I believe that DDS is an approach to attract more customers, go for aggressive campaign in fiercely competitve market with low attractiveness of any other value added service. Its a tool to manage acquisition. Does it actually help subscriber? To answer this question let us see the industry in which we are, Communication services are less driven by mind and more by heart, when one wants to talk then one wants to talk irrespective of anything as long as one can afford and mechanism to talk is available. In this scenario, cell phone is available, price is affordable, because if it was not then the subscriber would have not taken service therefore as and when need arises and desire to talk grows, subscriber will use the service. Its up to his luck to get discount if he happens to be in less occupied cell.

As a product strategy, it does work and it is interesting. It may happen some impact on revenue as well but more or less it is not going to create any revenue risk for operators and neither it will extend any great value to end user. Its just an attractive way to influence consumer decision.

There is very little data available as of now to do cost benefit analysis of DDS. It may happen that cost of providing such service may be higher than the net subscriber addition and revenue generation. I disagree that it helps in balancing cell traffic because nobody is going to drive 10 miles to talk, just because there is a less congested cell site. In india Uninor has used this strategy to acquire customers and this does work, it attracted many subscribers, therefore from acquisition point of view it works very well but what next, after sometime people will start realizing that didnt gain anything and then value for money will decrease in favour of offers from other operators like per second billing, that will make customer acquisition stagnant whereas cost of managing DDS will continue to remain and so the business risk will grow.

Uninor in India apparently had only one object, acquire as much and as quickly as possible, in such scenarios DDS definitely works, but I suspect that it can be taken in any other business case. Therefore though DDS is attractive just like Gold but essentially its not all gold, instead metal with gold plating

DDS is indeed a hot topic on many markets but there are a few basics that needs to be fulfilled for it to be a success:

- price sensitivity: meaning that subscribers must care enough about the cost of a call to wait for a higher discount or move to a less utilized part of the network.

- price elasticity: meaning that there must be significant price differences between high and low cell utilization. Where price wars, voice flat rates or massive cheap bundles of free minutes already apply DDS will have a hard time to succeed.

These two factors combined may efficiently block a major uptake of the service. And the usefulness of DDS to a service provider is directly corresponding to the number of users attached to the service.

Where it works, customers have the benefit of getting deep discounts when they shift their usage patterns away from peaks - maybe even giving very poor people the chance of making a call at all.

Service providers have the benefit of flattening out the usage curve as a result of this - reducing the need for network expansion to cope with peaks and improving quality at peak hours for the premium paying users. The offering should also attact new customers.  

So far experiences from operators such as MTN where DDS is a huge success has shown that the reduction in price is more than well offset by increased traffic and uptake in new subscribers.

Expect Dynamic Discount Solutions to continue to evolve. Countries where DDS for voice is a hard sell may very well be more successful for example with DDS for data services where instead of discounts, free usage quotas or better QoS could be offered based on the network utilization.

From a revenue assurance perspective I can see DDS as challenging. The algorithms to calculate the discount to apply are typically complex and takes input data from multiple sources - and as the name indicates the discount changes frequently. To verify all steps involved for an applied dynamic discount may indeed become quite complex.  

Regards

/Rolf Svensson

Hi Rolf

I liked two words Price Sensitivity and Price Elasticity, if we map present mobile tariff and consumption pattern then we can easily derive some indicators to DDS but keeping all analysis apart that definitely to me doesnt sound good for DDS for voice, for data yes I see a better opportunity for subscriber and operator both. I tried to run an unofficial survey when Uninor came with DDS, and again I tried to talk to same set of people after 1 month of service maturity and there was a different set of response. I am waiting for financial report of operators to TRAI that will clearly show who gained and who lost. In summary I make my botom statement as "DDS is good to influence decision of potential customer and go for rapid acquisition where other means of customer acquisition cannot work but as customer becomes acustomed to the service there may not be value realization due to very nature of voice service and offers from competitors may be more attractive keeping an operator with DDS with more opex to manage DDS for voice". This is my understanding as of now based on what I felt in my direct conversations with people. Battle ground is still occupied and weapons are still sharp so let us see if DDS can come out a real fighter like Per Second Billing or anything else. I'll love either of the outcomes but as of now not supporting DDS for voice.

Dharmendra,

It might be difficult to gauge the success of DDS externally from the high level KPIs. While revenue growth would be a good measure, the expected impact of DDS is just single percentage points.  It might be difficult to judge the combined effects of growing number of subscribers, change in average spend and market price erosion to the total.  Most importantly, the benefits from deferred Capex are hard to estimate from outside the service provider.

As price sensitivity and Price Elasticity of Demand vary by customer segment, DDS cannot be the only tariff plan service provider considers offering. E.g. high ARPU subscribers are unlikely to offset the DDS discounts by increased usage and need to be offered tariff plans appealing specifically to quality sensitive heavy users.  

I also doubt that customer acquisition should be the only target.  Increasing revenues from existing price sensitive subscribers while reducing their propensity to churn is equally attractive.  And apart form the service provider, low ARPU subscribers will be benefiting from more affordable calling which may accelerate mobile penetration in low income segments or regions.

To understand the full effect of DDS, we should also consider the linkage between price sensitivity and dual-SIM usage.  As price sensitive subscribers are splitting their spend on multiple SIMs from competing service providers, there is an immediate opportunity to increase the share of their wallets by offering more attractive prices through DDS.  As publicly posted prices - or discounts - are an open invitation to price war, incumbent service providers with high share of dual-simmers may entertain below-the-line offer to their existing subscribers as a more effective strategy to exploit this opportunity.  

I think we are just in the very beginning in exploring the opportunities related to DDS or "Intelligent Pricing" as we like to call it. The applications will vary by local market context and whether they are launched by challengers or incumbents.

Best,

Seppo