Verizon Wireless likely will introduce a usage-based pricing model when it launches its LTE network in commercial markets later this year, a Verizon executive said, lending credence to the idea that wireless carriers will increasingly adopt the model in the future.
The pricing paradigm likely will shift because there will be so many devices that run on the LTE network that customers will not buy in Verizon's stores, Verizon Communications CTO Dick Lynch said. Instead, the company will probably introduce a pricing scheme in which customers will be charged a base rate for using the network on LTE-connected devices--including tablets and appliances--but will then charge customers based on how much bandwidth they use.
"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 in an interview with the Washington Post. "That isn't long-term sustainable. Why should customers using an average amount of bandwidth be subsidizing bandwidth hogs?"
The company plans on launching 25-30 commercial LTE markets this year, covering a total of 100 million POPs. It has not detailed any pricing plans for the network, but has said that network will provide average data speeds of 5-12 Mbps for downloads and 2-5 Mbps for uploads.
Lynch's comments are not entirely surprising. He made similar remarks at a broadband trade show in September, where he argued that metered broadband was going to eventually become a reality.
AT&T Mobility has said it will introduce incentives to get its customers to use wireless broadband more efficiently, though it has not said it will introduce usage-based pricing. Analysts have been speculating that more and more wireless operators will eventually go that route as data traffic keeps growing.
"If you look at what's happening today, they're being forced by necessity to adopt usage-based models," Phil Asmundson, Deloitte's vice chairman and leader of its U.S. technology, media and telecommunications group, told Telephony. "All-you-can-eat business models depend on your ability to predict how much data your customers will consume. The iPhone has proven that you can't make those kind of predictions."