Likewise, policy management tools that can prioritize and shape bandwidth consumption can help service providers alleviate congestion and provide higher end user experience, where regulators allow such tools to be used. But there appear to be lots of trade offs.
Most executives would agree that flat-rate billing for unlimited use is a difficult and likely unsustainable retail packaging model for broadband access, especially in the mobile services realm. But what should be the replacement? That seems to be a tougher question.
As a corollary, executives must weigh “pricing by value,” or “pricing by application,” which means more complexity for consumers, or some simpler “pricing by consumption” approach.
Likewise, methods for managing mobile networks to avoid peak-hour congestion arguably can be viewed with circumspection. And the issue there similarly seems to be a mix of concerns about imposing more overhead on operations, irritating customers and adding complexity to the marketing and billing process.
Mobile service provider executives say they prefer to charge subscribers for data based on tiered usage plans, rather than by application, an on-line survey of some 300 mobile service provider respondents suggests, according to Connected Business Research.
For example, a large number of operators are considering changes to billing plans in 2012, but a substantial number of executives also are concerned that market perception and competitive considerations might prevent them from adopting their preferred billing schemes.
Retail billing preferences have to be balanced against market realities, in other words.
Although mobile operators are generally satisfied that their billing methods extract maximum value from different customer segments such as techno-savvy and business users, the survey reveals a strong preference by operators to charge subscribers for data based on tiered usage plans.
Other billing schemes, such as charging by type of application or service, either based on bandwidth intensity or latency requirements, do not seem to get much support.
Tier one service providers tend to be much more strongly favor in favor of charging customers for data on a usage basis than tier two and tier three service providers.
A similar challenge confronts mobile service providers that might like to manage peak-hour traffic more gracefully.
In principle, one might argue that capacity upgrades “solve” the problem. Others might argue that business models often make that difficult.
Others might argue that, though appealing, additional capacity might simply produce its own supply, as new freeway capacity never relieves traffic congestion. Another way of illustrating that problem is the notion that new, high-bandwidth applications are created whenever bandwidth supply increases.
The other issue is that unless providers can somehow charge more money for the additional capacity, the investments cannot, and will not, be made. So far, there is precious little evidence that supplying dramatically more bandwidth, for more money, is attractive for the typical consumer.
If data caps do not work to manage mobile network peak hour traffic loads, what does? The answers will vary from country to country, and are different on mobile and fixed networks.
U.S. mobile operators have different tools, including Wi-Fi and small-cell offload, policy, content optimization and QoS-based tiering. Those tools are not available to fixed-network operators, at least if current “network neutrality” rules survive legal challenge.
In some markets, “transparency” is required, but traffic management, including traffic shaping, can be employed. Ofcom rules.
In Canada, both fixed line and mobile service providers have more freedom than U.S. ISPs. Though regulators say “the best remedy for network congestion is investment in new infrastructure,” the second choice is economic Internet traffic management practices such as charging more for higher speeds,” said Konrad von Finckenstein, Canadian Radio-television and Telecommunications Commission chairman.
Aside from pricing incentives, traffic management practices, when used “must be technology-neutral, least intrusive and non-discriminatory,” he says. “ISPs can employ these measures at their own risk, knowing that if they are challenged they must bear the reverse onus of proving that these criteria have been respected.”
“Only in special cases, with prior approval from us, will providers be allowed to block content outright, or slow down time-sensitive traffic, such as video conferencing or voice over Internet Protocol service,” says the CRTC chief. “Other types of traffic may be delayed, but if the delay is so significant that it amounts to blocking, prior approval would be required.”
Eventually, to fully benefit from traffic management tools, mobile operators will have to move to real-time, cell-level traffic management in the radio access network, Monica Paolini of Senza Fili Consulting argues. Policy-based management will be needed.
U.S. network neutrality rules do not absolutely prohibit such measures in the mobile network, though fixed-line operators basically are stuck with rules that mandate complete “best effort only” access.
Paolini argues that mobile operators will need to actually act ahead of time, using predictive data to prevent congestion, especially when due to unexpected traffic spikes. That sounds appealing in principle, but adds new cost and complexity to carrier operations
“Most mobile operators I talked to would rather avoid to do this and reasonably so,” she says. “Tracking and acting traffic in real-time at the cell level inevitably adds complexity and today traffic data is available but only offline.”
Video optimization may improve the subscriber experience at peak hour, but during off-peak times, when there is available network capacity, video optimization does not have any beneficial impact on the subscriber experience, but it adds overhead to the network.
Operators could deploy video optimization only at locations and at times in which traffic is high, at the risk of less flexibility to deal with sudden or unexpected traffic changes at other locations not provided with the optimization capabilities.
Such are the tensions between the desire for operational simplicity, consumer friendly pricing and packaging, and the desire for more-sophisticated end-user features. Likewise, there is a tension between the ability to manage networks simply, and the desire to manage them with greater sophistication.
In truth, consumers, regulators and service providers are “conflicted” to some degree about balancing simplicity and variety. Users want understandable plans, fair pricing and clear billing statements. But they also might want differentiated experiences.
Service providers want simpler operations, but also greater sophistication in terms of ability to create and package new and existing products. The tension probably cannot be eliminated.
Gary Kim is an active industry writer and analyst, editor of Mobile Marketing & Technology, Content Marketing News and Carrier Evolution. He is a frequent contributor to IP Carrier and TMCnet, and a good friend of Razorsight. Keep up with all his industry insight -- follow him on Twitter @garykim.
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