Monday, June 7, 2010

The Truth About Mobile Bandwidth Pricing

AT&T just ended unlimited bandwidth for the iPhone and people seem to be confused about what this means. As a follow-up to my post on consumer bandwidth pricing, let me break down the mobile bandwidth pricing strategies for you.

It's not really a cap, it's a pricing strategy. Also, it's not about keeping a few extreme users from ruining the network for everyone. For congestion management you'd need peak usage pricing like electricity companies use, only for geographical areas instead of (or in addition to) time-based pricing. For instance, raise the price of bandwidth in Manhattan during daytime and at the Austin Convention Center's cell tower during SXSW. Cumulative usage-based pricing doesn't solve congestion. It's just a strategy to raise prices.

Here's the breakdown of how much you'll pay per month depending on your data usage on the various networks that support smartphones.

As you can see, AT&T starts low and then after the 2GB "cap" quickly cuts across all the prices of the carriers that offer unlimited bandwidth. If you actually use less than 2GB/month, it's still a pretty good deal, second only to Sprint. At 4GB/month, it's the most expensive.

Also notice that Tmobile is more expensive if you get a 2-year contract that if you have no contract. This is their terrible new pricing plan in which they no longer subsidize phones in order to lock you into a contract. Instead, they essentially finance your phone by having you pay less up front but then more per month. When your 2-year contract is up, you will have paid more than you saved on the initial phone purchase. So if you get a Tmobile phone, don't get a contract. Just buy the phone outright.