After years of quiet experimentation on Internet pricing, Comcast rolled out its latest trial in Atlanta on Sunday: an unlimited data plan that lets heavy users surf as much Internet as they want for an extra $35 a month.
The voluntary add-on waives the 300-gigabyte monthly limit on data consumption that Atlanta residents have been subject to since 2013. It's a limited trial, but the economics of Comcast's unlimited plan make it a potentially dramatic shift in the way we'll buy broadband in the future. If Comcast decides it's working, other markets where the 300 GB data cap is in place could start seeing similar offers, and it's not crazy to think the plan might someday roll out nationwide. Here's why.
The terms "unlimited data" and "data cap" likely sound familiar to you, as Cellular providers like AT&T and T-Mobile have been selling mobile Internet like this for years. You know how it works: Go over your monthly limit, and you'll face penalties such as reduced speeds or expensive overage fees.
In the select markets where Comcast has experimented with data caps — such as Nashville and Miami — the company assesses a $10 charge for every 50 GB a customer uses beyond their monthly limit. So for instance, if you blow past 300 GB in a month and use up to 350 GB, you pay an extra $10. Up to 400 GB, you'll pay another $10, and $10 again to go up to 450 GB. And yes, some Comcast users actually reach this point, paying as much as $30 a month in overage fees. These are what Comcast refers to as its "heavy data users."
When Comcast surveyed these folks, it found that 60 percent were willing to pay a flat $30 to $40 a month extra to be freed from overage payments. Which is how we arrived at the $35 unlimited plan in Atlanta; also, a separate experiment launched this fall in parts of Florida that charges slightly less — $30 — for unlimited service.
So far Comcast hasn't tested a $40 unlimited data add-on, but it is declining to rule out the possibility. "We're still at the very early learning curve," Comcast said of its experiments.
You can probably see where this is headed. The price of an unlimited plan in Miami, Fort Lauderdale and the Florida Keys is exactly the same as what a typical heavy data user pays in overage fees to use 450 GB of data.
This is why the Atlanta trial is so significant: It costs $5 more. And this is how Comcast could turn the unlimited plan into a revenue source in its own right. Even if there are only 100,000 people in the entire country who behave this way, that's an extra half-million in free money for Comcast every month if they all signed up for the plan. More, if it can entice non-heavy users to buy into it, too.
Comcast and other cable providers have been searching for ways to offset their losses in traditional TV as Americans increasingly move away from the cable bundle. Broadly, this has meant a wider industry shift toward monetizing Internet access. Comcast's unlimited data plan is consistent with that strategy, but it's by no means the only thing cable firms have tried. They've also expanded into providing broadband to business customers, and offered their own streaming video apps to retain viewers. A battle is even brewing over the future of set-top boxes and how they'll work in the Internet age.
Even if you don't use a ton of data now, more of our work and play is moving to the Web. Netflix accounts for one-third of the country's primetime Internet traffic, and we're only just getting started with driverless and connected cars, smart appliances and other devices associated with the Internet of Things.
Comcast isn't the only one looking ahead to this future. A federal study last year found that Internet providers everywhere could benefit financially from introducing data caps and other features associated with metered usage plans. The practice is relatively uncommon among providers of fixed residential Internet, like Comcast. But all the signs point to those types of companies eventually catching up to their counterparts in the cellular business — especially when you factor in one big difference between the two.
Many cellular providers have been working to shift consumers off of unlimited data plans. That's because unlimited data encourages greater consumption on networks that are already highly sensitive to demand. When a lot of people are crammed onto a single cell site, performance tends to suffer.
Fixed networks are a little different in that they often benefit from greater capacity, and with new fiber optic and cable connections that are capable of 10 gigabit-per-second speeds that let you download an HD movie in less than a second — well, it's easy to see why companies like Comcast can afford to offer more usage (and make a pretty penny from it at the same time).