CyberTech Rambler

January 20, 2014

Blame the data limit …

Filed under: Uncategorized — ctrambler @ 3:13 pm

Happy New Year!

I know I haven’t been posting for two months now. Not because there was nothing interesting, but I could not find the time to do so.

This news about AT&T sponsored data plan is interesting. Basically companies can pay AT&T so that access to their services do not count towards your data limits. It is interesting because it looks like and smell like an updated version of  toll-free telephone number service. This fact is of course not lost on commentators.

With toll-free telephone numbers, one do not pay for the call. It gives companies a mean of differentiating their services from their competition. It is generally regarded as an innovation. Move the clock over to today, AT&T “sponsored data plan” looks so much like toll-free telephone numbers that I think I am going to call it “toll-free data plan” in this post. This plan, however, draw critics. Part of me think the plan is not good for the consumer. The other part says that the plan has merits.

I was struggling to understand why I am OK with toll-free telephone numbers but not toll-free data plan. I do not believe that this was brought by the change in expectation over the years. If so, I would have the same disdain I have for toll-free telephone numbers as I have with toll-free data plan. I believe the difference is how they are being  charged from a consumer point of view. With telephone  calls, one is charged by the seconds and still is. Every time you make a call there is an expectation that you have to pay for by the minute. If you call a company you pay to call the company. If you call its competition you pay exactly the same to call the competition. But if the company has a toll-free number you can avoid the cost of  calling them. To borrow a modern metaphor, it is pay-as-you-go.  Crucially, if you choose not to call either, you are not charged. This  fact is important in this discussion.

However, with the internet, the norm is to pay for a quota of data over a charging period (the data limit). In that sense whether I direct my traffic to or none at all, I pay exactly the same. That differentiate it  from toll-free telephone number because I do still pay same whether I make the data connection to companies or not. If I do not use up my quota the amount that I did not use does not get carried forward to the next charging period. I am not paying for the amount I used in very small increments, e.g. by the megabytes. (I take megabytes as equivalent to charging by seconds on telephone calls).  Instead, I take a big lump of data over a fixed period of time to use as I pleased. AT&T data sponsor plans looks like an exploitation of the big lum sum data plan in order to make money out of it by attempting to reshape my behaviour. The danger to the consumer is they are going to artificially tighten the quota in order to drive traffic to their data sponsor. That in this day and age is unfair competition. AT&T is a critical facilitator of commerce. This is an important public function. While we are happy with them running its public obligation on a commercial basis we  cannot allow them to abuse their power to choose the winners or losers.

Simply because of the different way we are charged, both telephones and internet subjected to different market dynamics and comparing the two are like apple and orange, i.e., very similar but not the same in crucial aspects.

Could companies like AT&T charge by the megabytes? Yes, but they choose not to. . If they had been selling services by finer details, say charging per MB on a pay-as-you-go, that would had made toll-free data plan more palatable. However, they choose to sell using a time-based quota system, that makes it looks like they are milking the scheme for money.

Is the toll-free data plan necessarily evil? No. Some commentators is worried that it will favour companies with big budget. It will of course. However this is no different from what we have now in all fields of business. Having a large money pot always put you at an advantage. We already accept that. This can favour small companies as well. A small company can use toll-free data plan as a leg up to help it establish itself. Toll-free is a differentiator. It works for small company as well as big company. Remember back in the days where we have to pay for per-minute modem charges? Having a toll-free number does not necessary means there is no competition from others that does not have toll-free numbers.

At the end of the day, AT&T’s plan only work because there is an artificial limit to the amount of data. Sooner or later competition will likely dilute this quota into insignificant consideration for the consumer, if not get rid of it altogether. It does not mean we should not be wary of this sort of data plan. In the short term,  this can hurt us because it shape the winners and losers in this game and shape the future to come. In the long run, this problem will fade away.


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