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Telecoms:The Argument for charging Peak Hour Mobile Data Rates rather than Tiered Data Caps


After reading this article, the point driven across to me is that perhaps on a local context, the data bottle neck that was expected to be faced by telecoms like Singtel,Starhub and M1 will not happen.

The article argues that the bottle neck faced is in the 3G wireless spectrum rather than the backend network infrastructure. If that is the case, the spectrum usage might not be as high as previously expected.

Hoping to better handle the demands on its network from iPhones and iPads, AT&T retired its unlimited data 3G plans in June, in favor of a metered usage model intended to throttle heavy users.

Verizon is reportedly preparing to follow with monthly plans similar to AT&T’s $15 for 200MB, $25 for 2GB plans.

The solution looks like an ominous one to data-heavy services like Pandora, Rdio, Spotify, YouTube and Netflix and will likely turn smartphone users into megabyte counters and rationers. And it’s an odd business strategy — giving incentives to people to use your product less.

Even worse, it doesn’t necessarily solve the problem AT&T is intending to fix.

The caps are odd because they are an ill-fitting solution to the real problem — which isn’t heavy data usage. The real problem is congestion on the airwaves. 3G phones work by transmitting over specific frequencies mobile carriers have rented from the FCC to a tower, where the data is sent through a dedicated internet connection that sends the data through to an AT&T facility that counts the data going to and from the internet.

The cost for sending and receiving data from AT&T’s facility is cheap and still falling. The T1 line running to the tower, like the tower itself, is already paid for. The problem is just the scarcity of the airwaves — there are times when too many people want to use their devices at the same time.

It’s oddly not unlike what happens with pricing on using phones to make calls. We’ve all gotten used to the idea of peak hours with our phone minutes — and understand they idea of nights and weekends, where calls are cheaper or free because fewer people are making calls at that time.

So why not offer data pricing that offers (say) 1GB per month of peak data, with extra gigs priced at peak and off-peak rates? This way I’d be able to make better decision about how many YouTube videos as I care to watch, or decide to listen to all the NPR I’d like from my phone after I get home from work.

The peak hours could even be dynamic — so that if you say go to the geek-extravaganza Maker Faire on a Saturday or South By SouthWest and, like all the other people who think different, you have an iPhone, the phone and network could tell you that you have entered a peak zone and that you’ll be eating away at your cap?

That would be a reasonable way to deal with what’s surely going to be a longstanding problem. Spectrum isn’t unlimited the way that fiber optic cable essentially is. There’s more spectrum that carriers already have and aren’t fully using (the 700 Mhz), and engineers continue to find ways to make more efficient use of what is available. And the FCC is moving to free up 500 MHz more for wireless carriers over the next 10 years.

Oddly, if an AT&T customer decides to buy a micro-cell tower for their home or office (technically known as a femtocell), AT&T will still impose the cap. That’s despite the fact that using the 3G Microcell keeps your calls and data off their towers and takes care of the backhaul to the public network.

In its defense, AT&T says it interprets federal wiretapping law to require it to send all data that goes over 3G frequencies to run through its core network, so the femtocell can’t just ask your router and net connection to download YouTube — it has to ask your router to ask AT&T’s network to get it for you. Regardless of whether that’s actually required for data traffic (I’m doubtful), your femtocell skips the bottlenecks at the tower and the cost of data coursing through AT&T’s core network, rather than just letting your ISP find the fastest route, is miniscule.

Data transmission on core networks is cheap — see Facebook or YouTube or Amazon’s cloud computing for proof of that.

Perhaps AT&T’s solution will be fine. AT&T 3G users can now check their usage history and current usage on the web, and many found they weren’t using nearly as much data as they had suspected.

Regardless, it sets a bad precedent. These little computers in our pockets make us productive and are inspiring engineers and entrepreneurs to find all sorts of solutions to problems. Like how to make and edit movies on the go. Or how to find a decent restaurant in an unknown suburb. Or how to listen to music on the go that isn’t programmed by some greatest hits-obsessed executive at Clear Channel.

I asked AT&T if they could offer an explanation of why this wouldn’t work, but they couldn’t come up with anyone who can answer the question.

In the meantime, those who love their unlimited data can try other carriers — such as Sprint — though you can’t take the iPhone with you.

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