Flat-rate mobile data pricing doomed, says Coda

Carriers will be forced to move to tiered pricing for mobile internet access, according to Coda Research Consultancy.

The company forecasts that cellphone data traffic in the US will hit 327PB per month by 2015, rising at a compound annual growth rate of 117 percent. This means, says the firm, that tiered pricing for mobile internet access will become unavoidable.

At the core of this growth is mobile video. Rising at 138 percent CAGR to reach 224PB per month in 2015, mobile video will form two thirds of mobile handset data traffic.

“Will the carriers be able to cope? Peak capacity is the main issue rather than capacity in general. This is particularly problematic in high-density cities such as San Francisco, Boston, New York and Phoenix,” says Steve Smith, co-founder of Coda.

“As carrier networks now stand, network utilization will reach 100 percent in 2012 during peak times.”

While flat-rate pricing has helped drive mobile internet adoption, says Coda, as smartphone penetration rises and as carriers roll out 4G, they will have to move toward tiered pricing.

It won’t be easy to sell this to consumers, though, says Smith.

“Carriers have found predicting data usage difficult. How much more difficult will this be for users? Ask the average mobile subscriber how much usage 100mb will give them and it is almost certain they won’t know. Nor do people want to be constantly on watch for the amount of traffic they are creating as they go through the month,” he warns.

“Carriers are clearly going to have to do some creative thinking about how to sell tiered pricing to consumers. Alternatives to download limits may be around speed and time of day.”

Mobile internet and handsets in the US, with forecasts to 2015 is here.