Carriers call for value-based pricing with 3G

At the JavaOne developer conference in San Francisco this week wireless operators and mobile software infrastructure vendors are unveiling so-called value-based pricing schemes on their packet data networks as an alternative to charging users on the basis of per kilobyte of downloaded data.

The prime example of value-based pricing is in Europe where carriers charge 10 cents per SMS message. With the rise of J2ME applications that are small enough to reside on the cell phone, however, the problem is how to charge users that are not connected to the network and only accessing an application locally on the handset.

It appears that Sprint and others have overcome the problem of charging for offline use. Sprint calls it BOBO (billing on behalf of others) and is currently testing this and a variety of other pricing schemes, said Nancy Sherrer, a spokeswoman with Sprint, based in Overland Park, Kan. Sprint will offer value-based pricing schemes with its applications in the second half of this year when it launches its 3G network, Sherrer said.

By placing a counter in each application, even if a user is playing a game on the handset as he or she flies coast to coast or if a salesperson is checking an SFA application for an address offline, they can be charged for usage.

“Think of it as gong to an arcade and paying 25 cents for a game. It’s the same experience,” Sherrer said.

Other ways Sprint may charge include a subscription basis or selling the application outright.

“User will be able to go to a Sprint portal and download J2ME applications,” noted Sherrer.

Tira Wireless, a publisher of J2ME applications, is currently working with operators in the United States and Europe to deploy applications that have a usage counter built in.

“We can help the carrier bill by action or item. The next time the user connects to the network, the counter tells the carrier how many times the application was accessed and for how long,” said Tony Davis, CEO of Tira Wireless in Toronto.

Tira Wireless offers itself as a middleman that sits between the carrier and developers. For the carriers that sign up, Tira tests and guarantees the quality of the application and provides call centre support and software infrastructure to create unique ways for operators to bill for applications even when they are only used locally. Tira Wireless offers developers an entry to the major carriers to have their products seen and tested.

Tira Wireless is occupying a new business space, according to one industry analyst.

“A one-man shop with a Java application can’t negotiate with the carriers. On the other side, there is a need for quality assurance. A middleman that has the relationship with the carrier to handle billing and other components is what’s needed, but in the CDMA market that niche may be filled by Qualcomm,” said David Hayden, CEO of MobileWeek in Palo Alto, Calif.

Eventually, Sun will also have to have some roll in getting carriers and developers together, Hayden added. “At present Sun is not offering an effective way to get its Java developers before the carriers,” he said.

Nextel also has a J2ME site with about 60 downloadable applications, according to Karen Lien Miller, a spokeswoman for Nextel in Itasca, Ill. But Nextel charges either by outright purchase or on a subscription basis.

The problem that carriers are looking to solve is that charging for raw data or per minute does not work, according to Davis.

“The user has no way of tracking how much data they downloaded, and at the end of the month they may be hit with a huge bill,” Tira’s Davis said.