Wireless carriers: data providers should subsidize data plans

cell phoneAs mobile data usage grows, some wireless carriers are developing strategies to limit data access and shift the cost to content providers and web developers, according to a recent article in The Wall Street Journal.

Wireless customers have become accustomed to using the Internet on their phones whenever and wherever they want. But as traffic increases, carriers struggle with higher costs and overloaded networks.

As my colleague Jason Cella points point out a recent Bizmology post ‘Unlimited Wireless Data a Thing of the Past’, more wireless carriers are limiting connection speeds and shifting to tiered data usage plans. AT&T and Verizon Wireless no longer offer truly unlimited data plans. With AT&T, once customers with “unlimited data” plans reach a certain cap, their data speed is reduced. Customers may also purchase plans with more gigabytes than the “unlimited plan,” but have to pay extra. With Verizon Wireless, customers may have limited data access and slower speeds during peak usage periods.

Customers have complained about the new throttling strategy. Some are unhappy about being charged more for plans that are still limited. Others say that mobile Internet speeds are reduced before they actually reach their data cap. Customer backlash, competition, and limited network capacity is making it difficult for carriers to keep charging customers more for each additional gigabyte of data used.

As a result, some companies are experimenting with a new strategy. Rather than make consumers pay more, make Google and other major traffic producers foot the bill.

AT&T says web developers should subsidize part of subscribers’ data usage since websites profit from the traffic generated through the wireless carrier.

Some wireless carriers are making deals with content providers to allow unlimited access to those sites exclusively. For example, European wireless giant France Telecom’s Orange Group is now allowing unlimited web browsing on Facebook and Twitter, but charges for browsing on other websites.

But some smaller web developers are concerned this new strategy favors larger companies that can pay for exclusive mobile browsing deals. Other critics say the entire Web should be accessible; special access threatens net neutrality.

Global mobile Internet traffic has more than doubled in each of the last four years, according to Cisco Systems. And it shows no signs of slowing. Someone is going to have to pick up the tab for all that data. Although limiting mobile Web offerings and charging developers for subscriber data usage is still in the experimental phase, it is a sign that more carriers will change how they offer data plans in the future.

(For more information about wireless telecommunications services, see First Research’s industry profile on Hoovers.com.)

Rebecca Mallett

Rebecca Mallett has been researching and writing about companies, industries, and executives as a member of the Hoover’s editorial team since 2007. For the past 5 years, she has focused on the agriculture and food manufacturing, business services, and mining and energy industries as a member of the First Research team. Follow her on Twitter.

Read more articles by Rebecca Mallett.

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