Location Based Tariff Plan from Telenor in India
Uninor, which is a joint venture between Norway’s Telenor and India’s Unitech, came out with an innovative tariff plan to attract subscribers in a highly competitive Indian market. In this market, competition intensity has meant lower tariffs but Uninor has introduced the dynamic pricing where customers would be offered 5-60% discount based on traffic on the network. The traffic would be function of location and time at which they call. The discount would change on an hourly basis and the discount available at any moment will be visible at all times on the screens of handsets that display cell broadcast. When the call ends, a flash will appear on the phone screen indicating the actual discounted cost of the call. Discounts are calculated by a sophisticated ‘Discount Engine’ that relies on state-of-the-art IT systems to continuously monitor traffic at every tower in the network. This plan is called ’24X7 Badalta Plan’ which in English means ’24X7 Changing Plan’.
Many analysts have dubbed this plan as a revenue depleater. They suspect that the effective call rates would fall and this is another way of triggering tariff war. However, I differ in the assessment and feel that this plan has a potential to increase usage. Anybody who needs to call would call irrespective of the time and place but if the user sees 50% discount flashing on the screen, he would be tempted to call-out to his friends or family. I would not be surprised if this plan leads to overall increase in ARPU due to higher minutes of usage.
Uninor has already outsourced its network and in case of managed services, the payment is made on peak capacity. This means that the increased utilization in off peak hours is at no extra cost till the time it does not cross the peak capacity. This effectively means that any increase in usage would go straight to the bottom line and hence the EBIDTA of this plan would be very high. If Uninor customers do not make call in the peak hours and wait for the discounts then Uninor pay outs would come down on account of lower peak capacity in future. This way it is a win-win situation. Operators have tried to give incentives for usage in non peak hours like night usage at half price but the pricing has never been this dynamic.
Another benefit of this plan would be ability of the operator to offer differential pricing in rural and urban areas. The capacity utilization is low in rural areas. The dynamic pricing of Uninor would offer higher discount in rural areas and lower discount in urban areas. This would not only help fill up the rural network but also help Uninor differentiate itself from other operators in the lucrative rural market.
The location based pricing is a radically new concept and it would be wrong to dismiss it as yet another means of lowering tariff. Having acquired the ability of monitoring the network utilization by tower on a real time basis, Uninor would be in a position to collect consumer data on the price elasticity which would help it in designing better plans. Most of the operators struggle with questions around price elasticity when it comes to plans aimed at increasing usage. I for one would be interested in tracking the success of this plan.
It is an interesting move,but this is not enough in Indian telecom voice market,Some extra mile has to take by new operators to serve very low ARPU customer to encourage using voice advertising revenue source to make call further cheaper.Our country’s Rural market has high volume but very low income group.
I would appreciate this initiative as of now – the reason being, with this overall market trend with varied options the customer has varied options to choose from which is a win – win situation in this 21st Century
Mohit, with some limitations due to my ignorance of how this or similar proposals is received by regulatory or other government authorities in India, I both agree with your judgment of this move and hold out that this is a part of a forward-looking framework for regulation and competitive market developments. So, if my ignorance leads to any missteps, please correct my following assessment:
Stripping the situation down to bare essentials, the challenge and opportunity for the ICT industry is to make best use of the limited spectrum resource. India is an excellent incubator due to the price-sensitive, highly competitive market environment and socially conscious regulatory and government environment.
This is greatly amplified due to the evolution of wireless technology, convergence with information technologies and markets, and growing reliance on ICT to serve as the lifeblood of societal, environmental, and economic transformation. To compel best use, greater and level access, capital investments must be harnessed effectively. A way to help assure that is to build into the regulatory environment, commercial development and market acceptance the rate plans that fit public awareness and acceptance with the true costs of delivering the service across a range of requirements.
If we turn our attention to how competition has developed in the United States and many other parts of the world today, we see that operators are being vised between the needs to continuously upgrade network technology and deployment density while being pushed to lower per unit pricing. Even though capex expenditures can become a diminishing return, operators are pressed by a conspiracy of their own making to offer rate plans that stress unlimited voice and messaging services and high or no bandwidth caps. Whats more, operators must build networks for peak capacity while advertising devices and applications that tend to raise peak demand during particular time periods. The US FCC, emboldened by public network neutrality advocacy groups, can take on an extreme positions on use methods to screen PtP file sharing or other uses of QoS mechanisms to reduce the burdens on traffic, even if the intent is to utilize bandwidth limits only during peak demand periods. While the goals of regulation is to provide an even playing field for alternative service providers and applications, the affect is to raise the costs of operation and services and reduce the quality benefits to all classes of users.
The US Supreme Court struck down the FCC’s attempt to regulate a gross level of open access on Comcast, sending the regulator back to the drawing boards in their pursuit of open access and extension of BB to rural and under-served segments of the population. A better approach would have been and now makes more sense than ever is to acknowledge the need for operators to do ‘traffic shaping’ but requires open access for similar classes of service. This framework policy would allow ICT operators, whether wired or wireless, to offer rate plans that include tiered service levels, and offer incentives and limits that help to shift usage to portions of the network that can best and more cost efficiently handle additional traffic.
India is an excellent incubator for the international development of this, what I consider, enlightened approach to regulation of technology and markets. My wish is that this ‘movement’ prospers and stimulates innovations that inspire adoption in other countries. From a broad perspective, India is positioned in this regard to be the world leader.
-Robert
In developed countries like the UK there are location based tariifs which allow free calls (to landlines & intra-network) from a favourite place that one pre-chooses (can’t be changed for 30 days once chosen) and calls are only charged once the mobile moves out of the favourite place.
It is an interesting move,but this is not enough in Indian telecom voice market,Some extra mile has to take by new operators to serve very low ARPU customer to encourage using voice advertising revenue source to make call further cheaper.Our country’s Rural market has high volume but very low income group.
well… seeing that uninor is a new competitor in the market, they have done really well to make such an impact in the market..