Wireless Data Currently About Ubiquity, Not Speed
from the nice-one dept
We've already joked about how all wireless data services, no matter how fast, start their pricing at $80/month, in the hopes that business users with expense accounts will sign up while the network provider works out all their network and capacity problems. The prices eventually drop as the provider feels better about the network and (much more importantly) competitors have launched their own, faster, networks also at the $80 price point. Still, in an interview about wireless data offerings, the co-CEO of wireless data company Seven, provides an interesting rationale for the $80 pricing. He basically admits that it's too expensive for the power user, but just fine for the casual user. Seems a bit counter-intuitive, doesn't it? The power user, of course, is also a bandwidth hog -- and the carriers don't want bandwidth hogs clogging up these networks, so no matter what the price, the speeds of most wireless data service offerings aren't enough. However, for the more casual user, bandwidth isn't nearly as big an issue. For the casual user signing up for wireless data plans, the issue is ubiquitous connectivity -- and that's the target audience for these users. So, the question being asked is the wrong one. The interviewer is basically asking how they can justify charging $80/month for "what amounts to a very slow DSL connection." The answer (though, not this directly) is basically that users are buying the ubiquity and the mobility -- not the speed.
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Nice idea. There certainly should be a premium for ubiquity and/or mobility. However, that hardly explains the ridiculous propensity of mobile data carriers ALWAYS offering their unlimited plans at $80 - seemingly regardless of speed or ubiquity. Consider Ricochet, which only worked in certain regions: $80. Consider Sprint PCS 1xRTT which offers nationwide coverage almost as good as their voice network: $80. Consider Verizon Wireless with EV-DO service in just two cities: $80. Consider AT&T with EDGE nationwide or UMTS in six cities: all $80. Cingular nationwide GPRS? $80. The real reason the $80 price point is so often used is because it is the market-clearing price where supply (of network bandwidth) meets demand. Price it at $50, and hordes of customers will drop their DSL plans for the mobile broadband deal, and overload the network. Price it at $100, and practically no one will sign on. When Wireless WAN technologies that actually were designed from the ground up are launched, such as Woosh (UMTS TDD) in New Zealand, then the prices can be competitive with DSL, because the network can handle the increased demand that will cause.
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