When mobile operators wanted to encourage their customers to use their mobile phones instead of their fixed landline phones, some introduced special pricing plans that offered discounted calls when at home or nearby. Sometimes called Fixed Mobile Substitution (FMS), these low calling rates encouraged users to make the switch. I believe this approach makes no sense for operators who offer mobile broadband data at home - unless they do so using femtocells.

Large operators such as Telefonica O2 have had a lot of success (as this report from 2005 indicates) , with high takeup in countries such as Germany where there are large differences in prices between fixed and mobile networks.

The technology isn’t straightforward

Often it can be difficult to narrow down individual homes or office locations to a single cellsite. Often, the same area may be served by two or three potential sites, each of which may have 2G and 3G options. The situation becomes more complex during cellsite outages, when another more distant tower may take over. Operators have to put in place systems to register and map customer locations to their cellsites, update the mapping each time a new cellsite or radio configuration is changed, and implement these in both prepaid and postpaid billing systems.

When customers then call in to complain about being charged incorrectly for any reason, customer care teams need to have the information at their fingertips about what actually happened and/or may simply credit the customer with additional minutes – all a costly process.

I’ve seen even more complex tariff plans, such as one where calls to fixed/landline phones in the area you are calling from are discounted. So if you visit a city 200 miles away and make calls to people/businesses in that city, they are discounted – again encouraging you to avoid using the fixed/landline phone but quite complex to implement and for the customer to understand.

A simpler alternative

Some network operators chose not to go down the route of home zone tariffs for voice. Instead they simply provided a large number of bundled minutes, up to and including unlimited use, to encourage more use of the mobile phone. Since the incremental cost of making or receiving a call on the mobile phone was zero for the end user – you had already paid for it in your bundle/plan – this meant it was effectively cheaper than using a landline in many cases.

Since the cost of delivering a minute of use on your mobile phone is pretty much the same wherever you are, there is no reason from a cost perspective to reduce the price. Unlimited bundles have been very popular. In the US for example, average minutes of use for mobile phones is around 824 minutes a month (includes both incoming/outgoing calls) with T-Mobile reporting an average monthly usage of some 1120 for their customers.

Applying the home zone tariff for data services

Some operators are said to be considering providing a home-zone tariff plan for mobile broadband data.

Frankly, I think this is crazy. They should offer lower (or free) rates when using your home femtocell for data instead.

Analysts are forecasting a strong increase in wireless data traffic in the years ahead as more and more people use smartphones and applications. Video is seen as a particularly large contributer. Mobile networks will be overwhelmed by additional traffic and are already putting in place mechanisms to limit excessive use, such as capped data plans, traffic shaping and Wi-Fi offload.

The cost of delivering mobile broadband data services inside homes is said to be up to 10 times that of providing similar services outdoors, because it takes more capacity from the basestation to focus the signal to reach indoors (the signal may have lower modulation scheme, more coding bits to protect the data quality – a bit like talking slowly and clearly when communicating to someone in a noisy environment). So commercially it seems strange to me that network operators would want to discount prices to use the same service that costs more to deliver.

Instead, by encouraging mobile data users to install and use a femtocell they can offer discounted (or free) data traffic through it when at home/in the office, relieving the capacity from their outdoor cellsites which can continue to provide wide area coverage.

For those users that don’t have the choice of a fixed/wireline broadband service, perhaps there is at least a small premium that can be charged (typically by having lower data consumption caps per month for the same price point). This is justified by the convenience of not requiring a long term contract, immediate service as soon as you buy it in the shop, that it can be used in many places (nomadicity) and works even when you are moving in a train or car (mobility).

Summary

Home zone mobile data tariffs don’t make sense where this is provided from external cellsites – it costs more to deliver and would be provided at a discounted price. Instead, femtocells offer a cost effective means of providing discounted and convenient mobile data in the home or office, freeing up the more expensive outdoor network to take traffic that requires it.