AT&T's new data plans will ruin the future of mobile
knowyourcell.com
knowyourcell.com
Usage fees aren't bad when they're modest. Most of us pay for heat and electricity that way. For those of us who have a server, we get an allocation of bandwidth and overages are usually very reasonable - or with Amazon, you pay for what you use. Now, telecoms haven't always had the nicest pricing structures in the past, but I remember when long-distance service became very competitive and the price of minutes sunk. I'm hoping that the combination of 4G and two new entrants to the wireless world (Cricket and MetroPCS) will make data look more like long distance service.
Usage fees aren't terrible. Carriers do have costs to increase capacity and by charging those who are using that capacity, they have an incentive to build a good network and don't end up making light users subsidize heavy users. We must be vigilant that usage fees aren't onerous or out of line with costs, but I'm hoping that the combination of competition and increased capacity will keep prices down.
I would say this is very unlikely. Look at call minutes, look at SMS messages.
Both of these have plenty of scope for carriers to cut costs and compete while still being a profitable item. Do the carriers do this? No, not at all. They all keep their prices artificially high and roughly equivalent because it is in their joint interests not to compete too much.
If you look outside the US, there are plenty of telco's who's data prices are way higher and kept their for exactly this reason.
Carriers could compete on talk minute price, but they know that few people care. Those that do have already moved to something like Boost Mobile or one of the other low cost providers (most are owned by the big boys, so you could say they are already competing with lower prices just with a different brand).
SMS messaging while a ripoff from a production cost standpoint is not all that bad from the consumer view. For $10-$15/month someone can do unlimited SMS. From a cost to communicate with anyone and everyone as often as someone likes standpoint that is a very cheap price. Also, people don't really care enough to move providers in order to save $5 when they would rather have either coverage, service or a certain phone.
Are the carrier prices really artificially high? I will say they have some wiggle room, but they are walking a fine line of price they need to charge in order to build out the network across the entire US with the lastest tech and still somehow turn a little profit at the end of the day.
Net Profit Margin for the 1Q of this year: VZ - 8.49% T - 8.36% S - (10.7%)
Not exactly price gouging numbers above.
However, data demand isn't static, and it's going up. So I wouldn't expect to see data prices stay as stagnant as voice minute and SMS prices have, especially since that's the lucrative growth area cell networks have now.
2GB for $25 is pretty modest for current wireless devices; most users (including tech industry journalists[1]) don't hit it at all. Therefore, for an average month of usage, 2GB for $25 is cheaper than 5GB or unlimited for $30, simply because it's not pro-rated if you use less.
The only real problem is selling it to the non-nerd set.
[1]: http://arstechnica.com/telecom/news/2010/06/iphone-data-usag...
Of course the companies will never do this because I would only end up paying $6/month instead of the $25. I know ATT did their math and realized that most users are just above their lowest plan, but way below their highest plan. The goal is to push people into the higher plan and hope they use nowhere near that amount.
A couple months ago, I was in Colombia, where for $20/month you can get unlimited wireless broadband, pre-paid, without a contract. Colombia, fer cryin' out loud, where they still have insurgents attacking the army and pirates operating near major cities, but somehow they manage to figure out how to do mobile broadband better than the USA.
Needless to say, Europe and Asia left us in the dust years ago. It's incredible that I still can't walk into a store in LA and buy a USB stick with a month's worth of unlimited bandwidth on it.
I checked the SingTel site[1] and I'm guessing that they each have the $39 or $56 plans, $30 and $45 in Canadian dollars. That's their entire plan including voice, data, and everything else. I wish I didn't know how good it is in other countries. Fucking useless CRTC doesn't do anything about Canadian telecoms colluding and price fixing. The telecoms here have no interest in competing with each other.
[1] http://info.singtel.com/personal/communication/mobile/mobile...
But to be fair(er) to the telco's, it is a little easier to provide decent cellular coverage across Singapore than it is across even the densely populated swaths of Canada.
As a rural Canadian I'm not sure I could push much more than 2GB through my home internet connection a month if used it 24/7.
I just agreed to pay Rogers $30 for 10MB of roaming data in the US while I'm at WWDC. I'm obviously going to go over that and will be charged $3/MB all the way up beyond the 10MB.
That is just greed. They take advantage of people who either have the company paying the bills or don't really know how much data they'll use. There's no way I'll use my phone normally while I'm away, but I should be able to. This has nothing to do with Canadian infrastructure and everything to do with being taken advantage of because we are locked into contracts, and even if we weren't Canadian telcos do not compete with each other. They all have outrageous pricing last I checked. Maybe things have changed with providers besides Rogers during the last couple years but I doubt it. They have no reason to compete with each other if they can fix prices and all make a killing. Prices are too similar across the board for me to think otherwise.
I mean, this is capitalism, right? How is one company going to charge too much more than the cost of the bandwidth without another company undercutting them? I don't pay monthly for unlimited breakfast cereal, or gasoline, and yet somehow capitalism has managed to keep those prices in check. I have no idea why this guy thinks that bandwidth is so different from every other good or service.
The cellular industry, due to its high barriers to entry (stemming from the enormous initial infrastructure costs), tends towards a natural monopoly. In this case, it hasn't quite reached a monopoly - instead, we have 4 main companies (AT&T, Verizon, Sprint, and T-Mobile), also known as an oligopoly. I know there are smaller carriers, but since they don't provide coverage everywhere, their product is not the same as the one provided by the 4 major carriers.
The problem is that when there is a disparity between the value of a product to the buyer and the cost of production to a seller, if there is natural competition (cereal, gasoline, etc. are relatively close to natural competition), the actual price will tend towards the cost for the sellers, since companies will keep undercutting each other until the price drops to the lowest they can accept without losing money on each sale. OTOH, if there is a natural monopoly (or something close to it), the actual price will tend towards the value for the buyers, since the lack of competition allows the price to rise as high as the buyer will tolerate.
In the case of bandwidth, the marginal cost for the telecom companies for each byte transferred is miniscule compared to the value it provides to us. If we had an industry with natural competition (like they do in other countries where the government owns the pipes and the telecom companies simply lease it out), then we would only be paying that miniscule cost (which essentially rounds off to a flat monthly fee for unlimited access). But since we have an industry that tends towards a natural monopoly, the companies will milk us for every penny we're willing to give them.
Therefore, unless the amount of value that each byte of cellular data transfer provides decreases significantly for a significant portion of the telecom companies' customers, the prices won't decrease, regardless of what changes occur in the costs to the companies.
That is, of course, unless the government steps in as it has in other countries and artificially fosters competition, so that the cost to the companies plays a more significant role in determining the prices.
Maybe a challenge to use bandwidth wisely will spur innovation.
Wow. With all the pun threads on the internet nowadays... that's really one of the best ones I've seen in a long time..
AT&T's deal is more than 5 times the price of that. Is there a good explanation for this other than lack of competition?