The prospect of a fourth-generation network and the opportunities it can bring to modern technology has excited many. Verizon Wireless plans to launch the nation’s first commercial LTE 4G network this year, which could kickstart a wave of products developed with Internet capabilities. In fact, that’s what Verizon plans to do. They want third-party developers to create products that can connect to their network. But consumers shouldn’t get too hopeful yet. The connectivity might not justify the cost.
In an interview with the Washington Post, Verizon Wireless CTO Dick Lynch spoke to the issue of pricing the company’s 4G network. It sounds like they won’t use the same flat-rate pricing employed on their 3G CDMA network.
“The problem we have today with flat-based usage is that you are trying to encourage customers to be efficient in use and applications but you are getting some people who are bandwidth hogs using gigabytes a month and they are paying something like megabytes a month. That isn’t long-term sustainable. Why should customers using an average amount of bandwidth be subsidizing bandwidth hogs?”
Lynch barks up the wrong tree with his last line. Many successful companies offer affordable services because they employ a user subsidy model. Gyms, for instance, couldn’t offer you your current rate if all members used the gym every day. They wouldn’t have the space. Those who don’t use the gym often subsidize those who do. Netflix is another example. Those who go through two movies a month subsidize those who go through a dozen or more. If everyone rented 15 movies per month, Netflix could not sustain itself.
Perhaps the most glaring example comes from one of Verizon’s endeavors, cable TV. I present a perfect example here. Other than a few random games here or there, I watch baseball games exclusively. Why should I pay for all the channels I don’t use? Because I’m subsidizing the people who watch all the channels.
As for the bandwidth hogs, this seems like a PR play by broadband companies to paint heavy users as the bad guys. It’s not the carrier at fault, it’s that guy who sits on the Internet all day streaming YouTube and who knows what else. By creating this strawman, carriers are then open to set low caps on service, charging heavy users far more than is reasonable. Time Warner recently tried a metered billing system, whereby it put a 5GB cap on users. Using 5GB from a smartphone, or from occasional laptop use, isn’t big. But many users, especially families, go well over 5GB per month on their home computers.
Again, Verizon and other carriers have shown their intent to anyone paying attention. They’re foisting the bad guy status on other users so they can raise prices. When they do, they’ll explain how it’s fair. Except it’s not fair. It’s just another money grab.
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