Award Winning Blog

Monday, June 7, 2010

AYCE and the Third Screen

AT&T recently announced that it plans to abandon All You Can Eat (“AYCE”) unmetered data pricing substituting usage-based plans. One certainly can appreciate a strategy that eliminates cross-subsidies from light to heavy users. But consider what eliminating AYCE does to the overall conceptualization of wireless broadband.

Metering data consumption promotes efficient “non-wasteful” consumption, but that type of use is exactly what subscribers expect. Broadcast and cable television (“first screen”) consumption is not metered and the degree of financial support from advertisers is based on the amount of consumption. More consumption is better and the incremental cost to serve such additional demand is nil. Cable modem and DSL wired broadband carriers also offer AYCE to "second screen" computers, presumably because the incremental cost of an additional hour of consumption, while not zero, is either not worth metering, or the carriers appreciate the commercial and public relations benefits from providing AYCE access.

When consumers have to consider a ticking consumption meter, they likely will consume less of the Internet, so AT&T benefits by disciplining heavy users. But metering also reduces the overall utility most users will accrue. If I am mindful that video downloads will quickly exhaust my monthly downloading (throughput) allowance, I am not going to view or seek out full motion video advertisements that supplement carrier subscription revenues. What AT&T generates from additional Gigabyte downloading sales, it might lose from lower advertising revenues as subscribers use greater vigilance to conserve bandwidth.

We can applaud so-called efficient use of broadband, but “meter mindfulness” takes away some of the pleasure and serendipity the Web offers. Additionally AT&T strategy comes across as an acknowledgement that wireless Internet access cannot become the competitive and functional equivalent to wired options. Carriers cannot keep up with demand, cannot afford to accommodate heavy users’ demand, or wireless networks simply cannot scale up to accommodate heavy full motion video demand. If any one of these three conditions exists, then wireless devices do not fully operate as “third screens” in light of the carrier, bandwidth, and throughput limitations.