It appears the concept of roaming is undergoing a significant metamorphosis and emerging as a key differentiator for many CSPs. One of our customers, Swisscom, has just announced a new set of plans that offer ‘carefree roaming’ for their customers. Now, they haven’t actually wiped out roaming charges altogether, what they’ve done is far cleverer than that.
They’ve bundled in a specific amount of roaming into their packages depending on what level of tariff you choose. For example, the lower end plan includes 30 days of roaming per year with unlimited voice and text and up to 1 GB of data without incurring extra charges. A higher end plan includes 100 days and 3GB of data. If you hit your data limit, or run out of ‘free days’, you are not suddenly hit with extra charges. You are notified and only charged more if you choose to buy more data or make more calls.
The innovation in this plan is that it not only takes the ‘fear’ out of roaming charges, but also makes it simpler for customers to buy and use, encouraging uptake of higher value plans by offering a higher value service bundled in, while simultaneously getting rid of a myriad of customer complaints and experience issues that roaming has traditionally caused.
For decades, roaming rates have been priced at a significant premium to domestic rates. However, this revenue stream comes from a small percentage of high-value postpaid customers such as business travelers. In the era of smartphones, data roaming has become a highly debated topic spawning regulation and consumer protection initiatives.
When it comes to data, most consumers are extremely reticent and up to 80% switch off data roaming on their smartphone as data charging is inherently confusing and hard to ‘estimate’. With regulators mandating lower roaming rates in many markets, CSPs are reformulating how they price and package roaming, especially for data services. While this might appear to primarily benefit us as consumers, is it really such a bad strategy for CSPs and will it have a negative impact on revenue?
While the argument can be made that falling roaming rates are yet another revenue hit for CSPs, in a predicament where revenues in most markets have been flat or in decline for the past 5 years. On the flip side, one can ask the question – in today’s world – are traditional roaming charges a healthy, sustainable revenue stream?
The margins are great – but the fact is most customers don’t use their mobile devices while they’re roaming, especially for data services, and when they do they begrudgingly pay for it while cursing the service provider under their breath. Or cursing them over the phone when the bill is much larger than expected. So many CSPs now see lowering roaming prices, bundling roaming in, or packaging it more effectively as an opportunity to generate more data revenues across their entire customer base rather than collect premium roaming fees from 15% of their customers while alienating the rest.
The idea seems to be catching on as Vodafone and Rogers have launched Roam like Home plans. It is rumored that the Google MVNO might offer international roaming for ‘no extra fees’, and AT&T is talking seamless connectivity without roaming charges between the US and Mexico as a result of the lusacell acquisition. Even T-Mobile and Sprint are dipping their toes in the water, albeit with greatly reduced data speeds.
But I think this trend is not simply to satisfy regulators and woo customers. In the end, it’s really about re-building a revenue stream that is fraught with issues and only relevant to a small customer segment.
Make roaming cheaper, yes, but also make it easier to buy, easier to use, include higher speed connectivity so that it is actually valuable to the consumer, and provide 100% clarity on how much it’s going to cost. Now CSPs have a potentially much larger revenue stream that is predictable, sustainable, and actually drives customer loyalty instead of ticking customers off.
So in a time when many CSPs are looking at different ways to better monetize data, providing ubiquitous connectivity at a reasonable cost is opening up a potentially much larger pot of ‘roaming revenue’ and making customers happy at the same time.