Consumers reject 4G data caps

A new report claims that 4G data caps in the US are a rip-off. Whether that’s true or not, the study does highlight the resistance that cellcos are up against from consumers accustomed to unlimited data usage, and the importance of creating new packages that offer obvious value for money.

The study from public-interest group Public Knowledge says that while 4G (which in the US means HSPA+ and Wimax as well as LTE) is great, the data caps imposed by operators like AT&T and Verizon “create a disincentive to use the types of applications that benefit the most from 4G speeds. For most users, money spent to access a capped 4G network is money wasted.”
Author Michael Weinberg demonstrates this by showing how quickly a 2GB cap can be used up. For example, a single HD movie or two 45-minute HD TV shows from iTunes would wipe out a 2GB limit before they finished downloading. For streaming video, it would take less than eight hours of viewing time.
(NOTE: My own recent experience with LTE in Hong Kong allowed me to burn through a gigabyte of data in the course of an afternoon just watching HD videos on YouTube.)
One noteworthy caveat to this can be found in a US study released last month from Consumer Reports, which found that on average, smartphone users consume well under 500MB of data a month. If you look at the median numbers (i.e. the numbers in the middle of the range) it’s even lower – between 48MB and 158MB a month.
According to CR, the numbers reflect what cellcos already know – most mobile data traffic is consumed by a small percentage of their user base. And data caps more often than not tend to be set based on those percentages.
The Public Knowledge study acknowledges as much, citing June 2011 figures from Nielsen that put average smartphone data consumption at 500MB. But, Weinberg argues, those usage levels are generated by apps and content that work well on 3G.
That’s a fair point, as far as it goes. The numbers from CR presumably represent mostly 3G usage, as only a few smartphones in the US support HSPA+, and none support LTE for the moment. However, Weinberg’s conclusion is that if 3G suffices for smartphone data usage, there’s no business case for a 4G upgrade.
Not for smartphones, maybe. But 4G is a dongle play right now, and there’s a considerable difference between data usage on a smartphone (which is mainly email, web surfing and apps) and data usage on a dongle connected to a laptop. 
Weinberg also dismisses the Wi-Fi offload factor that would otherwise mitigate data cap limits for the same reason. “If the response to problems with 4G data caps is to tell people to use Wi-Fi, then there is no compelling reason to tell people to pay for 4G in the first place.”
Maybe, but that depends in part on who owns the hot spots. Many cellcos are banking on Wi-Fi offload as part of their mobile broadband strategy going forward. Bundling offload connectivity into a 4G package can actually create value if you sell it right (especially if it makes Wi-Fi log-ons a lot easier).
As for data caps, all I can add is that while cellcos may be increasingly preferring them to unlimited data plans, it’s already well understood that video is going to be both the biggest differentiator for 4G and the biggest bandwidth hog. Cellcos transitioning to LTE had better have a plan to account for that in their pricing models, cap or no cap.