Tiered Wireless Data Pricing – Is This A Good Or Bad Thing?

As most of you have probably seen, Ralph de la Vega, CEO of AT&T Mobility and Consumer Markets eluded this week that his company is considering a tiered pricing model for data.  Most people have been up in arms about this, saying that it’s just a way for AT&T to not only squeeze more money out of its customers, but better cope with the fact that its network can’t handle all the traffic that comes from the iPhone.

I’ll say: “Ya…So what?”

If I put on my economics hat (I do on occasion need to remind myself that I have a Master’s degree in the dark science), this is a classic case of Supply and Demand.  SSDD in econ parlance.

There was another article recently that said the 40% of AT&T’s data traffic was consumed by only 3% of customers.  How much you want to bet that many of those 3% are using an iPhone?  I’m not a “heavy” user of the iPhone and I still use about 400 MB a month.  Continuing the economics parlance, there is a cross subsidization from those who use little data to those who are using a lot of data.  This is not equitable in the long run. 

So what are we to do?  First of all, I do NOT believe there should be caps on the amount of data you can consume, e.g: only 1GB a month, or whatever.  Instead, you can actually achieve the same goal from a completely different approach.  Throttle back the speed.  Does EVERYONE need 3G?  My family sure doesn’t.  They just do email and surf the web occasionally.  Do I need 3G?  Heck, I need 4G.  I need access NOW…and for that, I would pay a premium.

The mobile network operators have much to learn from tradtional ISPs in my opinion.  I pay extra to have 30 Mbps on my cable modem as opposed to my friend who has a 1 Mbps DSL line.  It’s impossible for him to use as much network resources as me, because his pipe is 1/30th the diameter of mine.  See how this works?  I choose to be less constrained, and I am willing to pay the price.

Supply / Demand.  SSDD.

Why is this so hard for the carriers to understand?