Data Caps Serve Multiple Objectives, Exec Argues

The need to protect the fixed line business is the real reason behind the move towards data caps and tiered pricing for Long Term Evolution, says Roberto Saracco, director of Telecom Italia's Future Center. Data caps on mobile broadband usage often are justified because mobile bandwidth always is more finite than fixed network bandwidth.


On the other hand, business policies often can serve several goals, at once. Saracco argues that mobile data caps, especially as faster LTE fourth generation networks become available, also help some service providers protect their landline broadband access businesses.


With caps in place, users have less opportunity to replace a fixed network connection with a mobile alternative. One key issue is the size of the respective caps. Mobile broadband might feature caps between 2 Mbytes and 5 Mbytes, with optional plans of 10 Mbytes.


Fixed networks routinely have caps of 150 Gbytes, or two orders of magnitude higher. Aside from the fact that the cost per bit is much higher on a  mobile network, the difference in caps mean mobile substitution does not work.


Some lighter users, in single-person households, might be able to substitute mobile broadband for fixed service. Multi-person households, heavier users and people who watch significant amounts of video, will find mobile unworkable as a fixed network substitute product. 


On the other hand, there are instances where mobile substitution makes perfect sense for an ISP. Where a service provider has no landline facilities, wireless substitution allows a mobile provider to compete for some parts of the landline broadband access business, with no risk of cannibalization.