A Canadian family vacationing in Arizona recently received a shocking bill from SaskTel, their mobile Internet provider. It was for nearly $11,000 worth of streaming movies their kids had watched on a laptop, using a USB stick. For eleven grand, you might expect it was movies 24 hours a day for a few weeks, but the grand total was five films through Netflix (NASDAQ:NFLX) at roughly 400MB in size each.
This isn’t the first story about massive mobile data bills (there’s one mentioned by PC Mag that tops $200,000) and it won’t be the last, but it serves to illustrate the growing tension between telecom carriers and users of mobile devices. Texting, e-mail and Web browsing can all eat at a monthly data cap, but with more capable smartphones going mainstream and mobile users increasingly using cloud services to access large files on the go or to watch streaming video, the cost of data has become a hot topic.
How much it actually costs wireless carriers to transmit data is virtually impossible to dig up. Estimates range from virtually nothing to a few dollars per gigabyte of data, but besides the fact that the companies involved aren’t anxious to publish this kind of information (presumably because streaming service is quite profitable), there are other variables that need to be accounted for: employee salaries, network infrastructure, maintenance, and other operational costs. And in this case, roaming charges (moving from one carrier’s network to another’s) also come into play.
One writer’s estimate
However, I ran a rough calculation using published data plan pricing through T-Mobile of 10GB of mobile data for $60 per month. Presumably the company is making a profit based on that rate or it wouldn’t be offering it. I’m assuming the equation is in the ballpark for other carriers, so it’s not completely a case of comparing apples to oranges.
10 GB for $60 = $6/GB.
SaskTel (the Canadian carrier) charges $6 per MB for data and the bill came to $10,668.38, so that means 1,778MB (or 1.78GB) of data was downloaded.
$10,668.38 / 1.78 GB = $5,993.47/GB
Even allowing for roaming, different data costs for different carriers and virtually any other variables you care to raise, does charging nearly $6,000 per GB for mobile data seem excessive? SaskTel offered to reduce the bill to $1,000 —a decent enough gesture, but one that immediately raises suspicions that the carrier did so because it had nothing to lose.
There are three things to take away from this incident and others like it.
1. When travelling outside the country, turn off data roaming on all of your mobile devices, or buy a data plan through a carrier based in the country you’re visiting.
2. If telcos like Verizon (NYSE:VZ) or Sprint (NYSE:S) ever face regulatory pressure to significantly reduce mobile data rates, it’s going to hit their profits hard. On the other hand, with more smartphones and tablets using wireless connections to access ever increasing amounts of data, until that day comes they have a virtual license to print money.
3. With demand from consumers to stream video through Netflix or other services to their mobile devices, a company like EyeIO, which develops high quality, lower bandwidth video streaming technology, could quickly become a power player in the industry.