NDLI: Empirical Evaluation of Fair Use Flat Rate Strategies for Mobile Internet

Content Provider	Springer Nature Link
Author	Fritz, Marcel Schlereth, Christian Figge, Stefan
Copyright Year	2011
Abstract	The fair use flat rate is a promising tariff concept for the mobile telecommunication industry. Similar to classical flat rates it allows unlimited usage at a fixed monthly fee. Contrary to classical flat rates it limits the access speed once a certain usage threshold is exceeded. Due to the current global roll-out of the LTE (Long Term Evolution) technology and the related economic changes for telecommunication providers, the application of fair use flat rates needs a reassessment. We therefore propose a simulation model to evaluate different pricing strategies and their contribution margin impact. The key input element of the model is provided by so-called discrete choice experiments that allow the estimation of customer preferences.Based on this customer information and the simulation results, the article provides the following recommendations. Classical flat rates do not allow profitable provisioning of mobile Internet access. Instead, operators should apply fair use flat rates with a lower usage threshold of 1 or 3 GB which leads to an improved contribution margin. Bandwidth and speed are secondary and do merely impact customer preferences. The main motivation for new mobile technologies such as LTE should therefore be to improve the cost structure of an operator rather than using it to skim an assumed higher willingness to pay of mobile subscribers.
Starting Page	269
Ending Page	277
Page Count	9
File Format	PDF
ISSN	23637005
Journal	Business & Information Systems Engineering
Volume Number	3
Issue Number	5
e-ISSN	18670202
Language	English
Publisher	SP Gabler Verlag
Publisher Date	2011-08-13
Publisher Place	Wiesbaden
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Mobile Internet Discrete choice experiments Fair use flat rates Computing Milieux Business/Management Science Science Economics/Management Science
Content Type	Text
Resource Type	Article
Subject	Information Systems

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