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.

1. The Monetization Pendulum
Posted by Jonathan Morgan on Jan 6, 2011 2:19:28 PM
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.