Why do we pay ISPs for internet speed, but mobile network operators for the amount of transferred data?
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There are a lot of … not right answers here.
First ISPs (fixed internet). You pay for speed because it’s a convenient way to ‘price differentiate’ – that is, for the ISP to extract more money from those who are willing to pay more. You sell a premium service to those willing to pay a premium price, while still being able to have those with less deep pockets as customers. (They take the basic service). Speed is simply the ISP differentiates the different service tiers. Note that in general, this is *nothing to do with cost*. If you’ve built a fibre network, there is essentially no cost difference between offering the customer 50 Mbps or 500 Mbps. (Indeed, the 50 Mbps service is usually provisioned by artificially limiting the speed of the line in question).
The situation for mobile networks is a little different. Here pricing is driven by traffic (MB or GB) because this is a key driver of cost. If you offer unlimited usage, you run the risk of getting a bunch of high usage customers on your network who suck up all the capacity of your cell sites (which is shared between users in that area), leaving the other users with a terrible experience unless you spend a lot of money to upgrade the network. Think of an all-you-can-eat buffet, where the a hippo comes to visit and troughs the entire salad bar before you get there.
This is beginning to change, because it’s getting ever cheaper for mobile operators to add capacity, but usage growth is slowing. This is reducing the risk that unlimited offers will lead to unmanageable demand, so they’re starting to be a more important part of the market.
[Source: been in telecoms for over 30 years, have worked on pricing decisions, built network cost models etc etc]
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