How will carriers evolve data plan pricing strategies in 2009? By the end of the year,
it may be hard to tell the difference between a postpaid carrier,
a prepaid carrier and an app store.

Changes in wireless carriers’ data plan pricing are afoot for 2009, spurred by the combination of a slow economy and the rise of advanced services from prepaid carriers, industry sources predict.

Analysts and other industry figures paint a clear picture of what’s coming in 2009 for data plan pricing trends. Big carriers will copy the simplicity of smaller competitors, or possibly just acquire them, while the smaller competitors copy the technology of big carriers and may even offer some postpaid services of their own. What’s certain is that the lines between them will narrow.

In what may be a mixed blessing for consumers, “Tier 1 carriers will continue bundling data (including messaging) with voice plans through 2009,” said analyst Deepa Karthikeyan of Current Analysis via e-mail. “We are bound to see a decline in standalone data plans as carriers ‘unclutter’ their data service portfolio and try to increase data ARPU by locking in revenue via monthly contract plans. Bundles will also work better in the current economic conditions where users are presented with one flat bill every month, which is easier to digest than a series of separate charges for each feature, enabling them to plan their budget more efficiently.”

Such a transition is likely to be interpreted by prepaid carriers as confirmation that they’re on the right track, helping to squash their reputations as being voice-centric services catering merely to customers who are young or have bad credit. Prepaid carriers will see an increase in customers who exit from postpaid contracts just to avoid service provider lock-in and having to wait 12 or 24 months before getting good prices on new phones.

“As competition intensifies in the prepaid segment, the differences between prepaid and postpaid offerings will become narrow in the coming years. With 3G networks being extended to the prepaid segment, related services like video andmusic will become ubiquitous in the upcoming years, leading to an increase in the number of data plans in this segment … We can also expect to see an improvement in their handset lineup featuring devices that are more conducive to data-centric activities like QWERTY handsets and phones with large screens,” Karthikeyan said. Prepaid carriers also are more likely to offer per-day subscriptions and less strict data bandwidth limits, she said.

Smaller carriers also may carve a path for large companies to follow. Companies like Cellcom, Carolina West, GCI and Nex-Tech Wireless are already developing all-in-one pricing plans, Rural Cellular Association Executive Director Eric Peterson said. Such companies can be more nimble in changing their plans, which is important because their customers are still exposed to national carriers’ advertising, he noted.

Mobile Wireless Service Revenue

APPLICATION IMPACT
Carriers’ data plan pricing also may be affected by an increase in the number of handsets that allow users to install third-party applications. If carriers can’t have a walled garden, then at least they want to know what’s being installed and how to bill for it, said Paul Reddick, CEO of mobile applications reseller Handmark, when asked about lessons learned in his prior job as vice president of partner development and product innovation at Sprint Nextel.

Handmark today provides application stores to Alltel, AT&T, Sprint and Canada’s Telus. “One thing they want us to do is fill out a catalog across a range of different devices so they don’t have devices without any content on them. They clearly are concerned about their brand,” Reddick said.

Reddick noted that sometimes an application reseller can offer downloads for free, which helps carriers by increasing subscribers’ bandwidth use. Aftermarket applications also can be sold by carriers when priced as a service and not based on the actual bandwidth used – in some cases leading to steady data revenue without requiring as much network buildout, he said.

TIME ZONES
John Fletcher, an analyst with SNL Kagan, added that it’s a wild card is if 2009 will see the continuation of data services growth witnessed in the past few years. But he noted that the expected flat-rate trend also will occur in Europe. “The American model is something that the Europeans are looking to mimic. Everyone’s going to be hurting, everyone’s going to be pulling back … Every time I go to a prepaid carrier or I see them speak, they’re saying that the economic downturn is a plus for their business,” he said.

Another possible change in data pricing plans for 2009 is for carriers to offer more timeslot options than just day and nights/weekends. That would go against the analysts’ predictions of simplicity, but it’s a move supported by industry insiders, according to bandwidth optimization specialist Bytemobile, which counts major carriers such as 3, China Unicom, Orange, Sprint, T-Mobile and Vodafone among its customers. Nearly 60% of people who work for operators said in the company’s October 2008 survey that variable bandwidth prices based on the time of day will be an important new source of revenue.

THE RATIONAL BEAR
Other industry experts say 2009 may witness the emergence of some data pricing trends, but nothing drastic. It will just be a year for operators to stand pat, upgrade their networks and try to wait out the economy and the competition, 3G Americas President Chris Pearson said. “I see that 2009 will be similar to 2008. You’ll see carriers continue to be a bit more aggressive when it comes to flat-rate pricing,” but there will be more focus on making plans for 4G networks such as LTE in 2010 and beyond, he said.