Archive for July, 2011

Big Bells Use Usage Based Pricing to Slow the Mobility Revolution

Wednesday, July 6th, 2011

Yesterday, Verizon confirmed their elimination of unlimited data plans for smartphones and revealed the details on their new tiered usage-based pricing plans. In doing so, Verizon followed AT&T’s lead in adopting usage-based pricing as a weapon in their fight against the mobility revolution.

Since T-Mobile also started punishing heavy data users earlier this year, that leaves Sprint as the only national carrier still encouraging customers to embrace mobility for more than just talk.

Usage-based data plans can be a very effective baricade to hold back the mobility revolutionary masses trying to storm the status quo fortress (Bastille Day is a week from tomorrow…). If the Big Bells can get people to stop and question “Should I view/download that now on my mobile device, or should I wait until I get home and use my fixed broadband?” then they’ve turned the tide in the battle for the freedom that mobility promises.

Why are the Bells so set on slowing the revolution? I think there are two answers: money and power. Some financial analysts have observed that the U.S. wireline industry has already lost about $15B in EBITDA (a measure of profits) and that Verizon and AT&T are on track to lose another few $billion each over the next few years due to cord cutting. It’s also a natural response for a historical monopolist to oppose any threat to the status quo, to do everything possible to retain or grow market dominance so that they can dictate the pace and nature of innovation.

Of course, the Bells want to have their cake and eat it too. They don’t really want to kill the growth in mobility – that sector is their best hope for revenue growth. But they’d love to squeeze as much profit as possible by dominating the ecosystem and dictating how business models unfold.

How are other ecosystem players likely to respond to usage based pricing? If I run a business that depends on delivering high bandwidth content (e.g. YouTube), these Big Bell moves threaten my business model. If people are scared to watch my content, they’ll watch less and my value will be destroyed. What can I do? Well – I could go to the Big Bells and negotiate. I need my customers to know that they can continue to watch my content without worrying about data overage fees. In exchange, the Big Bells will exact their pound of flesh.

Of course, it’s handy that the Big Bells can point to the reality of rapidly growing data use to explain the need for usage-based pricing. Unquestionably, there’s a need for mobile operators to find ways to cover the rapidly growing costs of supporting

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smartphone users. But, it is my hope that we at Sprint will continue to find ways to do so that are fair, equitable, and continue to power the mobility revolution to the benefit of all!

Vive La Revolution!