Comments on article found at: blogs.wsj.com/digits/2010/03/24/sprint-ceo-rate-plans-will-move-from-minutes-to-gigabytes/

I have to say that I have no idea how this will work; in terms of actual pricing. This is not a new idea.

In the early and mid-1990s, the landline carrier community was experimenting with usage based billing. Back then it was a dialup business and usage based billing was the only way to deal with the costs of maintaining a link to the Internet. Furthermore, usage based pricing kept the number of users low, which meant a great deal for capacity strained networks. FYI, internet dialup had a profound on TDM network capacity; however, enough of the history lesson.

In the 1990s the wireless industry also considered using usage based billing as a way of dealing with what we were calling data services. In the early and mid-1990s, wireless data services amounted to SMS. We were looking at recouping our network costs of providing SMS by charging for bits and bytes. Needless to say, after professionals in the industry looked at what it would cost a customer to even use the service, those usage-based billing plans looked like they might make customers run from SMS. Frankly, no one really worried about it back then because wireless voice was still in its growth phase and hence just having cell services was a big deal.

True, SMS is not wireless Internet but back then it was the closest thing to it. In short the wireless industry tried usage based billing in a small way so there is some experience. Getting back to the present; Sprint and the other carriers need to look at some form of usage based pricing. A usage based pricing plan lends itself to content; enabling content owners to generate significant revenue for their content. Usage based pricing will be higher than minute-of-use based pricing.

I believe that current prepaid plans will also benefit from usage based pricing plans. Music, Video, and Internet access are things that lend themselves to usage-based pricing on the wireless net. The wireless industry needs to be not only need to be concerned about the carriers’ network capacity issues but also the content creators’/owners’ being fairly compensated. The industry needs to be concerned with content creators and owners getting paid for their work. Today’s flat rate plans do not generate sufficient revenue for the content creator and owners. A couple of years ago I had supported prepaid plans for wireless media; I had viewed prepaid media plans as being flat rate for voice and value priced for media. I had not been thinking usage based pricing for media but rather media priced based on the content’s value. My thoughts were and still are that traditional minutes-of-use based pricing could not properly represent the value of online (wireless and landline) media. I still believe advertising is a component of wireless media that will be forthcoming. If people want to see quality content then you need to pay the people who create it.

I agree with Dan Hesse and Sprint Nextel. I will go one step further.  Usage based pricing needs to be tiered. Think of wireless media like cable TV; you have got basic and premium channels and you have bronze pricing plans and gold pricing plans. You might be able to somewhat throttle usage on the network and hence manage capacity better. However, the reason for a tiered pricing plan is that it attracts more customers overall.

The challenge for Sprint Nextel and other carriers that follow is educating their customers to the reality of counting bits instead of minutes. I recall my reaction years ago during a friendly market trial when I realized how much we were charging the trial customer for all of the bits they were