Armenian mobile operator VivaCell has introduced its new BIT Unlimited mobile internet service for prepaid subscribers. The subscription costs AMD 2,500 (US $6.03) a month, and the service’s maximum data speed is 384 kbps.

Tarifica’s Take

While we believe that offering prepaid mobile data plans is certainly a good strategy in today’s environment, we think VivaCell is making a couple of noteworthy mistakes in its approach. First, given the low monthly subscription fee, VivaCell is almost certainly targeting low-end users. However, in the present climate, prepaid and pay-as-you-go plans are increasingly attractive to high-end data hungry consumers and businesses looking to lower their fixed monthly expenditures. Savvy operators that focus on developing such variable cost plans geared towards these more sophisticated users will likely be rewarded far more than those focusing on the lower end. The paradox is that while many high-end users seek the variable costs prepaid and pay-as-you-go plans offer, in the end their heavy usage will likely result in no less revenue being generated than if they had remained on postpaid plans. In fact, we suspect the amount generated will be more, which is the price these users will have to pay for the perceived benefit of a variable cost structure. By going downscale in its approach, VivaCell is potentially cutting itself off from this more lucrative end of the prepaid sector.

But an even bigger problem with this plan is the fact that its maximum data speed is set so low as to make the service all but unusable. At about a third of a megabyte per second, it is even lower than some “throttled” speeds operators impose after usage limits are reached. This is completely unacceptable and basically kills the offer’s chances of succeeding with any customers, low-end or otherwise. Rather than an unlimited data plan, VivaCell is offering what amounts to a zero-data plan.

The moral of this story, from our perspective, is that operators have to offer data speeds that will give users an enjoyable and productive experience, or else there is no point in offering data at all. Whether prepaid or postpaid, anything less is going to lower user satisfaction and runs the risk of eroding customer goodwill. Prepaid is opening up, becoming not only acceptable but desired by higher end consumers, and we encourage operators to go after them aggressively. Offering inexpensive plans as well to lower end users is fine, but giving them a poor experience, or a non-experience, is no way to gain customers or strengthen a brand.