The flat-rate mobile broadband backlash

John C Tanner
08 Feb 2010

The iPhone gets a lot of credit for kick starting the mobile broadband era, but the real enabler has arguably been the introduction of flat-rate data plans. But while users loved it, cellcos gave in reluctantly, fearing the risk of being relegated to bit-pipe status. Now, with mobile data traffic drastically outpacing revenue growth from mobile data services, the inevitable flat-rate backlash has begun.

Well, it's mainly begun in the US, where executives at 3.5G rivals AT&T and Verizon have declared flat-rate unsustainable and its days numbered as they lumber on to LTE. In December, AT&T wireless chief Ralph de la Vega said the cellco is looking at providing "incentives" to heavy users to cut back, but in the longer term, they were going to have to get back to usage-based pricing.

Verizon CTO Dick Lynch made a similar statement a month later, saying that LTE pricing will have to be different from 3G pricing, likely in the form of a basic monthly fee and usage-based pricing for bandwidth consumed. These aren't just US sentiments, either - I have heard some cellco execs in Asia voice similar concerns.

The problem with the above strategies is that they rely on one of the most unreliable metrics in the industry: the consumer. De la Vega was vague on details on how to incentivize heavy users, but it apparently involves requiring them to understand how mobile data networks and apps work so that AT&T can ask them not to use the service for what they're paying to use it for.

Good luck with that. Usage-based pricing relied on similar knowledge, and look how that worked out. De la Vega can talk all he wants about educating the customer on what a megabyte is. I, for one, know perfectly well what a megabyte is - that doesn't mean I want to access my Facebook page on my handset or my dongled laptop with one eye on the meter. (That said, a meter widget that actually shows you your per-MB data bill in real time would be helpful - although it will likely convince users to use the service less if there's no flat-rate option.)

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