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Monday, March 7, 2011

Hooked on unlimited data plan

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The take up rate of smartphones are at an all time high.

Partnering with smartphone manufacturers, GSM/3G operators had massive discounts for subscribers to purchase the smartphones for easy access to their social networking and constant connectivity to tons of web applications.

The astounding statistics of smartphones market share can be seen here at Admob.(Circa May 2010).

With unlimited data plans offered together with the discounted smartphones, gave subscribers the chance to be truly mobile with information,work,emails,videos,gaming,etc all at their fingertips. It can be said that the boom of the smartphones era is largely attributed by the "low cost" unlimited data plans offered by these telco operators.

Now almost everyone from the age of 10 to the age of 50 can comprehend the use of smartphones such as the Apple "IPHONE". When Internet Messaging(IM) started to gain popularity years ago, not everyone could be reached as they were "offline", ie not connected. But now, everyone can afford to leave their mobile IM application "online" all the time. On top of IM, new social networking applications such as Facebook, LinkedIn, Twitter, etc have had smartphone users more excuses to be online all the time. May it be updating and broadcasting their own thoughts to everyone in their "network", or merely retweeting someone else's thoughts, more smartphone users are now online more often than they are offline. They can even possibly online 100% of the time.

This trend of social networking and online availability makes it easier for the smartphone user to be constantly reachable without having to be in a call. Now anyone can be reached, located, and even be called without having to use any airtime. Emails, IM, Skype, Google Voice, allows for the unlimited data plan subscriber to be contacted without having to dial his/her cellphone number.

This trend eventually will mean that the mobile service provider will no longer be able to bank on incoming/outgoing call minutes as their main source of revenue. And the unlimited data plan contract means that the provider has no chance of earning more from the customers. Such a business model without growth will mean the end of the providers. If this goes on, then it'd just be fighting of customer contracts with the same offerings from different operators and the customer is the only one to gain.

And so, the mobile operators have their unlimited data plan smartphone users hooked on being online 24/7. That's a known fact. The bait has been taken. For the providers to reel in the income revenue, the only way to go is to stop the cheap unlimited data plans and start a rate-based charging scheme.

This will be a dark area as it might cause customers to move to another competing service provider. But in the business model whereby price is the only factor for consumer choice, it'd be wise for competitors to follow suit as well. Else the vicious cycle of unlimited data plan will eventually take its toll on the providers.

Akin to the tobacco industry several decades ago, when they realized that the each marketing campaign only resulted in a larger marketing campaign from the competitor and neither of the brands were getting more revenue as a result of competing marketing campaigns, they merely stopped extravagant spending on the campaigns as if agreed mutually for the sake of each other's bottom line. And it only takes the first brand to stop the campaign for everyone else to realize their potential savings.

So AT&T has started the wise move by introducing the tiered data plan and Verizon will be following suit soon. The two giants will trigger all other providers in other regions to do the same soon too. By then, consumers will soon have to pay more for being online all the time and depending on the intensity of bandwidth they consume, they might pay even more.

So after being hooked on unlimited plan contract for a 2 year plan, if the smartphone user continues to be hooked on popular social networking applications and IM, may not be that smart after all.


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