Is the Future of Mobile Broadband Pay As You Go?

By  |  Wednesday, August 18, 2010 at 3:25 pm

Over the past few weeks, I have been considering a mobile broadband solution. My reasoning is two-fold: I’d like a backup in case my regular connection fails–Comcast here has become somewhat spotty as of late–and something for when I’m on the road at a conference and don’t want to depend on the available Wi-Fi, which is sometimes unreliable.

For the time being, I have settled on Virgin Mobile’s Broadband2Go offering (I’ll have a review of it coming in a week or two after I’ve put it through its paces). It’s cheap, the initial cost of startup is not high, and it’s now Mac compatible. But while at Wal-Mart, I was shocked to see Verizon and AT&T are now offering their own prepaid plans. I must have missed their announcements–and it’s kind of surprising to me that those companies be interested in getting into the game.

While Virgin’s model has always essentially been a prepaid one, AT&T and Verizon’s have not. In fact, they’ve built their broadband offerings on the traditional post-paid model. AT&T offers a $35/month 200MB plan and $60/month 5GB one, and Verizon a 250MB plan for $40 and 5GB for $60.

These are one size fits all plans–so either you use the data or you don’t: the cost will always be the same. For many of us, that just doesn’t work, and in an age where penny pinchers are the norm, a two year expense we just can’t justify ($1,440 over the contract for the highest plans).

Virgin offers several levels of service: a $10 plan for 100MB, expiring in 10 days; and a $20 plan for 300MB, $40 for 1GB, and 5GB for $60, all expiring in 30 days.

My use of wireless broadband itself is very irregular. So a pay-as-you-go plan, where you’re essentially paying for what you use, is very attractive. That’s why I was so excited to see Virgin jumpstart this market, but as I now sit here I’ve begun to think, is this the future of mobile broadband overall?

Take for example the net neutrality debate. Much ado has been made of the decision to leave wireless out of any agreement — with ISPs claiming network management is one of the biggest reasons why. Moving to pay as you go would give these ISPs a way to rightfully charge those who are taxing the network the most while more casual users are not overtaxed for data they don’t use.

Moving back to AT&T and Verizon’s decision to cannibalize themselves, this type of thinking may have led them to think doing prepaid was a good move. Instead of limiting themselves to business customers and the techie crowd, they’ve opened up a whole new revenue stream.

Depending on how well it does, it could trigger a shift in the way mobile broadband is offered. One size fits all plans generally only really work for a small subset of subscribers. Instead of overage fees, carriers could allow customers to “top-up” on an as-needed basis.

With the desire for mobile broadband becoming ever greater as society becomes more connected, I think pay as you go will only become more and more ubiquitous. I don’t necessarily think that’s a bad thing, either.


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2 Comments For This Post

  1. Rob Says:

    The problem with such an approach is the short expiration of the purchased capacity and the need to predict usage. A model based on some automatic replenishment maximum, plus some means to replenish manually as needed, with a longer expiry term would be better. IOW, customers set up a credit card that can be charged up to a fixed maximum per month without further customer intervention, to automatically purchase capacity. Then, if the customer downloads something and needs extra capacity, the carrier can increase it, on demand. If the customer will be doing more than usual, the manual replenishment mechanism permits adding arbitrary additional capacity.

    With a longer expiration of, say, six months, a customer isn’t less likely to be forced into losing money or downloading something to get some value for the money spent. (It is very likely that one cannot use close to the purchased capacity, to avoid losing much money, without exceeding it, thus forcing the purchase of still more.) The longer expiry does mean carriers have a liability on their books longer than they might prefer, but it shouldn’t be onerous. Ideally, the expiration date would renew each time a customer uses some capacity. This means customers don’t have to track expiration dates except in cases of disuse.

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