Mobile Apps Fear Data Caps

For many years, unlimited data plans have given mobile app users an all-you-can-eat buffet. But how will customers react AT&T’s new, limited menu by simply eating less?  Many software developers fear consumers will download and use less mobile bandwidth-intensive apps. AT&T says that just 2 percent of its customers use more than two gigabytes a month so based on current usage patterns it shouldn't affect the majority.  The ripple affect could be large across many sectors of tech including: VoIP, Games, GPS Navigation & Internet Radio.  AT&T might not yet understand the negative implication of their potentially short-sited move.

Wall Street thinks the cap is about higher prices and price discrimination and it is going to be flowing in extra money and quickly. Customers inevitably will use more mobile bandwidth and consumers will ultimately pay as much as 50% more because of the change. The low cap also protects the wireless telcos lousy and over-priced video packages. With the low cap rates almost everyone will need to maintain their landline broadband for free wifi. There's nothing wrong with a cap at a reasonable level at least as high as today's 5-10 gigabytes. A 2 gigabyte cap will be destroyed by the market as Verizon + AT&T will soon marginalize wireless competition.

One of the biggest problems, developers and consumers say, is that users are not sure how much bandwidth they are consuming with an app. AT&T customers should be able to track data use via the company’s Web site portal and receive alerts when they near their quotas but is their an API available to provide more transparency?  I doubt it.  All mobile apps need WiFi only options and must show usage patterns and make it transparent about what the typical data usage is for various applications.

Wi-Fi vs 4G
Experts project that improved technology will drive down the cost to the carrier of delivering more data by as much as 50 percent as they move to fourth generation 4G speeds.  It is assume that carriers could afford to charge less as customers consume more but again Wi-Fi is free and it remains to be seen if mobile users will want to pay for heavy data consumption outside of Wi-Fi.  Our view is that once location based mobile advertising rates are understood that data subscription usage will be a thing of the past.  However, we are at the mercy of short-sighted profit oriented moron carrier executives who are profit and not product motivated.  

Applications that stream high-bandwidth video and route phone calls and face-to-face video chats like the iPhone 4G over the Internet could be seriously affected. Location based applications that constantly send a phone location and continuously download data from the network could face usage challenges. Internet calling services like Skype, which route voice and video calls over the cellular data network, could also be affected. However, Skype experts say users should be able to make plenty of voice calls on the service each day without having to worry about extra fees or data overages.  

Mobile content companies like Hulu, Netflix & Youtube will get hurt the most as soon as mobile customers begin to look at their monthly bills and get shocked.  It wouldn't surprise me to see some of these mobile subscription based video sites quickly establish relationships with the carriers to exempt their customers who are paying monthly fees. In theory AT&T could segment content distribution from their "partners".  Its not fair to the little guy but in all likelihood will happen.

GPS Navigation
Mobile apps for GPS Navigation are one of the applications that uses the most bandwidth and clogs carrier networks the most.  The continuous signaling issues experienced between cell phones and towers in densely populated or traveled areas have required carriers to beef up their back-haul in many locations where they have under forecast.  Google Maps, Bing Maps, AOL Mapquest and Navteq will need to provide some high level leadership for the industry if they truly want to inspire innovation for the up-and-coming apps. 

Mobile Games
Game developers have been trying to add more robust features to games to take full advantage of the iPhone, but they might scale back features like adverting, location based multi-player.  Games will have to be considerate of bandwidth usage or they may soon find themselves without any players if parents start to look at data monthly data bills.

Internet Radio
Rapidly growing Pandora now has 54 million users who listen an average 13 hours a month over the internet, but only a fraction of its customers currently use the app over 3G.  Pandora has been striking deals with auto OEM's to embed the service in radios.  It remains to be seen if 4G will be the answer to the bandwidth issue and if cellular (LTE) will take over satellite as the preferred distribution means.

Related Articles:
Walt to FCC: Consumers Are Getting Screwed
Don't Buy AT&T's iPad 3G
Howard Stern + Internet Radio = Pandora
Facebook Mobile Ads vs. Dumb Pipes
Free Mobile TV Available Worldwide Except US

Popular Articles