Revenue is largely disconnected from the cost model. This was a recurring theme at this week’s Management World Middle East, held in Dubai. Mobile subscribers, in particular, had been encouraged to take up ‘all you can eat’ data plans in order to stimulate data traffic. Along comes the HSPA network with acceptable connection speeds, ‘dongles’ (USB modems), throw in the iPhone and bang, suddenly everyone wants to connect.

The idea of being able to connect anywhere/anytime has caught on big with users many of which don’t even bother to connect via their home wifi and cable or ADSL high-speed connections when they get home. Many subscribers have gone as far as dumping their fixed-line broadband connections in favor of their mobile operator and having all their communications needs, voice and data, in one account.

You’d think mobile operators would be jumping with glee at this amazing market traction but in reality it appears to be quite the opposite. Not a day goes by without an industry news report of a mobile operator bemoaning the effect on its network of over-zealous web-surfers, bit torrent exponents and peer-to-peer practitioners. Woe betide any successful marketing campaigns that attract even more of these ‘data leeches’ when the realization sets in that there has to be considerable investment in new infrastructure to cope with the influx.

As John Aalbers, CEO of Volubill puts it, “the basic premise is based on the idea that flat rate means ‘capped revenues’ to the operators and ‘unlimited access’ to the users. The result is a disconnect in expectations for both.”

The immediate response is for operators to clamber to provide value aded services to their portfolio in the hope of capturing some extra dollars from the budget-minded ‘data smugglers’ using their networks purely as portals. This may generate some extra cash flow but the jury is still out on whether the investment in things like application stores, syndicated content, games portals and electronic shopping malls will ever be profitable. This is not the sort of business a telecommunications service provider is necessarily good at anyway.

That leaves them with the option to stem the uncontrollable flow of cheap data or ‘throttle’ it. In the case of AT&T this was probably an unintentional choice because the network reportedly reached capacity in some areas. However, in other markets, it is used in conjunction with a ‘fair usage policy’ which is usually in small print on the customer’s agreement. Sure, it’s a better choice than cutting off the customer completely, but it usually generates a customer care call and an unhappy punter unless they are warned in advance and given the option to pay more but that means monitoring every single data connection in real-time.

We are already seeing flat rate packages based on speed bands and yet another option to charge according to traffic priority. Those users willing to pay more to have their traffic prioritized will get premium service and, subsequently, lower priced packages will receive lower priority.

These are all feasible ways of increasing revenue from new subscribers but it still leaves the early adopters who, having experienced all you eat high speed accessibility, will be unlikely to agree on any alterations to their contracts. Will we see these users turning the hapless mobile operators into the dreaded big fat pipes we keep hearing about?

Anyway, what’s wrong with being ‘a big fat pipe’. ISPs and fixed line operators have been playing in this space for years and you don’t hear them complaining. Many of them charge a flat rate for unlimited usage, don’t they? It appears that they have calculated an optimum charging mechanism that accounts for both the over-users and under-users to work out an average which can then have a cost associated with it. Presumably, they optimize the number of average subscribers to their network capacity, calculate a monthly rate and make money from it. Of course, they also offer value added services like IPTV, but for the most part they are simply ‘big fat pipes’, and we rarely hear them complaining.

Maybe we should re-phrase ‘big fat pipes’ into a more acceptable term such as ‘voluptuously plump data portals’? I think I’ve been in Dubai too long. Thoughts of belly-dancers are flashing through my mind as I write.