WRITTEN BY – Brian M. Carney
Mr. Carney is a senior vice president at Rivada Networks.
In high school, I worked in a movie theater that offered half-price tickets on Tuesdays. I asked the manager, a septuagenarian named Joe, “Why Tuesday?” He answered in two words: “Milton Berle.”
No, I’m not that old. Milton Berle hadn’t been on the air for three decades by then. But if Joe could be believed, the theater still discounted its tickets on Tuesdays in the 1990s because, in the 1950s, it had to compete with Uncle Miltie. It might even have been true—a data-driven operation, this movie theater was not.
Today Uber has turned the smart phone into a tool for dynamically pricing and allocating car rides in real time, throwing the traditional taxi business into turmoil. It’s also given rise to a buzzword—Uberization—that is driving venture-capital investment and pundits to look for the next big business ripe for Uber-style disruption.
Uberization means different things to different people. For some, Uber is synonymous with its “surge pricing” policy—when cars are scarce and rides in high demand, users are warned that the cost of a ride may be much higher than normal. It’s then up to them whether to pay the premium or find another way to get where they’re going.
Surge pricing both tempers demand and encourages drivers to increase supply, helping ensure that a ride is there if you want it or need it. It’s made possible by real-time data about ride requests and the location and number of available drivers.
It’s the Milton Berle effect, but all the time, in real time.
We’ve long accepted similar price discrepancies for airline tickets, but information technology is allowing us to extend the concept to new realms. Some see a world coming in which everything, or at least a lot of things, are surge-priced—Uberized. Event tickets, restaurant reservations, pizzas: In theory a wide range of activities can be Milton Berled—Uberized—by combining smart-phone connectivity with voluminous real-time data on supply and demand. Which ones are and aren’t will be determined in part by what we think it’s socially acceptable to “surge price,” along with incumbents’ political ability to block innovation—as we’re seeing with Uber among others.
Is the wireless industry next?
This revolution is made possible by wide availability of wireless broadband. So it seems only right that we Uberize the wireless industry too. We now have the technology to price wireless connections according to demand in specific locations at specific times—and we all know that a wireless connection at rush hour in Times Square is worth more than one at 3am in Podunk. But we don’t price them differently, which is part of the reason you can’t download that email at times of peak demand, no matter how many bars you’ve got.
Demand-based pricing would increase supply in wireless in the same way that market pricing can increase supply in other valuable and scarce resources. And with fourth-generation LTE networks moving from marketing hype to industry standard, we have the technology to make our wirelessly connected lives better, faster, stronger. We just need a pricing model that rewards those who supply usable connections where they are most in demand. (Full disclosure: I work for a company, Rivada Networks, that has developed technology to price wireless bandwidth in real-time.)
Benefits of disruption
Right now most of the major carriers are wary of Uberization, as incumbents are whenever their cozy existences are in danger of disruption. But demand-based pricing of wireless capacity would increase the value of Verizon’s, AT&T’s, T-Mobile’s and Sprint’s spectrum holdings by billions of dollars. It would allow them to charge peak prices at peak times to those who need a connection the most, and to monetize their investments in their networks at off-peak times, when more often than not that same capacity is underused. What we have today instead is “Free nights and weekends!”–the Milton Berle of wireless, a blunt attempt to entice customers with discount in a period of low demand.
But selling a half-price movie ticket is better than selling none. As FCC Chairman Tom Wheeler recently noted in an op-ed in The Wall Street Journal, some 50 billion machines may be connected to the Internet by 2020.
Many of them will be sending data on their performance that could wait until prices are their lowest, and so the “Internet of things,” too, could benefit from dynamic bandwidth pricing. Mr. Wheeler has embraced Uberization as a beneficial economic force. Will his FCC push for dynamic pricing in the wireless industry he regulates?
It would be ironic indeed if wireless bandwidth—the great enabler of Uberization—wasn’t itself subjected to the empowering forces of supply and demand in real time, enabled by technological advances now available.
Article via Forbes.com