Data networks should be priced like toll-roads

There are three truths about telecoms today:

First, everyone wants free Internet access (WiFi preferably).

Second, everyone wants both data and voice services on their mobile phone.

Third, everyone wants  video content, it’s the killer entertainment medium.

The modus operandi for telcos is to try and address all three burning needs on the same network, with the net result being lower data costs, mediocre voice quality, and capped data plans.

Lets dig into the reasons:

  1. Affordable vs free Internet access

We all know there is no such thing as a free lunch, especially for a listed company. An operator cannot justify giving away free services. Instead, in response to consumer demand they’ve dropped their data pricing to cost, or below cost sometimes. Their voice revenues cross-subsidise their data products. Other than a few feel-good exceptions such as Wikipedia zero-rating, operators do not offer any free access.

  1. Mediocre voice quality

The result of point 1 above is mediocre voice quality. Why? Because the operators use the same infrastructure for voice and data, but when you look at the numbers it is clear that whilst data comprises less than 30% of profits, it consumes over 50% of network resources. The telco is forced to compromise voice quality in order to make the sums work.

  1. Capped data plans

Video and gaming comprises the majority of all Internet traffic. Telcos combat congestion on their data networks by implementing data caps or shaping traffic. If you take video & games out of the mix, a data cap would be unnecessary because non-video/game content is not bandwidth-intensive and therefore doesn’t hurt the network, or the user experience of other customers.

So what’s the solution?

Telecommunications networks should be priced like roads. A slow lane for email and web browsing (free WiFi). A middle lane for voice. And a truck lane for video & games.

3 lane highway

All the lanes are uncapped, but they have different average speeds and different toll fees.

The slow lane is government subsidised and therefore free for all. Average Joe pays a toll for the middle lane (faster speeds & better quality). Trucks pay the highest toll for a dedicated fast lane.

Of course the video junkies & gamers of the Internet will moan and groan, but so what? Truck drivers also moan about tolls, but they contribute a disproportionate share of wear & tear to roads, so they should pay a disproportionate share of the cost of building and maintaining the roads.

Instead of telcos trying to squeeze everyone into one network and not pleasing anyone, rather create three networks and give each customer segment exactly what they want.