Pricing Models for Wireless Data Access
Andrew M. Seybold - Commentary 4Mobility
29 January 2002
Pricing Models for Wireless Data Access
I was afraid of this. Suppliers of both wide-area and local-area "hot spot" wireless data access are pricing themselves right out of the market. As Barney mentioned in his recent News & Analysis 4mobility, Verizon Wireless expects laptop and notebook users to pay a $30 monthly fee and then pay for data by the minute at the same rate as voice. In my case that means I would be paying a per-minute fee of about $0.16 and $30 per month, every month, even when I don't travel or use the service.
For this I get a data rate of between 40 and 60 Kbps. While the data rate is better than dial-up, the pricing is not. For example, as I write this commentary I am sitting in a hotel room in Orlando. I have dial-up access to my email at 41.4 Kbps and have been online for more than two hours in the last 24 hours. The dial-up connection has cost me $2.00. Using Verizon's system I would have paid the $30 monthly charge and then $19.20 for the same amount of connect time. You could make a case that I would have been connected for less time because the wireless speed is faster, but anyway you look at it, I would have paid a premium for the privilege of using wireless to access my email and other data!
AT&T Wireless, Cingular Wireless and VoiceStream are also charging too much for wide-area data. Their charges by the megabyte are harder to understand, but had I been using AT&T's GPRS system I would have spent more than if I had been using Verizon since I downloaded a number of large email attachments.
Corporate America will be the driving force behind wireless data usage for at least the next two years. Our recent survey of CTOs and IT managers showed a willingness to spend about $50 per month per user for wireless data access for their field forces. None of today's pricing models will work for corporate America.
Not Alone
The wide-area wireless folks aren't alone when it comes to pricing services out of business travelers' reach. Companies providing access to Wi-Fi or wireless local-area networks at airports, hotels and other hot spots are also charging prices that will keep us from using their services. The biggest obstacle is that in order to get a decent per-use price on these systems I have to commit to paying a fee every month whether I use the service or not. Sky Dayton's new Boingo service, which was recently announced with a flurry, is the worst. I am expected to pay $24.95 per month, every month, for 10 connect days. Additional connect days are $4.95 per day. If I want unlimited service I have to pay $74.95 per month. If I want to "pay as I go" I have to pay $7.95 each time I connect.
MobileStar has similar pricing plans. Wayport, at least, lets me prepay $49.95 and draw down on the account as I use its wired and wireless connections. I know that all of these companies have to make moneythat's what they're in business forbut at the end of the day, they won't attract enough customers at these prices to make it in the long run.
Let's Get Real!
Verizon and Wi-Fi folks are currently offering services for notebook and laptop users. These people are heavy data users for sure, but they have high-speed connections at their offices and at home, and in hotels they increasingly have wired LAN service available for under $8.00 per day. I can plug in my notebook, sign on and LEAVE it connected to the Internet or my VPN for an entire day for instant access to my email and other business applications for only eight bucks!
Where I have to use dial-up, I can do so by paying for a local call. The data speeds are reasonable, and the only hassle is configuring the dialer at each new location. Because it's such a chore to find a spot to set up, find a power connection (notebook batteries not being what they should be), boot up the computer and then go online whenever they want to get to their email, notebook users typically connect only a few times a day. With wireless access they might be inclined to connect more often, but at such high prices they'll probably stick with wired access.
Wireless providers need to "get real" when it comes to pricing data services. Notebook users have learned how to get along on the road using wired access. If wireless isn't priced more reasonably, they won't even try wireless.
If wide-area and wireless local-area network providers want our business they had better get it right. Give us some pricing that makes sense. Charge us a reasonable amount on a per-connect basis. Let us prepay into an account and draw down that account. Or charge us a flat-rate fee of less than $50 per month. If Verizon wants our data business it must make it a no-brainer like voice. Today, I don't use a hotel phone because it's cheaper to use my wireless phone. If wireless data were more affordable, I'd connect more often.
It's their choice. Network operators can have a few wireless data users who pay a lot or they can have a lot of users who pay less. Neither the Wi-Fi community nor the cdma2000 1x operators should have to worry about capacity problems with the technologies they have chosen. GPRS operators have to worry, but the other operators dream of reaching capacity! However, with the pricing they have chosen to enter the market with, I'm sure that running out of capacity for data users is something they won't ever have to worry about!
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