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You are actually paying for a probability distribution of how much data you are using: if you were paying for the data you weren't using, then the plan would be much more expensive than it is; this is due to insistence from customers to not be billed per-kB combined with competition between carriers.

The result is that if you just let FaceTime be used by everyone with an existing plan, enough more data will be used to skew the probability distribution for all other users, including those that are not using FaceTime, which would force an increase in all their plans as well.

Now, maybe you'd prefer that scenario; part of me actually does (but then, I'm also for per-kB billing, as it will make costs transparent and remove all of these weird incentives carriers have to limit things), but you can't just claim this is some simple matter of "I already paid for it".

For more information, I gave a detailed talk about this at JailbreakCon (yes: arguably a weird talk, but the audience was insanely diverse, so I had to find a topic that would work across the board from users to developers to security researchers; I went for something akin to "pricing myths").

http://www.youtube.com/watch?v=z_7ZW8fngXI




No, that's how the value prop from the carrier works out across all of their subscribers. _I_ am paying for my x GB in a monthly fee, and I am resultantly entitled to all of it, as are everyone else who pays them.

Now, we all know their network doesn't have that sort of capacity, and that most don't use their x GB, and that's how they turn a profit... but that doesn't change the fact that, having paid them, I am now entitled to using all of my allowance.

It also doesn't help that the carrier in question is effectively prosecuting (by way of the DoJ) one of my best friends in federal court today for publicly shaming them for having poor security practices surrounding their users' PII.

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And to the extent to which that is false advertising, I agree with you: I even mention so much in the talk. However, you aren't paying them enough to actually get that service, and it isn't because they are screwing you. ...and no, I'm sorry, but the fact that the carrier in question is prosecuting your friend is off-topic and entirely irrelevant to this pricing problem.

You thereby have to frame these kinds of things inside of the larger framework: you can't just say "oh yeah, Apple is evil because they are allowing this FaceTime charge thing" unless you are willing to also accept things like "everyone should be paying more for bandwidth" or "users should be paying for bandwidth in much smaller slices": this is a complex issue.

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I don't know why techies aren't more accepting of paying more for bandwidth or paying in smaller slices rather than having most people pay for far more than the use. I mean, I guess I do know why techies are against that sort of thing, because they're more likely to be heavy users, and the current situation subsidizes heavy users to a pretty substantial degree. But still, basic fairness would seem to dictate that this stuff ought to be a little more sane.

Nobody seems to mind paying for precisely metered electricity, gas, or water. But the moment you want to meter internet usage, it seems like people swarm out of the woodwork to shoot it down, even though it seems that the current "unlimited" model is responsible for a lot of our current problems.

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Electricity, gas, and water all have something critical in common: they are heavily regulated, so you're paying more or less cost for them.

When Internet usage gets metered, it's because the carriers think it will allow them to massively overcharge everyone, and take more profit; and they're right.

I'm not opposed to an Internet-as-utility model, where it's metered but there is _some_ mechanism to ensure that the charges are related to cost, and not just made up.

The market _ought_, in an unregulated industry, to be that mechanism, but in consumer internet service provision we have a sort of half-regulated industry, where there is never more than about a duopoly of providers in any given market.

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No; in fact, when AT&T switched from unlimited to metered bandwidth pricing for iPhone plans, 95% of customers (including me) saw that they had to pay less per month. The private market is simply not so broken for cellular telecoms right now that AT&T can charge a lot more than their costs for things like bandwidth: they are actually in fierce competition with Verizon, and for the vast vast majority of users the only thing they care about when choosing between these two companies is price.

Five years ago this was not as true as it is today, as at the high-end of the market (so only people with a lot of money to burn) people would sometimes select carriers based on what phones were available (hence the value of the AT&T-exclusive iPhone), but with a world where handset manufacturers carry most of the power (and in fact get even a good percentage of the money paid to carriers, due to the subsidy) and all of the best phones are available for every major carrier, this no longer matters: carriers are now dumb pipes to everyone but a small percentage of people living in an area with a major coverage disparity.

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Ahh, when I wrote that comment I was thinking of residential ISPs. I agree that there is more competition in the wireless ISP space, and I don't think we're getting shafted _too_ badly by the pay-by-the-byte plans there, compared to what I would expect if residential ISPs got into the pay-by-the-byte business.

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Saurik, I definitely see where you're coming from, but why do the rules and standards change for cell phone providers as for other Internet providers? They pay the same for data as any other Internet provider.(probably less, actually) If you're paying more than $30/mo at home for land based Internet, you feel like you're being ripped off. Compare it to Cable Internet. You are capable of receiving impressive speeds during low use time and your experience will suffer during high use time. Same with cell phone data. Cable Internet isn't capped at a fixed amount. So, then if you work within the guidelines of spending over $30 is insane (Which I'm not saying is necessarily true, just arguing...) And you take into account that an average home user will use much, MUCH more data than what cell phone companies are charging their $30 on. (This article says average home broadband user uses 17GB/mo. I have no idea if it's accurate, but let's just use a much smaller number and avoid argument. http://www.guardian.co.uk/technology/2011/nov/01/home-broadb...) Let's assume 10GB. That comes out to 333.3 MB per $1, or 3.33 MB per $0.01. We're not talking about what the probability of what a customer would or COULD use, we're talking about actual amounts. Heck, if we went 1/10 of that, down to a mere 1GB per user per month, we still wouldn't be at what the cell phone providers are charging. At 1GB/mo, for $30/mo, it would be $0.03/MB. (For all of my calculations I used 1000MB = 1GB, not 1024 to keep it simple.) What the cell phone industry is charging for data is plain ridiculous. The going rate seems to be $15 for 250MB or $0.06/MB. That's maybe 20X what a conservative user spends at home. Why? Maybe you could compare it to satellite based Internet. Satellite has fixed bandwidths and astronomically expensive equipment and that's all it does it provide Internet service. But, why would you compare it to satellite based? All a cell carrier does is get it back to a tower a maximum of 5 miles away. There they pay for land based Internet pipes. They are considered CLECs also and pay stupidly cheap prices for bandwidth. Sure, it may be expensive to get local loop to the tower sites, but we're not talking launching satellites into space. Even satellite companies only charge $50/mo for 10GB/mo. (Wildblue's website).

So, I simply ask, if you support a pay as you go model for cell phone providers, what price per MB do you have in mind? Because right now, it highway-frickin'-robery and they're still whining about data usage.

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> If you're paying more than $30/mo at home for land based Internet, you feel like you're being ripped off.

Please speak for yourself: I pay much more than this, by choice (to get higher bandwidth caps). (For the record, I also "put my money where my mouth is", and immediately called AT&T when they started phasing out of unlimited data plans and opted myself out of that plan to the limited one. This has meant that on some months I pay much more than I used to, but it has also meant that on many months I pay less; it also means that I no longer am contributing to a systemic bias against disruptive-ish services like FaceTime or Netflix.)

> Compare it to Cable Internet. You are capable of receiving impressive speeds during low use time and your experience will suffer during high use time. Same with cell phone data.

This only argues for peak vs. off-peak pricing being different. In fact, I specifically cover this in my talk with an analogy to how electricity is billed. It simply makes obvious sense that if, in the middle of the night, bandwidth is nearly free due to unused infrastructure, yet during the day it is a spare commodity, that bandwidth should be priced differently during the night than it is during the day. Hell, even our cellular telephone service is billed in this way: it just makes sense.

> And you take into account that an average home user will use much, MUCH more data than what cell phone companies are charging their $30 on.

You seem to believe (not just with this sentence, but with most of your argument) that data should cost the same whether it comes over a wire or via a cellular connection: the costs simply aren't the same for numerous reasons ranging across the board from the technical to the political. (This includes some less-obvious ones, such as how no one wants a cell tower in their neighborhood, yet everyone wants good cell service: I discuss this particular issue in my talk along with some humorous slides.)

> We're not talking about what the probability of what a customer would or COULD use, we're talking about actual amounts.

No, actually: we have to talk about the probability of what a customer would use, as to do anything else is to price yourself out of the market. Again, I go into detail on this in my talk, using an analogy involving salt, but in this case, if AT&T charged for the actual bandwidth on the label it would be trivial for competitors like Verizon to undercut them by just noticing "hey, our average usage is for half of what we are charging, so there's a ton of overhead in our margin we can give back to the customer". Carriers, like most other almost entirely fungible commodity (they really are a "dumb pipe" with only minor differences in quality or locality), are in fierce pricing competition.

> Why? Maybe you could compare it to satellite based Internet. Satellite has fixed bandwidths and astronomically expensive equipment and that's all it does it provide Internet service. But, why would you compare it to satellite based? All a cell carrier does is get it back to a tower a maximum of 5 miles away. There they pay for land based Internet pipes.

Again, you seem to be entirely discounting the cost of those towers, both in terms of infrastructure and equipment and in terms of land; you also seem to be discounting the concern of limited frequency space, and the fierce competitions that occur to obtain it from the auction system we have for selling it off. If you want really cheap bandwidth, get a land-line: as you say, they exist.

And yes: even satellite internet may be cheaper in many circumstances; if nothing else, you have to take into consideration that most of the carrier plans people look at and compare are smart-phone subsidy contracts, which means that you are paying much much more than if you were willing to accept that, in fact, that iPhone or Android device in your pocket should have cost $500-$600. For some stupid reason, people get sticker shock at a large investment in hardware, but are willing to just whine about service costs.

> So, I simply ask, if you support a pay as you go model for cell phone providers, what price per MB do you have in mind? Because right now, it highway-frickin'-robery and they're still whining about data usage.

This question doesn't really matter; in essence, you are asking it because you feel that the carriers are drastically overcharging for a service that you somehow believe you can get from your cable provider, and thereby are certain that in a per-kB world the price will somehow be even more ludicrously expensive.

My contention is that the core issue here isn't price: it is poor incentives; the carriers are incentivized right now to hate data, as they are billing for it in an incorrect unit, leading to all kinds of weird pressures in seemingly-unrelated parts of the ecosystem, such as the old rule the iTunes App Store used to have on applications that used "too much" bandwidth (this was thankfully dismantled when AT&T stopped offering "unlimited" bandwidth pricing): you simply wouldn't have those horrible incentives under per-kB pricing.

Meanwhile, I am fairly certain that, based on the rather poor profit margins I see when I look at the financial statements released by carriers, combined with how fierce they seem to be to jump onto pricing models that aren't even sustainable in the long term yet give them temporary advantages over their competitors, that whatever the price that ends up coming out of this will be mostly fair. More expensive than cable? Well, duh. But, more expensive than now? Only if the customers suck and change their behaviors because of it; otherwise, when you have better pricing models things actually tend to get cheaper for normal people (as they did for 95% of customers when AT&T stopped running their unlimited data pricing plan).

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BTW, I didn't say it before and feel like a heel. Thank you for all the work you do for iPhone users. I have nothing but immense respect for you, your time and your talent. Also, I did watch some of the video (like 10 minutes) but the audio was so echo-y that I couldn't really understand you.

This was never about arguing with your points and I know I didn't make mine with the most scientific of data. I worked for an ISP for 7 years and know first hand on the costs of licensing spectrum and what the 700 MHz sold for at auction. They are a wireless ISP and I was the purchasing manager,so I also know what it costs to put up a tower (actual costs as well as land use, leases, licenses, etc). I believe that if a small, regional ISP can do it and still offer affordable service to the customer, then it should be easier for a much larger company such as AT&T, Verizon, etc to do it.

I know I clumsily compared it to cable and satellite Internet service and made vague arguments about customer perception and price. I do feel that they are somewhat valid because I think customers focus on price first and QOS, data amounts and reliability second, third, never...

I think we're in agreement that if there was a model that was based on usage and actual costs (and not some arbitrary amount that they think they can squeeze a customer for) then we'd all be better off and have concrete numbers in hand. That would allow us to use our data however we feel like. Kinda the same as Nathan is arguing about his "unlocked" phone what what he should be able to do with it.

Lastly, have a Happy Thanksgiving and enjoy the time with your family. - burtrom

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