II BUSINESS 101: PRICE AND QUANTITY FIXATIONS The Wireless Data Handbook, Fourth Edition. James F. DeRose Copyright © 1999 John Wiley & Sons, Inc. ISBNs: 0-471-31651-2 (Hardback); 0-471-22458-8 (Electronic) 87 8 FITTING APPLICATIONS TO PUBLIC OFFERINGS 8.1 NETWORK PRICE POSITIONING We are always interested in simple ways to classify complex choices. An initial application fit technique for terrestrial, two-way wireless data networks is shown in Figure 8-1. If traffic activity is brisk but message lengths are short, public packet switched networks are a reasonable business choice. If traffic activity is modest but message lengths are long, data over cellular channels are a better fit. This category includes pure (image) facsimile. If the application requires both high activity and long messages, a private network is appropriate. Public packet switched and cellular systems can be extremely price competitive with each other for application profiles featuring both medium activity and message lengths. 8.2 REPRESENTATIVE PUBLIC PACKET SWITCHED NETWORKS The steep line of Figure 8-1 is only representational. What is the real shape of todays public packet switched curve? List prices for many carriers are easily revealed with a Web search. Unfortunately, useful comparative evaluation of list prices is deeply flawed for at least five reasons: 1. Some carriers count only user traffic that is successfully delivered. Others count all traffic in the air, including protocol overhead and retransmissions. 2. Some carriers make no distinction between peak and nonpeak hours. For carriers who do make this distinction, the peak hours are rarely in perfect alignment. The Wireless Data Handbook, Fourth Edition. James F. DeRose Copyright © 1999 John Wiley & Sons, Inc. ISBNs: 0-471-31651-2 (Hardback); 0-471-22458-8 (Electronic) 3. Some carriers are truly nationwide with pricing insensitive to distance. Others have pricing regions or other long-distance charges. 4. Some carriers have discounted bulk rate pricing, 1 bundled offerings, 2 and special tariffs. 3 5. Some carriers offer special, all-you-can-eat pricing for specific application types they are trying to encourage. These are rarely the same applications, making comparisons difficult. Even more frustrating, many carriers change at least some of their parameters from plan to plan. Three very different pricing alternatives will be examined to set the stage for useful comparisons. 8.2.1 ARDIS Examples The ARDIS philosophy is to charge only for user information that is successfully transmitted. All necessary registration messages, retransmissions, and protocol overhead associated with its airtime protocols are absorbed, not billed. ARDIS has numerous nationwide pricing plans, which cover a reasonable range of applications, but all are skewed to favor short message lengths. 8.2.1.1 Short-Message Service ARDIS exploits a characteristic of its airtime protocol to offer low-cost pricing for telemetry messages. The charge for message lengths up to 64 bits is $0.03, regardless of time of day. 4 This low cost is especially Figure 8-1 Network types by message characteristic. 88 FITTING APPLICATIONS TO PUBLIC OFFERINGS useful in fixed-position security alarm or vending machine applications as well as mobile applications such as vehicle positioning, perhaps accompanied by key status information on the vehicle itself. The list price for short-message service has a monthly minimum airtime charge of $20. This charge is levied for a truck cruising down the highway, free to transmit at any instant, generating no billable user traffic, but registering on one base station after another on its way across the country. If the truck device has a time-of-day clock, or if the device is actually a fixed-position vending machine or burglar alarm, a special price is negotiated. In the truck example, the device must sleep without registering on the network. It can awaken once or twice a day to report its position and, say, whether it is attached to a trailer. This type of contract permits the minimum monthly charge to fall below $4, reflecting (mostly) the administrative costs of billing a user. 8.2.1.2 Basic Message Unit Pricing ARDIS standard, low-volume pricing plan is shaped by the actual cost of transmitting a user packet through the air. Even if there are only 10 user bytes present, there are tangible costs associated with getting them airborne. The costs grow only gradually after that, until the packet achieves its maximum length and requests an acknowledgment. The pricing length of the packet is set at 240 bytesan artifact of the MDC4800 protocol. The Basic Message Unit 5 plan is also time-of-day sensitive, seeing its peak costs between 7 AM and 6 PM local time. During the peak hour the list price empty message cost is $0.06. The cost per byte, and they are counted one by one, is $0.0003. Obviously, the cost of a user message will vary according to how much user information it contains, from $0.06 when empty to $0.13 when full. For the individual user, without any volume pricing, the peak-hour monthly cost at a variety of average message lengths and traffic volume is shown in Figure 8-2. Assume a light usage profile with an average message length of 180 bytes and a combined total of 210 messages sent and received each month. This solitary peak-hour user would pay nearly $28 per month. Figure 8-2 ARDIS basic message unit charges: peak-hour list prices. 8.2 REPRESENTATIVE PUBLIC PACKET SWITCHED NETWORKS 89 ARDIS markets to high-volume vertical markets. These subscribers simply do not live with list prices. Minimum monthly charges drop, as do both message unit and byte prices. During the peak hour the volume user with the same profile would typically pay ∼ $19 per month, as shown in Figure 8-3. 8.2.1.3 DataPak Pricing There are three distinct DataPak plans 6 : 1. AirMobile Mobile Office covering cc:Mail, Lotus Notes, and Mail on the Run! 2. RadioMail (this service was terminated in July 1998) 3. IKONs MobileCHOICE for Windows CE All three DataPak plans break free of the 240-byte packet and peak-hour considerations. Instead they are tailored to four monthly character usage levels: 20, 150, 350, and 750 kbytes. Between the price steps, which have a flatter slope than the Basic Message Unit plan, the incremental price per kilobyte is $0.54, very close to the price of a perfectly packed, 240-byte basic message unit. On the surface this kilobyte pricing appears to be 510 times higher than some competitive airtime prices. In reality it is not nearly that bad, but clearly the user is being charged for application function, not just airtime. A summary of the three DataPak plans is provided in Table 8-1. A visual comparison is shown in Figure 8-4. 8.2.1.4 Two-Way Messaging Services ARDIS price plan for its Inter@ctive Pager is reminiscent of the Basic Message Unit offering. Once again the number of messages is the key accounting unit, and each message may be up to 240 characters in length. However, there is no attempt to count bytes within a message. If you send or receive two characters, say, OK, the message charge is the same as 240 characters. A 241-character message counts as two messages. The notion of peak/off hours is discarded. The plan assumes nationwide coverage is required; no break is given for metropolitan or regional use. Two activity levels are fixed, along with Figure 8-3 ARDIS basic message unit charges: peak-hour discounted prices. 90 FITTING APPLICATIONS TO PUBLIC OFFERINGS several options, including Internet access for other E-mail offerings and transmission of text to a facsimile machine. The Two-Way Messaging Service plan is summarized in Table 8-2. 8.2.1.5 “All-You-Can-Eat” Pricing Virtually every carrier has a particularly enticing price plan for selected services it wishes to promote. The most attractive ARDIS offerings are identical: $49.95 per month for unlimited usage for one full year. After that promotional entry, prices return to the normal list level. During the second quarter of 1998 the services covered included: 1. Two-Way Interactive Messaging 2. Mail on the Run! 3. RadioMail 4. Ikon MobileChoice Within each plan there are often other enticements: lower device costs, free Internet access, or reduced-price operator-assisted paging; see Table 8-2. Table 8-1 ARDIS DataPak pricing Kilobytes per month 20 150 350 750 DataPak Plans AirMobile (cc:Mail, Lotus Notes) $19.95 $49.95 $99.95 $189.95 RadioMail $33.95 $63.95 $113.95 $203.95 MobileCHOICE (Windows CE) $29.95 $69.95 $127.95 $227.95 Additional kbyte $0.54 $0.54 $0.54 $0.54 Figure 8-4 ARDIS DataPak pricing. 8.2 REPRESENTATIVE PUBLIC PACKET SWITCHED NETWORKS 91 8.2.2 BSWD Examples BSWD has multiple price plans. The Standard Plan is usage based, with both peak and off-peak rates. At its optimum point it delivers characters for about $0.24 per kbyte, roughly half that of the ARDIS Basic Message Unit or DataPak plans. The Standard Plan is often the strawman tariff quoted to corporate customers and is accompanied by steep discounts tied to subscriber quantities and contract length. In October 1993 BSWD (then RAM Mobile) announced a simplified packets-carried plan 7 for its E-mail users. This plan was insensitive to time of day and had the very first all-you-can-eat provision for those power users willing to pay $135 per month. This price point became economical when usage exceeded 700,000 bytes per month. The first CDPD pricing plan, that of BAM in April 1994, was structured to lie literally on top of this BSWD plan. BSWD prices have mutated since 1993, and most customers are given special bids instead. The most common list price plans in the second quarter 1998 were those that competed with ARDIS DataPak and Two-Way Messaging plans. 8.2.2.1 Wireless Lotus Notes BSWD announced Motorola AirMobile support for Lotus Notes in January 1996. 8 Every effort was made to simplify the pricing plan; there was no peak-hour distinction, and no need to be aware of an arbitrary packet length. Four usage levels were established, based solely on actual data sent. These tiers, with BSWD descriptors, are shown in Table 8-3. The Lotus Notes service represents a price increase from the earlier packets carried plan in that the $135 mark is reached at 500, not 700, kbytes. Further the unlimited usage has been dropped and the optimum price per kilobyte raised. However, there is specific user function provided in this plan, which always brings a price premium. 8.2.2.2 WyndMail Pricing BSWD has several E-mail offerings. Examples include the now defunct RadioMail, as well as DTS Zap-It (purchased by GoAmerica Table 8-2 ARDIS two-way messaging services Plan 100 Plan 250 Number of messages (240 bytes) 100 250 Monthly fee $34.95 $49.95 Incremental charge/message $0.35 $0.35 Options Operator-assisted messaging $10/month + $0.40/message $10/month + $0.40/message Internet services $6.00 per month Included Facsimile, per page $1.00 $1.00 92 FITTING APPLICATIONS TO PUBLIC OFFERINGS on July 14, 1998) and WyndMail, available only on BSWD. WyndMail is feature rich and has many two-way paging, text facsimile capability and textspeechtext functions. It is usage based and ignores peak hours. WyndMail is very much in tune with BSWD coverage limitations and offers an optional high gain antenna to boost signal strength. 9 A very simplified summary of the pricing plan is shown in Table 8-4. 8.2.2.3 Two-Way Paging BSWD has created a rapid sequence of pricing plans for its interactive paging service. The earliest emphasis was regional in nature, with sharp price breaks if one did not employ the nationwide capability. The May 1998 promotional plan 10 ignored the regionalized structure in favor of reduced message fees and higher message counts. Like ARDIS, BSWD uses a message-based plan, but the maximum size of the message is doubled: 500 bytes. Discounts are published depending upon user quantity, and pager rental options are also offered. One restriction that existed throughout 1998 was that BSWDs Gateway would not permit entry to all E-mail services employing the Internet. Access to ARDIS 2way.net was specifically blocked by BSWD, for example. A simplified summary of the customer-owned promotional plan is shown in Table 8-5. 8.2.3 CDPD Examples 8.2.3.1 Low-Volume Usage The general CDPD philosophy is to charge for all traffic that flows through the air, including TCP/IP overhead, headers, forward error Table 8-3 BSWD Lotus Notes plan Tier 1, Occasional Tier 2, Frequent Tier 3, Typical Tier 4, High traffic Kilobytes per month 100 200 275 500 Monthly fee $25.00 $66.00 $85.00 $135.00 Additional kbyte $0.35 $0.33 $0.31 $0.27 Table 8-4 WyndMail price summary Plan 1 Plan 2 Plan 3 Plan 4 Kilobytes per month 50 400 800 1,200 Monthly fee $19.95 $59.95 $89.95 $119.95 Additional kbyte $0.49 $0.39 $0.35 $0.25 Facsimile, per page $0.25 $0.25 $0.25 $0.25 8.2 REPRESENTATIVE PUBLIC PACKET SWITCHED NETWORKS 93 correction overhead, and even retransmissions. In practice, this philosophy only holds together for volumes less than ∼ 1.5 Mbytes per month. In these cases care must be taken in competitive evaluations; a CDPD byte is simply not the same as, say, an ARDIS byte. ARDIS DataPak prices become quite uninteresting after ∼ 750 kbytes per month. Most CDPD offerings are just coming into their own at that point. As 1996 began, GTE Mobilnet became the price leader when it slashed prices of CDPD service. 11 The key GTE focus was at 1000 kbytes per month, a price point where it is still competitive. But GTE has not refreshed its prices; lowering them did not definitely stimulate interest in wireless data 12 as hoped. In 1997 BAM became the clear price leader 13 and remained so until May 1998. Then AT&T Wireless announced new Wireless IP (CDPD) rates that generally undercut BAM. 14 The usage-based AT&T list prices are $0.05 per kbyte when volumes are greater than 200 kbytes per month. After usage levels rise above ∼ 1120 bytes per month, the user becomes a candidate for one of two unlimited usage plans. Figure 8-5 is a comparison of the three carriers offerings at volumes less than 1.5 Mbytes per month. AT&Ts local offering is emphasized so that it is easier to thread through the maze of dots. It is interesting to read the words accompanying these price offerings. GTE Mobiles Bronze plan 15 is designed for low-volume applications such as remote meter reading, vehicle location tracking, and automated dispatch. This description encompasses an unusually broad range of applications and makes comparisons difficult. Meter reading usually demands a very low byte count, say 46, with very low frequency of use, perhaps once per month. The automated dispatch profile usually has outbound message lengths of ∼ 120 bytes, with an inbound return averaging ∼ 60 bytes. Moreover, dispatch activity is usually brisk, with some kind of traffic occurring many times a day (even several times an hour). Both BAM and GTE Mobiles list minimum monthly charge is ∼ $15, which surely must be lowered for, say, a volume meter reading application. While AT&T Wireless Table 8-5 BSWD interactive paging service pricing: Customer-Owned Equipment Number of messages (500 bytes) 200 400 Monthly fee 150 subscribers $24.95 $34.95 51100 subscribers $24.25 $34.25 101150 subscribers $23.50 $33.50 151+ subscribers $23.00 $30.00 Incremental charge per message $0.25 $0.25 Options Operator-assisted messaging $0.50 $0.50 Internet services Unclear Unclear Facsimile, one page $1.00 $1.00 94 FITTING APPLICATIONS TO PUBLIC OFFERINGS undercuts both, starting at $8 per month, no meter reading application is currently known to exist on CDPD. 8.2.3.2 High-Volume Usage This is the area of most dramatic change. AT&T Wireless now undercuts BAM by nearly 40%. The difference grows even greater should the usage grow beyond 4 Mbytes per month, the best BAM price point. GTE Mobile clearly does not choose to compete in the very high volume game. It begins to give up at 3 Mbytes per month; at 4 Mbytes per month its list prices are roughly double that of BAM and 2.5 times that of AT&T Wireless. A simplified summary of the prices in this high-volume area is shown in Figure 8-6. 8.2.3.3 “All You Can Eat” Plans 8.2.3.3.1 Bell Atlantic Mobile BAM was exceptionally aggressive in establishing a $55 flat monthly fee plan for unlimited access to the Internet, or company intranets, Figure 8-5 Representative CDPD list prices: low-volume usage. Figure 8-6 Representative CDPD list prices: high-volume usage. 8.2 REPRESENTATIVE PUBLIC PACKET SWITCHED NETWORKS 95