Mixed Reception To AT&T's New Data Pricing Scheme 514
Several readers have sent in followups to Wednesday's news that AT&T was eliminating its unlimited data plan. Glenn Derene at Popular Mechanics defends the new plan, writing, "Imagine, for a moment, if we bought electricity the way we buy data in this country. Every month, you would pay a fixed amount of money (say, $120), and then you would use as much electricity as you wanted, with an incentive to use as much as you could. That brings price stability to the end user, but it's a horrible way to manage electricity load." Others point out that this will likely engender more scrutiny from regulatory agencies and watchdog groups. A Computerworld article says that one way or the other, AT&T's decision is a huge deal for the mobile computing industry, influencing not only how other carriers look at data rates, but how content providers and advertisers will need to start thinking about a data budget if they want consumers to keep visiting their sites. AT&T, responding to criticism, has decided to allow iPad buyers to use the old, unlimited plan as long as they order before June 7, and Gizmodo has raised the question of "rollover bytes."
Last byte? (Score:4, Insightful)
No AT&T?
No Apple iWhatever?
NO PROBLEMS!
Rent (Score:5, Insightful)
Imagine, for a moment, if we bought real estate the way we buy electricity. We'd have a punch card at the door to record when we go out, and when we go in...
Re:I don't want this (Score:4, Insightful)
But imagine this... (Score:5, Insightful)
Imagine, for a moment, if you bought infrastructure equipment, and sold only the capacity you could actually deliver at any given time? Regardless of whether your equipment is fully utilized or underutilized, you still have to pay the cost of the electricity to power it, and the real estate in which it is housed.
This is why flat pricing models are a good idea. Imagine for a moment if AT&T charged by the byte, and people stopped using all that bandwidth to save money. AT&T's income would decrease, but not their cost of business (hey, they've already bought the equipment, might as well use it...)
If AT&T charges a flat rate, they can predict their income and plan accordingly. However, if they charge by the byte, then they have to deal with fluctuating income from one quarter to the next. Not only this, but there are perhaps a sizable portion of their customers who will instead try to minimize their costs. With a fixed rate plan, they have no option. But with a pay-per-byte plan, users like me could use their services for pennies a month. AT&T is about to come to terms with the fact that most users will opt for using less bandwidth and forking over less money per month. The reason why people pay so much for data plans is because they have to, not because they want to. Give the people the ability to save money, and they will take advantage of it.
These kinds of plans have been tried before, and they always fail. Email is cheap, bandwidth-wise, and movies can be had from Netflix for less than the cost of the bandwidth used by the net.
Stupid comparison (Score:5, Insightful)
Electricity and other limited resources are NOT like data. The only limitation on an internet connection is bandwidth, which is a rate, rather than an absolute quantity. The comment in the article comparing unlimited data plans to unlimited electricity is just stupid, and shows a complete lack of understanding of basic physics.
If you burn 1000 kilowatt-hours of electricity (which equals 3.6 billion joules of energy), that energy had to come from a specific quantity of oil, coal, natural gas, or some other limited resource. Generally speaking, if you hadn't wasted that power, the power company would still have that much in natural resources left to use. So every unit of energy carries a dollar cost.
Data isn't like that. If the connection is present, it costs no more for the internet provider to transmit at maximum bandwidth versus transmitting nothing at all, for a given period of time. You might as well use it. The only limitation is bandwidth, since the "pipe" is only so big, so if everyone is trying to transmit/receive data at the same time, they're going to be limited as they have to share.
If the ISPs are worried about people hogging bandwidth, there are other ways of dealing with that, such as by limiting their individual bandwidth. For instance, those found to be hogs during peak times can have their bandwidth limited to less than others who are more occasional users. Limiting people to a specific quantity of data is just stupid and greedy. If someone downloads tons of stuff during off-hours, making use of bandwidth that would otherwise go unused, this does not cost the company anything, nor does it inconvenience other customers.
There is absolutely no reason data providers cannot place transparent bandwidth limits on hogs during peak hours so that everyone can get along, without having to add on any extra fees or hard limits, or causing any inconvenience to other customers.
Mmeasured cs. Flat rates.. (Score:3, Insightful)
I woud LOVE it if at&t and, in fact, all phone companies, just charged me a fixed cost per text message, per minute call, per 1M data. A rate that was competitive. This works just fine for the water works, the electric company, the postal service, the toll system on the highway, to name a few.
I would be OK if they tiered a bit - first 500 minutes talk at $0.05/minute down to $0.03/min till 2000 minutes, etc.. Same with texting, same with data - essentially switching on bulk mode as you "earn it."
Right now, through "fear" and published horror stories about giant bills, they manage to talk most people into "flat unlimited rate" - show me the person who uses exactly 200M of data, or exactly 900 minutes of talk time. Rollover is sorta nice, but the rules around it are petty and serve to lessen the usefulness (expired minutes, resetting when you change plans, etc..)
If everyone paid exactly for what they used - you and everyone of us would win. Flat unlimited rate is a great idea, except that it doesn't really save anyone money - unless the resource is unlimited - which bandwidth cannot claim to be - in fact, mathematically and economically speaking, it can't.
Like electricity? Not quite. (Score:4, Insightful)
When you pay your electric bill, you typically pay a flat rate (a connection charge) to your electric company for the transmission system, and a per kwh rate to them to buy electricity from any number of generating plants. Use 1 kwh or 1000kwh, your payment stays the same. Now if you want to jump to the next level (1ph 120v to 3ph 480v) then you pay a higher connection charge, but still don't pay more for your usage for the /transmission/ of the power.
If you want to follow that model then I'll gladly pay AT&T $5/month for their network transmission services, and a per MB rate that they can pass on to the webmasters and hosts of the websites that I visit.
Re:I don't want this (Score:3, Insightful)
But if people keep using more and more bandwidth, someone will have to pay for more and more infrastructure to support the ever growing usage.
People keep saying this like its a bad thing. What, I don't want my phone companies or ISP to upgrade their hardware? By encouraging people to use less bandwidth, you stifle growth. By having network speed as something to compare when considering a phone provider, it keeps them trying to beat each other at phone speeds.
Re:Last byte? (Score:5, Insightful)
Electricity? well... (Score:3, Insightful)
The new plan is a really bad idea (Score:5, Insightful)
The plan is just a way for AT&T to get rid of its least profitable customers. These are the ones who actually *use* the network capacity that they pay for. Most people are light users. They pay a lot of money but don't actually use much capacity. AT&T loves these people, because it's essentially free money. The ones who actually use the service are not very profitable, because AT&T has to provide capacity for them. (Capacity isn't needed if you don't use the network!) So rather than expanding capacity to match demand, they're making it economically infeasible to *use* the capacity that you pay for.
AT&T claims that most people use less than 2 GB/month. That's great, but that's partly because of the lack of good applications for most smartphones. (iPhone users use much more than half the data on the network.) Imagine if AT&T had imposed a cap based on what most people used in 1993. The web would have no pictures. You couldn't afford them. If they based it on what people used in 1996, the web would have no audio or video. You couldn't afford it. Same with most applications used today, network based software distribution, Skype, and many other things we take for granted. The cap makes higher bandwidth applications unaffordable for most users, and will seriously stifle the development of new technologies for mobile device.
This is a truly bad idea...
Charge for tethering is a complete rip-off now (Score:5, Insightful)
The ridiculous part is that they're still charging a fee to enable tethering. That sort of makes sense with an "unlimited" plan. Presumably, the plan price was based on an estimate of how much data you'd use. Since tethering will obviously drive up usage, that assumption is no longer valid. (This highlights the absurdity of so-called "unlimited" plans that aren't really.)
But now that you are paying for actual use, there's no excuse to charge anything for tethering. You've paid for 2 GB (or whatever), and it shouldn't matter how it gets used. If you use more, you pay more.
I'd really like to see a regulatory authority question that charge.
Re:I don't want this (Score:2, Insightful)
Inapt analogy (Score:1, Insightful)
I am fine with the idea of putting a price on data, but the comparison to electricity is a poor analogy. The cost of providing electricity to someone, more or less, scales linearly with how much they use--each kWh is some amount of fuel that must be burned. The cost of transporting data from point A to point B does not scale linearly, though. E.g., once my router is plugged in, the cost of transferring 1GB from one of my machines to another is very nearly zero compared to just letting the hardware sit there. On the other hand, if I bake a pizza instead of letting my oven just sit there, that's 1kWh or so of electricity that would not otherwise need to be generated. Obviously that's an oversimplification, because the more heavy bandwidth users you have, the more hardware you have to install, so at large scales increased data transfer does increase cost. Nevertheless, it does not scale linearly, because there are economies of scale: bringing 1GB/s into someone's home does not cost 1000 times as much as bringing 1MB/s into someone's home. For energy, though, we've essentially maxed out on the economies of scale and are essentially in linear territory. (Yes, the local provider has an upstream provider, but still...)
Re:Rent (Score:4, Insightful)
That's analogy makes no sense. All your shit is still in the place whether you're there or not. Your rent is based on two things - location and space ("amount used"). If you want a 5 bedroom house, 4 baths, etcetera, it's going to be a damn sight more expensive than 1 room studio. To make your analogy work, hotel rooms would have to be used and it still breaks down.
I think the A&TT change sucks. If you're work and home have wifi, you'll likely be below 200MB per month... but if not, you'll seriously need the 2GB plan. But there are still people who want unlimited. Unlimited doesn't mean unlimited data like someone posted comparing it to an unlimited electric plan. Unlimited in this case means you could download 24/7 on the limited bandwith on the phone. In analogy to electricity, you could easily have an "unlimited" plan, because even the 100/200 amp wire into your house has a "bandwidth" limit of the amount of electricity it can pull at any one time. From there, the electric company just has to figure the average people on unlimited plans actually pull down and adjust their rates to profit from that.
It's not unfeasible, although it will incentivize everyone to switch to electric heat and leave the AC running 24/7 as well as the lights and TV. Of course, if the unlimited electric plan was $499 per month, most people would opt per kwh. OTOH, I dont see that much of a big deal about having a data pipe open 24/7.
Re:I don't want this (Score:3, Insightful)
the hogs will get crappy bandwidth during peak hours, but still be able to download to their hearts' content during off-hours when no one else is using the bandwidth
In science fiction circles this is known as "it was raining in planet X". The concept of "peak hours" only applies to your local time, not to the planet-wide internet.
Re:I don't want this (Score:3, Insightful)
I propose to use token ring for all our mobile networks XD
Re:I don't want this (Score:5, Insightful)
What about the billions the telcoms fleeced us for network improvements? Why would the government even subsidize profitable business? If they cannot afford to upgrade their networks, then something is dramatically wrong. Look at text messages. It costs them NOTHING to send them as they are sent over the control signal, yet they feel a need to charge upwards of .25 for one. This is all about fleecing the consumer and stifling innovation so they can get away with their rick shaw networks for another 5 years while the rest of the world outpaces us. How long did it take for 3g to come into america? Why are our cell phone plans so much more expensive than the european options? If they could get away with charging $100 for a 200 megabyte cap they'd totally try it.
I browsed the web for a few hours last night while listening to pandora via a 3g wireless tether to my G1. It didn't take long to break 100 megs. No multiply that times 30 and you start to see that it wouldn't take long to exceed a 2gig limit. 5gb or so seems fair, and I've almost exceeded that a few times with video and whatnot. I mean I understand that this isn't the same as a wired connection that has oodles of bandwidth available in the local loop. I understand that each cell site takes a dedicated connection and that costs a great deal. What bothers me is this whole bait and switch. A lot of people bought ipads on the premise of unlimited internet. Sure they are grandfathered, but for how long? It was the reason I decided to finally pony up the $100 a month a T-mobile contract costs me with android. If T-mobile went to a 2gig cap, I'd be really considering just paying the early termination fees and going back to the laptop+hotspot. Life wouldn't end necessarily.
To me it seems inevitable that in 5 years even 10gigs would likely not be enough. Especially at the 7-20mpbs the next generation of networks is supposed to start pumping out anytime now outside of new york and boston. Its like giving someone a Lamborghini with only a 5 gallon tank that you can only fill up once a month. I mean, what's the point really? Once android starts taking over the smartphone market with flash enabled those few gigs sure won't last long after you watch some 480p video or listen to some streaming music.
This is a really bad deal for consumers. One would hope that some of the other telcos don't follow suit and competition will hopefully sort things out. I won't hold my breath.
Give them your money! (Score:3, Insightful)
What's special about "infrastructure equipment"? When your grocery store decides how much perishable food to stock, they have to make exactly the same kind of prediction. And yet few stores insist on monthly milk-buying contracts.
The truth is that a recurring fee is the ultimate wet dream of anybody designing a business model. Harder to do when there's real competition. Which there is in the grocery business.
And also in the wireless data business almost everywhere outside the U.S. Which is why, contrary to what you believe, that these models have been tried and do work, in countries where there's real competition in the wireless space.
Re:If you want to compare it to electricity.... (Score:5, Insightful)
Also, do you have to buy a separate electrical plan per each appliance, and then get locked into a 2-year deal with your electricity plan?
Oh, and also electricity is heavily regulated because it's a utility. Are cell phone carriers prepared to be treated that way?
Re:I don't want this (Score:4, Insightful)
Not sure what you are so indignant about. The ads are what pays for the content in the first place, so not getting them isn't really "fair" so much as it is what you want.
Re:Data Budgets (Score:5, Insightful)
This is a bad thing exactly how?
I think if you WANT lots of stuff to download, go for it. I also think that a website that requires 1Mbyte of stuff downloaded just to view it is a waste of bandwidth. Web developers that do things like force you through a huge flash animation just to visit the rest of their site are an abomination. I've lost count of the number of commercial vendors I DO NOT deal with because I couldn't get to their damn text web page. (I have flash deliberately disabled on my browser because it screws the CPU and wastes my time.)
If you can say it in ten words and choose to use a 300k animated GIF instead, you should be shot. If AT&T's actions help eliminate web-bloat, I'm all for it.
Now get off my lawn.
Re:I don't want this (Score:3, Insightful)
But you do want the content, right? So how do you expect the content providers to pay for the bandwidth they use to provide you with it?
Re:I don't want this (Score:5, Insightful)
Ah, but airlines charge more money the fewer seats are left to discourage people from causing them to have to move to a bigger plane, and they discount the heck out of fares when they don't have enough passengers. The result is that the airlines are now constantly raising fares and whining about how they can barely afford to keep the lights on, all the while begging for government bailouts. If you want telecom to be in the same boat in ten years, this is where it starts.
Also, trying to compare telecom to airlines is a terrible analogy anyway. There's minimal additional cost to a telecom system for additional packets up to the point at which they have to increase infrastructure. With aircraft, the cost to the airline depends on how many people are flying. If zero people are flying, it costs zero dollars because they cancel the flight. If at least one person is flying, they have to pay the base cost of fuel plus an incremental fuel cost proportional to the number of people on the plane, the number of bags, etc. By contrast, with a network, ignoring minor fluctuations in power consumption, the cost of the capacity is almost entirely there even if the capacity is unused.
Finally, as for whether charging for bandwidth would stifle growth, we need to learn from history. When iPhone came out, suddenly AT&T started offering unlimited mobile data at a reasonable price. Traffic from smartphones is now about 1/6th the total Internet traffic. Before that, smartphone traffic was basically inconsequential. Now part of the difference is that iPhone provides a better browsing experience than most or all of the craptastic browsers that came before it, but speaking as somebody who had a previous phone that was capable of doing mobile browsing, I can honestly say that I never even bothered to test the feature to see if it was usable. Why? Because they were metering by the kilobyte and I wasn't about to run up a thousand dollar phone bill. I took one look at the rates and said, "No way."
Now I'll grant that the two-gigabytes-and-then-you-lose-service plan is less of a screw job than AT&T's extortionate per-kilobyte rates from a few years ago, but there's really no question whether higher prices will stifle growth. It historically did stifle growth, and it stifled growth massively.
I'm a light iPhone user. I almost never use it to check mail, and only occasionally use it to browse the web. Even still, I rack up an average of 300 MB per month. 2 GB is not a lot of traffic. It's like loading Slashdot's home page about once every twenty seconds for a month. It's like watching about 36 minutes of high definition YouTube video (if you could actually do that over 3G). Let's put that in hard numbers. Somebody watching nothing but YouTube HD videos all day (assuming a 14 hour day with time out to sleep and eat) would spend a whopping $17,500 in bandwidth fees. Talk about a phone bill that can stifle growth.
Yes, this AT&T scheme is a bad thing. A VERY bad thing.
Re:Stupid comparison (Score:4, Insightful)
You're wrong. Radio spectrum is a finite resource; there's no more untapped frequencies. It follows the same economics of energy, which is constrained by how fast we can suck it out of the ground. Radio spectrum is constrained by how smartly we can divide it up.
No, you're missing the point. Radio spectrum is just like internet bandwidth: the absolute amount is infinite, it's only the rate that is limited. Haven't you ever taken a calculus class?
If I transmit some information over a radio, it only uses up that spectrum during that time. It doesn't reduce the spectrum forever.
Again, there's still more demand then the bandwidth can handle. What happens as soon as a bunch of people decide to batch up their less-time-sensitive stuff and send it at night? Then nighttime will become constrained. We're already seeing bandwidth peaks at night.
It doesn't matter. It can all be handled by prioritizing traffic, and giving higher priority to those who use the least bandwidth. People who batch it up and download all at the same time will have the same effect as if they did it during the day: they'll be deprioritized in favor of people who have very low BW utilization.
Re:Data Budgets (Score:4, Insightful)
Forget about Flash. If I'm going to be paying by the byte, then I don't want to see any advertisement.
If our internet usage is going to be metered, that means all of a sudden we will be paying to view advertisements. I don't know about the rest of you, but all of a sudden any ad-driven site is suspect, any image is a potential waste of bandwidth. We might as well go back to gopherspace. Yes, I hate huge flash introductions to websites, too, but I'm not quite ready to return to the web being a text-only experience. Most Flash is wasteful trash, but I would miss a few baroque masterpieces like Tenacious D's website.
This changes the entire model of the Internet, making it a lot more like cable television, where you not only have to pay subscription fees, but you have to watch advertisements on top of it. Maybe some of you are too young to remember, but when cable television first came out, it was trumpeted as being superior to broadcast television because you wouldn't have to watch commercials. We see how well that worked out.
How much of your monthly internet bill are you willing to pay in order to see advertisements?
Apparently, AT&T didn't learn anything from the breakup back in the '80s. Maybe it's time for the government to teach them another lesson in manners. If we don't get strict Net Neutrality regulations in place, we'll be telling our grandchildren about how great the internet was way back when anybody could put up a website and some kid with an idea and elementary html skills could capture the world's imagination..
Re:Last byte? (Score:4, Insightful)
Here's the question that guides the economics of text messaging: Is it worth 20 cents for me to send a message to my friend?
Yeah, no, it's not worth 20 cents per, but over the course of the number of messages I send/receive, 20 cents multiplied by all those is a good deal more than my flat plan for texts, so I go with the plan. Really though, that doesn't affect me. Who it does affect are the people who barely send/receive any. They want figure they might as well get a plan for $5/month instead of risking paying the 20 cents per if they start getting a bunch. If they only send/receive 10 messages, that's $2 right there, and the phone company is making $3. It's trying to nudge people into buying text message insurance
It frankly amazes me that with all the alternatives on most newer phones, SMS is still used and abused.
What other alternatives are there? Yeah, I could use Google Voice, or Gtalk, or Skype, or any other messaging service, but how do I get people who are not on a smartphone to use anything but my Google Voice number. Also, everyone already has my regular number, so getting all my contacts to send me messages there instead of to my phone is damn difficult too.
Re:Last byte? (Score:2, Insightful)
I wait for the day when there are five or six (non-colluding) carriers, and they charge me $5/mo for service plus unit charges for calls, data, and texts, just like electricity. As long as there's enough downward pressure on pricing, the customer will be better off than now.
Re:I don't want this (Score:4, Insightful)
But you do want the content, right? So how do you expect the content providers to pay for the bandwidth they use to provide you with it?
Find a business model that works.
We are all ears!!!
The current model works. Simply suggesting it doesn't is not good enough. The evidence is all around you.
WE (yee olde web surfers, game players, and facebook fanboys) built the infrastructure in this country. We built it $30 per month, year after year. We added more dial-up lines. We added cable modems. We paid. We demanded faster connections so we could game. We paid. We tossed out old modems, bought new modems. We paid.
There is very little government money in our current infrastructure. Instead, you paid. I paid.
We accepted the ads, because those allowed us to read a blog, or visit a site for free, without having to open an account there. Could you imagine having to have an account at every site you visited? Could you imagine having a charge from Slashdot appear on each credit card statement, or watching your cable bill balloon each time you visit facebook?
The model works.
Data should be priced by the byte (Score:3, Insightful)
Re:I don't want this (Score:3, Insightful)
You dumb "geeks" as you claim to be won't be burying fiber, because you won't have any jobs (burying fiber is a pretty shitty manual-labor job BTW, that any dumb monkey can do). Meanwhile, we engineers will be actually building networks that really work and are financially viable, while dumb "geeks" like you sit at home in your mom's basement bitching about ISPs not giving you the bandwidth you think you deserve at a price impossible to achieve.
Re:it had to happen (Score:5, Insightful)
Instead, we have fees and inflated costs for services, because the network is wholly owned by a handful of companies which see fit to keep a relatively level pricing scheme between them. Tethering fees are only possible because of two things. 1) most consumers are too ignorant to know what they aren't getting. 2) monopoly control of what should be a public resource. That isn't capitalism, it's corpratism.
Re:it had to happen (Score:5, Insightful)
Capitalism is a lot dirtier than people suppose, it will always move to a monopoly of some sort, because that is the most profitable position to be in. Likewise being a part of a de facto cartel is also frequently a desired position as it's easier to maintain and as long as you're careful you can get away with it for a lot longer.
Re:Last byte? (Score:4, Insightful)
Let's suppose firms and consumers respond to incentives. Also suppose firms wish to maximize their own profits, while consumers wish to maximize their own utility. If AT&T effectively increases their price for data plans, then what do you think competitors will do?
AT&T's plans will effectively CUT costs for 98% of their user base.
Only 2% who slurp down porn flick after porn flick on their mobile phone will ever exceed 2gig. You know who you are...
Verizon will announce similar tiers soon, they have been hinting since march.
Sprint probably won't initially, but they don't have the network capacity to pick up the top 2% of AT&T's bandwidth hogs. They will be forced into some defensive tiering.
So all carriers will end with tiered pricing, just like the rest of the world.
With enough noise, and bad press, AT&T may raise the top rung to 3 Gig, maybe even 4, and they might raise the bottom rung up to 400meg. These caps seem to be laid out to allow some movement to a level that would engender less grousing.
But tiers are here to stay. There is not a glut of infrastructure out there anymore.
Re:Data Budgets (Score:3, Insightful)
FTFY
Re:I don't want this (Score:5, Insightful)
Find a business model that works.
Oh, bugger off. I've had it with people insisting that businesses trying to subsidise free content with ads need to "find a business model that works" because at the end of the day, someone needs to fund it. The problem is that these are the typical responses:
* Advertising: "I don't like ads. Find a business model that works".
* Paid content: "I don't want to pay. Find a business model that works".
* Merchandise: "I don't want to pay. Find a business model that works".
* Shutting down: "WTF? I visited that site! Why couldn't they find a business model that works?".
In short, stop spouting "find a business model that works" and offer some fucking suggestions.