To date, the transition to smartphones has been remarkably rapid and successful, with over 50% smartphone ownership in some markets. But we are entering in a phase in which the high-ARPU subscribers in most developed markets already have smartphones, and the competition for new data subscribers is shifting to more price-sensitive customers. They are unlikely to be the ones generating the highest ARPUs, but they can be just as much profitable – if not more – than the early adopters.

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Flexible plans that make it possible to choose the preferred and most-valued services will get the attention – and commitment – of these new potential subscribers. In other words, Value-based plans can be effective tools for market segmentation. Plans targeted at current feature-phone users allow operators to widen the appeal of smartphone data plans while protecting the revenues from high-ARPU subscribers.

Currently, operators use prepaid plans or plans with low traffic allowances to target these users. But many of the new potential subscribers want to have broader access to mobile data, and at the same time they may be willing to accept some limitations if they lower their bills. Prepaid and low-cap plans do not allow that flexibility. Value-based plans are increasingly used by operators – according to Allot’s Q2, 2012 MobileTrends Charging Report, 46% of operators offer Value-based plans, with services such as parental control or music streaming – and can be effective tools to attract new data subscribers.

For instance, subscribers may be interested only in some classes of applications (e.g., social networking, email and messaging, or VoIP), or agree to exclude some type of traffic (e.g., video), or accept being throttled when the network is congested (e.g., when a red light on the screen is on, they know that the connection is slow). Alternatively, the operator may give these subscribers free Wi-Fi access in its hotspot network if they allow their phone to be automatically switched to Wi-Fi when it is available. The operator may also choose to reward subscribers with additional traffic allowances or other credits for moving their traffic to their own Wi-Fi network (e.g., at home or at work) or to third-party hotspots.

The ability to create different types of plans with selectable features and/or multiple levels of service from the sign-up stage (as opposed to add-on optional features for existing subscribers) gives the operators a wider scope to manage traffic effectively because it reaches all the users, not just those willing to look for more attractive billing arrangements after subscribing.

Plans aimed at low-ARPU subscribers are an important tool in providing better service for gold/platinum subscribers, by relieving congestion where needed and thus making resources available for high-tier users instead.

Value-based plans encourage usage (and therefore subscriber satisfaction) where and when the network has unused capacity. And despite the explosive traffic growth, there is still plenty of unused capacity in today’s networks. Vodafone, the only operator I know that releases this data, has a network utilization of slightly more than 35%, so there is plenty of room to encourage mobile data usage without creating unsustainable congestion levels or affecting profitability.
Monica Paolini, PhD, is the founder and president of Senza Fili Consulting and can be contacted at monica.paolini@senzafiliconsulting.com . Senza Fili Consulting provides expert advisory services on wireless data technologies and services.