Expectations for Unlimited in a Modern Age

Submitted by roypoi on

In today's world of technology we don't question that Electricity and Water should be metered and charged according to usage, but with data plans the Holy Grail of data plans is the "Unlimited" plan, and every modern, sophisticated consumer expects to eventually be able to be able to purchase unlimited data or receive it for free. This expectation is so pervasive that it has worked its way into the strategic planning for telecommunications operators around the world.

Let's take a look at a world where we apply the same expectations to Electricity and Water.

Let's begin with the utilities. Electricity and water both require extensive infrastructure with finite resource inputs that are purchased by the utilities on a use basis. For example, to produce more electricity a utility must purchase more fuel, or for a water utility to pump more water they must pay to expand their access to water resources, wells, reservoirs, etc., as well as pay for more electricity, labor, and fuel to operate their infrastructure. As output scales up to meet increasing demand, so do the costs.

Now factor in a flat rate fee regardless of usage for consumers and businesses. How will that fee be derived. The simplest method would be to take the total cost of delivery and divide it into two groups - a certain percentage will be paid by dividing one percentage evenly between all businesses regardless of size or usage, and the remainder would be divided equally between consumers regardless of usage or income. Every utility user would be able to use as much or as little as they want to or need without incurring additional charges.

It doesn't take much thinking to realize that this model is 1) unfair, 2) unsustainable, and 3) flawed.

So why does it seem to work with data? Operators must still contend with extensive infrastructures and increasing input costs as demand and usage scale upward. Electricity, spectrum, upgrades, site leases, cell site densification, competition, etc. Perhaps the truth is that it doesn't work but customer expectations are driving the industry into it. As unlimited plans prevail the industry will enter a new "lean" period where operators will be experimenting with new business models to shore up falling revenues and rising costs.

A couple years ago I had to give a presentation on the business case for unlimited, but this business case only existed for the minority operator that had an excess of underutilized capacity and difficulty bringing a metered product to market, or a monopoly and the ability to charge like a public utility. The audience was skeptical about unlimited and for good reason, I honestly wasn't that into the idea myself. I had graphs and stats to support the business case, but it was obvious that unlimited data would lead to lean times for all. A quick look at the exponential growth of data usage is a good indicator that unlimited data would lead to flat growth during a time when the consumed resource was being consumed at exponentially growing rates.