I fondly remember my first mobile phone – large and clunky with a short battery life, but it could make calls. My current mobile phone, in contrast, probably does make calls (I cannot remember trying, but it must be there somewhere), but it is very good at emails (several sent today on the way to work), web browsing (traffic news checked before commuting) and by and large it is true that, whatever I want, there is an app for it.
So far from being a device for speaking when we are out and about (although by many this is still an important function) we have a device that for many tasks replaces a computer and perhaps can even rival the tablet (for example, the somewhat oversized Samsung Galaxy S4).
What does this mean for mobile operators? Well for one thing, as I have mentioned previously, the business model has shifted from selling minutes of talk time to selling talk, text and data, with an increasing emphasis on the latter. But the principle of a subsidised handset paid for by the subscription cost remains reasonably constant – it is just that this subsidy is being met more by payment for data than payment for voice. The problem for mobile operators remains the same – price competition, in terms of handset costs and subscription costs.
Wireless
What dawned on me recently, however, is how rarely I make full use of my monthly data allowance. When I am in the office, I am using wifi. When I am home, I am using wifi. And when I am on holiday or travelling on business in a hotel, I am on wifi. And, in fact, when in airports, I am using wifi. Now perhaps I am not typical, but I do wonder whether, irrespective of 4G, the more widespread existence of wifi networks, from coffee shops to airports to hotels and now the Tube, means we spend less and less time using mobile data, which we are still paying for. I recently reduced my data package for my iPad to the lowest data size available, and now realise I am not even near to using this limit.
The fact is that for many of us, the data packages are more of an “option good”, as economists would call it – something we pay for in case we need it and, in the case of the data packages, make some use of, but not to their limit. And here is the key to potential profitability for mobile operators: customers paying for things they do not consume. Unlike in a restaurant, where people half-eating a meal does not save the business money, data usage well below what you are paying for means less of a need to provide for high data usage and thus lower costs and lower infrastructure investment – or at least an extended time frame.
Deals
So just as all-you-can-eat restaurant deals rely on the fact that people cannot eat infinitely, and just as all-you-can-speak telephone deals – which would leave anyone trying to maximise the value of their package very hoarse – I am beginning to wonder whether data packages will, on average, follow the same pattern.
With 4G comes fast loading, for sure, but how much data do we consume on the move? Perhaps in part we need to reassess the mobile phone business: payment for a phone is part up front, then effectively a loan repaid as a subscription, since only part of that subscription payment is used to provide the data and call usage. The clever mobile phone operator will focus on those clients who value the ability to connect anywhere but do so rarely – probably, therefore, more the business market than young consumers, who might enjoy downloading videos or playing games online – at substantial cost to the operator.
