pool is big enough.

* The potential to use plans with lower allowances--Users have typically used 5GB individual air card plans, but average usage is often substantially lower than 5GB. With shared data plans, users can all be given a data plan sized at the average usage level, rather than at a higher level required to minimize the risk of overage charges for each individual user. This provides far greater potential for using less expensive plans that provide less than 5GB shared data.

Next page: Multiple-device plans

A growing trend in the consumer world is plans designed to support multiple devices for an individual or family, which provide unlimited voice and messaging usage across all devices and a data allowance that is shared across all of the individual's or family's devices, e.g., see AT&T's Mobile Share plans and Verizon Wireless' Share Everything Plans. Verizon Wireless is also launching similar plans for business users.

At the time of this writing, the details of these new Verizon Wireless business plans (particularly those targeted for enterprises rather than small businesses) have yet to be released, so the degree to which they differ from the data sharing plans that carriers are already offering is unclear. Traditionally, wireless plans have been linked to devices (notwithstanding pooling of voice and/or data usage; you buy individual service plans for each of your devices, with individual 12- or 24-month minimum service terms). So transitioning to a model that is more focused on users would be a big change. But it is also a change that has strong parallels with Unified Communications, where licensing and pricing models are already aligning with users, rather than devices, regardless of how many devices a user has. This will be fascinating to watch in 2013.

Will Equipment Subsidies change?
One longstanding "feature" of wireless services that presents a major challenge to de-coupling rate plans from devices are the large equipment subsidies that service providers give to offset the high cost of wireless devices, which lead the providers to require individual-line term commitments and early termination fees. The increased popularity of expensive smartphones has taken this aspect of wireless pricing to new extremes, despite the carriers' claim that they would prefer to do away with equipment subsidies.

T-Mobile is currently making a unique move in the consumer market by offering plans that do not provide equipment subsidies or require minimum contract periods. The other suppliers are watching to see how it turns out, and we expect changes in this area to be evolutionary, not revolutionary.

There is already one area, however, where suppliers are not offering equipment subsidies--tablets, particularly iPads. Although tablets that have built-in cellular data functionality cost more than WiFi-only models, users do not appear to expect tablet devices to be subsidized, despite the subsidized pricing for MiFi equipment, USB modems and of course smartphones. Yet in a classic case of a telecommunications carrier wanting to "have its cake and eat it too," individual-line terms and early termination fees still often apply to tablet plans.

Voice and Messaging are now subservient to Data
One of the interesting attributes of the AT&T Mobile Share plans and Verizon Wireless Share Everything Plans referred to above is that they all provide unlimited voice and messaging allowances. The price only varies with how much data you need, and across how many devices.

This reflects the growing dominance of data in wireless pricing and in what is important to carriers: The days when carriers were concerned that VoIP applications like Skype would cannibalize their voice revenues seem long gone. Indeed, Unified Communications solutions such as Microsoft Lync are making VoIP via cellular data part of an enterprise's core IT strategy, driving data and smartphone usage up and cellular voice minutes down.

While voice minutes are not yet anywhere close to being thrown in for free, messaging usage (SMS and MMS) is rapidly trending in that direction in competitive procurements, with customers extracting significant messaging allowances at no additional cost. This also helps to tackle a major rate plan optimization challenge. Whereas most sophisticated buyers of wireless services have become adept at optimizing voice rate plans (i.e., making sure that individual users are placed on the most cost effective voice plan for their particular usage profile), we routinely find that messaging usage and plans are far less optimized, and significant messaging overage costs are being incurred. However, when an enterprise can negotiate a significant message allowance for all of its users, messaging optimization becomes a non-issue for all but the most text-addicted.

One pricing concept that we do not expect to see is the sharing of messaging allowances across multiple pools of users--as the price point for messaging continues to erode, pooling messaging allowances becomes more trouble than it's worth.

The impact of BYOD

The impact of BYOD
The final trend that cannot be ignored in 2013 is the rise of Bring Your Own Device, or BYOD. Whether or not BYOD drives cost savings is hotly debated, but one non-debatable effect of the phenomenon is a blurring of the line between corporate-liable lines of service (i.e. lines the company orders and contracts for) and personal-liable lines (for which an individual signs a personal contract, regardless of whether or not they recover the cost from their company).

There have always been users who expense their personal-liable lines, but BYOD appears to be making this more acceptable, rather than an acknowledged bad practice that should be avoided. One reason why allowing users to expense personal liable lines is bad practice is that the rate plans available to personal liable users are substantially more expensive than the rate plans available to corporate liable users. Hence the general rule that if the company is ultimately paying the bill, a line should be corporate-liable, not personal-liable.

With the growth of interest in BYOD, some carriers are starting to offer a middle ground, with rate plans that are offered at price points normally only available to corporate liable users, now being offered to personal liable users as long as such users are part of the enterprise's BYOD program (e.g. authorized to access enterprise applications via the wireless device in question). There are other issues associated with personal-liable plans versus corporate-liable plans (for example, data or voice sharing/pooling does not work with personal-liable plans), but the many different manifestations of BYOD are not going away, and pricing constructs specifically designed for BYOD present another area where 2013 is likely to bring significant further developments.

Final Thoughts
Staying at the forefront of wireless pricing trends requires revisiting your wireless contracts and pricing frequently, and keeping contracts as short and flexible as possible. It is not necessary to wait until a contract is close to expiring to negotiate new pricing and plans. Proactive, informed negotiation, coupled with regular competitive procurements, is the best way to keep ahead of the wireless pricing curve.

Ben Fox is a Managing Director at TechCaliber Consulting, LLC, a global technology and telecom consultancy that advises the world's largest companies on strategies for reducing their costs for telecom and technology products and services. Ben can be reached at [email protected]