This summer Switzerland’s incumbent carrier, Swisscom, launched a simple but revolutionary new mobile tariff, Natel Infinity. Infinity is a speed-based tariff that comes in the versions XS, S, M, L, and XL, which represent download speeds ranging from 200 kbit/s to 100 Mbit/s. Prices range from CHF59 to CHF169 per month (€49 to €139). Significantly, the tariff throws in unlimited national voice, SMS messaging services, and data usage without any additional charge (XL even comes with unlimited international calls to most destinations and SMS).
The idea is simple: The greater your urge for fast mobile services, the more you pay — irrespective of which apps you use and how you wish to communicate. All that matters is speed. In this respect, Swisscom has replicated for the mobile world a tariff approach that is already fairly common in the fixed-line world. I believe this move by Swisscom is noteworthy in two respects:
· It effectively pulls the rug from under the OTT voice and messaging services like WhatsApp and Tango by removing the arbitrage potential created by time- or distance-based pricing schemes.
· It brings in line capital spending on and actual demand for network infrastructure capacity.
But speed-based pricing is a clever move as:
· Users always experience “speed” but don’t feel “data download.”This makes it easier for carriers to emphasize their comparative advantage vis-à-vis over the top providers of voice and messaging services, as well as “lame” carrier peers with a poor-quality network infrastructure.
Product strategists in various industries tend to dismiss telcos' role in service innovation, focusing instead on disruptors such as Google and Apple. It is true that new entrants and over-the-top (OTT) players have bypassed carriers, reducing their role to providing bit pipes.
Product strategists at telcos are suffering from what we are calling “bit pipe syndrome.” Didier Lombard, the former CEO of France Telecom, summed this up well when he declared back in 2007, "I am not building freeways for Californian cars."
Since then, many observers have claimed that telcos will die if they do not reinvent their business models, leveraging their networks as a service. This case is overstated: Reports of operators' deaths are exaggerated.
No doubt telcos are increasingly being commoditized to the point that they will become utilities, but there is no shame in monetizing networks — carriers' bread and butter for a few more years. Fundamental connectivity remains a valuable service — all the more if product strategists focus on gaining more pricing power and delivering more segmented offerings, either on their own or with new strategic partners.
When it comes to product innovation, operators still have key assets to leverage — particularly their billing capabilities — to become trusted partners for consumers and third parties. Some global carriers have a strong presence in emerging countries, and they will have more sway in shaping the types of content services that the world consumes.
Product strategists at operators have the assets to continue to differentiate their offerings and innovate in a disrupted telecom ecosystem. I am not saying this is not challenging and extremely difficult, but here are some approaches that could work: