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Vodafone warns investors of rival spoilers

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Vodafone's CEO has declared tiered data pricing, based on consumption, is inevitable while the company's US arm is already working out how to provide faster wireless to its best customers.

Speaking at an investors' conference, and reported by the FT, Vittorio Colao said that while smaller operators might hold on to unlimited data tariffs, for a while, that won't last. And in the end the bigger operators will dominate thanks to economies of scale and carefully tiered pricing.

Verizon Wireless, in which Vodafone is a partner, is already building its LTE network with much-more granular control over the speed available to users, for which it intends to charge proportionally according to the Wall Street Journal. Vodafone Germany has already said that once an LTE user hits their data cap they'll be busted down to 3G speeds.

Not that Vodafone is alone in this – O2 has already dropped its unlimited smartphone tariffs in favour of something more granular, and 3 goes further in throttling those on a lower tariff* when a cell is overloaded (and, to be fair, 3 also de-restricts data on an underutilised cell).

Even more interesting is Orange's decision to offer a cheap rate for data with the Samsung Tablet - an additional 1GB of data every month that can only be used after 16.00, which might be a UK first but certainly won't be the last.

Such innovative pricing will become normal over the next few years, as the intelligence in the network increases and operators seek new ways to redress the current imbalance between revenue and loading - where voice brings in 70 per cent of the revenue despite making up only five per cent of the traffic.

Time and/or application-specific bandwidth is an obvious first step, though operators are going to have to emulate the iPad's countdown timer (to show the bandwidth available and offer an easy way to pump up the speed) if customers aren't going to become helplessly confused.

Such models are considered inevitable by most of the industry, and Colao's comments are intended to prepare investors for some pain as Vodafone takes the first steps towards them. Other operators might hang on to unlimited data for a while, but ultimately will have to join their larger brethren in billing customers on the basis of how much traffic they use.

As the mechanic told Max, before he went mad: "Speed's just a question of money. How fast you wanna go?" ®

* Three has been in touch to say it restricts by application rather than tariff, for the moment at least.

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