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Readers weigh in on data caps
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Readers last week offered some thoughtful and insightful comments to my editorial questioning how long mobile operators can institute data caps on usage. I cited the instance of Billie Parks, who filed suit on behalf of herself and others against AT&T Mobility and RadioShack after she purchased a $100 netbook at a RadioShack bundled with a two-year data contract from AT&T. Her first bill was more than $5,000.
The industry clearly faces a conundrum: Operators desire to push mobile data services, and as they do, they face a consumer who wants to use these services just like they use their fixed broadband connections. Wireless operators cannot allow this as they are hamstrung by the finite spectrum resources associated with broadband wireless.
Some readers were bothered by insinuation that operators hide their data limit stipulations in the fine print. In fact many operators, such as Verizon, clearly spell out the 5 GB limit in their contracts and online and work to educate users about how much data is used up to send an email or view a video. So be it. But the fundamental problem is that the average consumer has a very difficult time understanding how much data they are using. This is an issue I have gone back and forth with many a carrier executive about. To them it is straight forward: Customers are accustomed to a certain amount of voice minutes, why can't they understand that they only have a certain amount of data?
Consuming data is not a matter looking at the clock to watch the minutes go by. There are some really tricky elements to it, as readers pointed out. For instance, a customer lands on a web page where streaming video and audio continually send data but they don't realize it. Spyware also continually running in the background eats up bandwidth too. (Yes, there are data usage statistics available, but as some readers pointed out, they aren't often reflecting usage in real time and they aren't available everywhere.)
At any rate, I want to share with you some snippets of the insightful comments that I picked out from the many commenters last week. Many of them sell these devices and plans in the field, so they have first-hand experience as to how customers understand caps on data plans:
"Most consumers who purchase these data cards only care about one thing... broadband Internet access. To inform them that a GB is 1000 or 1024 MB or 1,000,000 KB is a waste of energy because they will forget it. They will not remember that they can download 17,000 web pages or 25,000 photos. They came in to purchase mobile Internet access."
"I could give my customers all of the literature in the world explaining downloads and limits (which I do) and 99 percent of them end up in the garbage can. Most of my customers have cable modems or DSL at home with no limits. Some of them live out in the country and have been using no limit dial up connections."
"There are better ways to handle instances where the consumer contacts the carrier with that first big bill. I believe Verizon's policy is such that when the consumer has failed to read all the information about their plan and the sales person either did not adequately explain the policy or the consumer did not retain the information and this results in one of these big bills, the consumer can call Verizon Wireless customer service, get a credit of the overage on a one time basis while getting an explanation of how the cap and overage charges work, and how to monitor their usage. There is also a cap on overage charges that keep the second and third occurrence limited to no more that $200 dollars in overage charges. On subsequent bills, the customer is responsible for the charges. That's after 3 educational conversations about how the plan and overage works."
"The disclosure of policies, procedures and general product knowledge is so inferior with data compared to voice and that it effects each and every one of us who sells and represents the product and company. The lack of decent training with data is another compelling reason why the wireless companies hire people who know data to run their data divisions."
"Personally, I sell these products and I warn each and every customer about the usage threshhold. However, customers will be customers and most do not even understand how to properly use their computer and with the low prices for netbooks, many are getting their first computer and since the prices are so low, they are purchasing these computers for each member of their family, along with a wireless router to share the connection."
"...The customer uses their account for a couple of months, gets charged $59.99 per month and then sees a commercial about the NCAA basketball tournament being FREE and online at CBSsports.com. The customer watches hours of "free" online coverage of the tournament and then next month when the bill comes in, it is for thousands of dollars... Most people cannot possibly remember what they signed five months earlier. They just wanted to watch the "free" basketball tournament online. Incidently, while they watched the tournament, they saw the Verizon or AT&T or Sprint commercial advertising the free modem and wireless broadband service."
Thanks for reading and for your thought-provoking comments. I suspect that the debate over this issue is just heating up. --Lynnette
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Comments
Posted by Rick | March 9, 2009 - 12:22pm
The missing idea here is this: the customer should have the option of specifying a limit beyond which they are cut off from data services to prevent overage charges. This should be easy - after all, the carrier can track the usage in order to charge for it. Not to do this and then to claim that the customer "knows" the terms is to use the same disingenuous argument that banks use when they let customers overdraw their accounts using debit cards, and then charge $35 or $40 for each of these "services". In either case, not letting the customer prevent this is just a way to increase revenues at the expense of customer service.
Posted by Carrie McKenzie | March 9, 2009 - 12:27pm
I believe that in order for the public to truly adopt mobile wireless, the industry has to look at their service offerings from the customers' perspective. As has been said, how many customers understand how many webpages/videos/pictures, etc., are in a MB or a GB? It has been pointed out that one of the main reasons most households in America have internet is because of unlimited usage, which contrasts with the European model of pay-as-you-use. Customers want their mobile internet to work just like their internet at home or in the office, and if that is what they want to purchase, carriers need to figure out how to balance resources and costs to accommodate that. Until customers can buy it the way they want it to work, they will be dissatisfied. Let the customers guide the development of service offerings and watch how successful you can be.
Posted by Anonymous | March 9, 2009 - 12:31pm
The average American is pretty dumb. Assuming that he/she can understand how much data he/she consumes just shows how dumb that executive is as well.
Posted by Anonymous | March 9, 2009 - 1:48pm
Watching the rate of data is truly not that hard its just that the avg data consumed is ever growing with the newer content available and wireless carriers are not keeping up with the growing technology to provide a valid service to its people. new adays using using 5GB in a month is only adcheved if you know to know of or use sites like (facebook, myspace, youtube ect...) carriers need to stop trying to be greedy and use said walmart method of service sell more with for less profit per each so 100 units at $50 and not 30units at $80 the will make more money in the end.
Posted by Bill (3gstrategy.wordpress.com) | March 9, 2009 - 2:00pm
I believe that the solution here is not with educating the subscriber about data limits in their plan, but with utilizing the QOS capabilities that all 3G networks have built in to them. Then, subscribers that need better than best-effort data can pay to get it, and the carriers won't need caps to protect other users from being denied adequate service.
Posted by Anonymous | March 9, 2009 - 2:38pm
This is price fixing. All carriers doing the same thing at the same time means this is a planned problem. And made specifically to be a trap and to snare people. The spectrum that the carriers use belong the people of the United States and we lease them out. It is time to demand customer respect when using our air waves. Or give them to someone who will, like Google maybe.
Posted by Anonymous | March 9, 2009 - 3:24pm
The prior comment implies you can "bend physics"
Admittedly, the way forward is hybrid networks and pico cells, but will never displace capacity or requirements for wired medium backbone
Wireless is NOT wireless wires!! Wireless data
must be price rationed unless this guy can break Shannon's law!!
Just like on wired,certainly cannot tolerate everybody on wireless doing a "bit torrent" on a wireless device....even Google cannot meet his expectations! :-)
Posted by MichaelM | March 9, 2009 - 4:48pm
Here in New Zealand, we're well behind the times when it comes to wired internet services, let alone wireless. One thing that users have always had to deal with is data caps - whether this is actually justified is another debate, but there is a limit on resources (either physically and financially).
However, from a very early on, all ISPs (wired and wireless) worked out that the best way to keep their customers is to not charge for overuse - but to limit them to a very low data rate once they reach their cap. That way a) the user still actually has some service, albeit slow and painful and b) those customers have a minimal (and forecastable) affect on the network resources.
Customers don't get huge bills, and quickly learn approximately how much usage it takes to reach their limit, and often will upgrade to a plan better suited to them. Simple.
Posted by Anonymous | March 9, 2009 - 9:43pm
Service providers could also periodically notify customers of their "data balance" via SMS or some pop-up screen when they get closer to hitting the cap.
Said H.
Posted by Mark | March 10, 2009 - 4:37am
In UK the biggest consumer offerings in mobile broadband are prepaid. This automatically limits the usage to the amount in the prepaid account. With simple top-up methods this can work well.
Thinking slightly differently: if customers do not understand how much 1Mb is then why not measure in something they do understand and which wireless execs understand? Time. This is how Wi-Fi works and yes I know the costs of the network etc. are different but IF (note big if) we want clarity in the industry we should at least try this out.
Posted by ChadMC | March 10, 2009 - 6:20am
Point One - One size fits all? The teenager's use will be consistent with that of a business executive; and that will be consistent with an occasional user? If there are dozens of phone models available, then why not matching data plans?
Point Two - A "cap" is nothing more than pure greed. Regardless of what the telcos say, there is no additional cost to them if consumers use more bandwidth than 5Gb (btw, this is a VZW made up number). Their additional costs come into play when everyone needs the network at once. Concurrent system-wide usage is what costs them. A teenager streaming youtube at midnight won't cost them a thing. So why not price is appropriately? Why not "manage" the bandwidth during peak times and keep the flat rate? Why? Well it's greed of course. As the editor wrote above, they want customers to use the data services, but "not too much".
Posted by Derek Kerton | March 10, 2009 - 8:03pm
The solution is conceptually simple. Brain dead simple. As a carrier, you can easily cap subscribers, and prevent and/or manage any overages with this fantastic new innovation: communication.
Here's how it works:
- Sell the user 1GB or 5GB or such.
- Put a data counter in the dialler software, this is the program that users need to launch to connect to the cellular network. A few lines of code, and BAM, they have some useful information.
- Send them an SMS AND email when they reach 50%, 80%, 90%, and 100% of their monthly allotment. They will quickly learn, and be informed.
- at their monthly limit, DO NOT continue to serve them data and expect them to pay up. Use traffic shaping to reduce data flow (Satellite ISPs do this already) to dial-up speeds. Send email and SMS.
- at the monthly limit, inform them that they have reached the limit, and offer them ways to get the throttled connection open. Do it using a web page to cut down on call-center costs. This could include a one-time courtesy warning, or a pay to play one-off purchase (of say, 1GB extra).
GAWD! It's so simple. I've been telling my consulting carrier clients this for years, but I still see brain-dead billing plans that expect the customer to understand and manage the business. Don't make your subscribers do your work!! This will never work out well. Bills will be outrageous, carriers will get annoyed customer service calls, customers will be furious, lawsuits will result. It's good for no one.
My solutions, to be fair, will require better billing software, better OSS/BSS, and better communications solutions...but what exactly are the telcos supposed to be good at if not those things?
Why is this an issue? Designing a product with open communication about current usage shouldn't require an MBA or a consultant like me.
regards,
Derek Kerton
www.kertongroup.com
Posted by Anonymous | March 12, 2009 - 10:49am
Chad MC, You are absolutely right!
Gigabytes flowing outside of Busy Hour has no cost to the operator. Hence the total amount of traffic generated by individual subscribers is not what is driving cost, it's the total number of subscribers times their Speed requirement during the Busy Hour. AND incidentally, number of subscribers is typically multiplied by Monthly Fee to calculate Revenue... Greed can make people do silly things...
NO, sell the consumer something similar to what DSL/Cable opcos do, "up to 2Mbit" and "up to 5Mbit" etc and then manage traffic during Busy Hour to keep some control over cost.
Set a Fair Use Threashold at which the Traffic Management function kicks in, and communicate it. Hey consumer, I will let you download as much as you want, but after 3 or perhaps 5GB I may need to lower your speed from time to time, WHEN and IF there are lots of others of your friends who want to use Internet in your area...
Consumers get what they want, the CEO of the Operator can sleep well at night...
Posted by Konrad Roeder | March 12, 2009 - 2:14pm
"Gigabytes flowing outside of Busy Hour has no cost to the operator." How ridiculous. This is like saying that Cable TV should be free except for prime time.
The licenses and the infrastructure to create the network required to offer wireless services are tremendously expensive. Those costs have to be amortized over all the users.
Why not manage the bandwidth? Carriers get beat up for wanting to do that too. Just look at all the people pushing for "Net Neutrality".
95% of the subscribers stay significantly under the caps. The caps are there to limit excessive use because the over the air bandwidth is very limited. If there were no caps, then the cost of a data subscription would have to go up to support the data guzzlers.
Posted by Anonymous | March 13, 2009 - 2:43am
Dear Konrad,
What drives the Investments is Not the traffic flowing outside of Busy Hour, ok. I do agree with you that Cost, in financial terms, is depreciation of the investments. So I am sorry for using the wrong term! AND if you care to do so, you can calclulate your Cost per Gigabyte and thus of course you are right that ALL gigabytes do cost the operator. BUT that would still be internal accounting methods. Another operator may choose to ignore Traffic volume totally and rather calculate their cost (as depreciation of investments) over the Subscriber base instead...
Furthermore I do not agree that you can compare with Cable TV... IF, the content was Free you might, but Someone is actually charging the operator for the Content in that case. Hence any hours that a given Show, Movie etc is shown actually has a true cost to the Cable operator.
I don't know why you don't like Bandwidth Management, which you are suggesting as well (you call it Traffic Shaping). What I am merely suggesting is that one should allow the QoS functions in the network (Traffic Priority) to do the job. Basic functionality tries to do the job at Congestion, as fair as possible. But by dropping the priority on users passing the threashold of e.g. 5GB you will improve the experience of Normal users and only affecting heavy uses When and If they are in a congested Cell or Area.
The only real difference between your suggestion and mine is that in my case End users don't need to bother with SMS's and Top Up etc. Same thing for the operator, so I can't really see why "net neutrality" would be more of an issue in such a case.
Oh, and finally no one is calling you or anyone else Ridiculous!
Posted by Anonymous | March 13, 2009 - 2:47am
Hello again Konrad,
Sorry for mixing you up with another post. You did NOT suggest Traffic Shaping, that was another post above. Strike that part of the sentence.
Sorry Kerton for getting you involved in this!
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