Last summer, the fastest way to spend $50 in America was to fill up at the pump. This summer, the fastest way to blow through $50 might be streaming videos and music from the Web to your smart phone. From cable companies to wireless providers, the companies that provide the tubes of the Internet are waking up to the sheer amount of data that’s coursing through their networks and cooking up new pricing plans that are based on data usage. Their goal is to bundle together all of your digital devices into one plan and then charge you based according to your data consumption. At a time when most Americans are trying to make do with less, can they really afford to ante up even more money to feed their data habits?
The most talked-about example is Verizon Wireless, which is about to flip the switch on a controversial new “Share Everything” plan that effectively shuts the door on unlimited data by shifting to a new “usage-based” plan. Users pay a connect fee for each smart phone ($40) or tablet ($10) connected to the plan and then another fee for every gigabyte consumed. Paying for 1 GB per month would set you back $50, while paying for 10 GB per month would set you back $100. It’s easy to see how a family with 2.2 kids and several different devices hooked up to the Internet could easily spend $200 a month – and that’s if Junior behaves and doesn’t blow through his data cap.
And it’s not just the wireless carriers that are doing away with “unlimited data” and the all-day data buffet. Broadband Internet providers like Comcast and Time Warner Cable are rolling out new pricing schemes that are based around data consumption. As Brian Stelter of the New York Times recently pointed out, customers are being given “usage trackers” that add up all the data consumption in a household and rewards customers if they don’t go over their data cap. If they go over their data cap, they pay $1 for every additional gigabyte.
In addition to being expensive, the problem with usage-based pricing is that it’s complex and just plain confusing to understand what you’re paying for. Americans may know exactly how much gas they’re guzzling using MPG guidelines from automakers, and they may know exactly how much electricity they’re using, thanks to widening awareness about energy consumption – but do they know how much data they’re consuming?
Even digitally savvy consumers are more than a little confused by this transition to usage-based pricing. How much, exactly, is 1 GB? If you talk on the phone for half-an-hour, it’s pretty easy to realize that you’ve just used 30 minutes of free talk time. But what if you’ve been streaming videos on the Web? According to The Washington Post, 2 GB is a lot less than it sounds like – that’s roughly equivalent to streaming 30 minutes of video and five minutes of music and visiting 5 websites each day for a month. Plenty of other apps, too, are emerging as big data hogs – so much so that The Wall Street Journal recently profiled a new genre of apps that will help you track the guilty data hogs on your smart phone and alert you when you’re reaching your data cap.
There’s something fishy going on with all these data tiers and pricing plans. The U.S. Justice Department apparently agrees, and is already conducting an investigation into the cable industry’s treatment of data-intensive content like online video. The concern is that the selective treatment of certain types of Internet traffic could be inherently anti-competitive. Companies like Netflix – which some say accounts for 30% of all Internet traffic during peak viewing hours – would seem to bear the biggest burden of data-usage billing if customers decide that it’s simply not worth the money to stream all those high-bandwidth videos. Companies would be dissuaded from offering data-intensive services if customers won’t pay for them.
Nearly 30 years ago, Stewart Brand famously remarked, “Information Wants to Be Free.” Internet innovators embraced that concept, coming up with new ideas and innovations that essentially drove down the marginal cost of information on the Web to nearly zero. Maybe we need a new rallying cry for the data-intensive smart phone era, where entire industries are being built on top of the concept that Americans will have affordable access to blazing-fast Internet connectivity across their digital devices. In 2012, it’s not just information that yearns for freedom — data wants to be free, too.
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