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Volume cap based pricing kills appetite for mobile data

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Mobile telcos have widely implemented volume cap based data pricing in order to regain control of their margins by curbing heavy broadband usage. But Nordic analysts, Rewheel think volume caps will undermine operator efforts to monetize data by restricting market growth.

Rewheel points to their analysis made using the European Commission's statistics on mobile broadband uptake in the member states. The consultancy took the EU statistics and marked the countries where at least one operator has been offering speed-tiered data packages (e.g. 0.5 Mbit/s, 1 Mbit/s, 2 Mbit/s) instead of volume-capped offers (e.g. 500 MB, 1 GB, 5 GB). The correlation of mobile broadband penetration with pricing models is striking. The penetration reaches on average three times higher in the non data volume-restrictive markets.

Rewheel claims they witnessed several European markets where the introduction of volume caps stopped or even reversed the initially steep mobile broadband growth, in sharp contrast to the consultancy's home country Finland where the market rewarded the non usage-restrictive pricing models by over 17% "dongle" population penetration and a continued linear customer uptake.

"Okey, consumers prefer non-volume restrictive offers, that's a no brainer. But can telcos sell such services without hurting their margins? We are confident that they could", said Antonios Drossos, managing partner of Rewheel.

The consultant said that their recent independent analysis - based on publicly available sources - on Germany's E-Plus showed that the operator's new, low cost-base network and sizeable spectrum capacity would allow the pure mobile play telco to offer volume cap free, speed-tiered tariffs without compromising Capex to sales, EBIT and EBITDA. "Obviously, such a forward looking move is primarily expected from mobile pure play challengers, but as Wall Street Journal reported last week even market leaders like Verizon are having closer look at speed-tiers", Drossos said.

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Tags: mobile broadband