Global mobile broadband traffic grew by 83% in the second half of the year, with a compound annual growth rate (CAGR) of 234% in 2011, according to an Allot Mobile Trends report. Carriers are struggling to fund the rapid expansion of mobile data networks while many internet companies capture the bulk of the revenue that flows from that investment.
As traditional sources of income such as voice calls and text messages decline, mobile operators are exploring ways to generate additional revenue from data. What choices do they have, and how will those choices affect customer experience and loyalty?
Introduce data limits on plans
AT&T, the United States’ second-largest wireless carrier, recently joined the ranks of operators placing limits on data usage. Previously, AT&T slowed speeds for the top 5% of mobile data users—a policy widely criticized as both unclear (customers couldn’t tell if they were in the top 5%) and unfair (subscribers believed they had purchased unlimited plans).
Under AT&T’s new pricing, the carrier charges $20 for 300MB, $30 for 3GB and $50 for 5GB. While relatively few customers exceeded the 3GB level at the time, that is likely to change as devices and networks become faster and people increasingly stream video on YouTube, watch movies on Netflix and listen to internet radio on their smartphones and tablets.
However, capping data plans risks pushing customers away. The banks in the US provide a cautionary example: when Bank of America attempted to add fees to services that had been free, widespread backlash and competitor retreats forced the bank to back down. The lesson: introducing new fees for previously free services can provoke strong customer resistance and, if rivals don’t follow, result in substantial churn.
AT&T’s move occurs in a competitive context: Verizon Wireless and T-Mobile also sell plans with monthly high-speed data limits, creating an opening for Sprint, which at the time did not cap data usage and was working to improve its customer-service reputation.
A Wall Street Journal poll indicated that more than 63% of AT&T customers said they would be more likely to switch providers if their carrier capped data usage. In the UK, limited plans are common and caps are typically lower (for example, 750MB), but some carriers have started to promote unlimited plans to capitalize on negative publicity about caps.
If carriers choose to move customers from unlimited to limited plans, timely and accurate communication becomes critical to preserve loyalty. Notifications that arrive too late—after a customer has already exceeded a limit—cause frustration and unexpected bills. For example, I have a 25MB per day free data roaming allowance, yet on multiple occasions the alerts informing me that I was close to my limit arrived only after I had exceeded it, leading to significant roaming charges.
Given the rapid pace of data consumption, operators should optimize notification systems and consider waiving small overage charges (for instance 5–10MB) to avoid alienating customers. Customers hate robotic, penny-pinching approaches—one client even sent alerts when a user owed $0.01, which only reinforced the impression of impersonal service.
Transitioning from unlimited to metered plans, combined with the fact that mobile data usage surged more than eightfold in 2010, is likely to increase customer disputes and volume for call centers. This makes engaged, well-trained employees essential so customers feel the company cares about them.
Charge for faster speeds
With the rollout of high-speed mobile networks worldwide, operators can offer premium, higher-speed mobile data tiers for customers willing to pay extra. From a customer experience standpoint, this is preferable to throttling or hidden overage fees: subscribers have the option to purchase better performance rather than being arbitrarily slowed or unexpectedly billed.
Consumers are already familiar with tiered speeds from home and office broadband plans, so offering speed-based upgrades on mobile could be perceived as a natural next step—an upsell to a faster, premium service.
Offer curated or “sliced” web access
Some carriers, particularly in Europe, are experimenting with plans that effectively “slice” internet access by giving unlimited access to selected services while restricting or charging for access to the rest of the web. For instance, Orange in France offered an unlimited plan at a modest price that only covered Facebook and Twitter. Turkcell in Turkey has charged a flat fee for Facebook access while excluding competing domestic social networks. In Poland, a provider allowed free access to a small set of sites, including Facebook, while charging for broader web access.
These options can appeal to budget-conscious, pay-as-you-go customers who primarily use a handful of services. However, such models often generate disputes over data usage and increase contact center demands. They also attract criticism from consumer advocates and rival web services because they undermine the ideal of an open internet and can disadvantage competing sites.
Carriers pursuing sliced-access strategies must carefully segment their customers and conduct thorough research into usage patterns. Marketing teams may treat these slices as negotiable commodities—“we’ll add Twitter and Skype if you stay with us”—but focusing on trading slices risks ignoring the broader customer experience that drives retention.
Both metered plans and premium speed tiers require customers to pay more for data. Executives often argue that there is limited appetite among users to pay higher fees, which leads some operators to consider alternative approaches to monetization.
Conclusion
As people rely increasingly on mobile devices for daily life, telecom providers’ role becomes ever more central. At the same time, carriers face mounting costs to expand and operate data networks and are searching for ways to pass those costs to customers.
Striking the right balance between revenue generation and customer satisfaction is difficult. Competitive pressures and growing data consumption mean that customer experience will be a key differentiator—not just the specific “slices of the web” or price points offered, but how transparently and thoughtfully carriers communicate, handle overages and support users. A focus on fair policies, clear notifications and empathetic customer service will be essential to retain loyalty as the industry evolves.
To contact author: Zhecho Dobrev at [email protected]