Living Within Our Data Caps

Cell-TowerAn interesting thing happened to the wireless carriers on their trip to bring us 4G. They warned us repeatedly that we could expect issues as they upgraded their networks, and they forced us onto skinny data plans of a few gigabits of data so that most of us have learned to use WiFi with our cellphones rather than spend a fortune with the cellphone provider.

But maybe the wireless carriers have gone too far. Adobe Systems reported last week that that more than half of all data from cell phones is now using WiFi instead of 3G or 4G. Total WiFi traffic from mobile passed data directly on the wireless networks more than a year ago. This has to be troubling to AT&T and Verizon because their business plans rely on consumers using the faster 4G LTE networks. They have made huge investments over the last few years in increasing data speeds and that is the basis of all of their advertising.

So perhaps the tactic of imposing small data caps has backfired on them. They are not seeing their new expensive networks used nearly as much as they counted on, and this is limiting their ability to monetize the expensive upgrades. I know that I personally am very happy buying a 2 gigabit monthly cap and I only use cellphones data for directions while driving or when I have no other choice when traveling. I would never consider watching a video on my phone when I’m not at home. Apparently there are a lot of people like me in the world.

When AT&T and Verizon realized that people weren’t using as much data as they had hoped for they both got into the tablet business hoping that it would boost the use of their 4G LTE data. They have been bundling tablets into plans and even selling them below cost as a way to drive more data usage on their networks. But that move has also backfired and I saw a report that estimated that 93% of tablet data usage is using WiFi instead of the LTE network.

The WiFi trend is only going to get worse for the carriers as Hotspot 2.0 rolls out. That is the new WiFi standard that is going to let cellphones and other devices easily and automatically log into public hotspots without going through today’s annoying process of having to log onto each new network. With Hotspot 2.0 you can be pre-certified to join any WiFi router that is part of that network. So as you walk down the street in a business district you might long onto numerous different WiFi routers as you walk by them – while staying off the LTE network.

The precursors for Hotspot 2.0 are already in the market today. I know that once I have logged in once with my cellphone to any AT&T or Comcast hotspot that my phone doesn’t ask my permission whenever I come into range of another of their hotspots and just automatically connects me.

It’s been reported that the wireless carriers have had pretty good success getting families to upgrade to monthly 10 GB deluxe plans. But what they didn’t count on is how so many people are being careful to stay within their plan to avoid getting hit with charges for extra data.

It’s been reported that both AT&T and Verizon have invested heavily in the Internet of Things and they are touting 4G connectivity as the best way to connect for a wide range of devices from wireless utility meters to animal-tracking collars. But a lot of the IoT devices in the world are going to be inside of homes and businesses where an LTE connection is often not as good as a signal from an inside-the-home WiFi router. The fact is that any outdoor radio broadcast signal is going to vary with factors like weather, temperature and the amount of the spectrum being used by others. This often makes LTE less reliable locally than a solid WiFi signal.

It will be interesting to see how the wireless carriers react to this. They have spent many billions upgrading their wireless networks and are not seeing the kind of revenue they expected from that effort. This might make them more cautious about leaping in to make the next big network upgrade, which seems to be needed every few years. It’s possible that they will expand their network more through mini-cell sites to make their signal stronger where people live as a way to make it more usable. The one thing they are unlikely to do, at least for a while is to give customers more data in the base wireless plans. They are likely to stick with the incremental data usage plans in place today.

One place the wireless carriers are counting on is in the connected car industry since that is one market where WiFi is not a real alternative. It is expected that every new car will come with data connectivity and that the amount of data used by each car will climb over time as more and more apps are included with cars. Expect them to be selling tens of millions of small monthly data plans to car owners as a way to make up for us all avoiding their expensive data on our cellphones. But even in that market they are competing against the smartphone which can handle all of the functions promised for the 4G functionality that is part of the smart car. I know I would rather get driving directions as part of my existing cellphone plan than buy a second data plan for my car.

4 thoughts on “Living Within Our Data Caps

  1. I don’t understand the cellcos “scarcity” biz model when, in fact, there is so much “abundance” to be offered. In 2009, I wrote a booklet called “I’ll Vote for You If You Make My iPhone Work” (see amazon, its 99 cents). If a single fiber strand can deliver 1 terabit per second of data to a 4G LTE tower, why 10 GB data caps?

    If AT&T and VZ would adopt a fixed wireless biz model (if data caps, they might be 100 GB +) in CenturyLink country, they could put CenturyLink out of business in a few years (replaces DSL, T1 and even DS3 services).

    Comcast and Charter definitely get the Wi-Fi as “poor man’s 4G”. We may soon be roaming on their networks throughout urban and suburban America.

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    • I think the current skinny data caps are pure greed. It’s been reported that the data overage charges are the most profitable component of the cellular business. And that’s not hard to see when 1 GB of data costs $10 – $15.

      Cellular data will never be a perfect replacement for landline data for a few technical reasons. First, there are homes and businesses that get pretty poor data coverage inside. Second, any given cell site has a limit on the number of simultaneous users and this makes it a bit unreliable if it became the only source of broadband in an area.

      But you are right and if they priced 4G data right in rural areas they could clean out the incumbents (including themselves). But they don’t want to price it right – it’s that pure greed thing again.

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  2. Doug, Interestingly enough I had a friend who took a Verizon sales pitch to use 4G on a 6 GB plan for his home internet to replace a very slow AT&T DSL connection. 1st month he used 40GB and got a $2000 bill. It seems Verizon is now using a sliding scale and the more you use, the more expensive it becomes per GB… As always, buyer beware!

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    • I’ve heard the same stories. And I bet they never contacted him during the month to warn him to monitor his usage. People have little idea how much data they use at home. Sandvine reported recently that the average home in the first half of this year used 51 GB of total download per month. The top 15% of users averaged 212 GB. I have a cord cutter friend and we figured that his family probably uses 800 GB per month. Buyer beware indeed.

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