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Unlimited mobile data plans are changing June 3, 2010

Posted by Edwin Ritter in Trends.
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As the cell phone market matures, the major cell phone carriers are looking for ways to keep/increase revenue streams. We are witnessing this evolution in the latest move by AT&T to migrate away from unlimited data usage. If the usage based pricing model is successful, expect the other major carriers to follow with their own plans. Similar to pricing changes in the airline industry, this move will be watched closely by competitors and analysts. The NY Times has an article that talks about AT&T plan to use tiered pricing.  It is not surprising that companies are looking to introduce usage based pricing plans. The carriers are seeing revenue streams plateau or even drop on the current pricing for phone plans. So, carriers see growing demand for data access and that can easily be converted to a revenue stream. Price points can be tricky though. How much is cloud access worth to you? What part of your disposable income are you willing to spend on getting email anywhere, anytime? Checking stock prices or sports scores?

This is a clear signal that the market is sorting out and defining what types of consumers we are. There is no one data plan for all users. Think of business travelers, sales reps., soccer moms and college students – each has unique reasons to access the web for information. I expect there will be a price plan for each based on their needs and budget.

I don’t take full advantage of the flat rate services I use. I know that and it’s OK. I favor the flat rate plan for service. It is predictable and a constant. It also is up to me to use the service as much, or, as little as I need it. My cable company provides a flat rate for video and I hope it stays that way. I know about  cable offers with premium packages, like the NFL network. But, that is a niche, not the mass consumer.  As this plan rolls out, people will become more aware of their usage for a short time. However, I don’t think usage rates will change much. In fact, the usage may increase as people find more ways to access the cloud to stay connected.

On the technical side, I understand the argument but do not agree that a few users can ‘hog’ the bandwidth on the network. Come on AT&T, you’ve been in the network business a long time. You have automated processes and tools to balance and manage the traffic with equipment in the network that is smart and programmable. Routers and switches can be tuned to give priority to specific types of data packets. Load balancing is not just for the data center anymore and has been used in network management for a long time. I don’t buy the argument anymore that a few users impact the response rate for everyone. Even if less than 2% of your customers are ‘heavy traffic users’, the network response can be managed smarter. I hope folks managing data centers aren’t watching this and think it can be used with their service. Wouldn’t that be a change?

I think it is an opportunity missed by the carriers. Network data usage is sporadic for most people; it is not a constant demand. There are peak times and I’m sure the trends on network demand are charted and known. Think business hours and prime time hours – there is a predictable level of usage and different parts of the network can be idle at times. The network is not routinely saturated at all points with traffic causing congestion and slow downs.  We cannot use all the bandwidth provided 24X7. It comes down to capacity management based on demand aligned with load balancing.

Have all the ways to reduce cost in the current system been exhausted? Has all the waste and redundancy in process been removed? Perhaps an opportunity to use Six Sigma and lean manufacturing tools here…give me a call and we can talk about it. 😉

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