The Consumer Matters is the blog of Leslie Grandy, aka Gearhead Gal.  My passion is creating and delivering compelling products that delight customers through simple and elegant user experience design.

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Entries in 3G (1)

Thursday
Jan212010

Minutes, Messages and Megabytes - Making Sense of Wireless Pricing

First published on Technorati

On a recent visit to the concessions counter at the local Cineplex, my husband and I debated about the size of the popcorn tub to buy. He often argues that the best value is in buying the biggest bucket, while I maintain that it’s not a value because we consistently leave half of the bucket uneaten, since the portion size could feed a small village for a month. Inevitably when we have this debate, other couples join in and take sides, but in the end it is hard to argue that the small bag is a “good buy.”

Wireless carriers appear to have learned a lot about marketing to consumers from movie theater concessionaires. And the recent round of announcements about new unlimited wireless plan pricing from AT&T and Verizon continues the tradition. Intuitively, consumers feel good when the per-unit price of an item seems smallest. Unlimited voice plans give you the smallest per unit charge imaginable, since your phone bill is capped but your usage is not. Wasted minutes – known as “breakage” - are like uneaten popcorn in the bucket under your seat. It’s still the better deal per unit, even if you don’t take the benefit from the extra units. But some consumers wonder, is leaving a monthly pile of unused minutes and messages really a better deal?

There really is no risk that unlimited plans will drive voice consumption higher, because the truth is that voice usage is flattening and voice revenue has been declining. While carriers are hoping to spur the utilization of their voice networks and extract more revenue from their existing network assets, a minute of voice is no longer worth what it used to be to the average consumer.

Text messaging has followed the same bundled pricing strategy, although unlike voice, messaging has grown substantially in the past few years. To protect their margins, US carriers control the messaging costs by leveraging existing voice networks to control message size and offer no specific delivery time frame for messages.

While carriers appear to be giving away unbounded aciPhone mobile webcess to their mature voice networks with unlimited minute plans, they are much more miserly about giving away data. The accelerated adoption of web-enabled phones, app stores, and downloadable media has shown carriers where the demand is heading. Within 3 years, analysts believe the number of Internet-compatible mobile phones will be 1.82 billion, exceeding the number of PCs, and drive the majority of website accesses. Within 5 years, these same analysts predict mobile devices will become the main mode of accessing the web.

To protect against an overwhelming demand for data that may precede the build-out of their mobile broadband infrastructure, US carriers are much more defensive on the broadband side, and have been creating additional pricing tiers for data plans. These plans will introduce a new unit of cost for mobile consumers to assess: the megabyte (MB). Verizon, for example, will be charging all 3G phones users a mandatory $10 per month for 25 MB of web access. Unfortunately, most consumers don’t actually know how to gauge the number of megabytes they may consume while scrolling or surfing any particular site’s web pages. To help consumers prevent overages, most carriers provide a way to gauge remaining, unused megabytes, but these tools don’t give users an easy way to predict how visited sites may consume them.

Vodaphone MB Usage Calc 

Vodaphone introduced a MB Usage Calculator to help people pick a plan up front, but it isn’t specific enough to allow a customer to budget the number of pages you might be able to view, or how long you can spend on any web page. When Apple coined the phrase “1000 songs in your pocket” to describe the capacity of a 4GB iPod, they defined a unit of storage, a gigabyte, in terms any consumer could understand. To aid wireless consumers in understanding the new billing measure, Bill Shrink created a nifty graphic that applies the same approach to megabytes and data, translating these digital units into recognizable measures of usage. Bill Shrink