As I was typing up this post, a colleague who's overseas sent me an IM expressing how frustrating it is to be at a hotspot and not be able to get a reliable connection long enough to check some online sources because a few users are hogging the bandwidth by making never-ending VoIP calls.  That basically describes the central conflict in an article called "Service Providers: Take Control of Your Policy Decisions" appearing in Pipeline magazine.

In it Redknee's CEO, Lucas Skoczkowski, talks about how operator business models have changed over the last few years as it has become apparent that flat rate data pricing is not going to work.

Flat rate pricing has had its problems.  By decoupling usage (read: costs) from revenues, it could only have been viable if the average usage was predictably below the flat rate charged for it.  Even then, you would wind up with a system where, as the article points out, the light users subsidize the heavy users.  Or as in the case of my colleague at the free hotspot, the heavy users make it impossible for the light users to get anything done.

Why was flat-rate pricing so popular?  Because it was easy to understand.  Any move toward tiered or pay-as-you-go pricing for something as difficult for most subscribers to visualize as a megabyte of data seems to lead eventually to stories of bill shock. 

As operators continue to encourage longer lasting (and therefore more profitable) subscriber relationships, the article wonders what is the real source of this confusion?

"When subscribers overburden networks, or go over their minutes and incur penalties, is it because they don’t understand their voice and data plans, or is it because service providers don’t understand their subscribers?"

With the introduction of anti-bill shock legislation, the decline of voice ARPU, and increasing competition among carriers, the article argues that "It is incumbent upon service providers to take charge of their policy control now if they want to retain and add customers, increase revenue, and avoid customer bill shock."

And it proposes a new persona for policy control:

"With tiered pricing and prepaid plans growing in popularity, policy control is shedding its reputation as a punitive measure. Now, service providers can see it as a means to generate revenue and ensure that the subscriber receive the highest quality of service, partly because of transparency in billing, but largely because of increased communication.

"After combining real-time rating, charging and policy, service providers understand their subscribers to offer pricing choices based on their profile. Also, they can make bill payments and purchase third party applications. No longer are they unsure about what their plan covers, and this is proving to drive uptake in data services, as customers feel more confident in their purchasing options."

The full article is available at the Pipeline website and includes an example of a leading EMEA group operator's successes in increasing ARPU and subscriber uptake with this approach.