Last week I posted a piece on Verizon's upcoming data caps for smart phone users, and we got some interesting feedback, much of which was about data caps in general, rather than Verizon in particular.
People seem to fall into one of two camps when the topic of data caps comes up. Either they see them as an arbitrary mechanism for the service provider to make some extra cash off its customers (I fall into this camp) or they see them as a logical and sensible way to keep costs down.
I wanted to highlight one exchange that exposed the two camps. I had said that Verizon ought to let me 'roll over' some of my data allowance during months when I didn't use my entire data allocation. That makes as much sense with data as it does with voice minutes in my opinion. Verizon says they need to charge is $30 for 2 GB of data in order to stay solvent. Therefore if I decide to limit my data use to 1 GB in a given month, I've effectively earned Verizon an extra $15 that month, right? Verizon can't have it both ways...if they claim it costs more to transmit more data, then they have to admit it costs less to transmit less data.
MikeOpager_LinkedsWGMLy started a lively exchange by trying to debunk my argument by substituting water for data. I didn't understand this at first, until he explained:
In our small Wisconsin community, residential accounts pay a set amount for water up to a certain number of gallons used, with additional charges for usage above that level. No refunds for usage below that amount, I'm afraid. They also tag on charges for stormwater, sewer, garbage, and fire protection... talk about bundling!
heulenwolf_tw14966257 didn't think the analogy worked:
Regarding the earlier comment comparing data to water, are you serious? Do you really buy into the concept that data is some scare natural resource like clean drinking water? That concept is fundamentally flawed. Once you build out the infrastructure to deliver 2 GB/month to millions customers, the incremental cost to deliver them 3GB is $0. The exact same infrastructure just gets used for a greater portion of the month instead of sitting idle. During peak times all the customers' connections get a little slower. "Overage" fees are pure profit. There is no data treatment plant, taking in dirty data and cleaning it up for reuse with expensive chemicals, massive moving parts, and filters that need to be cleaned like in the water utility business. Fibre optics, unlike water pipes, don't wear out faster when they're used more. "Overages," (Something, by the way, customers have no control over, they just show up on our bills after the fact) are the result of buying into that false concept that there is an incremental cost per bit like there is a cost per gallon for water. The scarce resource that Verizon provides is the *rate* at which data flows and the *coverage* it gets data to, not the sum of all data sent and received. My take on how rate and coverage should be billed is here: http://agcrazylegs.blogspot.com/2010/06/user-focussed-mobile-data-plan-model.html
(I encourage you to follow the link and read Heulenwolf's more complete thoughts on the topic.)
MikeOpager's counter argument was that data infrastructure needs to be maintained, just like the water company's.
My problem with Mike's analogy is that water is physical. It exerts pressure, it causes rust, it causes physical wear. Water is also a limited resource, and many of us have experienced periods when the local municipality asks us to reduce water usage due to low supplies. When's the last time you heard about a low supply of bytes?
Obviously an ISP has to factor in the cost of maintaining its infrastructure when it's determining how much to charge, but that should be a flat rate. Whether you use 1 GB/month or 10 GB/month, you're causing the same 'wear' on their infrastructure (which I'd argue is essentially zero. Wear, in this case, is a factor of time, not usage).
One of the problems discussing data caps seems to revolve around finding the proper analogy, given that data is so ethereal. Comparing data pipes to water pipes really doesn't work. Electricity doesn't, either, since someone needs to produce the electricity.
So what analogy do you use? One I tried in my comments on the Verizon piece is a kind of thought experiment. Imagine you have a desktop and a laptop on your home network. On Monday you transfer 100 megs of data from the laptop to the desktop. On Tuesday your transfer 1000 megs. Did it cost you 10 times more to run your network on Tuesday? Of course not. If you keep transferring more data every day, eventually you'll tax the capacity of your network and you'll have to incur a one-time fee to increase that capacity, after which costs will once again remain the same.
ISPs that have data caps make the argument that caps prevent them from having to incur that capacity upgrade. I argue that increasing capacity is part of the cost of doing business; after all, they also have to increase capacity when they add new customers, right? These same ISPs tantalize us with faster and faster connections; if they can upgrade the speed of their network to entice new customers to join their service, the same should apply to capacity, no? And in fact I suspect there's a lot of overlap between increasing speed and increasing capacity (though I'll admit I'm no ISP engineer).
Anyway, which side of this argument do you come down on, and what analogy do you think works best when explaining your stance? Please leave a comment!