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Should wireless carriers protect residential voice subscribers from high overage and underage charges? Insights from the Canadian telecommunications market

  • Wong, Ken Kwong-Kay
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    Prior research suggests that wireless subscribers often overpay for their services due to subscription of rate plans that are not financially optimized. Some wireless carriers have responded by introducing a new type of plan called "Flex", which gives subscribers the best service rate based on their actual usage. In Canada, this kind of cost-minimizing plan is only available for 3G data service. Should it be extended to customers who are using the "bread-and-butter" voice service? To what extent do they select inappropriate rate plans? This paper explores these issues by analysing subscribers' rate plan suitability with a focus on their revenue implications. Based on a 44-month study of 8146 postpaid wireless subscribers, this paper reveals that optimal rate plan subscribers contribute approximately 50% less revenue than those with non-optimal plans. Wireless carriers should be prepared to sacrifice the short-term revenue in exchange of loyalty by having subscribers on financially optimized plans.

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    Article provided by Elsevier in its journal Telecommunications Policy.

    Volume (Year): 34 (2010)
    Issue (Month): 8 (September)
    Pages: 461-481

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    Handle: RePEc:eee:telpol:v:34:y:2010:i:8:p:461-481
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