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Why Your Telco Needs to Cap Your Mobile Internet

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This year, we see both telcos started admitting that there needs to be a cap on our mobile internet. Globe is sunsetting SuperSurf into GoSurf while Smart has recently introduced All-Month Surfing.

Both mobile data plans have a soft cap (Globe has 5GB and 10GB while Smart has 3.5GB, 8GB, 10GB and 18GB), something we’ve only experienced this year. This is one reason why the Department of Justice has published an advisory against the practice of throttling and data caps.

The original reason behind the imposition of data caps is network congestion. Well, we now know that it if subscribers pay more, they are given mo data allocation which debunks the idea that it’s merely congestion.

Telcocap • Why Your Telco Needs To Cap Your Mobile Internet

The real and more logical reason — business growth. If you read the recent investor reports of PLDT and Globe, you will notice that their year-on-year revenues are either flat or declining. If you look closer, the revenues from SMS and voice calls are the ones that went down significantly while revenue from data/internet is growing.

Subscribers are now using messaging apps (WeChat, Line, FB, iMessage) more rather than traditional SMS while voice calls are now leaning towards Viber or Skype rather than traditional phone calls. The user behavior is even more prominent with NDD and IDD calls.

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The shift in business growth is expected as more and more Filipinos are becoming connected (35% internet penetration this year) to the internet while smartphone penetration has grown to 15% with 30% adoption on new purchases.

The trade-off in services, SMS and voice shifting to data-based communication, poses a problem. So, we followed the money-trail and investigated. Here’s why:

1) Data services (mobile internet) is supposed to be a new product line. It’s even classified as VAS (value-added service) and supposed to augment the existing revenue streams coming from SMS, voice calls and fixed line.

2) Messaging Apps are eating into the SMS and voice usage of active subscribers. This cannibalization of existing services reduces its year-on-year growth as more and more people use the internet. While telcos earn more from data subscription, they are losing money from reduced usage of voice and SMS.

Realme Philippines

3) The risk in this shift in subscriber behavior is that loses in SMS and voice might be bigger than the gains in the data front. As such, as more and more people use data, there’s a net negative effect on revenue growth.

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4) To compensate for this cannibalization, telcos need to push data services so that the growth in that service will compensate in decline of core services.

5) However, providing “unlimited” data services will mean that revenue potential from that service will eventually hit a ceiling. That ceiling used to be Php999 a month per subscriber.

In theory, once all subscribers are paying that amount for unlimited data, there’s no more room for growth. What used to be multiple revenue streams will not be just be from one single source (e.g. Php800 from voice, Php500 from SMS and Php999 from data will become just Php999 from data since it can carry voice and SMS for free).

6) As a business owner, that is a scary future. Once the market is saturated, there will be no more room for growth. The idea that “as subscribers consume more, they pay more” in the era of voice and SMS will not hold true once they shift to data.

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7) As the business owner, what do you do? Don’t offer unlimited mobile data. Keep the old model of voice and SMS — pay more if you use more.

That’s the reason why your fixed line internet (DSL) doesn’t really pose a huge threat compared to mobile internet, thus, the idea of capping DSL isn’t on the table. It’s the smartphone users that are changing their consumption behavior.

Since telcos are publicly listed companies, they need to perform well or else investor confidence goes down, share value goes down and market capitalization shrinks. Now that’s a scary thought. The sooner we realize that as subscribers, the sooner we understand that it’s where this business is heading.

So yes, it’s all about the money.

From the business perspective, the revenue model for VAS (specifically mobile internet) needs to be changed in order to survive and continue the uphill growth.

As consumers, what we can do is (a) not give them your money and/or (b) lobby for better legislation on net neutrality.

Avatar for Abe Olandres

Abe is the founder and Editor-in-Chief of YugaTech. You Can follow him on Twitter @abeolandres.

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Renz Path
3 years ago

I like that you shared with us that telcos recognized the need for the mobile internet to have a cap like a soft cap that both Globe and Smart have. As I am not really a tech-savvy character that idea is something that will take time for me to absorb fully. However, if that is the case, then all the internet service providers must provide a cap or have a cap as a matter of compliance as well because more and more are becoming connected to the internet.

kremtopad
kremtopad
4 years ago

What we’re paying is for the speed. Pinagkakakitaan nila yung hindi naman sa kanila. Internet is free, guys.

john
7 years ago

If there’s something us consumers should complain about, it’s the false advertisements that Smart and Globe continuously doing. There’s no such thing as “unlimited” in mobile internet world, Globe and especially Smart should stop telling that to people because most of us don’t spend time researching about the product before we buy.

john
7 years ago

dear writer,

It’s not all about business at all, it’s all about network traffic and providing better network service. Mobile internet is not designed for heavy usage, if you like downloading videos or large files you should subscribe to DSL because DSL providers don’t have to worry about network traffic.

In fact I’m surprised that there’s no data capping here in the Philippines until this year, maybe that’s one of the reasons that Philippines has a slow mobile internet. And I’m glad that they implemented data capping to provide better mobile internet here in Ph..

UGLYBUSSINESS (DTI?)
UGLYBUSSINESS (DTI?)
7 years ago

Hehehe, They knew they had the wrong moves…
Now they LEARN…

NTC and DTI (You should be the one to protect us)? who should win?

Them or the consumers?

Name: pwnishable
Name: pwnishable
7 years ago

Ok lang kung may cap pero lakihan naman nila. bakit? kasi as a gamer, ngayon kasi naguumpisa na ang 4K resolution. Baka abutin n ng 50GB ang isang game in 4k resolution at high quality audio same din sa movies mapasteaming or download. Disc will become a thing in a past and Cloud services is getting more popular. Sa Gaming services like PSN, Steam, Xbox Live ang lalaki ng file size ng mga AAA titles at Downloadable contents kahit 720p lang ang resolution and the price is cheaper kung idadownload mo na lang ung game instead of buying disc. kung bibigyan ka ng 12GB lang, kulang na kulang talaga. Pagdating naman sa illegal stuff at meron kang unli data, abusong abuso talaga ang mangyayari. Sino ba namang tao ang ayaw ng free stuff sa net, di ba.
In the end, Telcos should really think ahead, internet data it is becoming a basic necessity, sa bahay, sa school, sa trabaho. They really need to catch up.

steelicon
steelicon
7 years ago

http://visually.visually.netdna-cdn.com/AdvertisingvsReality_4e5e4cbd77c23_w550.jpg

Liars all. WYSINWYG.

InsideJob
InsideJob
7 years ago

There is NO NETWORK CONGESTION. If the internet is truly congested, every form of accessing the net will be very slow.

Globe and Smart are capping data because they are only “renting” from PLDT to use the internet. Smart only capped their data recently so as not to attract attention (say MVP, Smart, and PLDT in a sentence).

It’s all about the money. More data usage by customers, Globe pays more, less profit for Globe.

x
x
7 years ago

I DONT CARE WHAT THE REASON IS ON CAPPING,JUST GIVE US WHAT WE WANT, INVENT SOMETHING, FIND A WAY TO GIVE US THE UNLIMITED INTERNET YOU ADVESTISED. DAPAT SABIHIN NYO “UNLI UNTIL THIS OR THAT” OR JUST SAY LIMITED INTERNET OR UNLI (THEORETICALLY).

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