Faster is Not Always Better: The Search for Value (Part 1)

August 14, 2013 by Nigel Back

Early stage marketing of technology products often focuses on the technology itself. When PCs were cool and young, marketing led with the CPU… 286, 386, 486, Pentium. They even put a flashy sticker on the box! Same with displays – LCD/LED/PLASMA, how many pixels? And video recorders – “Really, you can program 100,000 different programs a century in advance, mine only does 1000”. And printers…and…

At some point, technobabble framed early adopter value propositions yield to a more nuanced understanding of what users are trying to achieve with the technology. This drives product variants with value propositions tuned to different customer segments. Better graphics cards for games PCs, better power management for road-warriors…lime-green casing for graphic designers and so on.

So it’s no real surprise that mobile broadband is following the same pattern - 2G, 3G, 4G, … “My phone has LTE and you have mere HSPA, I don’t know you, please move away from me.” Until quite recently, mobile broadband has been marketed predominantly based on technology – specifically the speed or bandwidth of the underlying radio access technology. This is reflected in speed-based tariffs, potentially with some monthly cap beyond which bandwidth is ‘throttled’. The implied value proposition is that ‘speed is good.’

But the industry is now transitioning to the phase where product design is increasingly influenced by customer need and experience rather than pure technology. Consider shared data plans launched by US operators Verizon and AT&T and Sweden’s Telia, among others. These reflect a community oriented value proposition linked to the customers’ family or business group - “When I buy something everyone in my family needs, I prefer to share it rather than buy separately for each family member.” Life would get pretty expensive, not to say quite bizarre, if a family needed to buy separate instances of everything it consumed! “No son, you can’t have some of my breakfast cereal, get your own box!”

Importantly, once a more segmented value proposition is defined, options to further enrich the proposition quickly become evident. With sharing plans marketed to families, why not offer self-care parental control? “No Johnny, SMS stays off during school and no, I won’t enable your data until you finish your math homework!”

An alternative value model focuses on what users are doing with their devices, particularly around application preferences. Examples include Telkomsel in Indonesia offering unlimited WhatsApp™ and Facebook Messenger™, and Mobilink Pakistan offering 24 hour Facebook access for a (very) small daily fee.

There is no right or wrong. Ongoing debates arguing the absolute merits of sharing versus unlimited are slightly missing the point. Fast cars address a huge market segment. So do family cars. Most major car manufacturers are very smart in how they address both, recognizing also that the same customer often plays in both segments at different times.

One thing these segmented tariffs have in common is the need for an efficient and unified approach to real-time charging and policy. The parental control example makes dynamic service authorization decisions based on time of day rules configurable for each group member. Similarly, configuring allowances and limits for different family members demands a real-time capability for spend/usage monitoring and threshold notifications. Application-centric tariffs such as the daily Facebook package are often time-bound, again requiring a dynamic authorization decision at time of use.

I titled this entry ‘Part 1’ as tariff innovation is starting to grow rapidly, particularly in LTE enabled networks. Part 2 in a few weeks will provide an update.

This entry was tagged Operator business models, Data sharing