Data Pricing Sanity Maybe?

http://www.tbray.org/ongoing/When/201x/2012/03/25/Mobile-data-pricing

by locopati • 14 years ago

83 61 14 years ago

jpadkins2• 14 years ago

This guy doesn't get consumer pricing psychology. It has been shown over and over again that consumers prefer fixed price, even if they have to pay more to get it. They don't want to be on a meter, they want a predictable budget. The telcoms don't set the dominant pricing model, the consumer does. There have been plenty of iterations of $/min and $/MB telcom plans already tried in the marketplace.

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.

jerf4• 14 years ago

And the way to do that is: Fixed price for the first X GB, generous enough to cover ~90% of the users, variable pricing thereafter, and the aforementioned transparency about the status of your account. (In particular, text message alerts warning you when you've hit 90% of the limit, or some other active notification that you're going over, not just some abstract page that you could, theoretically, hit.)

andrewaylett• 14 years ago

This. It's what I've got, pretty much, on my ADSL: 50Gb/month (doubling (again) next month) with a sensible per-gigabyte never-expiring top-up if I need more.

billybob2• 14 years ago

This pricing model sounds to me like "the user is always punished."

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?

billybob2• 14 years ago

I guess I don't get it either. "Fixed price" is always a floor, never a ceiling. How is that good for you?

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.

apenwarr• 14 years ago

You just described the payment model Apple negotiated for the iPad. No contract, no subsidies, just a flat payment: $x for $y GB in 30 days. If you don't use it in 30 days, it's gone, but if you use it in less than 30 days, you can just buy another block of bandwidth (and restart the 30-day counter).

I think it's great, especially when travelling to different countries (which seem to all offer this option - only for iPad).

yellowbkpk4• 14 years ago

This all sounds great up until I get to the "How?" part. All of his suggestions are sane and sound reasonable, but I don't trust any of the current data providers to implement any of them in a sane way.

>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.

jerf4• 14 years ago

While I understanding your general cynicism, may I observe that except for the easy API part, Comcast already does all this transparency stuff. (Different pricing plan, but it is transparent, and mostly adequate.) If market pressure could get Comcast to comply, I don't think it's that hopeless that it can get the telcos to comply. Your cynicism is perhaps a little too cynical.

yellowbkpk4• 14 years ago

Which Comcast transparency are you talking about? I had Comcast in mind specifically when I was writing my cynical post.

easp• 14 years ago

Um, no. Maybe they are transparent once you've signed up, but until you do, they are opaque. My best source of information on their actual speeds, rather than just the burst rates they advertise, was Wikipedia, and I'm sure that was at least a little out of date. As for pricing, I can't find any concrete information on that past their special offer period, even if I give them my exact address.

gst• 14 years ago

Telco companies in other countries are able to do this. Why shouldn't companies in the US then be able to offer such a model?

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).

yellowbkpk4• 14 years ago

I never argued that they couldn't offer such a model. I'm arguing that they won't because they're too averse to change and the short-term risk that they might lose money in the pursuit of more customers paying slightly less (or more?) in the long term.

runjake2• 14 years ago

Because the US has a duopoly (AT&T/Verizon), for the most part. We have two smaller national carriers (T-Mobile/Sprint) and many regional carriers, but they are not competitive, nationally.

With the duopoly, they can maintain the status quo as there's no real competition or innovation going on.

jpadkins2• 14 years ago

> Why shouldn't companies in the US then be able to offer such a model?

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.

peterb• 14 years ago

Isn't this what Ting is doing in the USA? They use the Sprint network.

fungi2• 14 years ago

Yeah that's why i kind of rolled my eyes when i read this:

> 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).

dkokelley• 14 years ago

There are a number of things wrong with they way our current cellular network industry works in the US. The biggest issue IMO is subsidizing phones. When we pay phone bills, we're also paying for the cost of the phone. When we buy more expensive smart phones (which make excellent use of a data connection) we pay more via data plans. These data plans also have the cost of the phones built in.

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.

JumpCrisscross3• 14 years ago

Or at least disentangle phone financing from data & voice.

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.

huxley2• 14 years ago

Not so:

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.

telcodud• 14 years ago

"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.

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.

phren0logy• 14 years ago

The best thing in this article is the linked Jean-Louis Gassée piece:

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.

CookWithMe2• 14 years ago

I vote for a pre-paid per-MB pricing. And fair pricing, but yeah.

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).

JumpCrisscross3• 14 years ago

Why would you prefer pre-paid over being billed at the end of the month? The former is lending your carrier money at zero interest on a monthly basis.

jamii• 14 years ago

Because prepaid limits risk. You never end up at the end of the month with a bill for 100s or 1000s of dollars and at the first sign of trouble you can switch provider.

CookWithMe2• 14 years ago

Two reasons: In Germany the pre-paid carriers are actually (a little bit) cheaper. I assume they can be run more cost efficiently, not only because of the interest but also because they don't have to worry about people not being able to pay their bills etc.

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.

dfrey• 14 years ago

> A price-per-MB that falls during the course of the month as you use more and more.

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.

michaelbuckbee• 14 years ago

From a technical perspective it's all just bytes. The fact that we (myself included) think of calls, texts and data as three separate things just shows how far off the rails things have gone. It's like if my home internet bill was divided into Skype Minutes, Emails Sent and Web Data.

TylerE• 14 years ago

Well, they're just bytes OVER THE NETWORK. But once those bytes hit the telco at the other end, and go out over the POTS network, that's not free to the originating carrier.

robocat• 14 years ago

From a technical perspective they are not the same. Voice has complex/expensive real-time requirements (and emergency service, reliability requirements too), but predictable (low) bandwidth. Data can max out internal edges of a network and over-usage issues.

mindslight• 14 years ago

Erm, why are we talking about price per MB ? The per-MB rate is so intangible (1 cent? that sounds cheap!), it's a recipe for disaster. Current mobile usage/caps/etc are all in terms of GB, and that's what usage pricing should be specified in terms of.

mrtron2• 14 years ago

You really want price-per-MB?

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?

jarek• 14 years ago

Second bullet point:

"A price-per-MB that, off the top, feels reasonable."

mrtron2• 14 years ago

When there is an oligopoly of telecoms, you don't determine that. The existing market prices are what telecoms deem reasonable.

malandrew2• 14 years ago

First off, if we do go with variable pricing, the last thing we want is values to be denominated per MB. There is too much cognitive load on humans to think in terms of MB quantities.

Second, variable pricing makes sense if those who use very little data get a discount off the amount this currently use.

adestefan3• 14 years ago

But yet we price water and gasoline per gallon, natural gas per cubic foot, and electricity per kilowatt hour.

* in the US, others feel free to convert to your local units.

fr0sty• 14 years ago

Not sure about you, but my gas bill is $/therm(~100 cu ft) and my water bill is $/100gal.

Pricing data in MB (or KB!) is like billing for water by the cup (or Teaspoon!).

malandrew2• 14 years ago

Gallons makes sense. I could wrap my head around the 15 gallons I used to put in my car's tank. What I wouldn't want to wrap my head around is thinking about putting ~56,781 cubic centimeters of gas in my tank.

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.

phamilton• 14 years ago

I use TruConnect for mobile broadband. They use a per MB pricing model with no monthly contracts. It's a little pricey for power users, at 3.9 cents/MB, but great for my once or twice a week usage. My monthly bill is around $10.

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.

zokier• 14 years ago

The major problem with usage based billing is that I'd need to evaluate the value of every bit I'm transferring. Was that cat picture really worth X cents? What about this blog post? And do I trust this app not to make a huge bill? Oh, I can't afford to download these updates now, surely nobody will try to exploit remote code execution holes on my box. My home web server got just slashdotted (hn'd?), how much will that cost?

mapgrep• 14 years ago

"Fixed-price unlimited-volume data pricing is a totally, unfixably broken idea." -Bray

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.

adestefan3• 14 years ago

You need to preface all of this with "in the US." Per minute POTS billing is very common outside of the US.

adestefan3• 14 years ago

Another problem is that current network applications assume an unlimited data model. We would need an equivalent to the big yellow EngeryGuide label for data applications. The last thing I would want is some applications that just keeps sucking a MB here and a MB there in the background without my knowledge.

schneitj• 14 years ago

I was always a fan of a fixed cost to go towards the infrastructure and a variable cost based on network congestion.

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.

nestlequ1k• 14 years ago

Current 4g pricing is unbelievably busted. At $10/gb, it costs me more to download a movie than it does to buy it on DVD.

omgsean• 14 years ago

>“Nope, I gotta have flat-rate data”, they’re thinking, “because otherwise the telephone company will rape me.”

There's got to be a better way to say this.

Lagged2Death• 14 years ago

A price-per-MB that falls during the course of the month as you use more and more.

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)?

dubya• 14 years ago

I'd love to see this tied to opening up the last-mile infrastructure to competition. It seems like variable pricing would require regulatory approval, so it might be a good time to renegotiate.

zanny• 14 years ago

The problem is we have a telecom monopoly, or at least a mafia effect. There is no competition to drive the cost of bandwidth down because spectrum is fixed.

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.

koalaman• 14 years ago

Metered internet would be devastating to the current primary publishing monetization platform. I.e. people will be far more likely to block ads if they're paying for them by the KB. We'd have to come up with a way to have publisher paid bandwidth for selective content.

saurik• 14 years ago

This article has a self contradiction: it is correct in stating that unlimited bandwidth deals put all the players in a position of poor incentives, but then fails to realize that "developers pay for bandwidth used by their users" is the only way to make that model (which is pretty much what we have) work.

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.

Data Pricing Sanity Maybe?

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