Verizon Considering Usage-Based Wireless Data Pricing

Verizon's Chief Technology Officer Dick Lynch says wireless companies will eventually have to change how they bill customers. More specifically, Lynch is talking about charging customers based on the amount of bandwidth they use. According to the Wall Street Journal, Lynch recently said current flat fee data plans with unlimited Internet access encourage overuse of wireless networks by a small number of bandwidth hogs.

Although wireless carriers should be able to handle the increasing demand for Internet usage over the next few years by simply upgrading to the next generation of wireless technology, Lynch expects that carriers will need additional spectrum and new ways of billing in the long-term. "We will end up billing differently in the future," said Mr. Lynch. Lynch has been known for his view that carriers should charge on a metered basis similar to how water and power companies bill their customers.

Even if changes will be necessary someday, Lynch has said that the company has no immediate plans to change how it bills its customers. AT&T has also mentioned that it is exploring alternate ways to bill customers, though no official announcement has been made and the company has said that no changes are imminent.

Lynch and some others in the industry believe that metered billing could actually benefit most customers who use light to moderate amounts of data because they wouldn't be subsidizing the bandwidth hogs. However, while many have made this argument, no financial numbers have been given to back up the claim. AT&T has said that 3% of its customers are responsible for 40% of data usage, but we still don't know exactly how much data the top 3% uses or what an average business customer uses.

In the short-term, wireless companies plan to increase network capacity and download speeds by moving to 4G technologies. Verizon and AT&T both plan to use LTE or Long Term Evolution. Verizon has said that it expects to offer LTE throughout most of the U.S. by 2012 or earlier.

If you're reading this and cringing at the thought of a usage-based billing model, you're not alone. The thought of usage-based pricing makes many customers afraid that their already high wireless bills will increase even more. Hopefully carriers such as Verizon and AT&T will realize they need to provide numbers to show customers how good (or bad) such changes could be, keeping in mind that the "average" customer's usage is likely to increase over time, especially as cloud computing, new online apps, and tethering become more and more prevalent.