Cutter Trends Council debates "all-you-can-eat" vs. "pay-as-you-use" wireless data pricing
Lou Mazzucchelli
Cutter Fellow Lou Mazzucchelli has long asserted that any kind of "all you can eat" pricing model is sub-optimal. He includes in this assessment the increasingly popular flat rate Internet connection pricing based on connection speed, likening his reaction to this model to "my reaction when Pets.com offered free shipping on 50-pound bags of dog food back in the day: buy all you can, 'cause this deal can't last."
In the most recent Cutter Business Technology Trends Council Opinion, Lou asserts that pay-per-use pricing solves real and perceived problems for consumers and carriers alike, stating "A pricing strategy like this might lower the monthly bill for an average customer, and allow for some increased consumption without breaking the bank. It would provide the consumer a way to lower their costs just by reducing consumption. There would be a substantial disincentive for order-of-magnitude increases in consumption -- if the data were really that valuable, this would prove it." Mazzucchelli concludes that it's "only a matter of time before usage pricing becomes the standard."
Contributor JP Rangaswami argues that this shift is "a function of product/market maturity, where flat rates are prevalent initially and then migrate toward variable rates," invoking as an example the pricing behavior of long distance markets as they matured.
Cutter Fellow Robert Scott finds that this "transactional pay-per-use model assumes a user level of technical sophistication that the vast majority of Internet users do not have." Fellow Ron Blitstein points asserts that "markets generally treat 'free goods' with disdain," and sees pay-per-use pricing as perhaps a "more sane and more efficient allocation of a scarce resource."
Contributor Allan Weis invokes net neutrality in his response, stating, "In the same fashion that companies from FedEx to the US Postal Service offer different levels of service and routinely charge a premium for faster routing, Internet pricing needs to be based on usage at some level."
Though Cutter Fellow Ken Orr is confident that the market and regulators will find a rational solution to the pricing issue, he is concerned over larger, greater societal impacts: "the Internet is rapidly replacing free radio and television, free access to public libraries, and a whole range of future advances most of us can only imagine. The way we pay for the Internet and for the tools and toys we use to access the Internet will have a major impact on the society of the future."
To receive the full Business Technology Trends & Impacts Opinion, or to set up an interview with Lou Mazzucchelli, please contact Kim Leonard at Cutter Consortium (+1 781 6487 8700 or press@cutter.com).