AT&T joins the cable guys in usage based billing

Here’s a little known factoid: In the early days of electrical power, you paid a monthly charge based on the carrying capacity of the transmission line entering your premises. Electric service began as a luxury, and prices fell rapidly as companies began to rush to connect new customers. Electric meters arrived after just about everyone was connected. There wasn’t really any lack of capacity, there was a lack of new revenue growth. The occasional massive power failures began long after the electric companies began to manage use. Yes, by then we had many more devices that used electricity, and capacity was necessarily increased. The electric companies had no competition, so while economies of scale were realized in adding capacity, lower prices for consumers never came.

While states like Texas are making efforts to encourage competition in electric service, we seem doomed to repeat the same mistake with broadband access. There is some level of service available to just about every easy to reach customer, and often there are two providers to chose from. New customer growth has peaked, and the tiered service level opportunity has already been employed to boost revenue. What’s left? Usage billing. The cable guys started it, and now AT&T has signaled they are ready to run with the pack rather than compete. Why? Competing usually means you have to lower prices and improve service.

From a Wired interview with AT&T’s new chief technical officer, John Donovan, he stated:

……. AT&T will begin testing usage-based pricing starting this Fall. That’s driven by the economics of building network capacity, he says, not by an attempt to make more money. According to Donovan, one percent of the company’s customers account for 20 percent of the network usage; the top five percent account for 40 percent of the usage. Because the network must be able to accommodate peak traffic loads, AT&T — like other network providers — finds itself building far more capacity than most users need, just support the most prolific users.”It’s almost a taxation issue,” Donovan said, comparing the overhead required to support the top 1 percent with the annual taxes the corporation must pay. “Traffic on our backbone is growing 60 percent per year, but our revenue is not,” he said.

Usage-based pricing trials will be, he says, an attempt to encourage greater efficiency in the way customers use capacity.

It would seem the death star is on board with the plan to charge us more with no improvement in service. The need for new cash to meet demand is a paper tiger. The cost of delivering service is tiny, maybe 10% of the retail price. The balance is more than enough to build a more robust network if only adequate competition existed to foster it. Plus, new network infrastructure requires less power, upkeep and fewer man hours to operate while delivering exponential increases in capacity.

With Time Warner, Comcast, and AT&T on board with this new effort to further bilk the customer, will Verizon join the party? Bet on it. If our esteemed representatives in Washington and the state capitals were not so well bought off by the duopoly, we’d see charges of the duopoly operating as an illegal cartel being made.