Editor’s Note: Welcome to Reality Check, a feature for RCR Wireless News’ weekly e-mail service, Mobile Content and Culture. We’ve gathered a group of visionaries and veterans in the mobile content industry to give their insights into the marketplace. In the coming weeks look for columns from Mark Desautels of CTIA, Laura Marriott of the Mobile Marketing Association and more.
“Dumb pipe” and “bulk transport” pejoratives recently re-surfaced in response to Sprint Nextel’s $99.99 per month voice and data “Simply Everything” plan and the chorus of voice-only similarly priced responses from AT&T Mobility and Verizon Wireless. Arguably, Sprint Nextel’s gambit is more dramatic than a voice-only offer. After all, Agner Krarup Erlang figured out over 90 years ago that people can’t actually talk 100% of the time. Things like sleep and eating, at least for the polite set, intrude. But adding a full data bucket increases the exposure to all-day streamers and the specter of having to invest in zero marginal revenue network resources. It also invites comparisons to all-you-can-eat buffet restaurants and evokes the dreaded “commodity” word.
Of course, selling lots of voice minutes and data bits for lots of money doesn’t make them commodities. They either are or they are not. To probably misquote Churchill, “We’ve already established what you are. Now we’re haggling.” If carriers were already selling commodities, selling more for more money probably isn’t so bad. Please do throw us in that $100 per month minimum ARPU briar patch. But if carriers are probably safe in betting that people can’t talk all of the time, what about Sprint Nextel throwing in unlimited data?
Necessary evils
Unlimited (more or less) data plans aren’t new. Every carrier has one. They have to. The average customer can’t possibly figure out how many bits are buried in the attachment download, or picture upload, or in the exciting, all singing, all dancing WAP page they just stumbled across. Surfing the Web by the bit is like handing your wallet to an identity thief and telling them to be sure and call if they need the last four digits of your Social Security number. Some carrier restrictions around all-day streaming are probably reasonable, but flat-rate data plans are an essential tool in getting more customers to sign up for data in the first place.
And getting more customers using data services is the way wireless carriers are going to win the big battle with broadband and media networks for consumer mind share. They have to open their networks to attract high-quality content and applications and create large-scale attractive advertising inventory. If they try to maintain Balkanized walled gardens they’ll get Googled and die. But once carriers have lots of data customers and open networks, they have a shot at owning more of the consumer’s wallet than anything but food. And, oh by the way, make a lot money selling commodities.
Commodities are, almost by definition, very big businesses. They don’t have to spend much money on customer acquisition and don’t subsidize the railroad cars. Low-cost producers of high-quality commodities make lots of money. But it’s just no fun at all trying to be a high-cost supplier of low-quality commodities. Sooner or later people catch on.
Wireless carriers do have lots of challenges, but also lots of control over the competitive battlefield. They have to build flexible cores, optimize radio access networks across licensed and unlicensed spectrum, cut per-bit backhaul costs, lower customer support costs while increasing satisfaction, provide cool, easy to use, on and off phone customer experiences, and not spend huge amounts of money trying to reacquire the customers they just lost. I believe that moving to unlimited voice and data plans is a good move. It’s also the easy part.
You may contact Tom directly at tom@seapointventures.com. You may contact RCR Wireless News at rcrwebhelp@crain.com.
