WiMAX and LTE will reach critical mass soon, and everyone from Tier 1s to new entrants are thinking about what to do with all that landline-quality mobile broadband. Unfortunately, carriers are approaching the business model as though it’s just a faster version of 3G that needs to be charged by the gig. What they need to do is forget tiered billing for WiMAX and LTE data. Instead, prepaid and real-time charging can and should break open carrier business models.
When it comes to 4G project engagements, there are “tremendous amounts of info around network capability and the speeds it can achieve, and there’s a risk of getting lost in the technology of it," said Patrick Hayes, vice president at the consulting firm Cambridge Strategic Management Group (CSMG). "There is not a lot of new stuff that people are talking about yet that will enable 4G to really appeal in ways beyond the 3G model."
That suggests there will be a monetization issue, first and foremost. "How will operators make money with 4G?" he noted. "If a lot of what I can do today I can do tomorrow but maybe it’s faster, that’s interesting, but is that compelling to make users pay more for it?"
Operators are exploring the idea of going to a tiered billing model, with Sprint CEO Dan Hesse and AT&T's Ralph de la Vega both noting the merits of a per-gig postpaid model in recent public addresses. But for that to fly realistically requires delivering a lot more value beyond zippier downloads — in other words, they have a commodity problem.
"One of the potential challenges is, how to do you move pole from a pricing model consumers are used to today if you’re not bringing them any significantly new capabilities," Hayes said. "Competitively, they're price-pressured anyway. Take a page from airline pricing. If one raises fares on a route, within 10 minutes they’ll know if the increase will stick. If no one else follows, it falls apart, because it's all the same thing."
When you look at the potential 4G use cases, it becomes obvious that there needs to be a big shift in charging, which will "break current operator models wide open." Pat McCarthy, vice president of global marketing for service delivery solutions at Telcordia, says that means service offerings that leverage primarily prepaid and real-time charging.
