Mobile devices: when data service fees attack

What if Internet access on your mobile phone for one month cost you HK$ 14,000, or about US$ 1,800? The following story occurred in Hong Kong, but this is a problem common over much of the planet. As recently reported by the South China Morning Post (SCMP):

Mobile-phone users are facing big bills for internet services they thought were free, the consumer watchdog [Hong Kong Consumer Council] warned yesterday. One customer ran up a HK$14,000 bill in a month.

The complainant hit with a HK$14,000 bill told the watchdog he thought he was using free Wi-fi services to access the internet.

However, he claims his service provider connected him to the Net through its fee-paying service without warning him first.

“Charges for Web surfing catch out phone users”

South China Morning Post, June 17, 2008

Mobile networks face an important self-imposed obstacle: metered data service charges that are unclear, unrealistic, and often rather opaque to the consumer. While most companies now understand that promoting third generation mobile services requires clear and friendly flat rates, some operators still extract value from their customers the hard way, by selling them voice service plans with Internet access charged extra by the *byte. This is supposed to be the Internet age; regardless of whether the user in question understood he was on Wi-Fi or 3G or 2.5G, a 14,000 dollar bill is exorbitant from any point of view.

This is not a new occurrence. In the April 1, 2003 issue of the SCMP [unfortunately, the SCMP does not support direct linking to articles and requires a subscription] Neil Taylor reported on much the same topic:

operators know that if their customers were to actually use data services to their fullest capacity, they might suddenly notice what over-priced luxuries these things are.

Last week, I spent three days with Sony Ericsson’s P800 smartphone….

And after three days of happy surfing, I received my phone bill.

If that HK$400 [US$ 51.41] GPRS charge had been for a month’s downloads, I might have been irritated. But I was appalled at what I was charged for three days of sporadic surfing.

By any measure, GPRS charges are extortionate. They are also confusing. Just as we saw with voice and Internet services, the operators appear to have conspired to make their charges as hard to compare as possible.

“Guinea-pig users losers with punishing GPRS charges”

South China Morning Post, April 1, 2003

Neil Taylor was writing about GPRS, the forerunner of 3G, but the business model sounds depressingly similar. Where is the incentive to get a 3G handset and subscription, one may ask? In the July 2005 issue of Receiver Magazine, Outblaze founder and CEO Yat Siu spelled out his view:

The 3G incentive
Serious mass usage of 3G applications will occur when service fees become fixed and subscriptions become attractive and affordable for most users. In Japan, for example, 3G brought about the development of a vibrant and active content download culture that emerged following attractive consumer pricing of 3G bandwidth. Some telecoms may resist the idea, but ultimately they should pay heed to the lesson learned from broadband: charging a service on a usage basis discourages subscription, and will generally limit utilization to early adopters and technophiles.

Many operators who rolled out 3G services erred in setting exorbitant pricing, thus discouraging regular consumers from utilizing expensive 3G bandwidth services. 3G downloads of products such as video streaming, applications, or large emails are fairly substantial and therefore incur a greater cost on a pay-per-use bandwidth model; clearly, this is discouraging to potential customers.

Yat Siu, in Receiver Magazine, July 2005

There is the argument that 3G network operators were fleeced by their governments, but regardless of who bears responsibility for high 3G prices, several operators used confusing metered pricing to transfer the high 3G entry costs to their customers. And that’s not the only way in which the consumer loses: the high and often confusing costs of 3G services keep adoption rates low and indirectly hamper 3G technology. Until the majority of operators offer attractive flat rate data usage plans as well as “common sense” plans that prevent gigantic Internet access charges, consumers in most of the world will continue to be confused and outraged at the end of the month. That is, if they make use of data services in the first place, which is something many people avoid.

This brings us to Wi-Fi: it’s cheap, available across a growing multitude of devices, supported by just about all operating systems, and growing fast. Consider FON, a network of hundreds of thousands of members around the world who share their bandwidth with other FON members. In Hong Kong FON coverage is getting quite good, and you’ll find a free FON signal at Starbucks, McDonald’s, and major shopping malls just to name a few. FON has even been reviewed by the government of Hong Kong.

Outblaze operates FON in Hong Kong and we might have a slight bias, but there are local alternatives in most cities. Although FON is a global service, in Hong Kong Y5Zone is fairly prevalent and well organized, with over 800 hotspots. PCCW also offers Wi-Fi around the city.

Service plans with hidden or secret rates simply cannot compete with affordable flat rates. We’ve seen the shift from metered to flat charges in traditional telephony, television, and fixed line Internet access; isn’t it time the latest generation mobile network operators modernized all their fee structures to match their handset line-ups? You too can help discourage those network operators who maintain confusing charges: just have your mobile device connect via Wi-Fi when you need the Internet, and avoid data service charges entirely. In a city like Hong Kong Wi-Fi is available at most locations, so you’ll avoid astronomical bills while sending an important message to your provider.