Korean operators set to switch to usage-based billing – report

In a sign of the disruption set to be unleashed by the 5G era is has been reported that Korea’s main operators are all expected to switch to usage-based tariffs next year.

This is the view of Hana Financial Investment and was reported by the Yonhap news agency. The rationale stated in the report is that usage-based billing will offer higher ARPU and thus cover the cost of investing in 5G, but that seems like a pretty tenuous theory. Yes, some people will pay a premium to be able to constantly stream HD video over 5G but a lot more may end up paying very little because they’re on wifi most of the time.

“There is a high possibility that mobile carriers may change their current high definition content into UHD or virtual reality, which will inevitably lead to an increase in traffic and jack up their sales sharply,” Kim Hong-sik, an analyst at Hana Financial Investment, was quoted as saying in the report.

Usage-based billing is expected to become more commonplace, but the assumption that it will be a cash cow seems hasty. Assuming telcos every get their digital transformation act together, they should be able to get into deals with OTT players like Netflix and app developers to introduce dynamic billing models that allow premiums to be paid for certain scenarios.

Lest we forget, usage-based (or metered) billing was common back in the 3G era, but if failed because it dissuaded people from using data at all. Then they jumped to unlimited and everyone got carried away in the opposite direction, before the industry settled on the monthly allowance model that prevails today.

Unless metered billing is introduced in a much more sophisticated way this time there’s no reason to assume it will fare any better. Another billing revolution expected to accompany 5G is a return to unlimited, which would presumably appeal to heavy users, so it will be interesting to see how they manage this. The fact that all three of them seem to be planning to make the move unison is also noteworthy.