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We have been advised by both Telstra and Optus that they are planning big changes to the way mobile phone data allowances are allocated.

They have indicated that in the later part of 2013 ….probably within 60-90 days of the next iPhone release they will be drastically cutting the data allowances on all plans to either Zero or 1-200 mb allowance. Data charges will primarily be pay as you go with data rates of 2-3 c per Mb being fairly typical. They have also indicated they will no longer provide free social networking access.

The driver behind this has been the rocketing use of mobile data that is placing massive cost burdens on the carrier networks. The carriers are reporting annual triple digit mobile data usage growth that parallels the massive growth in the use of smart phones. The carriers are investing significant sums in infrastructure investment to keep the networks going and bandwidth usage costs soar with increased use. The upcoming spectrum auction is expected to free up additional capacity currently used for Free to air TV (and raise billions for the Government). These costs will also flow on to the carriers and by extension the end users.

Whats does that mean to most users? Currently the average user user uses around 250-350mb per month. On a plan with 100 included Megabytes and with a data charge of 2.5c per Mb this will add approximately $5 per month to the users mobile phone plan and of course heavy users will pay a lot more …if you currently use a 1gb of data its going to be an extra $25 per month.

What does it mean for the carriers? Well its going to be interesting to see who is going to jump first because you would expect that whoever jumps first is going to see a rapid flight of customers to the other carriers. Timing is expected to be around 60-90 days after the release of the next iPhone as many customer contracts are tied in with the iPhone updates (Customers signing new contracts to get a new iPhone) so the carriers will want to get those number locked away before making any moves. However we are seeing moves already in the wholesale space that will flow on to the smaller telcos first.

For the bottom line the returns are impressive . Multiply the number of Smart Phone subscribers on each network with an increase in Revenue Per User of $5 per month per subscriber, x 12 months of the year and there is a lot of Zeros in the outcome for each carrier.