Data caps blocking consumer understanding, demand for 4G

Data caps blocking consumer understanding, demand for 4G

Summary: A panel of mobile Internet experts discuss the future of 4G LTE networks and why consumers aren't jumping onboard just yet.

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TOPICS: Mobility, Wi-Fi
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SAN FRANCISCO -- 4G is slowly but surely becoming the mobile broadband standard, but its benefits to consumers are not as prevalent yet, according to a panel of tech execs and analysts assembled at the Open Mobile Summit on Wednesday.

See also: LightSquared CEO: Demand for data will outweight spectrum capacity soon

Verizon Wireless CTO David Small asserted what is all but certain: customers will consume more and more data, and they want to with more speed. Small also remarked that they want the latency characterisitcs that LTE offers, and he made it clear that this is what Verizon is trying to accomplish with its innovation centers in California and Masschusetts.

"We're pushing as hard as we can, but it's because we know customers want it very, very badly," Small said.

The ability to understand the distinctions between what is changing between 3G and 4G is difficult, said Scott Devitt, a consumer Internet analyst at Morgan Stanley. Devitt posited that the most obvious way to make this distinction is seen with video.

Yet with the invention (and undoubtedly, hindrance) of data caps, the challenge to see the difference and for consumers to actually find value in these HD streaming and connectivity features surrounding video is increasing over time.

"With a long-term view, there is value to the consumer as the points get rationalized by the telecom providers and realistic pricing models emerge overtime," Devitt said. "From the consumer standpoint now, it's not really clear as to the value of that transition."

Rob Glaser, a venture partner at Accel Partners, made the argument that it becomes a downward spiral of sorts from there. Unless you build the infrastrucutre out, Glaser said, consumers won't know the benefits -- thus developers won't build for it.

"We haven't yet seen definitive, killer apps that are only 4G," Glaser stated. "I can see the difference anywhere I go in the country that has these networks. That doesn't mean the consumers think of it as semantically as I have to buy a 4G phone today. That might happen at some point."

Sprint's chief technology officer Stephen Bye remarked that it's when you get a device that enables a customer to consume richer content at a price point where a consumer can buy it.

Sprint is one of the major exceptions nationwide -- and even worldwide -- when it comes to unlimited data plans, but pricing for smartphones and other mobile devices are still proving to be roadblocks for consumers -- not to mention rising costs for monthly voice and data subscriptions.

Somehow, and possibly amazingly (at least for mobile providers), these data caps and rising contract prices have not created the kind of customer revolt that we have seen happen following pricing changes by Bank of America and Netflix.

Devitt theorized Netflix is an example where the business model -- basically based on discounted access to TV and movie rentals -- and the way that that company interacted with consumers over many years changed drastically this year.

"There hasn't been a Netflix-like firestorm because the [mobile] industry was careful in putting those caps in," Glaser also argued. "They were put in place in a way that only had an impact on a small number of users. Netflix raised its rates by 60 percent for everyone."

At some point, Devitt added one has to ask, "How much pricing power do the companies have?"

Glaser offered two possible explanations as to why these firestorms come about now. The first one, which Glaser noted he hopes will only be temporary -- possibly lasting for the rest of the decade, is constraints on consumer spending thanks to the recession.

The second reason is the amount of transparency and information flow that is largely seen via social media has been ampllfied -- making consumers much more aware based on what they learn directly from other consumers.

"You have to be all the more careful when making any kind of change to pricing," Glaser said.

In the case of data caps, Glaser said there has only been a "mini-firestorm among the hardcore digerati," but the majority of consumers are too reluctant or disinterested to make major changes to their mobile plans just yet.

That explanation could be applied to why many consumers don't see the need to jump onboard with 4G just yet. Until reasons for making a switch have been made known to them on a more wide-scale, valuable basis, then 4G development might become more stagnant than predicted.

Topics: Mobility, Wi-Fi

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17 comments
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  • RE: Data caps blocking consumer understanding, demand for 4G

    What good is super fast data that lets you stream HD video it your monthly cap is not even enough for 1 movie. Telcos have got to get this priced correctly. It does not seem logical that a Gb of wireless data costs more than wired data.
    txscott
    • RE: Data caps blocking consumer understanding, demand for 4G

      @rshol Amen! The significantly faster speed just lets you hit your insanely low data cap that much quicker.
      BillDem
    • Sorry, the bandwidth won't support that.

      @rshol - Forget that kind of usage. Maybe one day - another ten, twenty years. But if you've got a large screen, what are you doing trying to use radio? Wouldn't fibre broadband be more appropriate in your case?
      peter_erskine@...
  • RE: Data caps blocking consumer understanding, demand for 4G

    No surprise here. Unlike wired channels, wireless has a fundamental physical cap at about 300 Gigabit/sec in any given area, which is shared by all radio communications -- broadcast, meteorological, military, navy, radio-location, etc.

    Radio band is quickly becoming a scarce resource. More demand -- higher the prices and lower the caps.
    andrsib
  • RE: Data caps blocking consumer understanding, demand for 4G

    All you have to do is look at Verizonn Wireless income statement to see they are over charginng for Data. It is just greed as to why data plans are so over priced.
    tgschmidt
  • How about NO CAP?

    Folks... what about Sprint? They have no caps on data speeds and data usage. Why isn't attention and media coverage being referenced here?
    robslusher
    • RE: Data caps blocking consumer understanding, demand for 4G

      @robslusher They are getting little attention because their 4G coverage area is miniscule.
      BillDem
    • RE: Data caps blocking consumer understanding, demand for 4G

      @robslusher Sprint network is so slow they don't need data caps.
      wb923
      • RE: Data caps blocking consumer understanding, demand for 4G

        @wb923 you are so right. sprint has the slowest network on 3g and 4g. Other companies have three times the speed or more in 3g or 4g.
        The Punisher
  • RE: Data caps blocking consumer understanding, demand for 4G

    I think two factors are reducing comsumer outcry over caps.

    The first is that a lot of people are getting "grandfathered" into unlimited plans and a lot of these people are the ones who would complain about the caps as they are current data users.

    The second is the one alluded to in the article. Other than those already using data plans, new customers aren't all that sure what they want a data plan for and therefore aren't sure what the caps mean.

    My personal guess is that competition will make one of the major providers give unlimited data as a sales feature and everyone will need to follow, sort of like the current standard of calling to anywhere in the US on voice plans. Obviously, that is just speculation, but as I don't see either ATT or VZ leaving the market soon, I suspect that they will keep bumping each other to gain market share.
    sbf95070
    • RE: Data caps blocking consumer understanding, demand for 4G

      @sbf95070 <br><br>You're absolutely right on the first point. I've been grandfathered in. My unlimited plan already costs a lot, and I get bothered to change my plan regularly so the carrier can institute caps. There are many months when I use 12 - 30 GB or more of data, because I tether to my laptop, for which I pay even more. 4G LTE would be one of those changes that would cause these caps to be put in place. So I'm sticking with my expensive unlimited 3G plan so that when I NEED to, I can download that 20 GB / month without getting nailed for overages. I'm not complaining, because I know the deal. When I DO change it will be to switch to a different (unlimited) service on another carrier.
      tsssys
  • RE: Data caps blocking consumer understanding, demand for 4G

    They were sly in that 3g and 4g data cost the same for the consumer. If I weren't data grandfathered I would view my purchase differently. At this point the only benefit of vzw 4g is simultaneous voice data and even that I rarely use it. 3g streams Netflix just fine.
    LarsDennert
  • RE: Data caps blocking consumer understanding, demand for 4G

    It isn't just the data caps. On the 3 devices I have that are capable of 4G, none of them get any kind of decent battery life when I use 4G. They need to improve on the client hardware more so that it doesn't cause such a high power draw.
    tommcd64
  • RE: Data caps blocking consumer understanding, demand for 4G

    Last week I was going to give up my smartphone and data plan and go back to a less costly plan because I couldn't deal with the caps that a new plan would cost and my present plan is costly enough for my 2 phones without going to a more expensive plan for a higher data allotment. My data usage for last month was around 8GB. Being as I was grandfathered in for unlimited data I decided to keep my current plan.
    07734dan
  • RE: Data caps blocking consumer understanding, demand for 4G

    putting a bandwidth cap just goes to show they have no idea what they are doing, where the digital world is going, or what consumers take into account. Why in gods name would I use my phone for anything besides local wireless if you damned vampires are trying to make a phone bill into a mortgage. You dinosaurs are one wi-fi city plan away from being a Blockbuster or Playboy. Since the run away of the internet around 97ish is when I personally seen a huge change in business model, these ancient machines think they have it all figured out. From drm to hunting down 11 yr olds listening to Madonna(rightfully so) it is quite clear companies think they can do things on their terms and will always be proven wrong.
    turrenti@...
  • RE: Data caps blocking consumer understanding, demand for 4G

    There is no point of getting 4G when you do not even get the speed of 3G. :)
    rxantos
  • RE: Data caps blocking consumer understanding, demand for 4G

    Could it also be a quiet revolution against the 350 cut off fee if you no longer want the data plan? While there has be some discussion about throttling, how many people have a realistic understanding of what their actual data usage is and if it would affect them. They simply think they are buying a service and on other other hand you are taking it away.
    trpilotjr