Oil is still flowing into the Gulf of Mexico and the World Cup is underway in South Africa but those stories were pushed off the front pages for a while to make room for the really big news. Of course, I’m referring to AT&T’s announcement that new customers will no longer have the option of an unlimited 3G data plan. From now on if you exceed your usage cap, you’ll pay extra. I was amazed at how much coverage this story had. Smartphones, particularly the iPhone, are the cultural icons of the day, so the media lavishes attention on something as seemingly mundane as a price change.
Even north of the border AT&T’s announcement received extensive coverage. SAS Canada had a big presence at the Canadian Telecom Summit where the subject of usage caps was a hot topic. Canadian operators already have usage caps on wireless data so the changes in the US were seen as validation of longstanding policy. I moderated a panel discussion where TELUS Vice President Brent Johnston defended his company’s usage policy. TELUS imposes a cap but warns customers when they are approaching the limit. According to Johnston, the cap is not an issue for most customers.
This is not the first time AT&T imposed a cap for a service that had been unlimited. Until 1977, Ma Bell allowed us to call Directory Assistance as often as we liked. Most of us would consult the telephone book first, but some people would dial 411 anytime they needed a number. A new charge of 50 cents per call was implemented but you were granted a few freebies every month (I think it was two), but it might have been more. They claimed that a very small percentage of people were responsible for most of the calls and that most users would rarely exceed the number of freebies. Then, as now, the usage cap generated a lot of debate, much of it negative. I was in college then saw comedian Gabe Kaplan entertain the student body at the Gator Growl. Joking that 50 cents should justify more information than just a phone number, Kaplan called and asked “what is the meaning of life?"?
With the media buzzing about AT&T’s new price plan, The Wall Street Journal conducted an unscientific poll asking - Is AT&T doing the right thing by imposing a cap? Seventy percent of the respondents said no. But the people responding to the poll are not the ones tasked with managing the business.
Communications companies have a never-ending challenge in balancing fixed and usage-based charges. Consumers will always want both lower prices and price certainty. Knowing which offer is the best fit for a given customer is not a trivial task. It requires getting data from silos across the organization and applying advanced analytic models to get the right answer. In March, Yankee Group published the results of a survey of US and Canadian operators and 68 percent plan to invest in analytics for product and price optimization within the next 18 months. SAS will be working with communications companies around the world to ensure they strike the right balance.
