Are mobile operators cutting the mustard?

Posted on July 16, 2015

Asked how he amassed such a handsome fortune from a humble condiment, Victorian mustard magnate Jeremiah James Colman famously remarked that he made all his money from the mustard people left on the side of their plate. His customers were paying for something they didn’t use; had they scooped from the jar only what they needed, Colman would have made a lot less money.

Today, millions of smartphone users on post-paid tariffs pay for a bundle of mobile data every month, some of which they don’t consume. At the end of the billing cycle the unused allowance, like mustard on a plate, is simply wiped away.

Exactly what proportion of customers don’t reach their data limit is carefully guarded, and no doubt varies a great deal. But GSMA recently reported that, for a leading operator in Sweden, one of Europe’s most advanced mobile markets, the figure was around 85%.

Now, it’s not an operator’s fault if a customer doesn’t use all their data. But the discrepancy between allowance and consumption highlights the difficulties operators face in communicating mobile data value propositions, and matching those propositions to their customers.

Numerous attempts to express data allowance in terms of emails sent, websites browsed, videos streamed, or social media statuses updated have done little to clarify the situation for a confused mass market.

While operators have sought to demonstrate improved value by increasing data allowances or introducing rollover options, the same problem persists: Users can’t be sure that more volume equates to more value. And with a larger allowance they are even less likely to use what they’re paying for.

So it was fascinating to see that, as part of Project Fi, Google intends to offer customers a refund on unused data. Google’s not alone — U.S. Wi-Fi First disruptor Republic Wireless launched a similar offer in June. Not for the first time, non-traditional players are defying the establishment with offers conceived from the perspective of the customer.

These guys are even challenging the challengers: When John Legere unveiled his typically provocative Data Stash offer, which lets certain T-Mobile U.S. customers keep unused data for an entire year, he said the practice of wiping out unused data was like petrol stations siphoning leftover fuel from people’s cars. Promoting his own new plan, Republic CEO David Morken subverted Legere’s comparison by asking if people with plenty of petrol remaining should be obliged to go on an extended road trip just to burn through it.

Market disruptors are always drawn to areas in which they can make a visible difference, usually because those areas have been ignored or underserviced. In the mobile market, data pricing is one such area and Wi-Fi is another. It’s no coincidence that the same players introducing pricing models designed to reflect actual user behaviour are delivering connectivity conceived along precisely the same lines.

Integrating cellular and Wi-Fi into a single service and managing the movement of the user between those networks according to circumstance and preference enables Wi-Fi First operators like Republic and Google to offer pricing enticements that will draw customers onto their services. These pricing structures might be limited in their availability now but, such is the power of simplicity, it seems inevitable they will quickly find appeal worldwide, just like Jeremiah Colman’s spicy condiment.

Operators that succeed will be those that cut the mustard; the rest will only feel the heat.