Why Your Future Phone Bill May Charge by Speed—Not Usage

Verizon's proposed speed-based plan could become industry standard

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Verizon's hot new 4G network, the "Fastest 4G Network Network in America," will launch in 38 cities across the country by the end of the year. In preparation for the service, the company is considering new ways to charge customers. In an interview with The Wall Street Journal, Verizon CFO Fran Shammo said they may charge a premium price for higher speeds. "If you want to pay for less speed, you'll pay for less speed and consume more, or you can pay for high speed and consume less," he said. Verizon wouldn't be alone among national carriers to charge by speed (Sprint already does) and some observers say that's where the industry is headed. Does speed-based charging make sense?

The pricing scheme would be a significant change for wireless plans, which usually focus on the amount of data you use. It’s tough to introduce tiered speed pricing on 3G connections, since there isn’t much bandwidth to carve up (3G connections are typically around 1.5 to 3Mbps), and it’s difficult for carriers to offer consistent 3G speeds.

But with Verizon’s 4G network topping out around 12Mbps, the carrier could conceivably offer a 3 or 6Mbps plan — which for most people would still appear to be faster than 3G.

  • Industry-Wide, Speed Is Becoming a Bigger Factor in Pricing, writes Mark Kurlyandschik at Daily Tech:

While AT&T has taken a hardline approach by capping usage, the two smaller carriers, Sprint and T-Mobile (third- and fourth-largest, respectively) have taken speed into account. Sprint charges an additional $10 a month to customers who want to take advantage of its burgeoning 4G WiMax network (in fact, they charge it to anyone who purchases a "4G"-branded device, regardless of whether the service is available in the area). And T-Mobile, which also offers a low-usage smartphone data plan similar to Verizon's, now throttles data speeds when consumers reach 5 GB of usage in a month.

  • Pricing By Speed Makes More Sense Than Pricing By Consumption, writes Sarah Perez at Read Write Web:

There are arguments both for and against tiered pricing plans. On the one hand, tiered plans allow for more low-end options through the introduction of "data caps." That means people who couldn't have otherwise afforded it, now have the ability to own a smartphone. However, consumers don't have a clear grasp of what a megabit, megabyte or gigabyte of data is nor how much data is associated with using a particular function -like a download, using an app, surfing the Web or checking email. One could easily argue that they shouldn't have to know the difference - the carriers should simply offer affordable unlimited plans as anything else will hamper real-world adoption of smartphones and their capabilities. In other words, if you don't know how much data you use, you'll always be worried about going over and being charged. The easiest solution is to not use data much at all.

At least the option to pay for 4G would be clearer: pay more for faster speed or don't.

I wouldn’t be surprised to see other carriers following suit when they get their 4G plans figured out. Not every customer will need the full speed offered by 4G networks, so just like home broadband, a cheaper option could be better for the consumer and keep unnecessary load off of the wireless network.

This article is from the archive of our partner The Wire.