Remember when wireless service providers like AT&T and Verizon offered unlimited plans? And then they tried to get rid of them and substitute pooled-data plans instead? Today, we’ve come full circle. Providers are re-introducing unlimited plans to the market, which gives rise to a few questions. Why did that happen? Is there a benefit to subscribing to the latest offering? What about other ‘unlimited’ subscriptions? Microsoft Teams Voice, Zoom, Cisco Webex, and just about every other provider of voice services now has their own version of ‘unlimited.’
Unlimited plans and licenses are attractive because they reduce the need for monitoring, managing and auditing the underlying usage. As an example, subscribing to Cisco’s unlimited Bridge Country Call-Me/Call-Back License for Webex for $7.50 allows an enterprise customer a predictable fixed monthly cost. Doing so simplifies budgeting and makes reviewing invoices easy. But what is the true cost of this simplification? Unfortunately, the answer lies in that underlying usage.
Does Your Actual Usage Align with the Cost of Unlimited Plans?
Using the Cisco/WebEx example above, suppose an enterprise customer has 10,000 subscribers to the license. The monthly cost is $75,000. If those 10,000 users consume zero minutes of Call-Me/Call-Back voice services, then the customer has paid $75,000 and gotten nothing in return. If those 10,000 users consume 1 million minutes of voice services that month, then the cost per minute is $0.0750 – a very expensive rate in today’s market.
However, if the average usage is 10 million minutes per month, then the cost per minute is a relatively competitive $0.0075. Just how reasonable is 10 million minutes? Well, let’s say on average all 10,000 users have one meeting per week, lasting 30 minutes, with 5 participants and all 5 using either Call-Me or Call-Back access. The formula is 10,000 x 4 x 30 x 5 = 6 million minutes. The same analysis can be done on any usage-based service where a supplier packages it into an ‘unlimited’ offer.
Two Reasons Why Providers are Bringing Unlimited Plans Back to Market
So, why did unlimited plans disappear? I don’t have definitive insight, but I suspect the carriers began sunsetting unlimited plans soon after the launch of the iOS App Store in 2008. Wireless service providers (WSPs) feared the new iOS apps would overwhelm their cellular networks and therefore introduced plans that would limit a subscriber’s data or increase a subscriber’s cost when they went over the plan allowance.
WSPs have now re-introduced unlimited plans for two reasons. The first is experience. They now have 10+ years of experience with average data consumption per user. As such, they can establish a list price that covers the cost of that average and for an enterprise customer, they can look at the historical average consumption and discount the cost to a level that continues to cover their costs (and provide a healthy margin).
The second reason is WSPs have implemented throttling that allows them to restrict data throughput when a user uses too much ‘unlimited’ data. The cost of unlimited data plans can be calculated in the same way as the earlier example. If an enterprise has 10,000 cellular subscribers but the average data consumption is only 1.8GB per month, is it more effective to buy a $45 unlimited plan or buy a $42 3Gb pooled plan? The 3Gb pooled plan has plenty of room for occasional spikes in usage but saves the enterprise $30,000 per month.
Enterprise customers should always analyze the actual usage of a service against the cost of an unlimited plan offer to determine if the offer is competitive with market. As the examples above illustrate, unless usage truly warrants an unlimited plan, companies are at risk for material overspending – easily six figures or more – over the course of their provider agreement.
If you need help analyzing actual usage against carrier/provider plans, NPI can help.