RESEARCH STRATEGY REPORT UNLIMITED MOBILE DATA PLANS: EVALUATING IMPACT AND DEVELOPING BEST PRACTICE ARIS XYLOURIS and STEPHEN SALE Analysys Mason Limited 2017 analysysmason.com
About this report This report examines the different unlimited mobile data tariffs that are becoming increasingly available in various countries and assesses the best strategies for mobile network operators (MNOs) to use or defend against them. It is based on several sources: Analysys Mason s primary research, such as the consumer smartphone analytics project Analysys Mason s internal KPI trackers, including the European Telecoms Market Matrix (TMM) and the mobile handset data pricing tracker 2Q 2017 interviews with MNOs. KEY QUESTIONS ANSWERED IN THIS REPORT What effect do unlimited mobile tariffs have on data traffic, and should an MNO consider the increased traffic a hindrance? What policies could an MNO use to contain this? What are the different types of unlimited mobile data plans? Are they purely unlimited, speed-based rather than data-size-based offers? What are some common fair-usage policies (FUP) applied? Where does an operator go after unlimited data plans? What are the options for upselling and how should their mobile tariffs be structured? Can an MNO successfully compete against unlimited data plans without launching its own unlimited plans and if so how? GEOGR APH IC AL COVER AG E CASE STUDIES Worldwide Operators mentioned in this report include: AT&T Elisa Play Swisscom T-Mobile WHO SHOULD READ THIS REPORT MNO product and marketing teams that are looking at the potential of launching unlimited mobile data tariffs and want to examine the best practices for harnessing the potential of these tariffs. Strategy teams in MNOs assessing how to compete against unlimited mobile data plans. Strategy teams in various stakeholders across the industry that are exploring the effect of unlimited mobile data and longer-term pricing models. Analysys Mason Limited 2017 2
CONTENTS EXECUTIVE SUMMARY MOBILE MARKET DYNAMICS CONSIDERATIONS FOR INTEGRATED PLAYERS FUTURE PRICING TRENDS APPENDIX ABOUT THE AUTHORS AND ANALYSYS MASON Analysys Mason Limited 2017 3
Executive summary Operators need to plan for the end of the volume-based approach to mobile pricing. Integrated operators have more options available to them and may even benefit the most from a move to unlimited data. Figure 1: Short- and long-term approaches to mobile pricing in the context of moves towards unlimited data plans Unlimited mobile data plans are making their comeback, with an acceleration of activity in 2017. This comeback brings renewed fears about the ability of operators to monetise potential rapid increases in traffic growth while controlling costs. More fundamentally, operators are concerned about losing the ability to structure mobile pricing around data usage and the longer-term effect this has on their pricing/business models. Concerns about traffic explosions are largely unfounded, but the example of Taiwan shows what can happen when operators offer truly unlimited unstructured offers at low prices. For the most part, operators should view a move towards unlimited as an opportunity to explore alternative pricing structures that are better able to address customers perceptions of value. Operators can control data traffic associated with unlimited plans with pricing and policy levers. Integrated operators have additional options when competing with unlimited plans, notably through FMC bundling. Unlimited plans should prompt operators to review their longerterm pricing strategies. Analysys Mason Limited 2017 4
Unlimited mobile data plans are making a comeback in the 4G era and are threatening to disrupt existing pricing models The number of unlimited mobile data plans is increasing worldwide, raising concerns but also providing opportunities. Figure 2: Timeline of selected unlimited mobile data plan launches Unlimited mobile data plans are making their comeback in the 4G era, with an acceleration of activity in 2017. 1 These are often initiated by disruptive operators that want to use aggressive pricing to convey a consumer-friendly image, and/or by mobile-first operators that want to stand out in competition based increasingly on FMC bundling. Competitors are also responding, either by increasing data allowances or by launching unlimited plans of their own. MNOs have several concerns about unlimited mobile data plans. Offering users unconstrained cellular data access will lead to a rapid increase in traffic growth, with negative consequences for capacity provisioning. They are unsure how to respond to these offers and how unlimited plans may fit into their portfolios. They are concerned about losing the ability to structure mobile pricing around data usage and the longer-term effect this has on their pricing/business models. This report addresses these challenges. 1 See the appendix section of this report for a full picture of the status of unlimited plans worldwide. Analysys Mason Limited 2017 5
Unlimited data plans are an eventual consideration for any mobile operator and there are various ways to compete Operators need to plan for the end of the volume-based approach to mobile pricing. Integrated operators have more options available to them. Figure 3: Current approaches towards unlimited mobile data tariff pricing The rise of unlimited mobile data offers is reflective of a broader shift of customer value away from volume-based offers. The mobile experience is increasingly defined by access to popular apps and services; the megabyte is too crude a measure for this and is far from customer-friendly. This report identifies different strategies that can be used by mobile operators to structure unlimited offers, as well as highlighting the dangers of a completely unstructured approach to mobile data. Possible areas of consideration for MNOs launching an unlimited plan include speed tiers, fair usage policies (FUP), content and service bundling, and traffic management. We also identify a range of options that are exclusive to integrated operators that allow them to retain flexibility in pricing. We also suggest ways that unlimited mobile data can enhance a converged consumer offering. The third section of the report considers the longer-term impact of unlimited data on pricing models and discusses three approaches: a focus on network quality and customer experience; a focus on content and services; and a broader rebalancing of tariffs away from usage towards access. Analysys Mason Limited 2017 6
Recommendations 1 MNOs can use pricing and policy levers to control data traffic associated with unlimited plans. Unlimited data plans can lead to strong market share gains in terms of subscribers but also potentially high traffic growth. The structure and pricing of unlimited data plans define how unlimited these plans really are. Operators that are launching an unlimited plan should consider the following speed tiers, FUPs, content and service bundling, and traffic management. 2 Integrated operators have more options than mobile-centric operators when it comes to competing with unlimited plans and might ultimately stand to gain the most from these plans. Integrated operators can compete with their own unlimited data plans, using the advantage of bundled fixedmobile services and/or content to supplement these plans, and will face less exposure to traffic growth due to Wi- Fi offload. Overall, unlimited plans can fit well in an integrated operator s product portfolio both in terms of pricing and cost-control. 3 Unlimited plans should prompt MNOs to review their longer-term pricing strategies, and potentially their business models too. The volume-based pricing model looks increasingly redundant in mobile as value becomes associated with specific apps and services (such as Facebook and Netflix). The return of unlimited plans goes hand-in-hand with a focus on zero-rated promotions and segmentation around service usage. MNOs need to correctly identify the markers of value for consumers and evolve their pricing structures accordingly. Analysys Mason Limited 2017 7
CONTENTS EXECUTIVE SUMMARY MOBILE MARKET DYNAMICS CONSIDERATIONS FOR INTEGRATED PLAYERS FUTURE PRICING TRENDS APPENDIX ABOUT THE AUTHORS AND ANALYSYS MASON Analysys Mason Limited 2017 28
About the authors Aris Xylouris (Analyst, Research) is the lead analyst of the Fixed Broadband Services programme and a key contributor to Analysys Mason's primary research for the Consumer Services research practice. His areas of specialisation include fixed broadband strategy, the bundling and pricing of multi-play and convergence services, customer satisfaction and consumer-facing marketing strategy. He also specialises in statistics, surveys and the analysis of primary research, and manages Analysys Mason's Connected Consumer Survey and Consumer smartphone analytics series of research. Stephen Sale (Research Director) oversees Analysys Mason's consumer research and is also the lead analyst for the Future Comms research programme. His primary areas of specialisation include next-generation communication services, over-the-top (OTT) player strategies and mobile pricing. He also has extensive experience in analysing operator strategies and forecasting fixed and mobile service markets. Before joining Analysys Mason in 2004, Stephen worked in the industry on areas that include VoIP, next-generation service architecture and broadband access. He has a degree in economics and an interdisciplinary MRes from the University of London. Analysys Mason Limited 2017 29
Analysys Mason s consulting and research are uniquely positioned Analysys Mason s consulting services and research portfolio CONSULTING We deliver tangible benefits to clients across the telecoms industry: communications and digital service providers, vendors, financial and strategic investors, private equity and infrastructure funds, governments, regulators, broadcasters, and service and content providers. Our sector specialists understand the distinct local challenges facing clients, in addition to the wider effects of global forces. We are future-focused and help clients understand the challenges and opportunities that new technology brings. RESEARCH Our dedicated team of analysts track and forecast the different services accessed by consumers and enterprises. We offer detailed insight into the software, infrastructure and technology delivering those services. Clients benefit from regular and timely intelligence, and direct access to analysts. Analysys Mason Limited 2017 30
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PUBLISHED BY ANALYSYS MASON LIMITED IN DECEMBER 2017 Bush House North West Wing Aldwych London WC2B 4PJ UK Tel: +44 (0)20 7395 9000 Email: research@analysysmason.com www.analysysmason.com/research Registered in England No. 5177472 Analysys Mason Limited 2017. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason Limited independently of any client-specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only. Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark. Analysys Mason Limited maintains that all reasonable care and skill have been used in the compilation of this publication. However, Analysys Mason Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents or any third party. Analysys Mason Limited 2017