Pricing for profits on the mobile Internet

Abstract

Addresses the pricing challenge facing mobile operators as a result of technical developments in the transition from the second to the third generation of mobile telephony. A central issue in such a varied and differentiated service architecture is the charging structure for providing such services to end-users. Users must be given the right incentives to satisfy their needs. Pricing new services too high will result in a low take-up rate of the service, whereas pricing the service too low could result in low and unsatisfactory revenues. This study presents the results of a consumer study in the UK consisting of more than 2000 interviews with potential end-users of third-generation services. It presents a theoretical approach to the practical pricing problem at hand, and suggests some solutions. The principal conclusion is that the previously accepted price-optimization theory of charging per megabyte is insufficient for the introduction of wireless broadband services. Before simply applying the strict mathematical maximization principle of mainstream economics and marketing it is of critical importance that operators decide which set of parameters to maximize. This presents an open opportunity to set prices and involves an element of innovation. A strategic pricing decision needs to be taken at a service-specific level, thus producing a considerably broader and more complex pricing problem that requires a completely different set of theoretical tools.