Untenable Mobile Broadband Pricing Slows Adoption and Innovation

"I just need AT&T to lower the service fees a little bit." "Don't count on it." While these words could have been shared between any two people with a cell phone and a healthy suspicion of their cell phone operators, this lighthearted exchange actually took place in December between Doug Garland, vice president of product management at Google, and AT&T President of Emerging Devices Glen Lurie during a panel discussion on how Silicon Valley can make money from broadband and mobility.

"I just need AT&T to lower the service fees a little bit."

"Don't count on it."

While these words could have been shared between any two people with a cell phone and a healthy suspicion of their cell phone operators, this lighthearted exchange actually took place in December between Doug Garland, vice president of product management at Google, and AT&T President of Emerging Devices Glen Lurie during a panel discussion on how Silicon Valley can make money from broadband and mobility.

Garland's crack came while talking about expenses stemming from outfitting his children with the mobile data-connected devices they craved. However, he was also making the point that device manufacturers, independent software makers, and Web-based service companies need a critical mass of users to become mobile Web users to consume the products and services they develop. In this way everyone can make a little money from the mobile Internet--something hardly anyone is doing now.

Unfortunately, carriers are getting in the way of this happening.

Lurie's response, while not unexpected, was disappointing. To be sure, AT&T has spent a lot of money upgrading its mobile data network in the last few years, laying the groundwork for the company's forthcoming migration first to HSPA+ and then to LTE for faster mobile data rates. Off the cuff, Lurie estimated AT&T has spent $30 billion on network improvements since Cingular bought AT&T Wireless back in 2004. Of course the company wants to recoup their investment, but the current prices bar the doors from most people ever becoming customers at all and keeps those who can afford some connectivity from extending their reach to a greater range of devices and services.

As such, AT&T and other major U.S. carriers are doing no favors with their current mobile data pricing structures. Potential customers can't afford to connect many devices, and software and service suppliers don't have the money to innovate because it's unlikely they will make money without those customers on board.

Depending on the device, mobile broadband fees range from $20 to $60 per device, no matter how many devices are connected or how little traffic each device generates. The going rate of $60 for 5 GB of monthly data to a single laptop is expensive, but $240 to outfit each member of a family of four with that service is insane. For the plethora of other mobile device types that could benefit from always-on connectivity (GPS, digital cameras, gaming platforms, netbooks, or even picture frames), there may not be any pricing model at all right now.

At the very least, I would think about paying $60 for a data plan, as long as I could link multiple devices to a single plan - one that allowed me to share a 25 GB bucket across 5 different devices. It would be even better if the devices are operator-neutral, unlocked so I could take the whole kit to a different carrier if I wanted to.

For the most part, major U.S. carriers don't seem interested in letting users share data service plans across multiple devices. In a quick survey of the four major carriers around San Francisco, I found only Sprint currently offering a data plan designed to be shared across devices. The company's Everything Data plan provides two lines with Web and e-mail connectivity plus 1,500 minutes of shared voice services for $130, which rounds out to about $105 for voice service and only $25 for data.

For two lines, that sounds more like it. Sadly, that price is far from the norm.

Lurie indicated that AT&T has some transaction-based billing schemes in the works that could be appropriate for a variety of Internet-connected devices, plans that presumably will allow the carrier to charge for connectivity per bit or event. While such an offering is a start, there remains much room for carriers to innovate with their service offerings, allowing customers to have a richer mobile Internet experience with the devices of their choice and letting software and service vendors innovate and capitalize on the influx of newly connected users.