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Summary:

More than 60 percent of mobile operators have congested networks with one in five describing that congestion as severe according to Amdoc a provider of billing software for the mobile industry. But if carriers are so worried about network congestion why not implement better pricing plans?

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Sound the alarm! More than 60 percent of mobile operators have congested networks, with one in five describing that congestion as severe, according to Amdoc, a provider of billing software for the mobile industry. Such survey results not only explain the dropped calls on certain networks. They also help feed the growing panic about spectrum shortages and justify pricing changes for mobile broadband that will eliminate unlimited plans. Unfortunately, bandwidth hogs and the network congestion they allegedly cause is a red herring designed to distract users from the real motive behind pricing changes: profits.

The spectrum shortage worries are about to kick off a ton of action at the federal level with the FCC and Congress working on schemes to bring in more than 500 MHz over the next decade, but in the meantime carriers seem to have settled on pricing as a means for reducing congestion, because as it turns out smartphones and a small percentage of users, yes, the “bandwidth hogs,” are messing things up. From the release:

Data demand is driven by smartphones and laptops with mobile broadband: In the Americas and Europe smartphones are driving data demand, accounting for more than 40 percent of total data consumption. In Asia, the Middle East and Africa, laptops with mobile broadband is the key driver. A further factor fueling demand is flat-rate data tariffs where “bandwidth hogs,” although comprising only an estimated 2-3 percent of the customer base, are consuming approximately 30 percent of the network’s capacity, contributing to further service degradation for the overall user base.

Pricing, when done well, is an excellent opportunity to curb overuse of a network, especially on wireless networks with limited spectrum capacity and the current limitation on backhaul. However, instead of the pricing that operators such as AT&T have implemented (it offer two tiers for smartphone users, one at 200 MB per month and one at 2GB per month), more refined tiers and congestion pricing based on the time of day make more sense if the goal is to alleviate network bottlenecks. However, AT&T claims its pricing change is about value, as opposed to a tool to fight congestion. Instead of treating all bits the same as most current plans do, make mobile broadband more expensive during hours when the network is busiest, much like a utility does with electricity in some areas. Or make certain types of traffic, such as video streams more expensive.

Plus, some of the capacity crunch reported to Amdocs is somewhat temporary: before the huge increase in data demand, some carriers had underinvested in their networks, but now many are adding more backhaul and optimizing their networks for data. Also, a large number are in the process of moving from lower capacity 3G networks to 4G networks which not only have more room for bits, but can also transport them more cheaply. That doesn’t change the fact that the demand curve for data appears to outpace the carriers’ capacity, which means that users sucking down a tremendous amount of data are a problem, but it would be nice if operators decided to match their pricing to their rhetoric.

Related GigaOM Pro Content (sub req’d):

  1. Love how you think people that use the services they pay for are hogs that are sucking down your internet but I look at things a bit different if they want to meter internet maybe they should meter cable tv or limit how much you are allowed to drive because its all fair use right. Maybe durring times when the traffic is high on the highways they should block you from getting on to help with the flow of traffic.

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  2. [...] rising use as network speeds increase, operators will continue to tweak pricing plans to balance network infrastructure, spectrum, consumer…. As I’ve mentioned recently, we’re currently undergoing a seismic shift in mobile [...]

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  3. [...] Carriers are already implementing pricing plans that are enabling them to recoup their investment in their networks, but most of those plans don’t actually address the issue of congestion; they only address the carriers’ efforts to get more money for delivering their bits. [...]

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  4. [...] Now operators can convince more people to sign up for data plans on lower end phones, expanding the lucrative plans across more of their subscriber [...]

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