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Summary:

AT&T’s Ralph de la Vega this morning said the carrier either has to “reduce or modify” the mobile data consumption of some of its high-end users. Which could mean the end of flat-rate pricing in favor of prices that vary based on network congestion.

AT&T’s Ralph de la Vega used today’s UBS Global Media and Communications Conference in New York to deliver a message to the carrier’s data-hungry mobile users: We will have ways of modifying — or monetizing — your behavior.

Noting that roughly 3 percent of AT&T users generate 40 percent of the traffic on the network, de la Vega spoke of offering “incentives” to get users to curb their data habits. Those “incentives,” though, may come in the form of stiffer fees or higher changes for downloading information during business hours — what’s known as congestion pricing for mobile broadband.

“I’m not going to give you in detail what we’re going to do, but if three are causing 40 percent, then we’re going to try to focus on making sure we give incentives to those small percentages to either reduce or modify their usage so they don’t crowd out the other users in those same cell sites,” de la Vega said. “You’ll see us address that more in detail in the future…What’s driving usage on the network and driving these high-usage situations are things like video or audio that keeps playing around the clock. We’ve got to get to those customers and have them recognize and change their patterns.”

As Stacey wrote a few months ago (GigaOM Pro, sub. required), a combination of attractive price plans, high-quality smartphones and the rise of mobile applications are already driving mobile broadband usage — in a big way. Much of the traffic is due to streaming content such as web-based video and on-the-go music services that require far more bandwidth than things like text messaging and mobile e-mail. And that consumption will surely continue to surge as netbooks and a flood of other connected devices come to market, and as the fatter pipes of LTE make accessing content even easier and faster.

Indeed, de la Vega this morning said that simply boosting capacity on AT&T’s 850 Mhz network in New York resulted in an “overnight” traffic increase of 30 percent. AT&T’s woes are a prime example of network shortcomings, to be sure, and the carrier is scrambling to appease data-hungry users by upgrading its 3G network to HSPA en route to the 4G technology LTE. But other operators are certain to experience such growing pains as they grow their data businesses with iPhone-like handsets.

Carriers are increasingly turning to technologies like Wi-Fi and femtocells to help offload the increasing traffic, but operators will likely also abandon their flat-rate pricing models in favor of congestion pricing. A consumer who uses mobile data primarily for email on the phone, for instance, could opt for 200kbps service while a netbook-toting road warrior could be asked to shell out for a 1.5Mbps connection. And connectivity could vary not just by user but also by use case, giving consumers the flexibility to pay more when they need a lot of data quickly or during peak hours. Cable operators and a handful of European ISPs are already toying with such models.

Congestion pricing has some substantial drawbacks, of course. Charging consumers based on a host of variables is a marketing strategy destined to foster confusion in the minds of users, and it could force carriers to make upgrades to billing infrastructures to ensure users are billed accurately. But with mobile data already straining the capacity of some operators’ networks, it’s a model you may see sooner than you expect.

  1. Shorter GigaOm: Price gouging consumers who are doing the cool things advertised, all while AT&T’s wireless profits are up but investment as a percentage of revenues are down = AT&T offering consumers “flexibilty.”

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  2. Crying all the way to the bank, anybody have a tissue?

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  3. Why people would want to stream stuff over the AT&T network is beyond me, but if you really want to blame somebody, call Apple and ask why they refuse to approve apps with music and video that is in the store. Confusion!

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  4. Bite the hand that feeds you (the tastiest food)? Nice one AT&T…

    Where would AT&T be if the never partnered with Apple on the iPhone? Probably not having network issues, but also not rolling in all the revenue iPhone customers have bought.

    Such hypocrisy! Charge $80-90 dollars for 5Gb/month and now that customers actually use what they pay for, AT&T throws a fit? Wow!

    If you’re going to meter my data plan, then meter my voice minutes too, dammit!

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  5. “de la Vega spoke of offering “incentives” to get users to curb their data habits. Those “incentives,” though, may come in the form of stiffer fees or higher changes for downloading information during business hour”

    Seems like the wrong way to solve the problem. Why not just dealing with people’s demand?

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    1. Exactly, fix the problem AT&T – stop releasing these bandwidth-intensive products without having the proper infrastructure in place to handle the demand. I’m getting out of my iPhone and trading up to a Sprint EVO. Never had a single dropped call with Sprint.

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  6. [...] I spent this week at the TM Forum conference being held in Orlando, Fla. The conference attracts mostly suit-wearing members of the service provider and back-end software community.  The two main themes I found interesting at the event were the emphasis on telecommunications firms making their way into the cloud and the myriad ways that service providers could use to get folks to limit their mobile broadband consumption, an issue that AT&T’s Ralph de la Vega highlighted yesterday. [...]

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  7. Let’s face facts: cellular data technology was never meant to be a replacement for television. The typical amount of spectrum used by a cell site — 5 MHz — is smaller than ONE analog television channel. It certainly can’t handle transmitting dozens of channels to dozens of users simultanously, while also handling 911 calls, etc.

    The reason why you’re charged so much when you exceed the limits is that you’ve monopolized a cell site that cost between half a million and a million dollars to put up — not to mention spectrum which was bought for a king’s ransom.

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  8. [...] I spent this week at the TM Forum conference being held in Orlando, Fla. The conference attracts mostly suit-wearing members of the service provider and back-end software community.  The two main themes I found interesting at the event were the emphasis ontelecommunications firms making their way into the cloud and the myriad ways that service providers could use to get folks to limit their mobile broadband consumption, an issue that AT&T’s Ralph de la Vega highlighted yesterday. [...]

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  9. So how does this fit in with all the claims by the carriers of even faster technologies just around the corner? When do we realize that while speed is important, the total amount of data that we are allowed to consume in a given time period is just as important.

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  10. [...] GigaOM believes the introduction of congestion pricing for mobile broadband will happen “sooner than you expect” as the mobile networks strain to cope with demand.  Juniper Research agrees, making an overhaul [...]

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  11. This should be a good reason to short AT&T’s stock and go long Apple, Verison and anyone in the market for developing better wireless data networks. Nothing like revealing your weak spots to investors when your service is below par and you can be easily replaced if the damn iphone would release to other carriers.

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  12. … Meanwhile, the latest AT&T wireless commercials are all talking about how fast the network is. This was posted on December 9? Yep, that sounds about right. Way to lose your customers AT&T. I guess you don’t really care though, what with all those multi million dollar business to business contracts you guys have. Keep on stickin’ it to the little guys.

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  13. [...] plan is the same price that folks currently pay for unlimited data via the iPhone, which had AT&T executive Ralph de la Vega complaining in December that folks were downloading too much. And giving folks a bigger, faster device isn’t likely [...]

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  14. [...] data plans are “the big issue that has to change.” (AT&T’s Ralph de la Vega made similar comments in December, pointing the finger at data-hungry iPhone users.) Verizon Communications CTO Dick Lynch in January [...]

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  15. [...] But it’s once the network gets humming when Sievert believes Clearwire starts looking good, both because it will be cheaper to send bits across and enable the company to provide more capacity to data-hungry users, something that may play a larger role as rivals introduce tiered pricing plans, as both Verizon and AT&T have talked about doing. [...]

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  16. [...] But it’s once the network gets humming when Sievert believes Clearwire starts looking good, both because it will be cheaper to send bits across and enable the company to provide more capacity to data-hungry users, something that may play a larger role as rivals introduce tiered pricing plans, as both Verizon and AT&T have talked about doing. [...]

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  17. [...] AT&T Exec: Stop Streaming, Dammit! (gigaom.com) [...]

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  18. [...] the carriers are positioning themselves for the implementation of usage-based pricing schemes for mobile broadband, Sandvine is merely telling its future customers what they want [...]

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  19. [...] going to cost you, and possibly make you think twice about that download — or upload. That is exactly what AT&T wants — and why it changed its pricing plans for new subscribers as of yesterday. [...]

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  20. [...] is going to cost you, and possibly make you think twice about that download — or upload. That is exactly what AT&T wants — and why it changed its pricing plans for new subscribers as of [...]

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