Price Wars

Back in 2002, when mobile telephony had just opened up, I remember that a simple mobile was a very posh gadget used by some of my friends in my engineering college, where incoming was charged at INR 5/minute. Eight years hence, with TELCOs waging price wars, incoming is not only free but some you pay per paisa in every minute. Uninor charges 29 paisa for every minute. Whether the new entry barrier is dictated by the price wars or not, here is a formula for a new entrant for an aggressive expansion.
Let us consider this example:

Local TELCO TO TELCO 100 minutes
Local TELCO to Other       200 minutes
STD to Mobile                    300 minutes
STD to LAN LINE              400 minutes
ISD                                       50 minutes

Let us consider 3 schemes for an individual.

Plan A which has the following rates: TECLO to TELCO 0.4 INR/ min, TELCO to Other 0.5 INR/ min, STD to Mobile 0.6 INR/min, STD to LAN Line 0.7 INR/ min, ISD 5.0 INR/ Min. the base charge is 300 INR.

Plan B has a flat rate of 0.5 INR/ MIN for all calls except ISD where call rates are 7.0 INR/ min. The base charge is 400 INR.

Plan C has 600 minutes of local and STD free after which 0.5 INR/ Min is charged. ISD stays at 6.0 INR/ min. The base charge is 500 INR.

Under this scheme, the plans have the following charges:

Plan A
0.4 * 100 + 0.5 * 200 + 0.6 * 300 + 0.7 * 400 + 5.0 * 50 = 40 + 100 + 180 + 280 + 250 + 300 = 1150
Plan B
0.5 * (100 + 200 + 300 + 400) + 7 * 50 + 400 = 500 + 350 + 400 = 1250
Plan C
0.5 * (1000-600) + 6.0 * 50 + 500 = 0.5 * 400 + 300 + 500 = 1200

In this light, I propose the dynamic pricing scheme.

Had Plan A was adopted, the individual customer would have paid 50 to 100 INR less than Plan C and Plan B respectively.
Depending on the usage type based on historical reports, here is the scheme for the usage types for the initial pricing:
Maximum usage is local Plan A

Maximum usage is ISD   Plan A

Maximum usage is STD Plan C

No particular scheme      Plan B

Again, coming back, the dynamic pricing scheme would include changing of Plans dynamically so that the individual pays the least amount from his pocket for the same usage. The corresponding month, the dynamic calculation is done again.

This is probably not the new entry passport but also the next generation theory for price wars.

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