Economists are always searching for market revealed information from businesses. Whether it is quarterly data on sales, revenues and profits or decisions made by businesses in their day-to-day operations, this information provides insight into the “economics” of the business and its industry.
Today’s announcement that AT&T is changing the pricing structure for Internet data plans, just like its suspension of iPhone sales last Christmas in NYC, provides insight into the economics of the wireless industry. It clearly indicates that wireless congestion is significant. The point-to-point downloads of large audio and video files for their increasing number of subscribers is choking their system.
AT&T is not alone. Verizon is making similar noises about charging for larger downloads. It raises the whole question of whether the wireless distribution of large video and audio files is the most efficient distribution architecture.
The convenience of watching a particular video or listening to a specific audio performance whenever you want it is attractive and desirable. Yet, it comes at a price — use of the wireless spectrum. In contrast, watching a program on a local television station or listening to a local radio station — while not “on demand” — has the benefit of the point-to-multipoint architecture that allows unlimited numbers of viewers/listeners.
The ability to reach multitudes of listeners/viewers in mobile environments is also possible with the broadcast model of distribution. A new mobile digital television system is presently being tested in the Washington, D.C.-area that may soon provide several alternative video program streams. Of course, radio programming has always been available in mobile environments, and efforts to include an FM chip in cellular handsets may expand that capability even more.
In sum, the convenience of downloading what you want when you want it on your mobile device is truly remarkable. As the popularity of devices has recently grown, however, the ability of the network to deliver that level of service always and everywhere has been severely strained.
AT&T’s plan indicates that the resources to provide that level of service are not unlimited. Those actions, and the possibility of similar actions by other wireless service providers, also suggest that the most efficient method of distribution of these video and audio services may not be via the point-to-point architecture but instead may be the traditional point-to-multipoint broadcast architecture.