Collision Course: The Cloud and Tiered Data

An Unavoidable Issue

Cloud music services such as Google Music, Apple’s iCloud, Amazon MP3, and Samsung’s Music Hub are rapidly proliferating, as are cloud file storage services such as Dropbox and and productivity/storage hybrid services such as Google Drive.

Meanwhile, the two largest carriers in the United States, AT&T and Verizon, have done away with unlimited data plans and are taking steps to force grandfathered users off of their existing unlimited data plans. For example, those who have grandfathered unlimited data plans on Verizon (including many who upgraded to devices like the Rezound, the RAZR, and the Galaxy Nexus from devices purchased prior to the 4G rollout) will have to give up their unlimited data plans if they wish to upgrade to a subsidized device from this summer onward. This, of course, will include the highly anticipated Verizon variant of the Galaxy S3.

In the place of unlimited data plans, the two carriers have introduced far more expensive tiered data plans with extremely restrictive caps and prohibitive overage charges. AT&T’s most expensive plan, a whopping $50 per month, limits you to 5GB of data per month, with overage charges of $10 per GB. Verizon likewise offers a $50/5GB plan, but it also offers a $80/10GB monthly plan that gives you a slightly better rate per GB. Like AT&T, Verizon charges $10 for every GB you use over your data cap. Compared to the $30 unlimited data plans of yesteryear, this is a very sharp price hike especially since the two carriers were already enjoying record profits prior to tiered data.

What Could Happen When These Trends Collide?

One possibility is that carriers will launch their own cloud music lockers and perhaps exempt them from their data caps for an added fee, while they package the related apps as bloatware. Another possibility is that Google’s rumored plans to sell the Nexus tablet and 5 new Nexus phones directly to consumers this year could give the company more leverage it can use against the carriers.

Google could pressure the carriers to either exempt its cloud services or offer unlimited access to those specific services as an add-on for a set fee. Samsung, as the world’s dominant Android phone manufacturer by far, also has considerable clout that it could bring to bear on carriers for its own cloud services. The biggest problem with this possibility is that carriers could be vulnerable to a flood of net neutrality lawsuits.

Google might also launch its own wireless service, presumably with either unlimited data or reasonably priced tiered data (the Google Voice service may even eliminate the need to charge separately for minutes). Google certainly has the resources available to purchase Sprint, as does Apple, which might enter a bidding war with Google should Google make an attempt to buy Sprint. Even if Apple were to win a bidding war over Google to purchase the 3rd-largest US carrier, Google might still be able to pull off what AT&T failed to do: purchase T-Mobile. Alternatively, Google could become a virtual wireless network operator (MVNO) in the vein of Boost Mobile or Straight Talk (formerly TracFone). Rumors actually indicate that both Google and Apple may have plans to take this route.

Mobile Customers Caught in the Middle

Customers are already angry about the recent moves by AT&T and Verizon to outrageously expensive capped data plans. As cloud storage services like Amazon MP3, iCloud, Google Music, Google Drive and Samsung’s Media Hub (as well as streaming media services like YouTube, Netflix and Pandora) become more popular, the anger and frustration will only increase. If none of the possibilities mentioned above come to fruition, frustrated customers could consider organized protests in the vein of the successful Stop SOPA social media campaign. Or they could pursue legal avenues, such as net neutrality lawsuits or lawsuits based on Verizon’s conditional purchase of C-block spectrum.

Realistically, though, there are few viable options available for customers to take matters into their own hands. There are enough loopholes in existing regulations (and efforts to reduce government regulatory power in business) that lawsuits have a low likelihood of success. Also, since carriers in the United States are not as dependent on public approval as elected government officials, the chances of a social media campaign succeeding are limited. Other factors also work against consumers such as currently being locked into contracts, prohibitive up-front costs of unsubsidized devices, and severe coverage gaps for more affordable mobile data providers such as Sprint, T-Mobile, and smaller regional carriers.]]>

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