Data Pricing Sanity Maybe?
tbray.org
tbray.org
This "unfixably broken idea" is how the internet spread to the general population, 1995->present. That's 17 years. Seventeen years in which even very limited carrier competition brought prices way down and speeds way up. Does anyone remember how much a 128kbps ISDN used to run?
Seventeen years in which the typical consumer went from downloading mainly text and gifs to downloading mainly (bandwidthwise) lengthy videos, many of them high def. Despite the fact that, as Bray puts it, "once the network operator has your monthly payment, they’re powerfully incented to keep you from using the network."
Now any reasonable person can imagine how mobile might change things. But Bray gives such ludicrously short shrift to the power of flat-rate pricing it is hard to take anything else he writes in the essay seriously.
Of course the idea of unlimited usage is an illusion. Consumers know this. They have always known this in the deep and visceral way that only a flaky modem/ISDN/DSL/cable/EDGE/GPRS/3G connection can convey. But they like the trade offs: The ISP limits your bandwidth basically continuously such that your connection might slow down or outright disappear and such that latency might increase. In return, your bill is predictable.
ISPs have always worked this way. Always. You'd dial the modem bank and get a busy signal. Or you'd connect -- perhaps even through newfangled DSL technology, which in theory insulated you from your neighbors -- only to find the provider's upstream internet link was saturated. Or you'd jump on a cable connection and find it running at half speed because your neighbors were awake.
What consumers liked about "unlimited" was what it meant for our pocketbooks: Your use is unlimited as far as the bill is concerned.
Metered pricing is an illusion, too. The illusion is that you pay for what you use. But of course that's not true. No one is proposing dropping monthly mobile fees, you notice. So 0 bytes != $0. Also, having a million dollars to blow will not magically get you unlimited bandwidth. All the limits of network contention with fellow users, and all the limits of the network itself, are still there. Sure, other people might USE less data. But also, the telco might BUILD less infrastructure as a result. So in a way metered is the worst of all worlds: You still get the implicit limits and unreliability of a mass consumer network, PLUS new explicit limits that allow the telco to wallet-rape you.
It is amazing to me that someone as smart as Bray looks at this tangled mess of competing, differently- (but not-very-differently-) crippled versions of paid network access and actually accepts the abstractions at face value and, worse, writes off the arguably slightly less realistic abstraction as unworkable when that very abstraction is the reason he draws a paycheck from a company that sells web advertisements. I mean.
>Ruthless transparency from the telco as to how much you’ll pay for every MB.
When have any of the telcos even been translucent when it came to pricing? They hide real prices in pages and pages of fine print and don't offer any details on taxes or fees until they print them on the bill after you've signed up.
>A price-per-MB that, off the top, feels reasonable.
... like the rates we pay for text messages? Or existing wireless overages?
>A price-per-MB that falls during the course of the month as you use more and more.
Again, I don't trust any of the existing data providers to lower prices ... ever.
>A lightweight API so that you can obsessively check how much you spent in the last week or hour or ten minutes. So that after a while you won’t need to.
I foresee SOAP or invalid XML/JSON or servers that mysteriously go down at the end of the month due to "unexpected demand."
These are great ideas, but I think we need new competitors in the market before any of them will get implemented in a mildly sane way.
Unfortunately my login details are not where am I am right now and I can not give you directions straight to it, but it's not that hard to find once you jump the hurdle of finding your login.
Also, I just spent 15 minutes poking through the comcast.com website without finding any mention of a 250GB/month limit. I did a search for "250gb" (it even came up as a suggestion from their search engine) but it told me there were no results for that search query.
E.g., see "Bob" in Austria: http://www.bob.at/gigabob
The table (for one of their plans) says:
Included volume per month: 9 GB
Cost per month: 8.80 Euro
Each additional GB: 4 Euro
Fee to activate the plan: 0 Euro
Max. speed: 4 Mbit/s
Commitment period: None
I'd say this is pretty transparent to the user and there aren't really any "traps" in the plan (except that traffic gets a little bit more expensive once you are past 9 GB in a given month).
With the duopoly, they can maintain the status quo as there's no real competition or innovation going on.
They don't have to because they are in a government regulated cartel. Classic case of regulatory capture. The only free market in the US is the wifi sprectrum, which is providing the most value to US citizens.
So while we see occasional push back when public outcry gets too loud, most law and regulation is written by telco's, and hence telco friendly.
> I can sense Net-heads all over the world rolling their eyes and shaking their heads: “Nope, I gotta have flat-rate data”
In my experience the usage based billing is the norm everywhere (i generally buy a sim card for data everywhere i go).
And telcoms would probably prefer a variable pricing model, makes their business model sane. Want to see a telcom exec head explode? Ask him if he wants more traffic on his network or not.
You bought XGB this month. You didn't use it all? Ooops, you overpaid. Punished.
You used more? Ooops, you pay a higher rate for the overage. Punished.
How about we treat this like any other commodity and I get exactly what I pay for?
It is pretty well established. Where your model deviates from reality is in not accounting for the mental costs associated with having to (/wanting to) track how much bandwidth you've used on a minute-by-minute basis... how much is that Netflix movie costing me? How much is this Youtube video costing me? etc etc
You can argue about how irrational this is. You can even be objectively correct. And it won't matter very much.
Even objectively, you do need to worry about some fixed costs too. A package deal for the first X GBs might now be as irrational as you initially think.
My power bill isn't the same every month. My water bill isn't either. I know my patterns and roughly the monthly cost, and I can use less if money is tight.
You know how much cellular data I use per month? 0KB. Why? Because I don't want a giant fixed price add-on to my bill. If I could buy a smart phone, use WiFi 95% of the time, and spend $5 on data once in a while when I need it, I would use some. But I'm not jumping on a fixed price. I'm not paying for more than what I use.
I think it's great, especially when travelling to different countries (which seem to all offer this option - only for iPad).
From the carrier's perspective, grandfathered unlimited data plans are acceptable because the cost of the subsidies have already been recovered. More expensive newer phones require higher subsidies to be palatable to consumers, so data pricing is adjusting accordingly.
I would be happy to pay by the GB for my data if it were charged at the market rate, but it isn't. Cellular bandwidth is charged at the market rate + the subsidy recovery.
Having financing and pipe compete independently would allow consumers to get a better idea of the (now implicit) financing rate they pay to have their phone subsidised while allowing more freedom for a financed phone, e.g. switching carriers without worrying about cancellation fees.
http://www.mondaynote.com/2012/03/11/carriers-whine-we-wuz-r...
"The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices."
For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims.
From a carrier's perspective, grandfathered "unlimited" data plans are acceptable because it costs virtually nothing to keep the customer at their usurious rates.
For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims.
I dislike[1] the US carriers and their absurd data plans as much as the next guy, but the above logic has always baffled me.
Everyone seems to confuse revenues and earnings when talking about smartphone subsidies.
The subsidy of $20/mo (as quoted above) is paid out of carrier earnings, while the phone ARPU gets added to their revenues. Assuming a generous profit margin of 40%, unless the additional ARPU, compared to non-smartphone devices, is greater than $50/mo (2.5x the subsidy), the carriers are not exactly making out. This is the case more so for iPhones, where I understand the subsidies are higher than other smartphones, but the ARPUs are equivalent.
[1] I'd prefer the model where the customer brings in an un-subsidized (smart)phone and pays lower on monthly plans.
According to JL Gassee, the ARPU for most cellphones is $46.09, for iPhones it is approaching $120 (inclusive of the subsidy).
He quotes: "AT&T CEO Randall Stephenson pronounced himself happy with the 'over $100' ARPU from iPhone subscribers."
There is a very healthy amount there to absorb the subsidy plus cost of providing voice + data.
http://www.mondaynote.com/2012/03/11/carriers-whine-we-wuz-r...
It has a breakdown of how much carriers are getting per smartphone customer. In summary, they don't have much reason to complain.
Isn't this exactly the opposite of the way other metered services work? With residential electricity, for example, isn't it usual for the price per additional KWH to rise as one's monthly usage crosses the pricing tiers?
Isn't that exactly what you would want to encourage people to moderate their use of a supposedly scarce resource (like energy or bandwidth)?
Here is the current conditions for Rogers:
-Usage exceeding the data allotment provided is charged in $10 increments. Additional usage exceeding the data allotment provided is charged at $0.02/MB. U.S. data roaming is $0.006/kB and International data roaming is $0.03/kB.
Summary: local: $20/gb, US: $6000/gb, international: $30,000/gb (prices in Canadian dollars, basically on par with USD)
Oh, but the good news is they offer 'unlimited social networking'. If you use the right app on the right phone (I believe it is currently some horrible WAP applications), you get:
Unlimited browsing on select social networking sites (Facebook, Twitter, MySpace, Bebo, Flickr, Photobucket and LinkedIn)
This will crush mobile startups. How can you compete with services that don't cost the user money?
"A price-per-MB that, off the top, feels reasonable."
On a phone, similar to seeing signal strength, you could see the current cost per min calculated by your location and current time.
People should be able to download stuff in off hours in what ever quantities they can. If there is a huge event that would normally overload the local towers, this would be a way of properly allocating network access to people who really need it.
It might take some time for people to get used to it, but a comparison to gas prices might be helpful.
On day -1, the price of unlimited (or "very large cap that no one notices") bandwidth is based on average usage cost (which is really small, as there is nothing to do). On day 0, Netflix is released, and now there is something fun for a large number of users to do with an obscene amount I bandwidth. This violates the pricing model set by day -1.
So, on day 1, either: 1) the price of bandwidth for /everyone/ needs be drastically increased, 2) the people using "excessive bandwidth" (and who are now likely in "negative profit" category) need to be separated and shunned (poor incentive), or 3) Netflix needs to include the bandwidth their service is driving in their price and send it to the carrier.
Of course, we could 4) bill people for what they actually use (specifically, not over-billing some and under billing others, all the while hoping the numbers work out), which is exactly what the article is asking for, but it is important to realize that that isn't what we do now, so it should only be surprising if carriers did /not/ ask developers to chip in for bandwidth.
Second, variable pricing makes sense if those who use very little data get a discount off the amount this currently use.
* in the US, others feel free to convert to your local units.
Pricing data in MB (or KB!) is like billing for water by the cup (or Teaspoon!).
If you require someone to perform multiplication beyond 10^1 scale to estimate costs, it becomes easier for telcos to overcharge users. You and I probably have no issues with multiplication in our head on the order of 10^2 up to 10^6, but for most users, that scale is mentally taxing.
Compare:
0.02 cents per sms message $20 per 1000 sms messages
Plus, prices are "stickier" at 0.02/message than 20.00/1000 messages, since it's easier for two telcos to start discounting their price relative to one another with the latter, like $15/1000 vs $20/1000. The equivalent to such a discount under the per message pricing schema is to charge fractions of a cent. i.e. 0.015/message vs. 0.020/message. The only place in society where we really see fractional cent pricing in daily life is with gallons of gas, and even there the burden for the end-user is high enough that the gas stations all get away with leaving that fractional amount at nine tenths of a penny almost all the time.
One thing the article mentions is a lightweight API to check how much data you used in the last ten minutes. Truconnect has an app, http://www.truconnect.com/manage-my-mifi/ , that let's you track that.
It works with any MiFi, but prices are tuned to Truconnect.
DISCLAIMER: I have a business relationship with Truconnect, as the author of the above app. I do however, eat my own dog food and find it to be a good service and a useful app.
I sort of disagree with his pricing model. I think this is the best model for both data and voice:
Charge me an account fee (say $10 per month for a phone with every feature enabled. Caller id, voicemail, data, text messaging etc, etc) and then charge me per minute of call time, per text sent and per MB of data. Here's the important part: Charge a reasonable amount for each one of these.
There's got to be a better way to say this.
Until you can introduce competition to the system, any bandwidth plan will be grossly oversold at huge markup profits to the telecoms, who will be complaining they have to build any towers at all while taking home huge profits off phone rates.
I think it is comparable to a gas station: You drive more, you pay more. You drive less, you pay less. There are many reasons to feel raped by the oil companies, but that there is no gas flatrate is not one of them (I dont want to share a flatrate with people who use way more gas/data than me).
The other reason is, back in the early days of the internet I moved and switched from a modem to broadband. I also changed my contract with my internet provider, switching to a flatrate. They sent me an email, saying "order for flatrate received" etc. I didn't read the small print. 2 months later I received my first bill: No flatrate, huge bill. What happened? The day after I ordered, they changed their contracts. My order was for an old contract-type and was silently cancelled. Their fault, right? Nope, legally not, because the email said in the small print "Flatrate not yet booked, please wait for confirmation mail". Customer service figured it was better to screw me over than to keep me as a customer. (Propably a good choice, I think I could buy a flatrate for 3 or 4 years for that money today :) ). Anyway, wouldn't have happened with pre-paid.