IBM:Tiered mobile data pricing here to stay

While many may hate the tiered pricing models that AT&T rolled out last month, they're also likely the future of mobile data consumption according to analysis by IBM.

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In a paper analyzing the telecommunications market over the next five years, IBM Global Business Services says that as IP-based high-speed mobile data standards such as LTE and WiMAX spread more broadly throughout the world, carriers will give up trying to stop over-the-top providers such as Skype from riding over their pipes and will eventually "enter into formal partnerships" with them. But because the carriers will be losing the revenue they once generated through minute-based cellular plans, they will have to make up for it by eliminating their all-you-can-eat data plans.

"If people value connectivity then they must pay for connectivity," says Ekow Nelson, the global leader for the communications sector at the IBM Institute for Business Value. "With all-you-can-eat models there's going to be no way for carriers to compete. This will be an adjustment because most users have been conditioned to enjoy unlimited access to over-the-top services for free."

Looking at the broader telecom industry, IBM games out four possible scenarios for how the industry will develop over the next five years. In short, the scenarios are that declining consumer spending leads to revenue stagnation, leading to even further consolidation within the industry; a market fragmentation that will be accelerated by municipal and government efforts to bring broadband to underserved and unserved areas; a scenario where big providers consolidate and band together to aggressively compete with over-the-top service providers; and finally, a scenario where the barriers between over-the-top services and carriers comes tumbling down "as regulation, technology and competition drive open access."

IBM says the latter two scenarios are the most attractive to carriers, as they will allow the carriers to retain their strong market shares while successfully adapting to the challenge of over-the-top service providers. The carriers most likely to be successful in these scenarios, says IBM, are those with the ability to create "inter- and intra-industry alliances" that will help telcos compete with Internet companies or those with a more open network access infrastructure that can support third-party applications and can essentially incorporate over-the-top applications into their basic set of services. In particular, IBM recommends that carriers "establish value proposition for third-party providers, including interfaces to network capabilities, service enablers based on open standards... and infrastructure support for common business process services."

As far as what technologies will be most important over the next five years, IBM singles out fiber-to-the-x (FTTx) for fixed broadband and Long Term Evolution (LTE) for mobile broadband. According to a 2009 IBM survey of telecom companies, 71% of operators said that FTTx was critical to their success over the next five years, while 67% of operators said the same about LTE. In contrast, only 8% of operators surveyed said that WiMAX was critical to their success over the next five years while 54% said that it was not critical to their success.

"The race for mobile broadband appears to have been decided to LTE," IBM observes in its report, noting that global subscribers to the technology "are expected to reach 400 million by 2015."

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This story, "IBM:Tiered mobile data pricing here to stay" was originally published by Network World.

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