Pricing for Mobile Data Services Considering Service Evolution and Change of User Heterogeneity

Abstract

The recent increase in mobile data traffic has resulted in service quality problems. Although an economic approach to control congestion can be achieved by pricing, the current pricing schedule of mobile data services instead causes smartphone users to create more traffic. We establish a pricing model based on the distribution of demand types among heterogeneous users to improve the current tariff structure; our method mixes usage-based and fixed-fee pricing schemes. The results derived from the application of this model to survey data on willingness-to-pay for mobile data service demonstrate that the provider can decrease the amount of data traffic and increase the expected revenue by lowering the price for a unit of data and raising the fixed-fee level for unlimited service. The model also explains the changing weight of usage-based and fixed-fee pricing schemes by considering shifts in the type distribution through service evolution and proposes pricing strategies for future communications services.