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Buffet Tiered 3G Plan to be abolised

At Investment Moats, I talked about it pretty early that we may eventually follow the US in abolishing all-you-can-eat mobile data plan to one where you are charge based on your usage.

Do read these articles if you haven’t:

  1. Primer to telecom investing: Singtel, M1, Starhub
  2. Starhub, M1 and Singtel’s existing telecom business model approaches end of life
  3. How the smartphone revolution will affect M1, Starhub and Singtel
  4. Smartphone revolution causing back hual problems
  5. Telecom operators in US moves to tiered pricing
  6. The rise of VOIP iPhone App Viber

This week we finally got more information on how 4G plans is going to be in Singapore. For Singtel, they will be offering lower data cap in LTE plans. Eventually they will remove 3G all together.

  • First stage pricing: New 4G plan will bundle 10GB of LTE data along with existing 50GB of 3G data for an additional $10 on top of $59.90
  • Second stage: Upon the LTE roll-out reaching 80% of users by end 2012, 50GB 3G data cap will shrink for new subscribers of the plan and for existing subscribers on contract expiry.
  • Third stage: When LTE roll out reaches 95% by 1Q 2013, 3G data cap may be dropped altogether, leaving new subscribers with 10GB of LTE data.

Singtel said that 11% of users account for 60% of data traffic and tiered pricing is specifically to charge these group of users more so as to align to capital expenditure as these guys wear out the infrastructure more than the rest of us.

Overall, I see the 3 telcos all doing that. The take up will be slow since on average not many will see the upside of this. I wonder if their projected dates will come to fruitarian.

How it will affect telco profitability

Much will depend on the rollout

  1. Higher subsidies for 4G handset will increase cost
  2. Tiered pricing and no reduction in price plan will increase revenue
  3. 4G LTE ready infrastructure are more cost effective
  4. Singapore have the world’s highest smartphone penetration rates

I see an upside for the telcos in 2012-2013 definitely.

The telcos’ crusade against virtually unlimited mobile data usage might soon be upon 3G shores. StarHub and SingTel are taking a good look at revising their 3G price plans, the two telcos told BT yesterday.

StarHub said that it may ‘review current (3G) pricing plans and consider introducing usage-based data pricing’, in response to BT’s queries.

This, it said, was ‘to ensure optimal network quality for our customers’. Currently, StarHub has three mobile broadband modem plans that offer unlimited data allowances. It also caps the local data usage bill at $30 a month for its mobile phone subscribers.

When it launches its own Long Term Evolution (LTE) – or 4G – network next year, it will not offer an unlimited data option, it said.

SingTel will be reviewing its 3G price plans, which include its mobile broadband plans that carry a data usage allowance of 50 gigabytes (GB).

This comes two days after it moved to start weaning high data-usage consumers off generous 3G data caps with a new 4G pricing structure.

By 2013, when 95 per cent of its users have access to the 4G network, new 4G data subscribers will have to make do with a 10GB cap on data, paying for the additional data that they use.

SingTel also revealed that 11 per cent of its 3G subscribers on dongles and tablets account for a staggering 60 per cent of data traffic.

‘It’s unsustainable and when you grow it, it becomes a challenge,’ said Yuen Kuan Moon, SingTel executive vice-president, digital consumer group.

StarHub and M1 did not reveal their own data figures, but industry observers believe the usage patterns are similar to SingTel’s.

M1 is staying tight- lipped on both its existing 3G price plans and approach to pricing LTE usage next year.

‘We regularly review all our service offerings to ensure they are compelling and competitive,’ its spokesman told BT.

It has the same narrow view of unlimited data usage, however. ‘Mobile network resources are limited, and the experience of the majority of customers should not be adversely affected by a minority of customers who regularly consume large amounts of data.’

While SingTel’s new 4G service currently applies only to dongle modems, StarHub’s review of its 3G price plan could apply across several devices – dongles, smartphones and tablets.

Analysts have pointed out for a while that the real battle for average revenue per user will be fought not over the dongle platform, but on smartphones and tablets, where increasing data usage is cannibalising lucrative voice calls and SMSes.

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Sunday 25th of December 2011

no probs.

Dividends Warrior

Sunday 25th of December 2011

Noted. Thanks for the explanation. :)

Dividends Warrior

Sunday 25th of December 2011

Hi Drizzt,

Basically, the new pricing plan in the future is something like "the more data you use, the more you pay".

Is my interpretation accurate?


Sunday 25th of December 2011

generally. but i dun think it will affect most people. they are likely to cap average you and i plans to 10GB. The average folks would find that adequate. For folks who stream alot and exceed that do revert to me. I think its hard to exceed that but with higher streaming of HD content the average folks might exceed.

what should be noted is that the telcos may opt to not reduce the average selling price of the plans. lower cost of capex and higher ARPU would mean greater profits. But this scenarios is base case where the 3 oligopoly do the same thing. The moment one of them under cuts their margin by offering say 30 bucks for 5GB data plan the playing field might change.

i doubt alot of people exceed 15 GB of downloads but i could be wrong. There should not be much impact to the bottomline there.

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