The Multidevice Data Plan
It looks like sooner or later we're going to witness the end of unlimited wireless data plans here in the States. They had a good run, but all indications are that eventually all of the major US wireless carriers are going to follow AT&T's lead and institute data caps of some kind. I'm not sure anyone is super happy about this, most people like the idea of being able to surf the web, watch online video, download apps, etc. without having to worry about going over their limit and paying overages (and keep in mind that even so-called "unlimited" wireless data plans usually have a cap of around 5GB per month).
It's just that with wireless data usage surging, total US wireless data traffic is expected to hit one exabyte this year, and the reality is that tiered plans make economic sense for the carriers, even if they do stifle adoption of bandwidth-intensive apps and services that will drive innovation in the mobile web. While it doesn't cost so much these days for carriers to handle voice calls and text messages, wireless data is pretty expensive by comparison. In fact, given their relative costs, if anything we're grossly overpaying for texts and voice calls while probably underpaying for data.
Here's the thing, if we are going to have to deal with caps then the carriers need to start thinking differently about how they offer their plans. I can accept that capped data plans may be inevitable, but if that's the case then I also want to be able to use my bandwidth allotment however I see fit. And that means I should be able to use it with as many devices as I want as long as I don't go over my limit. It's my 2GB, right?
So I'm proposing that the carriers offer what I like to call a "multidevice data plan." It makes sense that the carriers wouldn't want someone sharing their smartphone's unlimited wireless data with their laptop (which is why they charge extra for tethering), but under a capped plan there's no reason why you couldn't offer subscribers the option to have multiple phones, tablets, and laptops sharing that one fixed amount of data and then charge overages for anything beyond that (this is why AT&T's charging for tethering on a capped plan is so loathsome; it just feels wrong). Besides, if the carriers are able to offer shared buckets of minutes across several handsets they can surely offer a shared bucket of data across multiple devices. Sprint's already done something a bit similar with its Everything Data Family plan.
The reality is that more and more of us have more than one wireless device in our lives and are finding it difficult to justify paying for multiple data plans just because we want to own a smartphone (or two), a tablet, and a laptop. You can see the carriers straining to figure out the right way to price data service on Samsung's new Galaxy Tab tablet (the subject of an earlier newsletter); a shared data plan would make it so much easier for someone to buy one and just add it to their existing plan or bump up their plan a tier.
Though supposedly at least one Canadian carrier has been considering multidevice data plans, I don't expect to be able to sign up for one anytime soon. The carriers are inching towards this by offering wireless routers like the MiFi, but those don't really solve the underlying problem. Wireless routers are no doubt handy, but they're also an additional gadget to have to carry around and charge, they require a second data plan in addition to the one most people already have for their smartphone, and they don't take into account that more and more devices are coming with built-in 3G and 4G connections.
Even though the carriers like forcing people to sign up for additional data plans, I do think in the long run it'd be good for them to offer something like this as an option. For one thing it gives them an opportunity to create additional pricing tiers that would drive more revenue per user. I know I would happily spend a bit more per month if I could spread that bucket of data across multiple devices, and I'm sure tons of people would be a lot more inclined to pay $35 for 3GB or $50 for 5GB a month if they could share that data plan amongst their smartphone, tablet, and laptop. In fact, think about how many more people would buy a 3G-enabled tablet if weren't for the cost of that additional data plan. You can imagine all sorts of devices like game consoles getting built-in 3G and 4G when the price of a data plan stops being a barrier to adoption. To put it another way: do you think the Kindle would have had as much success if it had required users to sign up for another data plan?
Of course, I'm sure that part of AT&T's new pricing model is predicated on most users not getting too close to that 2GB cap each month, so something that makes it easier for them to actually use up their monthly allotment might not be a positive development (at least from the carriers' perspective). But even so, assuming that the market does shift away from unlimited data plans, a shared data plan would be a surefire way for one carrier to grab marketshare away from its competitors in much the same way that family plans did when they were first introduced. The reality is that the amount of wireless data the average person consumes and the number of wireless devices the average person owns are both only going to go up, and whichever carrier figures out how to best satisfy this growing demand will reap the benefits.
There are surely a bunch more reasons for and against something like this, so I'd love to get your feedback and ideas on this one. Anyone at a carrier want to (anonymously) comment on pricing and the real cost of delivering data?
Implementing caps is like selling diamonds at $2 a pop and then limiting how many per month anyone can purchase. It's pointless, stupid, and makes no sense. If demand is outstripping supply, most econ 101 students will tell you that your price is too low. I'd rather pay more per bit with no cap, because to me that's the REAL value and thus a fair price.
In theory your only limit is how much bandwidth there is. In practice what makes it affordable is multiple users sharing the radio frequency. If we follow the pricing that you suggest then people who can afford to pay more will hog most of the network and make connectivity a lot more expensive. If carriers follow a supply and demand sales strategy they will not reach the wider audience of users.
Carriers are not trying to be fair by reaching everyone. They are trying to use the concept of network value in the way that a cellphone is only useful to you if you have someone to call. Pricing data on a supply and demand basis would create a haves and have-nots ecosystem for the carriers that would reduce their value to the customers because demand will surely outstrip supply on a YouTube burdened network.
Peter's recommendation of the shared plan at fixed pricing does several things - it provides a realistic plan to get more people online and paying for data for all the devices they own, and it still provides for telcos with a predictive model for revenue and data usage. Unfortunately, as noted customers will definitely use a higher % of data available, and more importantly the overall data usage trend will increase at an even steeper rate than the telcos are fighting to manage today.
If they can manage the growth in demand, there are real monetary rewards to be had. (...just holding my breath for 4G)
Your argument about the have/have-not ecosystem only works if the wireless space was an isolated network that was only as valuable as the number of users it has. Unfortunately that isn't the case, as the wireless space is a small piece of a much larger internet. Certainly the small chunk of wireless users add value to the overall value of the internet, but does not carry enough weight to make it worth the kind of protection you argue for.
In truth, the cost for everyone is driven up more using the current model, in which the bandwidth hogs skew the average for the amount of data consumed per-person. This means most of us are actually paying more than we would otherwise. If most of us consume, say, 5GB per month, and a handful consume 30GB per month, the average would sit somewhere *above* 5GB per month. Now, if we all pay the same flat rate, it's pegged to that skewed average, meaning most of us are subsidizing the few that are using 70% of the bandwidth.
Apply the same principle on the per bit charges and you have a stratified model that serves the haves (at a premium) and the have nots. And if the have nots want to gobble up an extra GB of data, they either pay through dollars or through the effort it takes to find some free WiFi.
But good luck. Try arguing that with AT&T who charges you $20 for the privilege to "Tether" because as they say "you use more when you tether."
WTF? 2GB is 2GB! If I use 3GB I pay for 3GB. It's like arguing with an idiot.
I do see data plan competition getting more aggressive. Virgin Mobile had dropped pre paid data plan prices. T-Mobile has a competitive mobile broadband plan now. Maybe they'll all finally get their heads out of their butts but I'm not counting on it.
You know what they'll do:
$25 for 2GB, on any device. Or $35 if you want to play video. Part of this 'tiered service' BS they want to do in the face of net neutrality.
I say it's time to play hard ball. Pay per GB, 100% net neutrality. Period. If everyone has to pay per GB, they'll have to keep costs low to keep demand up, otherwise people will simply not use it.
1. If we compare it to wate: everyone has a base level of water consumption per month, while there are some people who use very little and some who use very much, most people are very closely clustered around the average and these levels of chainring are likely to remain the same in the foreseeable future. Data however follows a very usage pattern, some users with data plans are fine with 100MB a month or less because they only check mail or frequently connect with WiFi while others like me could easily go through several GB in just a couple days and there is a broad spectrum in between. The distribution of use per customer is probably possible to determine for some time period but data usage is much more likely to change from month to month. For instance, some great new game comes out and one of these users who would typically only use data for email is suddenly pulling tons of data and just as quickly interest in this data intensive game could wane. The providers don't have a real good way to model the usage patterns of their customers, data usage is highly unpredictable and, as Peter mentioned above, limiting data access stifles innovation which I take to mean that increased access should foster innovation (which is precisely what Google is testing with their gigabit landline connection test in some lucky US city).
2. Precisely because water is considered a utility, most people have access and that access is equal, either you have clean water coming to your house or you don't. The same can't be said about 2G and 3G coverage. Since coverage (access) isn't equal, I don't see it as particularly fair to charge the same for the same quantity of data but that has more to do with my personal opinion and less with logical arguments based in economic reasoning.
If we accept that the bandwidth hogs are of the minority, and the $30/mo price tag (as an example) covers the average cost per-person plus some sort of profit markup, the bandwidth hogs are skewing the average to the upside. This means most of us are actually paying more than we would otherwise.
As to the issue of people having access to different types/qualities of coverage, that's a non-issue. I think you are making the assumption that a single price per bit would somehow be dictated for all forms of data communicated. If we instead consider that different connections could be priced differently per-bit, then the picture changes somewhat.
The market would support higher prices per bit for higher quality connections and lower prices for lower quality connections. This same principle can already be seen with your water example: bottled water versus tap water. Bottled water offers more rigorously filtered water with fewer chemicals (like fluoride and chlorine), and guess what? It's more expensive. I think the same principle could still be applied to both wired and wireless data.
If people can use between 0MB and 200MB, obviously the people who use below average will pay more per MB than the people who use more than average. Having limits just helps the carrier plan deployment and avoid capacity-related problems.
With the restaurant example, what if you consider one plate representing 1 unit of data (whether that be GB, MB or bits). Do you limit every customer to just 1 plate per day? What if you have so many customers you couldn't possibly serve all of them, what do you do? Continue selling meals at $5 a plate, or do you raise it to $6 or $7 until you have a level you can manage?
Generally speaking, overwhelming demand is the market's way of saying your price is too low.
The problem is the level of consumption per customer in that period. In 2006, most data customers were using only a fraction of the data as compared to the amount of data we use today. Providers set their prices then, based on what it cost them to offer data so that on the vast majority of customers they were making enough money to cover their costs, pay for expanding their infrastructure a little and (hopefully) make a little profit. As time passed, they realized that we lived in a world of Apps and that the new data customer required way more data so they were make less money per customer. Ideally, they would be developing ways to increase capacity at the same pace that consumption is increasing but as anyone in SF or NY will tell you, data networks have not been built out enough to keep up with the demand for mobile data. Data consumption has proven to be unpredictable, they have no model to develop that would help them run their business if they make per customer revenue an unknown - at least not at this point.
Rising prices isn't as simple as you think. Stuff at a supermarket is priced $9.99 and not $10.05 for a reason. I don't think telcos take a 200MB packet of data and figure out the price, but instead they're trying to match pricepoints and their expected popularity against how much data they can sell in total.
Telcos aren't trying to get the best single price per bit, but rather to extract as much profit from the whole market as possible. That means that for people with more money they should have a product that is more expensive (though better value).
Chatting with the T-Mobile third party vendor who sold me my iPhone about a year ago we got to talking about this and he mentioned he actually had two phones running the same data plan. Turns out that several years back T-Mobile (here in Germany) actually just what Peter is proposing. They offered an unlimited data plan in conjunction with some voice/SMS plan for which additional SIMs could be bought and put into any T-Mobile or unlocked device. However, once they realized that devices like iPhone and Android were drastically increasing the amount of data that consumers were eating through each month they got rid of this already not-so-well-advertised option.
coming from Europe it hurts not to have more then one sim card for the same account.
Check out my earlier article on MobilityMinded to help move this subject forward in the US.
Let me know how I can help, if needed
Johan van Mierlo
I know some carriers, if not all, have a way of telling you how much data you've been consuming, but it would be better if you could also see what your current data bill is at that very moment. In other words, an easy way to monitor your usage by displaying it in layman's terms, without having to dig too deep.
Right now manufacturers and devices are trying to cobble together these things and get around the fact that the average consumer is too adverse to pay a separate dataplan for their car.
Each of these devices has a data device and requisite plan. You can try and simplify by opting for a smartphone with tethering, at the sacrifice of battery life, which on some of these devices is woefully inadequate. This model works. WiFi is fairly mature and so it's battery use is negligible relative to 3g and certainly 4g, so the devices that are tethering to your cell can do so without fear of drastic battery drain. But it could be better, especially on the phone's end.
I think an opportunity exists for a manufacturer and carrier to get together and develop a new type of handset, one that emphasizes it's sharing capabilities with a larger battery and smaller screensize. Larger screens improve productivity. But if the working assumption is that as a power user you have a laptop and tablet at hand then you're less likely to need that added screen real estate. This could pay dividends on other device manufacturer's by allowing them to trumpet lower cost devices that don't need the 3g radio but still maintain mobile data through your phone.
I don't know if it's really feasible but I also think it is seriously infeasible to have to pay for data plans for all of my devices.
I have a (company provided) smartphone and love it. I'd like for my wife and teen to have the same experience, but there's no way I'm going to pay Verizion $60/mo on top of $60 for voice+text family plan. I hope the manufactures that are trying to sell smartphones are listening.
I've been asking for shared data plans for a few years. I don't see why a family with 5 smartphones can share minutes but are forced to pay $150 for data even though they use only 5 GB's per month (avg) between all devices.
I like T-Mobile and Walmart's version of 1GB for $40. Yeah, a GB for $40 sounds expensive until you realize it's for the entire 1 GB not a 30-day windows. So if you have 2 devices on the plan and each device uses about 200 MB's a month than that 1GB will last you for almost 3 months. And with WiFi in more places that type of plan makes sense.
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