Stay on Top of Emerging Technology Trends
Get updates impacting your industry from our GigaOm Research Community
AT&T this week said it would join other broadband providers in trialing tiered broadband services. The trial packages range from the ability to download between 20 and 150 Gigabytes of information and are supposedly an effort to help AT&T manage the growth of traffic on its network. But the move is more likely an attempt to capture some of the value of the content moving through its pipes without getting in trouble with regulators.
As broadband matures, carriers aren’t merely upgrading their networks, they’re also upgrading their pricing plans, the thought being that different service levels offer a more nuanced way to manage traffic and increase sales. For an example of multiple plans in action, check out PlusNet, a UK-based ISP that lists at least four different service plans on its web site. Kurt Dobbins, chief technology officer of IP services with Arbor Networks, a company that sells network management equipment to both AT&T and PlusNet, says this is to be expected in a mature market, especially in light of the FCC’s efforts to ensure transparency when it comes to delivering broadband services.
“Carriers are all seeing a fundamental growth in traffic, and very few of them are seeing the equivalent growth in subscriber acquisition, so they’re spending billions more on bandwidth capacity but are seeing no new revenue,” Dobbins says. “This is an answer to how they will grow revenue.”
The end result will be bills that have different tiers of speeds and caps, as well as different service levels for different applications. For example, users would be able buy a voice and video service that would prioritize those types of traffic as more important than gaming or a virtual private network line. Dobbins also says the use of such tiers could help offload traffic by allowing customers to, for example, shares files during off-peak hours, and perhaps see that traffic not count against their cap. In a quote that would make any telco marketing maven proud, he called that, “giving the customers something for free.”
“The service provider business models are trending to some form of usage-based billing, but the end game is value-based pricing and subscriber opt in,” says Dobbins. “In the case of usage-based billing and caps, ISPs see that as an interim step.”
Because Dobbins works for a company whose sales would do very well under such pricing schemes, he may be a bit biased, but the scenario is still a likely one. Even today, AT&T is making a distinction between levels of service for its U-verse television offering as compared to video delivered via broadband.
Carriers, in creating these sorts of plans, relegate the Internet to entertainment or a productivity tool, and encourage consumers to view it that way as well. That’s unfortunate because the Internet is far more than a source of Tina Fey videos or a line back to the office; it’s a direct connection to people and information that can be harnessed in ways we are only now discovering.
Such uses include medical monitoring via the Internet, or interactive collaboration to make music or to design buildings. Carriers are refining their offerings to price those services according to their value. I can’t argue with their right to do that (in a truly competitive market), even if it means that I end up paying more. The downside is that it will put certain valuable services out of reach for some. So instead of being a great equalizer, the Internet ends up perpetuating the inequalities in education and access to information that exist today.