Death of AT&T’s Data Cap, Part 2

In Part 1 of this blog entry we talked about the reasons why data caps are such a bad idea: they scare users away from using the innovative features on their shiny new devices – so the first operator that can eliminate this fear can probably get a nice uptick in subscribers.

So what’s a poor overloaded carrier to do?  There are many technical solutions for adding capacity: Femtocells and Long Term Evolution (LTE) first and foremost, but there will always be a need to manage bandwidth: the question is all about the best way to do this.

My suggestion: switch over to selling data plans based on different speeds and application awareness.  Modern Deep Packet Inspection (DPI) equipment can do a great job of identifying each subscriber and identifying each application in detail, so the operator can provide very granular control at the subscriber-by-subscriber and application-by-application level.

Here’s the simplest example that AT&T could implement tomorrow: your plan includes 2GB of data, and if you exceed it then your maximum download speed will be limited to 64Kbps for the rest of the month.  Result: no fear for the subscriber and no overage charges.  If you get tired of the slow speed, you simply reply to the text message they send (telling you that you had exceeded your cap and were being rate-limited) and you get back your full speed for the rest of the month for only $1/day. Easy.

Good DPI equipment enables service plans that provide even more interesting features, too.  How about these examples?

  1. Plan where web surfing is fast, but peer-to-peer traffic is limited to 64Kbps.  Appeals to the subscriber who doesn’t plan any P2P and appeals to the operator who is terrified of the debilitating “threat” of P2P traffic.
  2. Plan with no data cap where the subscriber has no bandwidth restrictions but agrees that if the cell site or core network gets busy, his/her traffic will be prioritized below that of other subscribers
  3. Plan where web surfing is fast, but the subscriber agrees that all streaming video will be transcoded by the operator down to a lower bit rate, resulting in huge bandwidth savings for the operator

I’d personally take any of these over a plan with a data cap and big overage charges.  How about you?

These are all win-win plans: better for the subscriber, but also better for the network operator. Each of these plans would reduce congestion and usage more than the existing data cap + overage charges, and these all have the advantage that they can generate more revenue.

AT&T has said that only 2% of their subscribers will hit the 2GB data cap, but I bet that they could get any double-digit percentage to take a premium plan that costs a few dollars more per month, leaving AT&T (or any other operator) ending up ahead from where they are today.

We’re starting to see signs of this tiered application-aware pricing overseas.  Any bets on which operator will be the first to take the plunge in North America?


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