Let’s face it, I’m an early adopter. And to be honest, I’m the kind of guy who won’t bat an eye-lid when I receive a text message from my operator saying I’ve exceeded my daily mobile broadband roaming limit. If I lived in the US right now, I’d be avidly anticipating the release of Verizon or AT&T’s 4G LTE version of the Samsung Galaxy S2. In the UK, I’ll probably have to wait until the end of 2012 if not 2013 before having my 4G itch scratched.
Yes, unfortunately, it looks as though the introduction of 4G in the UK is going to be a long, stretched process. Maybe I’ll get lucky and be in one of those areas where they will be doing early trials... although I’m not getting my hopes up, given that I still need to use a femtocell to get 3G coverage in my home today. FYI, I live in Shoreditch, at the heart of London’s so called ‘Tech City’, not rural (and so beautiful) Cumbria.
But amidst all this excitement regarding the imminent roll-out of LTE on a global scale, two words are getting in the way of making this evolution a truly game changing, revolutionary, ubiquitous mobile era: data caps.
In recent news, we are hearing more and more about operator X imposing new data caps for various reasons: capacity crunch, changes to mobile termination rates imposed by EU Commissioner for the Digital Agenda Neelie Kroes, huge costs associated to 3G or 4G licences, profit targets, reduced competition, customer lock-in and the list goes on... these are all factors that have contributed to the industry looking at controlling supply rather than fully letting demand free flow. Net/net, data caps prevent anyone from seamlessly using the full potential of a 4G network. And to be honest, the whole 4G hype campaign makes this a bit hypocritical.
Looking at the US example, AT&T and Verizon have trail blazed and set some standards: we’re seeing tiered plans, ranging from $15 for 200MB to $80 for a 10GB Plan. Expect to see $10 per additional GB consumed outside of your plan. The real problem is not so much the price tag; it’s the fact that having overage fees psychologically impacts a consumer’s behaviour. You’ll be alright if all you want to do is update your status on FB, fire up Tweetdeck or Seesmic on your smartphone and download email. However, if you truly want to leverage the promise of 4G (HD video uploads, HD streaming, etc.), then you will always have the unsettling feeling that maybe you’re doing something wrong; something that is going to cost you dearly. From a pure marketing/consumer behaviour stand point, that mental disposition simply implies that the average person isn’t going to make ‘high end data consumption’ a habit. Michael Weinberg, from Public Knowledge has a theory that this could nip 4G in the bud, so to speak.
This whole process kind of reminds me of the status of FTTH service adoption in France. Companies are so focused on FTTx roll-out ROI that they are rolling out services in areas that already have stellar ADSL2+/VDSL service. Customers literally don’t have a real incentive to move to FTTH (higher price point) as they are perfectly happy staying on their current service for their most common use cases (watching TV, making phone calls, and downloading/uploading stuff). Taking that line of thinking further, if all I can really do with my 4G connection is email, update my social network statuses, and download micro-apps (due to fear of overage), then why move to 4G in the first place?
Ads like this one for Verizon’s LTE USB modem make the promise of fast downloads... but if you’re being capped at 1 Gb, what’s the point? That’s one HD TV show (yeah, well, if I have a Samsung AMOLED screen, I want HD)... and barely nothing left in the plan for songs, ebooks or mail attachments. FANTASTIC…
If carriers in Europe follow the road taken by VZW or AT&T in the US, then 4G faces the real risk of falling flat on its face. Data caps actively discourage the very behaviour that 4G (and all the advertising around it) incentivises. We all suffered 3G bill shock; we’re not about to go through all this again.
I truly hope that European carriers will consider the usage of caps very carefully as they begin to advertise their brand spanking new 4G networks. If they don’t, millions of consumers may end up with a severe case of bill shock. Perhaps it is time to start thinking about how we can start breaking down the capacity crunch by using smart, high capacity, microwave solutions; increasing the competitive landscape by allowing smaller operators access to LTE spectrum (which implies more spectrum), and optimising coverage using cost effective small cell topology. Of course, all these options (non exhaustive) are being looked at by mobile operators world-wide. In which case, let’s cross our fingers for shackle free 4G mobile broadband!
This blog post was inspired by a white paper written by Michael Weinberg, from Public Knowledge, entitled “4G + Data Caps = Magic Beans”. It’s a riveting if not slightly controversial read.