Forget caps, here’s the next big thing in wireless pricing

Updated. In 2012 we’re going to see the emergence of a “turbo” button on our mobile phones. Verizon Wireless(s vz)(s vod) is developing a network API that would allow customers to buy temporary bursts of bandwidth on their phones, giving priority to their video streams or downloads even during the most congested network conditions. On Thursday, Leap Wireless(s leap) CEO Doug Hutcheson revealed at a Citigroup(s C) conference that its mobile carrier Cricket would offer a similar bandwidth boost option.
Cricket Both operators plans to implement their its turbo buttons this year, while Verizon has not set a launch date, but they plan to position them differently. Verizon’s will be a premium service for customers looking for speeds beyond the norm, while Cricket’s will be a means for customers to reclaim their regular data speeds after customers use up their monthly gigabyte quotas and are throttled down to the equivalent of dial-up modem access. (Update: Verizon clarified to us on Monday that, contrary to earlier reports, its turbo technology is still deep in the labs, and it hasn’t settled on a timeframe for commercial release or a specific business model.) But they both accomplish the same thing: giving customers a bandwidth oomph beyond what they would get from their normal data plans.
A turbo button is an intriguing concept. Most of the data services I use on my phone – Twitter, e-mail, web browsing, Pandora(s P) — don’t require a stellar mobile broadband connection, but for some apps the network’s best effort isn’t good enough. If there is a video I’m aching to see or a big download I want to speed up, having the option to pay a few cents to a dollar for instant gratification might be worth it.

What about the other guy?

There’s a trade off. The wireless network is a shared resources, so every packet of mine that gets prioritized means someone else’s packet is getting de-prioritized. If you’re in a congested cell where a bunch of other people have temporarily turbo-charged their phones, your network connection has to make up the difference, sticking you with even slower speeds than normal.
These kind of data management policies are starting to make their way in to mobile networks and they could result in a new order of data plan tiers, based on quality of connection rather than gigabyte tonnage consumed.  Tekelec (s TKLC), which develops the policy management technology behind Verizon’s turbo button, believes we’re going to see a lot more ways to slice and dice data in the near future. In a recent interview with GigaOM, Tekelec CTO and VP of engineering Doug Suriano said we can expect to see operators start offering “upside down” data plans, which will allow customers to customize their plans – and the prices they pay – based on the types of applications they use and the times they typically use them.
The next type of pricing policy we’re likely to see, Suirano said, will be the opposite of a turbo button: the equivalent of a network brake. Rather than pay more money to  get temporarily faster speeds, customers may be willing to pay less money to temporarily suffer sluggish bandwidth. Customers often would enjoy the same robust speeds as their full-fare counterparts, but when the network gets congested their data traffic would be the first be deprioritized, clearing the capacity fast lanes for premium turbo subscribers, Suriano said. He used Verizon as a hypothetical example for such a service:

Verizon Wireless has a reputation for providing a quality service to all customers, so for any premium customer there will be mechanisms in the phone to ensure that you always have a ‘Verizon-quality’ experience. But if you want to pay $10 to $20 less a month for data, Verizon could offer you a service that’s good for most of the things you want to do with your phone, but doesn’t always guarantee you that Verizon level of quality.

Could prioritization be the answer to data caps?

What’s particularly interesting about such a scenario is it might revive what a practically extinct concept in mobile: the unlimited plan. While there is a set cost for to delivering any megabyte of data to a customer, the really expensive thing for an operator is to deliver a megabyte each to hundreds of customers in the same cell. It’s a matter of network scale and load balancing. If you’re wandering around the streets of your city’s financial district at 4 AM, the network is wide open, its capacity lying dormant. But at Noon that same network is overloaded.

If an operator had a way to ensure that customers’ speeds were downgraded only when other customers were vying for that same capacity, then it could open up the data spigots, offering unlimited, though restricted, access — or at least a whole bunch of gigabytes for cheap. But such a policy might produce its own problem of scale. If everyone is accessing the network all of the time, then the network is always congested and everyone’s traffic — except for that of a few premium customers — gets de-prioritized to oblivion. To make it work, operators would need to strike a delicate balance between the network capacity they can feasibly build and the way their customers access it.
Of course, any time you start talking about prioritizing certain types of traffic over others, controversy ensues. Wireless carriers may not be bound by the same net neutrality restrictions their wireline counterparts face, but that doesn’t mean they aren’t vulnerable to the ire of their customers. Preferential treatment of one person’s packets over another’s could create a stratified mobile Internet, with an upper class that’s willing to pay to access what they want, when they want and lower class left with the network’s scraps. Depending on how operators implement these new pricing policies, they could spark a revolution in the pricing and availability of mobile data or they could create data apartheid.
Speedometer image courtesy of Flickr user Nathan E Photography
Yield image courtesy of Flickr user Seth J
Buffet image courtesy of Flickr user Wesley Fryer