Settle in for the hangover, folks, because the unlimited mobile data party might well end in 2010. While Americans have been enjoying the giddy, anytime, anywhere use of the Internet, social media, cloud-based picture-sharing and streaming video, revenue per megabyte has been falling for operators. And that means we are likely to soon see the end of flat-rate mobile data pricing, across carriers.
“We believe carriers will increasingly have to manage the usage side of the equation,” said Bernstein Research analyst Toni Sacconaghi, who explains that bandwidth consumption since the introduction of the iPhone has grown by 50-fold, while data revenues have grown by only 250 percent. “Carriers that have not already done so are increasingly likely to adopt usage-based pricing schemes that more fairly match price to usage but which will also inevitably discourage the most profligate kinds of applications.”
Take AT&T Inc., which would like to “encourage” you to use less 3G data, please. Or, well, there might be consequences. Like being converted to usage-based data plans instead of paying the $30 per month (average) flat-rate that users enjoy today.
AT&T has been famously hard hit by congestion in the access and backhaul networks, stemming from the large amount of primarily iPhone-related data traffic. It has been busily upgrading its 3G coverage to accommodate (2,000 more cell sites are planned), but upgrades might not be enough as the industry moves forward. The reality of mobile data’s downsides has prompted comments from AT&T about how to deal with data hogs.
“What we are seeing in the U.S. today in terms of smartphone penetration, 3G data, nobody else is seeing in the rest of the planet,” said Ralph de la Vega, president and chief executive for mobility and consumer markets at AT&T a6t a UBS investor’s conference in New York. “The amount of growth and data that we are seeing in wireless data is unprecedented.”
He said that 3 percent of AT&T’s smartphone users consume about 40 percent of all wireless data. “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 customers on those same cell sites,” he said.
He said the plan is to "encourage" users to cut back. But failing that, analysts say the carrier could very well move to a metered plan, forcing subscribers that are used to unlimited data to learn the meaning of a megabyte. It’s an idea that carries the risk of enraging American consumers, who, unlike the rest of the world, expect affordable all-you-can-eat plans. It also carries an educational risk, with users potentially facing huge unforeseen bills due to not understanding how much bandwidth various activities take up. Does anyone really want to deal with memorizing that one minute of streamed video equals x number of photo uploads to Facebook?
It might all be a moot point. “iPhone users consume Web, e-mail and video data on the mobile network at levels that many believe are adversely affecting other subscribers on those mobile networks,” said Saccionaghi. “Network congestion in turn is triggering higher capital spending requirements for carriers. Unchecked, the iPhone’s very high usage levels could severely undermine the economic returns of offering the iPhone.”
