July 12, 2011

End of Unlimited Data More Fairly Allocates Costs for Users

Adam Thierer

Former Senior Research Fellow

Just a few days after Verizon introduced a new tiered pricing system, a Pew study finds that 35 percent of adults own smartphones. With smartphone users increasingly using their mobile devices to access the Internet and consume more cloud-based services and mobile video than ever, the “all you can eat” data buffet eventually had to end.

Tiered and metered pricing schemes are a sensible way to price demand for bandwidth-intensive users and applications and, in the process, alleviate network congestion, encourage new investment, and ensure that average costs for consumers are more reasonable over time.

It makes more sense for the most intensive network users to pay more instead of raising average costs for all consumers. Why should minimal data users subsidize the big eaters?

No one can be certain which pricing schemes will best calibrate supply and demand while also ensuring optimal network investment. Policy makers need to allow network operators the freedom to innovate and employ creative business models so market experimentation can solve that riddle.

For more from Adam, check out his Forbes column or his posts on The Technology Liberation Front.