Think about the ways that new firms often attract new customers by giving away free samples or subsidizing their products. Uber and Lyft, for example, have used subsidized rates to attract a vast new ridership and improve transportation options in underserved markets. Numerous Web content firms are now signing up for the sponsored data programs of T-Mobile, Verizon and AT&T, at least until a federal agency tells them to stop. Far from helping small upstarts, a sponsored data ban could impose a crucial obstacle to Internet innovation and consumer choice.
If new mobile business models are restricted, all consumers may be forced to buy an all-you-can-eat package at a single price. There would be no disincentive for consumers to grab as much of the available capacity as possible. Heavy users will hog the data, while light users suffer the effects of an overloaded network. Prices will rise for everyone, regardless of usage. The endgame will look like the heavily regulated old telephone network: high prices, few choices and little innovation.
Opponents of free data are also ignoring a third consideration: the need to build a new, fifth-generation (5G) mobile network to keep up with massive consumer demand for video and the immersive Internet of Things. The impetus for 5G is to serve a much wider array of users, devices, content and industries than the traditional mobile phone market. Yes, 5G will provide faster data speeds for smartphones and tablets. But the new network will also serve connected cars and transportation networks, remote sensors, appliances, industrial machines and super-high-definition interactive entertainment. It will also provide a competitive connection for residential and enterprise broadband.
The whole point of 5G is building a single network to serve numerous markets. These applications and verticals — virtual reality, retail apps, connected cars, autonomous trucks, health care monitoring, industrial maintenance, supply chain and smart city services — will all require distinct data capabilities and price points and thus business models. Some will require high data throughput at certain times of day. Some won’t need as much data capacity but will require high reliability and low latency. Some will be unpredictable. As the variation in use cases explodes, so will the business models needed to build sustainable solutions.
Limiting the evolution of business models in the mobile ecosystem will not only make today’s 4G services more expensive, but also make it difficult to invest in 5G networks, content, apps, devices and services.
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