Wednesday, May 25, 2011

Overage charges will kill the mobile revolution

I have been in mobile long enough to have witnessed every attempt by the mobile operators to milk data revenues. SMS being the holy grail they always wanted to replicate (can't be done, some things are too good to be true...).

It started with outrageous pricing, which did not make any sense. It kept out anyone but large enterprises, mostly using BlackBerry. Finally, the prices were relaxed, consumers could afford them, the smartphone era began and the mobile revolution started. We owe a lot to Apple, as usual.

Then the panic kicked in, combined with some greed. The network started to look overloaded, thanks to the combo AT&T + iPhone in major cities. They began telling us they had to limit the use of the network. They needed to offload to Wi-Fi (smart). They needed tiered pricing, abandoning unlimited data plans (this is happening today in the US).

I am in favor of tiered pricing. I am a capitalist. If you use the resources more, you should pay more. If you use it less, you should pay less. It makes sense. Nothing in this world is unlimited. I get it. It has been like that in Europe forever.

The issue is what happens when you reach a threshold. When you are a network hog. When you are hitting the upper limit that gets you to unlimited.

We know from the landline Internet that very few people do get there. But those few, use it more than half of the rest. They are the one a carrier should target, making sure they do not bring down the network for everyone else. How can they do it?

First option: overage charges. If you go above a certain amount of network use, you start paying per MB or time or whatever. You pass the threshold, you will be punished. The carrier will make it so expensive you are not going to do it again.

Second option: throttling. When you use it too much, the speed of your network goes down. You become a second class citizen. It still works, you do not pay more, but the quality decreases.

Overage charges are a very bad idea. They do limit usage by bad guys, but they scare the good guys (everyone else). You just need one story of the poor kid that got charged $274,000 by AT&T because he made a mistake of some sort: the media will jump on it and everyone will be scared. Parents will not get data plans for their kids. Seniors will stay away for good. The market will not take off. Actually, it already has, so this would likely kill the mobile revolution. Or slow it down dramatically.

Overage charges seem a good idea to carriers. In theory, they can make more money from the bad guys. And that is appealing. But in reality, they won't make a dime. Only few people will be caught and by mistake. They will be pissed and ask for their money back. A PR nightmare, for nothing.

Throttling is the way to go. Limit usage for the bad guys, everyone else will be serene. They won't hit the limit in any case. They will buy in because there is no fear ("worst case scenario, my network will be slow, I do not care"). The mobile revolution will continue.

If you are a mobile operator, please consider this. Overage charges are a bad idea. Throttling is the way to go. Pleeeeeaaaase...