Should wireless carriers protect residential voice subscribers from high overage and underage charges? Insights from the Canadian telecommunications market

Prior research suggests that wireless subscribers often overpay for their services due to subscription of rate plans that are not financially optimized. Some wireless carriers have responded by introducing a new type of plan called “Flex”, which gives subscribers the best service rate based on their actual usage. In Canada, this kind of cost-minimizing plan is only available for 3G data service. Should it be extended to customers who are using the “bread-and-butter” voice service? To what extent do they select inappropriate rate plans? This paper explores these issues by analysing subscribers' rate plan suitability with a focus on their revenue implications. Based on a 44-month study of 8146 postpaid wireless subscribers, this paper reveals that optimal rate plan subscribers contribute approximately 50% less revenue than those with non-optimal plans. Wireless carriers should be prepared to sacrifice the short-term revenue in exchange of loyalty by having subscribers on financially optimized plans.