Big Bells Use Usage Based Pricing to Slow the Mobility Revolution

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!

5 Responses to “Big Bells Use Usage Based Pricing to Slow the Mobility Revolution”

  1. PaulHTX says:

    I was hoping this announcement would precipitate a blog post. Thanks, Russ.

    This reminds me of how dial-up ISPs used to work. My family had Compuserve in the 80s, and it was very slow and very expensive, and your bill was based upon minutes connected and data transferred. It wasn’t until the 90s with “Internet-in-a-Box” Sprynet that introduced a fixed monthly plan with unlimited access. Soon, every ISP had to do the same thing.

    I’m sure nowadays I use more data in one day on my phone than I did in all the years I was on Compuserve combined.

    I share your hope that Sprint will continue to empower consumers with unlimited plans. As long as they do so, it will fuel the fall of the bells. Has anyone heard of Compuserve or AOL lately? [Ok, AOL is still around, but they have little to do wth the busines they started 20 years ago. Right?] The thing that Sprint could do to secure its place as the champion of the revolution would be to officially remove the cap on 3g access. But, that is another discussion for another day.

    If Sprint does end up going to a tiered and throttled system, it will just be a matter of time before someone comes up and starts a new carrier with all unlimited plans. The revolution wil not be stopped. Consumers will drive it.

  2. Alamgirian says:

    Mr. McQuire, you have used strong words such as “punishment’ for your competitors who are limiting data use. Isnt sprint “Punishing” its old legacy customers by forcing them to change their phone plans while other carriers respect old customers in this regard ?

  3. Phil says:

    I agree. I don’t like the direction I see this ATTmobile/Verizon Duopoly heading. Lack of of competition=lack of motivation to have innovation. Its not phones but look at the EA Madden Football. They got an exclusive contract with the NFL, and were basically playing the same game for the last 4 years with updated rosters. Very Stale. They (EA) Bought the exclusive rights, locked out the competitors.

    In the same sense, I think that if the ATT/Tmobile merger is allowed, we are going to have not only less innovation, but higher rates on the customer end. :(

    Ultimately, I am worried about the underdog Sprint. With the marketshare the duopoly will have compared to sprint, it wont be long (in my opinion) before Verizon gobbles up Sprint, (possible hostile takeover) leaving no national carrier to push the innovation revolution ahead. I think that’s a big reason why Verizon is being quite about the merger as they are looking at the future.

    Speaking of the wireless information revolution and smaller underdogs getting a fighting chance, what is going on with HPwebOS and Sprint? Love webOS, and I hate to leave Sprint over a phone, but it seems as if Sprint is going monopoly with Android, where is the room for competition there?

    Great Blog, enjoy reading. Keep up the great work!

  4. Russ says:

    Alamgirian,

    I’m not aware of any cases where Sprint has forced customer to change plans. There have been cases where upgrading phones required a change to the plan, but customers could continue on their existing plans if they chose.

    Russ

  5. Eric says:

    I actually switched to them right before they ended the unlimited when word leaked out. The sad thing is at the kind of speeds their LTE is doing you could use up your 2GB in 11 minutes, and incur another $10 in overages every 5-6 minutes. I’d have considered it fair for them to change their unlimited to maybe a 10GB (if on LTE) with just enough of an overage to discourage somebody tethering and using it for their home internet (maybe $2 per GB over 10GB?). 2GB for the same price as unlimited? $10 for what you can consume in 5 minutes? Although I got the unlimited I do worry about the day they start requiring new phones to have new plans, and then my phone finally dies on me.

    While I personally chose to go with Verizon while I still could get unlimited, when a relative asked me today about phones/plans I pointed them at Sprint. The only downside to Sprint is Clearwire’s coverage problems because of the frequency they own (pretty much anywhere I went indoors was a no signal area) which hopefully will be solved over the coming years with the phasing out of the iDEN network and using that frequency for LTE.

    If Sprint could come out with something as fast as Verizon’s LTE, and with the same ability to penetrate into buildings, while matching Verizon’s pricing plan that I’m on (the unlimited data one) I’d come back very quickly because in the end I’d rather support Sprint than Verizon. (plus, it doesn’t hurt that Sprint is usually able to get the best phones, nothing on Verizon compares to the EVO 3D)

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