Cellphone Pricing to Modify Behavior

I discussed AT&T's plans to use new pricing strategies to gate unlimited cell phone bandwidth usage (see December), and now that has become a reality. In June 2010, AT&T announced that it would stop selling unlimited plans and instead charge extra for data consumption that exceeded a certain amount (WSJ, 6/4/10, B6 - AT&T Pricing Shift Will Test Behavior).

This decision reflects the Incentive component of the Coproduction Experience Model in that the pricing plan now includes a punishment (increased costs) for the use of bandwidth beyond a certain amount. AT&T claims that such a policy will limit bandwidth hogs who download TV shows to their iPhones (or at least more fairly charge bandwidth hogs for their use of a limited resources).

AT&T's policies are very similar to what is happening in the utility industry, where dynamic pricing of electricity aims to reduce consumption on peak days, and therefore increase reliability of the electric grid (and reduce the need to build new generation capacity).