Data caps are really to protect landlines says expert
Director of Telecom Italia's Future Centre thinks carriers are scared of LTE luring fixed line customers
Published: 18 April, 2012
For the first time, the 4G technologies promise speeds close to those of wireline broadband, creating interesting dilemmas for operators. On the plus side, mobile-only carriers can offer fixed and quad play services, while fixed broadband providers can expand coverage cost effectively in underserved regions. But firms with wired and wireless connections need to balance the attractiveness to consumers of a single line (and bill) for home and mobile connectivity, with the cannibalization of their already pressurized landline businesses.
The need to protect the fixed line business is the real reason behind the move towards data caps and tiered pricing for LTE, says one expert, Roberto Saracco. A senior member of the IEEE and director of Telecom Italia's Future Centre, he said in an interview with IDG that LTE operators need to prevent their users ditching landlines, especially in areas where the carrier has not invested in the superior performance of fiber broadband.
While caps are clearly justified to limit consumption on hard-pressed 3G networks, many LTE networks will have greater capacity, speed and efficiency and so will have greater capability to support the rise in data usage. Saracco sees another agenda, commenting: "You're always going to want to make the maximum amount of value. And you don't want to have your fixed line network being cannibalized by mobile."
He added that, while carriers have been marketing LTE for its download speeds, the real benefit should be that it provides users with a native IP connection, which in the long run will deliver cheaper connectivity, as it did in fixed broadband. He argues that most smartphones do not actually need LTE data speeds despite the heavy marketing of this feature of 4G. Once there is greater 4G competition he expects consumers to start buying mainly on price, depriving cellcos of their ability to charge a premium. "My feeling is that if you're using a smartphone you're never going to need this kind of [LTE] speed," he said in the interview, published in NetworkWorld. "It's a different story if you're using a dongle on your laptop and you're downloading a really big file."
LTE, then, may be a cover for introducing tiered pricing to improve wireless margins and protect landline subscriptions. However, other carrier critics take an opposite view, accusing operators like Verizon and some Vodafone units of skimping on investment in fiber by promoting LTE as an alternative - far cheaper for the operators since they would be building the network out anyway for mobile.