AT&T's FaceTime charge shows unlimited data deals aren't rubber-clad

The forthcoming iPhone 5 with iOS 6 from Apple [AAPL] will support FaceTime calls over cellular connections, but AT&T has run into a hail of criticism for openly announcing plans to charge for this service. What I don’t understand is how anyone can be even faintly surprised at the carrier’s decision?


Think about it

Just think. Carriers are already migrating business plans from dependency on voice and text communications toward provision of data bandwidth. Fair enough. However, carriers also need to provide the data bandwidth, and that sort of provision raises a host of problems. 

Data use follows patterns. If you think about domestic electricity consumption, utility providers already know that peak usage times tend to be at the beginning of the day when people grab their breakfasts, and around 7pm when people prepare their evening meal. In order to prepare for this, utility providers must ensure sufficient power is in place to drive demand at both these peak times. They don’t necessarily need to provide that much power 24/7.

It’s the same with mobile bandwidth. Peak times are in the mornings and evenings, at least for domestic users. Carriers then face this challenge: do they deploy sufficient bandwidth to serve maximum demand levels at all times, or do they compromise with contention ratios designed to maximize use of that bandwidth they do provide.

Bandwidth is expensive to deliver. All those cellular masts cost cash to erect. The move to 4G demands further infrastructure deployments. The massive spike in mobile data consumption since introduction of the iPhone has been a challenge for carriers. They’ve had to spend a lot of money to meet this demand, and as we all know they’re really only looking to defend their profit margins.

Call it up

Then comes FaceTime over cellular. Apple says it has worked hard to ensure the video conversations don’t demand too much bandwidth, but it’s still going to demand significant bandwidth. Carriers want to ensure they are maximizing their take on the services they offer. That’s not an apologist’s position on the matter, by the way, just a simple statement of fact.

Where AT&T goes, other carriers will follow. And, while critics in the US are attempting to characterize AT&T’s decision as a Net Neutrality fail, I don’t believe that argument will prevail. Way back when Apple announced FaceTime over cellular I predicted carriers would attempt to charge for the feature, or at least for heavy users of this feature. I warned you this would happen when I wrote:

You don't need to scratch too deeply to figure out that carriers aren't going to be offering iPhone (or any other smartphone) users all-you-can-eat data plans for the rest of time. The demands on their networks are increasing exponentially; the cost of creating those networks is climbing; transitions such as that to LTE/4G pose extra challenges.

You see, carriers were happy to offer all-you-can eat data deals when the iPhone first hit the scene. They had invested huge -- mind-boggling -- sums in 3G infrastructure and no one was using 3G. The iPhone helped bring usable 3G services to the masses, putting these into the mainstream and fostering more use of mobile broadband among endpoint security deniers in the enterprise while it did.

So long unlimited data

When you look at the furor around FaceTime over cellular, you’re looking at a hint of the future. You’re in the last stages of the all-you-can-eat data deal -- you’ll see a little more in the next couple of years while carriers attempt to hook you into 4G services, but things are going to change. 

As I’ve warned in the past, in future, carriers will offer tiered services. They will resist accusations of ignoring Net Neutrality when they move to these by arguing the step’s essential to ensure they have viable businesses, as call revenues get consumed by services like FaceTime over cellular.

Cisco says last year's mobile data traffic alone was three times the size of the entire global Internet in 2000, and this is set to grow: mobile data traffic is expected to grow to 6.3 exabytes per month by 2015, a 26-fold increase over 2010.

With this in mind, carriers are likely in future to offer tiered deals: Like to watch a lot of video? You’ll pay a fee for the service; Enjoy voice calls, you’ll pay for that; essentially they’ll split the data usage according to what that data is used for, with video being the key component for high revenues.

In a sense they have a point. They’ve invested heavily in their infrastructure and they don’t want to have to invest a huge amount in kit that’s really only fully utilized at peak periods. 

Perhaps they have a point, but given they way they operate, well, The Register puts it this way:

Mobile network operators are desperate to apply more flexible billing, just as customers increasingly want flat-rate services. Billing by applications used, rather than the straight per-bit rate we now have, would give them flexibility to create impenetrable data tariffs, saving money for the most diligent customers prepared to analyse their own usage, while costing the rest of us more - which is rather the point.

Tiered data plans

That might be true, but I also feel it’s an inexorable reality. In a report for a little-known carrier-focused magazine, Amos Sivan, CEO of FTS told me: “By offering packages based on the service or application, service providers can increase revenues beyond anything that a flat rate usage policy can offer...the provider will be able to offer subscribers packages such as 'YouTube subscription', or 'Online Gaming subscription,' or 'regular surfing and email subscription'.

The impact of these new pricing plans (and you can bet a few dollars carriers already have these plans filed somewhere in their future product departments) is going to extend far beyond consumer markets. Enterprise users will have to begin to question just what their bandwidth is already being used for. Do they really need to pay for employees to access YouTube on mobile devices, for example?

So, dear reader, when you become hot under the collar over AT&T’s move to levy a charge for FaceTime over cellular, please be advised that, when it comes to the way your carrier charges you for using their network, you ain’t seen nothing yet.

So what should we do when carriers become too expensive? 

My prescription, should you wish to hear it, is really, really simple: Apple should buy Iridium, improve that firm’s satellite phone technology, and introduce satellite calling on Apple’s own one-price-fits-all global calling network within a future iPhone. Perhaps it could call this model the iPhone 5S. The space phone. 

And why not? Because ultimately the network is the root of the whole mobile evolution. Surely it’s inevitable carriers will become utilities, and satellite broadband could, if improved, create the biggest network yet.

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