Why don't telcos get it?

My weekly print read is the Economist and this week they have a section on Telcos and how after the last two failed hype waves of fibre & 3G (both costly investments with not much return, and a number of casualties), convergence is the next big theme.

The strange thing is that I don't think that telcos have any idea about appropriate consumer pricing, preferring instead to charge on a basis that is almost guaranteed to deter usage. Secondly, they make it hard to use the services. Its a view I've held for a long time and was echoed by many at the recent momo London (Mobile Monday) event. Now my comments are based on experience mainly in the UK.

For example, want to consume data via GPRS? Fine, you need to sign up to a separate data package. This has an expensive monthly charge, a piffling amount of data usage included (say 5mb per month) and a high per mb charge for additional usage. Given its hard to assess how much "data" you are consuming, most people are concerned about incurring high charges for a service they're not sure they'll use. Want to activate it via your phone - sorry, please contact the call centre and endure 20 minutes in a queue to be told in can be activated in a few weeks if you'll sign a new 12 month contract. Can't be bothered? Hardly surprising, after all until you've got it and used it, most people don't appreciate its usefulness.

Additionally the data packages always lack the things that people find useful like lots of included minutes and text in the price. T-Mobile seems to be a rare exception in the UK, bundling 75 minutes and 50mb in its tariff, but then this is available only to business users and includes no texts.

Instead, telcos could include enable data in all of their packages and devices as a matter of course, or at the very least allow activation via a SMS text. Data pricing could be capped or a flat fee for unlimited traffic, similar to broadband. They've already built the infrastructure, so have incurred the capex and fixed running costs - so removing the barriers to accessing the service will make it easier for revenues to start flowing.

Similarly Location Based Service (LBS) charging is crazy. With LBS, the telco provides details of the general proximity of a phone, and hence its' user, based on the base station/cell its' currently connected to. Depending on the concentration of base stations, their radius can extend from a few thousand metres to 10s of km as a I understand it. So the accuracy of location is not great i.e. not GPS standard. Nonetheless, many people have written about the opportunity for location related commerce - it even feature in Mission Impossible! So what do the telcos do to kick start the market - in the UK they charge 15 pence (over 25c) per location enquiry, whilst in some other markets they simply don't provide the data. Ah, but perhaps they want to offer these services as a gatekeeper. Perhaps, but the most notable offering was a feeble effort from Vodafone in the UK which offered a "Yellow Pages" lookup. Even for 4 queries per day, the monthly cost would be about £18 or a doubling of most monthly phone bills!

Why not get people used to the benefits and then do revenue deals or simply charge a flat fee for the data, bearing in mind the user has to consent to each service accessing their location data?
SMS Text messaging took off because it was made cheap and is now bundled with lots of free text included (in the US I believe most people get free SMS anyway). Broadband became popular because it was faster but also because with unlimited traffic you knew what it would cost you. I don't know the take-up numbers but I suspect that those broadband deals with only low levels of inclusive data are fast dwindling in the face of "all you can eat".

The daft thing is that the telcos bemoan the current lack of 3G traffic and data volume without seeming to appreciate that its their pricing that is the deterrent. Come on telcos, kick start the markets and start generating some revenues.

posted by John Wilson @ 1:11 PM Permanent Link newsvine reddit


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