Thursday, June 10, 2010

User-focussed mobile data plan model

If you look at some of my older posts, you'll see that I'm no fan of the data plan model currently in-place in the mobile wireless industry. Flat fees for "unlimited" plans that are, in fact, quite limited, with zero accountability for the quality of service provided, and inordinately large and increasing termination fees that hamper consumer mobility just aren't good enough. The recent changes announced by AT&T and rumored to be coming soon on Verizon where users are charged for "buckets" of bytes doesn't make sense to me, either. These plans create a false sense of scarcity for something that, once "enough" infrastructure is in place, costs the carrier nothing: the byte. In fact, the majority of costs to a wireless carrier are incurred to install and maintain a given capacity and those costs remain nearly static no matter how much you use them. The cost per byte actually drops the more customers consume them. This by-the-byte approach rolls out at the same time as mobile ad platforms (which use data, too) are rolling out. How much are you willing to pay to see ads? Since no system is in place to inform users of how much data they currently use, until they exceed their arbitrary limit and find out in their increased bill, metered usage doesn't make sense, yet, and still fails to incentivize carriers to provide higher capacity and availability. This approach continues to put all the information, and therefore power, in the hands of the carrier while all the responsibility for managing usage falls to the customer. There are many criticisms that could and should be applied to the wireless industry (not the least of which is the spinning of the word "bandwidth," but that's a whole other rant).

It is easy to criticize, however, and hard to propose a more reasonable alternative. The fact is that carriers are saying they will provide feedback to users about how much data they have "used" along with warnings when they're about to exceed the plan amount. Also, bytes, like minutes for phone plans (as in, used for talking), are fairly easy for users to understand and carriers to monitor. The more data you send and receive, the more you pay. Carriers, for their part, need to track usage as part of normal operations to ensure their network is balanced, anyway, so why not report those data to users. Its simple, in concept. How else should usage be tracked if not by byte?

So, what if we came up with a way to meter the bill based on something that's focussed on user experience? The primary complaints customers have, and the primary challenges of a carrier, are capacity and availability. If there are great connections all over a city but poor connections outside the city, what happens when you're driving or taking the train home for the evening? Your call gets dropped and your files start downloading slowly. So, why should you pay the same price while you're in a bad area as you do in a good area? Reversing the scenario, what load (and therefore cost to the carrier) do you put on the network when you're in an office building where the signal doesn't penetrate? How about when your phone is powered off? None. The carrier allocates zero wireless capacity resources to you when you're off the grid. So, why should you be paying at all for the significant portion of the day when you're not able to use the service? I suggest billing based on two factors: 1) The Carrier's quality of service to the user (i.e. speed and latency) and 2) The portion of time that service is available to the user (availability). The better job the Carrier does, the greater proportion of the plan fee they can charge their customer at the end of the month.

As with any idea, the implementation details determine everything. I'm not advocating making the wireless business so volatile that carriers can hardly stay in business. Reasonable limits should be in place such that customers have a minimum fee to pay, even if they choose to turn their phone off all month. There are some costs to having the network available to you, even if you don't choose to use it. Likewise, reasonable limits should be in place on how much the carrier can charge if they achieve 99.99% coverage, quality, and reliability. That maximum amount should be known and agreed to when the plan is purchased. Carriers should publish their quality and reliability numbers, by area, every month with history reported for at least the length of the longest contract offered, so that customers can make informed choices when selecting their carrier.

This approach increases complexity, though, by using several numbers to determine your bill. There are many ways to simplify that complexity, however. Speed and latency thresholds could be set in the plan such that the sole variable determining the bill is time of availability better than both of those thresholds. By contrast to AT&T's recent announcement of $15 for 2GB with $10/GB after that, perhaps you'd pay $15 as a minimum for the month plus $15 x the percentage of the month your phone had a connection at the agreed quality available to it (as determined by periodic connection tests from phone to internet firewall). I'm sure many methods of implementation would be thought up and tested in the crucible of the market. The point is that customers would pay more for a better, more consistent experience and less for a worse experience. Right now, you get what you get and you pay the same or even more, regardless.

This approach has merits for the customer in that it re-balances power such that more is in hands of customers and it gives carriers an immediate and continuing incentive to improve the customer experience. It also gets the industry away from billing customers for a commodity that has no direct link to cost - bytes - and which customers have little to no control over (web pages don't tell you how big they are before you load them!). Instead, the industry moves towards billing for the primary cost drivers - capacity and availability. Carriers who provide a better experience by expanding and balancing their networks better make more money. Customers pay for availability at an agreed quality level.

So what's wrong with this idea? First of all, carriers would never willingly agree to giving up so much power. Gov't regulation would be required and that's tough to get right. Secondly, its complex. The only way to ensure lawmakers, who don't really understand the issues, get those laws right is to make things crystal clear, black and white, such that its clear they're doing the right thing and gathering the approval of constituents (who often don't really understand the issues, either) by voting for it. The industry has already convinced us that paying over $1500/MB for text messaging (that's about what 20 cents per message works out to) makes enough sense that it's turned into a multi-billion dollar per year revenue stream. Their ability to cloud issues and shape regulation has been a big part of their success. This kind of change needs a champion inside Congress to carry it forward and a bevy of champions in the regulatory agencies to insure it is properly enforced.

1 comment:

Anonymous said...

Like your idea, but the granularity by which you want to be charge through the availability in itself will cost carriers some dollars to measure, or at least some cost incurred in there part to relate charges to availability (or quality of service). At work, our network services try to do that with a charge-back to departments utilizing network infrastructure, but when I ask them to work out how to credit our department should we experience network outages, they have no answer or associating the time of outage to a certain dollar amount. Either they don't know how, or don't want to bother. It's easier just to set a flat rate, and I have a feeling carriers are just taking the same philosophy.