Utility Pricing for Cellular

I hate the way cellular data is sold in the US. Each month when I get my gas or electric bill they tell me how much I used and then multiply that amount by some cost factor to calculate my price. Not so for cellular data. Cellular data is almost always priced as a ‘bundle’ of bits that you can only purchase in large buckets. I’ll use AT&T for my examples though the situation is similar on the other providers.

With AT&T’s individual plans you can choose to either pay $20 for 300MB, $30 for 3GB or $50 for 5GB. Overages for these tiers are charged at the same cost per megabyte as the base plan in 300MB or 1GB increments (respectively). Thus, AT&T is superficially pricing data at either 7¢/MB or 1¢/MB depending on your tier.

The reality, however, is that their setup is designed to fleece you no matter how much data you use. With the exception of using exactly your data allotment each month you are always being overcharged. In the graph below the two dark bars represent your tier thresholds, the blue is your actual usage and the red is the amount that is overcharged. It is as though they are rounding up your electric bill each month to an arbitrary number then charging you for the difference.

I fully realize that the reason the carriers do this is because it is an easy way to raise the effective price users pay in a manner that most customers might not realize. This is an area that I’d love to see someone like Apple get involved in. In the same way they were able to bully the carriers into contract free iPad data plans or obviated the need to use SMS with the introduction of iMessage. I think it will take an external force to motivate a change. I hope that day comes soon.

David Smith