2.5G and 3G Wireless Network Pricing Plans
(Based on Press Reports - Contact the carrier for more details- MobileInfo.com)

2.5G & sub wireless prices vary all over the map, literally. Early indications are that carriers are still not sure how to price it, get users hooked and still give return on shareholders' equity. During early stage of 3G introduction, service prices are expected to be volatile. The following partially-filled table shows variation 

Some (Misplaced) Principles Used for Pricing 2.5G and sub3G Services

• To transfer one megabyte of data on GPRS, simple arithmetic and a little bit of queuing theory tells us that we need equivalent of four voice circuits to achieve an effective download speeds of 30 Kbps (or thereabout). Considering protocol inefficiencies and software delays at two ends, it will take about 10 minutes in the best case scenario to transfer this much data over these networks. We would love critics of our calculations to give us their calculations and numbers. At 15 cents per minute, this means $6.00 per megabyte.

• $5-10 per megabyte pricing for GPRS and 1xRTT is reasonable and much lower than what we are paying for wireless data now. We should also note that ratio of wireless data to voice usage on the network is extremely low.

• On a WiFi 802.11b hot spot, it costs a fraction to transfer this data. Therefore, wide area wireless network pricing should be competitive with that. 

Telprice as a Modeling Tool for 3G Pricing Strategies
By calculating the elasticities between the various products and segments, TelPrice has the ability to manage and optimize an operator's product portfolio to a superior and profit maximizing level that cannot be achieved with spreadsheets. With TelPrice, consideration is taken of the direct effects, cross effects between products in the portfolio, and influential competitor pricing.

Ericsson Pricing Test bed : Based on research sponsored by Ericsson as his doctoral thesis "Innovative Pricing," Andreas Jonason puts the question of pricing into a broader economic theory. He also analyses the successful Japanese I-mode and business cases of Mobile Internet, drawing useful conclusions for operators that are deliberating new pricing models. Go here for more info on this.

MobileInfo Advisory and Comments: It appears to us that the carriers and operators have not come to grips with a realistic pricing formula for GPRS or 3G applications. Marketing executives at these companies are being guided by unproven economic theory and inaccurate perception of elasticity of consumer demand. Having paid extremely high prices for spectrum and network build out, the carriers are eager to recover their investments. We do not blame them for it. But they must learn hard facts of economics. We were taught in our marketing class in school a very simple principle that price should not be a function of the cost of goods or service but what the market will bear. It is also not long ego that this principle was well demonstrated by the collapse of multi-billion dollar Iridium satellite network fiasco that Motorola launched.  Most of the price plans that we have seen recently (as of April 2000) are high. It appears to us that consumers are not biting - certainly not in numbers that we call acceptable adoption of wireless networks.

If the sole purpose of GPRS and 3G is to increase voice subscriber capacity, we can see the justification for GPRS, 1xRTT and other variations of sub3G networks but we should untie voice capacity displacement as a basis for figuring out wireless data pricing. There is a principle we were taught in accounting that is called standard costing. This principle says that if we have excess network capacity for selling wireless data, then standard cost of that capacity is almost zero except for marketing, billing, and customer care cost. To us in simple accounting terms, any spare capacity that is left unsold has zero cost. Therefore, sell this capacity at any reasonable price that market will bear. If the market buys this and your spare capacity decreases, start increasing the price so that you can build more capacity.

May we remind the carriers that in the wired world there is no comparison with price of T1 lines that they offer to businesses with how many long-distance voice circuits does that T1 circuit it displaces. 

Let us find out what economic value do wireless data applications give to the consumer and to the enterprise. If an alert message with a graph for a stock trader is of a lot of value to the subscriber, let us charge a lot - not necessarily based on bytes of data transferred and comparison with displaced voice circuit for x number of minutes. If an SMS message is a popular application, let us price it on the basis of how it is in Europe where kids know how to spend their piggy-bank quarters on SMS messages. If the wireless advertising patrons can get more customers by sending an electronic coupon to a consumer driving to find a restaurant, let us charge the restaurant a dollar or half because that content is of much more value.

The point we are making is this - let us price the content in as many cases as the service can be identified and price the pipe on traffic count basis only to intermediaries. Let us not always compare cellular voice per minute prices with that of wireless data. For large knowledgeable enterprise consumers like Fedex, we can sell part of pipe capacity but let that be at whole sale prices just below what it would cost Fedex to install their own private wireless network or force them not to implement that wireless application.

• Let us price the services to consumers so that we can hook them to these applications persuasively in such a way that they will continue to use them and therefore pay for these services for a long time. 

• Let us offer a "pooled megabyte" pricing to enterprises where users can share this chunk of megabytes among different users. 

• Let us also introduce QoS (Quality of Service) criteria so that high-priority users pay more than others. 

If we do not price 2.5G and sub3G services on these principles, wireless data network may never take off.

Finally a word to our esteemed subscribers - IT professionals. Please find out what value does the wireless implementation of your business application offers to your bottom line. You may be surprised that you can justify some business applications even on 2G networks and at 2G prices and many more applications become affordable at 2.5G and sub3G prices. Also note that in your business case projections, you can safely assume gradual reduction in wireless data prices. As far as much-hyped 3G video and multi-media applications are concerned, you can justify those only when your favorite carrier tells you its pricing plan and implementation time table.

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