Tiered Billing for Wireless Data — Really? Bad Juju

Billing & OSS World, Washington, D.C. — Tiered billing. That phrase has a sense of finality, doesn’t it? But AT&T, which just implemented it in the wake of a by-now infamous network congestion nightmare brought on by the iPhone, and anyone else who follows its lead, might have a bumpy road ahead. It’s just bad juju, as far as I’m concerned.

Sure, tiered billing for wireless data is a staple in Europe. But you know we Americans like to strap on our buffet pants and go back for seconds, and thirds, and as much as we can get for one low, low flat-rate price. And also you have the likes of Clearwire just loving AT&T’s move because it can sniffily remind us that it has no plans to implement any such thing. There are plenty of competitors that won’t move us out of our gluttonous comfort zone, in other words.

I think tiered billing might be a rough sell too because, ya know, my dad has absolutely no idea what 5GB per month allows him to do on his netbook – AT&T has always had tiered levels for the netbook offer. And neither do I, for mine, to be honest. And frankly, I suspect no one else does either. Talk about your bill shock. And in fact, people might stop being so willy-nilly with the App Store too if they start to worry about limits. A gating factor on innovation?

Pat McCarthy at Telcordia has talked to me several times about the necessity for offers that make sense to the average Joe (or the average back-office reporter, ahem). You know, something like, x amount of bandwidth is the equivalent of streaming four movies, 24 hours of Internet browsing or 80 song downloads.

But that also seems a bit muddied. Pat’s other idea, to make things more transactional, might make more sense. Just microcharge for everything as you go, in real-time. But the systems needed, and the buy-in of developers and online content peeps, are not in place today.

I was talking to Juhani Hintikka, Nokia Siemens’ global head of OSS, the other week, and we chatted a bit about pricing for profit — aka dynamic charging. AT&T could for instance keep things flat-rate, but then push incentives to users in times of congestion. For instance, tell subscribers that if they log on to their e-mail within a certain geozone (one that is not as congested as the one they’re in right now), they’ll get a $5 discount on the bill. The problem is that while this has been successfully implemented in many places, mostly emerging markets, where $5 is food for a week, we’re back to a cultural issue with Americans. We’re cheap, but we don’t like to work too hard for small discounts, because that actually looks cheap.

What about moving to a world where prepaid becomes the norm? The 3G plan for the iPad is a prepaid offer, activated on-demand, on-device, with no hassle. Users can even get a day pass. Maybe we need to see prepaid-for-convenience offers, which can woo postpaid users that like that kind of flexibility to the protection of a prepaid plan. For instance, as Ken Marchant at HP was explaining to me, it could be very compelling to offer a prepaid plan, but then when a user approaches her limit, offering an upgrade to unlimited for the rest of the month for, say, $10 not only supercharges ARPU opportunities for growth but also gives the customer the opportunity to feel like she’s in control of her own billing destiny.
Regardless, we need some better ideas than the classic unlimited vs. tiered decision. What’s your idea?