Skip to main content

Flat-Rate Mobile Leads to Flat-Rate Margins

Mobile operators in the U.S. have begun offering their subscribers flat-rate, unlimited use service pricing plans. These are intended to reduce customer churn and attract new subscribers, and they frequently succeed.

But according to ABI Research, operators should beware of the risks such plans pose to their network and backhaul capacity.

"Flat rate plans will test the limits of 3G networks, raising new challenges for operators," says senior analyst Nadine Manjaro. "Operators need to pay close attention to the capacity limitations of their 3G networks and the true cost of all-you-can-eat data plans."

These challenges affect multiple parts of the networks. Increased usage of SMS can flood the network and impact its ability to deliver voice signaling, which may impact voice calls. Another concern is that unlimited plans may spur text message spamming. Instant Messaging and picture mail usage may also increase under flat rate plans.

Unlimited Internet access will have the biggest impact on the network, especially if users begin to visit sites such as YouTube to download videos. Continuous use of video applications, whether streaming, downloading or uploading pose the biggest challenge by significantly increasing network utilization and reducing per-subscriber data rates, or the number of subscribers able to access the network.

There are reports that two majors Korean operators (SKT and KTF) offering video calls and global roaming on WCDMA networks are experiencing degraded voice quality.

Backhaul is also affected. As operator's 3G backhaul requirement increases and they plan for network migration, higher capacity backhaul becomes essential. Operators have been evaluating alternative backhaul solutions for some time, but higher utilization of 3G networks will drive this requirement faster than 4G requirements.

"The cost of increasing backhaul capacity, handling more calls to service centers, and potential increases in customer churn can quickly erode any gains from flat-rate plans," Manjaro concludes.

Popular posts from this blog

Financial Inclusion Through Digital Wallets

The digital wallet evolution represents far more than a convenient alternative to carrying physical payment cards or cash. What began as a pandemic-driven necessity has evolved into a fundamental reimagining of financial services delivery. As these platforms mature into comprehensive financial ecosystems, they're addressing one of the most persistent challenges in modern commerce: ensuring that everyone can participate in the Global Networked Economy . Digital wallet transactions surged 110 percent between 2020 and 2025, propelled initially by health concerns but sustained by genuine value creation. Juniper Research projects the user base will expand from 4.5 billion in 2025 to 6 billion by 2030, representing more than three-quarters of the global population. Digital Wallet Market Development What makes this expansion compelling is the diversity of wallet architectures emerging to serve different market needs. Open-loop systems like PayPal have achieved global reach through their f...