The Fallacy of Wireless Data Usage

It's like clockwork. At least once a month, a major wireless operator trots out an executive to say the current model for mobile data usage is unsustainable. The sob story goes something like this:

Wireless customers with their fancy smart phones (that we sold them) are using up too much of our network capacity and are causing traffic jams. These greedy "bandwidth hogs" are crippling our wireless network. They need to start paying us more money so we can fix the problem. Also, we need to stop this "all you can eat" data pricing model and start charging people based on how much data they consume.

Well guess what? I don't buy it, and neither should you.

First, wireless carriers are making money hand over fist from wireless data plans. When CEOs talk about "explosive growth," they're not referring to bandwidth, they're referring to their coffers. I will spare you the disgust of having to see all their financial figures (if you must, here you go: AT&T and Verizon Wireless).

Second, they already impose outrageous overage charges – the fees you pay when you go over your allotted data plan. Let's look at AT&T's:

Wireless Card: $500 or $1000 per GB
Media Net Usage (no data plan): $2000 or $10,000 per GB (depending on when you signed up)
Messaging 1500: $374,500 per GB
Messaging 200: $749,000 per GB
Text Messaging (no plan): $1,498,000 per GB
Note: I assume you use all 160 characters in each of those messages.

At the rates they charge for text messaging without a plan, watching this short video would cost you more than $10,000!

You can — and should, if you're a heavy user — purchase an unlimited messaging and/or a cell phone data plan. But for these carriers to suggest that they don't already charge people based on their usage is ridiculous.

One notable exception to an unlimited offering is wireless cards, which typically offer a large amount of data for a higher flat fee. Both AT&T and Verizon Wireless have limits of 5 GB for $60 per month. But if you go over the 5GB limit, another 5GB will cost you $2,500. Why do these companies charge $60 for the first 5GB and $2,500 for the second 5GB? Because they can.

You should expect the same thing with cell phone data plans. With every quarterly financial call, these companies prove that not only should we not be paying more for using our cell phones, we should be paying far, far less.

Let's put this in context: You buy a smart phone to surf the web, watch video and stream music. You take the carriers up on on their offer, probably signing a two-year contract and taking on a huge early termination fee in the process. You hold up your end of the bargain every month (probably paying some overage fees in the process), but the carriers have no incentive to provide good service, since you're locked into a contract with high early termination fees.

Some people just want an advanced phone with a QWERTY keyboard so they can stop using T9 for texting. But AT&T and Verizon Wireless now force every customer with anything more than a basic phone to have a data plan, even if those customers hardly use any data. In any event, customers who use .0001 GB per month now pay as much per month as heavy data users, giving the carriers a huge windfall. Meanwhile, the carriers are complaining that their customers don't pay enough. Seriously?

The next time a reporter hears one of these executives complaining about data, instead of just reporting on it, how about asking some tough questions on behalf of overcharged consumers?