Encouraging Data Use? What A Concept!
By Mike Masnick, Fri Oct 29 23:45:00 GMT 2004

Mobile operators have a way of doing everything they can to discourage early adopters from figuring out how to best use mobile data. Thus, it becomes newsworthy when one actually tries to encourage use.


The biggest fear among many mobile operators seems to be that they might lose control over pricing with the customer. Years ago, when digital phones were finally overtaking analog, I heard a top executive at a US mobile operator complain that they had all screwed up by pricing the digital service at less than the analog service to encourage subscribers to jump. He wished they had viewed it the way the recording industry had when they shifted from cassette tapes to CDs. The technology was cheaper, but they were able to extract higher fees from the users. In many ways, it appears that certain mobile operators are determined never to make that "mistake" again.

New data services are almost always priced at a premium. The operators are clearly trying to extract the maximum revenue out of these new products, recognizing that often the earliest of the early adopters are those more likely to feel they really need the new offering, and thus, are more willing to pay through the nose for it. In some cases, this is a sensible strategy. Some new offerings aren't ready for widespread use; by charging high fees and letting in just a few select users, the operators can let them stress test the system, while building out additional capacity.

However, at some point, when the decision is made to throw the doors open wide, someone needs to calculate the value of having a lot more customers paying less, or just a few customers paying much more. Too many companies get seduced by the high fees they get from the early adopters, and hold off on lowering the fees until their competitors have already walked off with the market. Some, however, recognize when it's time to start encouraging use, rather than keeping the gates blocked. Telenor Mobil, in Norway, is starting a new two-month promotion where they will encourage data usage by capping the daily data fee at NOK 5 (0.61 euros or $0.78 US).

This isn't quite a "flat rate," which would have the advantage removing any concern about how much data they use from subscribers' minds. However by making the cap so low, it clearly encourages people to make use of data, even if just to experiment to see how it works. Even more surprising is that this offer will overlap Telenor's UMTS launch. Right now, Telenor only offers EDGE data rates, but plans to launch UMTS before the end of the year -- going against the trend described above, and throwing the doors wide open at launch to encourage usage right from the very beginning.

This lets Telenor get the boost from press coverage of the eventual UMTS launch while still encouraging widespread adoption rates of mobile data usage. This is a smart, longer term, strategy. Rather than simply trying to maximize immediate revenue, Telenor gets more people interested in data usage -- which should be a long term driver of revenue. Of course a two month offer may not be long enough, and could upset those who enjoyed using the inexpensive data, but aren't yet convinced it's worth paying the higher data rates and worrying about how much data they're using.