Mobile data economics: the limit of unlimited

14 September 2010

The unlimited mobile data plan, rightfully credited with being a key part of the current boom in handset-based mobile internet use, is now being scaled back across the US and UK, with capped data bundles of various sizes now preferred

The economics of data are such that current price plans (including unlimited ones) combined with current average smartphone data usage rates are still respectably profitable for the mobile operators on an incremental basis, provided they do not substitute for the far more profitable voice and text messaging services

However, current average smartphone usage rates are around 1/50th of home broadband usage rates, and smartphones’ improving screens, increased storage capabilities and faster processors are enabling some users to push well beyond profitable usage levels, leading to the danger that average usage may surge in the future (possibly even within current 2 year contract periods), to the point where current plans are not profitable

Usage caps are therefore probably a long term necessary evil to guard against this risk, but mobile operators need to be sympathetic to most consumers having no idea how much data various activities might use, and protect them against the bill shock that might result from out-of-bundle charges

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