Company again complains about the flat-rate pricing model that made billions...
Ever since Verizon announced in 2007 that they'd be "opening up" their network, the writing was pretty much on the wall that if Verizon was going to be forced to give up their walled garden approach to content -- they'd wind up making up for the lost revenue with high broadband charges (in fact, we told you as much
). It's several years later, and while Verizon's wireless network is only somewhat open
, they've imposed a number of new, painfully expensive pricing models that carry caps between 25 and 75 megabytes
. As the company moves toward launching 30 LTE markets in 2010, they're again pushing for an end to flat-rate pricing, according to The Washington Post
"The problem we have today with flat-based usage is that you are trying to encourage customers to be efficient in use and applications but you are getting some people who are bandwidth hogs using gigabytes a month and they are paying something like megabytes a month," Lynch said. "That isn't long-term sustainable. Why should customers using an average amount of bandwidth be subsidizing bandwidth hogs?"
Lynch ignores the fact that the bandwidth hogs of today are the regular users of tomorrow. And while usage plans based on how much bandwidth consumed sound nice, the metered pricing models carriers actually wind up deploying frequently fail to offer consumer value
, and rarely result in lighter users actually paying less money. While consumers have grown comfortable with flat-rate pricing (like the $30 per month for the iPhone), there has been a growing push in the investment community to end the flat rate pricing model -- because overages will generate huge returns as usage explodes.
Of course Verizon's current high-end wireless broadband pricing isnt fully flat-rate anyway. The company imposes a 5GB monthly usage cap, with overages for laptop 3G users who exceed that amount of usage. You'll recall that in late 2007
, Verizon got in trouble with New York's Attorney General for advertising their capped wireless services as "unlimited." Metered usage in the wireless space is likely inevitable (consumers had no problem with 200% SMS hikes), so the question then becomes what kind of LTE pricing model will Verizon employ, and will it require a second mortgage?