A cost-based pricing analysis

The high anticipated mobile data growth pushes mobile operators to rethink about the way they charge for mobile broadband. The purpose of this study is to analyze the cost-based pricing which provides fundamental information to mobile operators to form a pricing strategy. Assuming that the total network cost has to be recovered at a specific traffic level (price-determinant traffic level), the analysis shows that for real traffic level which is more than this price-determinant traffic level, the usage-based pricing is always preferable than the flat rate pricing. Whereas for real traffic level which is less than this price-determinant traffic level, the flat rate pricing is always preferable than the usage-based pricing. Also, the flat rate pricing level has to increase while the traffic level increases, unless more users join the network to share the cost or the total cost declines. On the contrary, adopting the usage-based pricing, the operator is able to decrease the unit price level while the traffic level increases.