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Summary:

The surge in mobile data usage will keep ramping up as multimedia-friendly phones continue to gain traction. So network operators are exploring ways to move beyond flat-rate plans to monetize high-end users and minimize the effects of increased traffic on the network.

The growth of data revenues was a huge story for the mobile industry in 2009, and those gains are sure to ramp up over the next few years as connectivity continues to expand beyond phones to new devices like netbooks, e-readers and a host of other consumer electronics. That uptake will increasingly be a double-edged sword for carriers, though, which are already struggling with ways to support the increased traffic driven by Apple’s iPhone and other multimedia-friendly devices.

Which is why AT&T and its competitors are beginning to discuss ways to minimize congestion on the network as they increase revenues from data-hungry consumers. There are lots of ways to attempt that, of course, from the current “unlimited” caps that generate disdain among users — and have largely failed to address bandwidth issues — to the congestion pricing that cable companies are beginning to toy with. But as Stacey points out in the latest report from GigaOM Pro (sub. required), each option has some important pros and cons. Variable-pricing models can be confusing to consumers who (like me) don’t know how much bandwidth they typically use. And while embracing alternative technologies like Wi-Fi can ease traffic on the cell network, it can also cut into the mobile-data revenues that will increasingly become crucial as margins from voice whittle away.

The dramatic surge in mobile data usage will continue to ramp up quickly as Android gains traction and superphones become more commonplace. Among carriers, the rich are getting richer thanks to that uptake, but they’re also beginning to experience the kind of network hiccups that invite users to move to rivals that can handle the traffic. The challenge for operators, then, is to figure out how to deliver — and monetize — data-heavy services to the relatively few users who demand that kind of bandwidth without sacrificing the connectivity required from more mainstream consumers. The carriers that can most effectively solve those issues will have a significant edge as we move from 3G toward 4G.

Image courtesy Flickr user B Tal.

  1. Why not try tiered speed pricing like the Cable industry does. For example, 500k downlink, 100k uplink for $30/month; 1m down, 200k up for $40/month etc. Consumers can understand this and there is a direct correlation between bandwidth speed and usage.

    Scott

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  2. Malik Graves-Pryor Monday, December 28, 2009

    Didn’t the experiment with metering during the dial-up AOL days in the 1990s prove it to be an ultimately flawed strategy?

    If you want people to use your services and ultimately improve your bottom line, remove metering entirely.

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  3. Reminds of this article on the way AT&T and the networks are handling this situation http://www.fakesteve.net/2009/12/a-not-so-brief-chat-with-randall-stephenson-of-att.html

    any billing system which is reasonable is more probable to be adopted… switching to metered and charging 1$ for every 5kb is just going to kill the market, but the networks still greedy from the glory days of voice calls and long distance charges may do it…

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  4. One possibility that it seems they’re missing out on is the use of data caps combined with speed caps. I live in Armenia right now and Orange Mobile just came to the country; it utilizes what I think is a quite smart strategy that avoids the inherent fury of consumers when they have to pay a bunch extra for going over data caps. Essentially, you have a certain amount of data for the month at 3G speeds; once you hit that cap, you still have unlimited data use but your speed is ramped down significantly. You can top it off with more 3G data if you want or just deal with the slower speeds for the rest of the month. I think that if the companies are going to move to a metered future that this is an excellent strategy as it allows for people to have a significant amount of fast access but also somewhat keeps a flat fee; consumers would only spend more money if they choose to top off their account by adding more 3G data and wouldn’t be hit by huge overage data charges.

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  5. consumers also should be allowed to combine packages. for example many carriers now cap broadband plans at 5GB. but why can i not pay double and have my cap set at 10GB? or triple for 15GB. the per KB overages are just way too expensive to be considered an option to use every month.

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  6. [...] for smartphone makers. Both AT&T and Verizon Wireless have increasingly spoken of the need to scrap unlimited data offerings in favor of metered offerings that will see prices increase for those who consume the most data [...]

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  7. [...] for smartphone makers. Both AT&T and Verizon Wireless have increasingly spoken of the need to scrap unlimited data offerings in favor of metered offerings that will see prices increase for those who consume the most data [...]

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  8. [...] limiting the impact that traffic has on their networks. Which is why both AT&T and Verizon are moving toward metered billing and away from flat-rate data [...]

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