Mobile's looming money problem

As people use multiple devices, customers face payment overload that could hinder mobile usage

Page 2 of 3

Why the carriers don't want mobile devices to share accounts
The carriers want to treat mobile devices as unrelated accounts because that lets them make more money. They know that an iPad owner may pay for a 2GB plan, most users won't even come close to using 1GB. The carriers justify their usage bands by saying the headroom prevents users from incurring overage charges -- tapping into the fear from the early days of cell phones, when you could rack up hundreds of dollars in charges due to per-minute fees. The carriers played the same game with data usage during the dawn of 3G.

The truth is the carriers know they can make their plans look less expensive by playing games with these data consumption bands. When a carrier charges $20 for 1GB and knows from usage patterns that the typical customer consumes just 400MB, the effective price per megabyte has doubled. Meanwhile, the carriers are aware that customers compute the cost by dividing the maximum data -- whether or not it's accessed by the user -- allowed into the price.

You can tell that carriers are manipulating customers by comparing data plans across devices: They charge for for the same bucket of bytes when used by a laptop or MiFi device as they do for a tablet or smartphone. Why? because they know a laptop user who has a 2GB data plan is likely to eat up most or all of that 2GB, whereas an iPad user does not.

As for the argument that the headroom in their data usage bands is meant to avoid unexpected overage charges, that's easily remedied in a less manipulative way: Send users an alert when they hit, say, 80 percent and then 95 percent of their plan's bucket of bytes, and require the user to agree to buy more once that cap is reached. To be fair, thanks to Apple's strong-arming of AT&T last year when the iPad was first released, iPad 3G customers get such alerts. Some carriers, such as Sprint's Virgin Mobile subsidiary, do the same for laptop users, which shows that the overage games aren't necessary; a straightforward approach is possible.

The bottom line is that the carriers make more money the longer they force each mobile device to be on its own plan and reap extra profits from the unused data on each device. In other words, they'd make less money if they really were selling 2GB for $25, rather than counting on your using just 1GB. The carriers like to claim poverty and talk about the expense of deploying 3G and 4G networks (even though these lower their delivery costs for voice traffic), and they want the freedom to restrict traffic on their networks to deal with congestion they blame on heavy users of online video and games.

| 1 2 3 Page 2