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The Monetization Pendulum


Recently there has been lots of discussion about a webinar given by Openet and Allot that showed this slide.


It showed a scenario where mobile operators charge for over the top service and applications, but charge nothing for applications provided by the mobile operator itself. Some of the scenarios are flat rate fees while other scenarios are usage based.  This generated a fairly significant reaction from various people in the industry both positive and negative, but lets face it, mostly negative. It created blogs on the need for net neutrality and for the opposite. 

This one chart might now replace the famous traffic growing faster than revenue chart as the most overused slide in the industry. 

In contrast, Disruptive Analysis published a blog why application-specific policy and charging won’t work. 

What’s interesting about this whole discussion is that our industry used to charge for data based on usage, and no one came to the Field of Dreams. We then moved to flat rate charging and not only is everyone coming to the Field, all sorts of application providers are learning how to profit from it (well, at least make some revenue), and generating significant traffic, which generates profitability concerns.  Thus the chart and the question is whether and by how much the pendulum will swing back in the other direction. 

There are many challenges with a pendulum swing.  Consumers are now used to a model where they don’t have to worry about what they use.  I personally think it would be challenging for the pendulum to swing back too far.  All operators would have to swing back to the same level.  If only a single operator resists, customers would likely move to that provider.  Even if all of the operators move to a service specific model, it’s likely an upstart would come in and try to take advantage of the situation. 

What does this mean for monetization? It means that operators must think about which models make sense, less drastic models, or more importantly new business models.  For example, It doesn’t mean that operators won’t be able to create tiered services.  This is now becoming common.  This leads to opportunities such as Freemium services where you zero rate certain applications, or Toll Free Broadband where a content provider pays for the data being sent.   I would personally be willing to pay for some specific content on a monthly basis; for example, I’d pay to see the New England Patriots play (as long as it’s a flat additional fee and they keep winning). As a consumer, I like to pay flat rate.  IIt’s like a breakfast buffet at a hotel.  You pay a flat fee for access to certain tables of different types of food, and you can eat as much as you want at that table.   

2011 is going to be an exciting year.  It will be interesting in a year to see how much changed (or not).  Let me know what you think.

1 Comment

A bit of an addendum.  Attached is a link for an interesting video from Light Reading on whether consumers would be willing to pay by the bit/byte.

The question was specific to fixed broadband, but I doubt the response would be significantly different. 

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