Deterring entry by new competitors is the business reason behind umbrella pricing strategies. In fact, a new competitor actually gains when the incumbent maintains high prices, allowing the attacker to establish a clear value proposition by offering the same service at a lower price.
In fact, contestants in competitive communications markets tend to recognize the value of having the leading incumbents set a high price umbrella, the simple reason being that an attacker will make more money for the attacker if the pricing umbrella is high, than if it is low.
In fact, a low pricing umbrella might not allow an attacker to make enough revenue to gain a foothold in a market.
That seems to be the case for over the top applications in the messaging space, in European markets that feature high tariffs.
European operators rely on high tariffs for international calls and texts. Whatever else one might say about that situation, the high tariffs allow lots of room for attackers to offer the same features at much lower cost.
Over the top application providers provide salient examples.
By way of contrast, U.S. service providers, operating with a continental-sized domestic market, offer unlimited or huge buckets of calls and texts for a flat rate that offer much less room for attackers to exploit.
The exception is international calling, where apps such as Skype get serious amounts of use. But for domestic calling, tariffs are so reasonable that there is little incentive to modify domestic calling or texting behavior because the marginal cost of a domestic text or call is zero.
OTT apps appear to be gaining serious traction in some European mobile service provider markets, for example.
TheAllot MobileTrends Report, for example, shows that WhatsApp, an over the top messaging app, now accounts for 18 percent of instant messaging bandwidth, a dramatic increase in popularity from only three percent in the first half of 2011. That’s an order of magnitude growth in six months.
Facebook Messenger likewise grew from zero to 22 percent of total IM traffic in just four months, the study shows. That’s two orders of magnitude worth of growth in four months.
In other words in markets where tariffs for voice and messaging are high, mobile service providers are seeing accelerating end user shifts to over-the-top alternatives to service provider services.
That is in large part the result of the high pricing umbrella in Europe, compared to the situation in the United States.