AT&T’s president and CEO of Mobility and Consumer Markets, Ralph de la Vega, has called out the smartphone crowd in recent comments to the press and investment analysts. In the days of more primitive phones, “mobile” versions of websites were necessary; small screens, small amounts of available memory, and poor image quality all brought forth trimmed-down sites and the .mobi TLD. Then came the iPhone.
Suddenly, carrying a smartphone was considered cool. Crackberries were no longer just for the business traveler, and Google felt threatened just enough to wade into the smartphone market by developing a phone OS. Today we have the Blackberry Storm, the Motorola Droid, HTC, and others as viable (and in certain features, better) alternatives to the Apple iPhone. With their big, vibrant screens came real web browsers and “apps” which could pull data from the Internet. While it’s hard to believe that AT&T didn’t think the iPhone would be a hit and end up in the hands of quite a few subscribers, the other carriers never had an excuse once AT&T woke the sleeping giant known as iPhone.
After the initial success of the iPhone, the carriers knew full well what they were dealing with. Just like the widespread availability of broadband Internet services to the home in the U.S. (cable, DSL, FTTP) caused an explosion in overall bandwidth, the average customer took advantage of the higher throughput rates. Those of us who remember the days of 56.6k or even 28.8k modems know how hard it was to listen to streaming audio, much less watch streaming video. (My sympathies for those who are still stuck with dial-up, out of the range of the CO for DSL.) Now that we have 10Mb, 20Mb, even 50Mb pipes coming to our homes, we don’t think twice about watching a Youtube clip or downloading the latest warez…er, buying the latest game on Steam.
de la Vega’s argument is simple: three percent of smartphone users make up 40% of total data usage on AT&T’s wireless network, and their usage is impacting other customers on the same cell tower. According to a Computerworld report, “We have to get to those customers and get them to recognize they have to change their patterns,” de la Vega said at a UBS analyst conference this past Wednesday, “or there are things we will do to change those patterns.” The Godfather-like tone was clarified by other statements indicating some sort of tiered or pay-per-unit pricing. He was quoted by Computerworld, saying “there’s got to be some sort of pricing scheme that addresses the [heavy] users.”
The New York Times quotes an “independent wireless analyst,” Chetan Sharma, as saying that data usage should be treated like voice usage. “You use more minutes, you pay more,” he said to the Times. And AT&T’s de la Vega said that “The first thing we need to do is educate customers about what represents a megabyte of data[...].”
Therein lies the problem: Sharma has fallen into the trap called non sequitur, and de la Vega wants customers to tally something that a human can’t estimate. The carriers don’t get it, and neither does this one analyst. (It’s hard to say whether the wireless analyst community as a whole gets it, as the Times only quoted Sharma, and Computerworld didn’t interview an analyst.)
First, to address the non sequitur: You use more minutes, therefore you pay more, so you use more data, therefore you pay more. In the U.S., most ISPs do not enforce a hard cap, i.e. a bandwidth limit for each billing period, instead warning high-usage customers and occasionally threatening disconnection or moving them to a more expensive “class” of service (either a faster tier or “business-class” tier). Customers generally pay based on max throughput, with a bigger pipe costing more, and for all intents and purposes the connection has unlimited bandwidth. This is neither what the carriers currently do (charging for a certain amount of bandwidth per month, or for “unlimited” service, without really offering tiers of throughput) nor is it what AT&T is proposing with tiered bandwidth pricing.
Second, de la Vega thinks this is an education problem. Teach a customer what a megabyte is, and they’ll consume less of them. Without pulling out the calculator, tell me how many megabytes the following are:
And how do you provide a real-world definition of a megabyte? A megabyte might get you 7 seconds of a standard-def TV show episode, or it might get you the full front page of Slashdot, or it might only give you the photos on the front page of CNN.com. And a picture at 1 MB could easy turn into 20 MB, if the smaller version from compressed from a RAW format; conversely, it could be squished into 100KB, if turned into a low-quality GIF.
Urging smartphone users to browse less is a bad PR strategy. Think about it: a customer has shelled out $150-$200 for a contract-tied phone, plus a “required” data plan usually costing $30 a month, and now you’re telling them to not use the phone’s features all the time? The natural Internet response is to create an online petition and vote with your feet. Sadly, because of the state of wireless networks in the U.S., hopping to a different carrier may not be viable (e.g. no coverage) and even the threat of a government investigation into text-message pricing hasn’t kept the major carriers from steadily increasing the rates over the past few years.
I call this looming AT&T policy a bad PR strategy because it’s unlikely that implementation will cause a mass exodus to the other carriers. Many customers are perpetually in contract for the subsidized phones, while others won’t budge because of a particular phone (e.g. the iPhone) or coverage areas or employers (work phones only serviced by one carrier, or employees get a special discount with a single carrier).
Captive audiences make a great business strategy. Only time will tell whether this is the future of wireless data plans, or if the carriers realize that metered data with a meter that no one can estimate or predict might draw the ire of legislators and government regulators.
(As a sidenote, if bandwidth caps are implemented, does that mean we get to run Adblock on our smartphones?)