Prepaid Internet isn’t a new thing. In Eastern Europe it’s a common practice to use a prepaid system rather than a subscription by contract for mobile services. One may believe that this is because of necessity, but many middle-class people enjoy the freedom it offers them by allowing them to switch providers at the flip of a coin if they are unsatisfied with the service they are getting.
Verizon (via press release) and Comcast (via Business Wire) have both announced the launch of prepaid broadband packages in February and March 2017 respectively. Believe it or not, this might actually help invigorate innovation in the United States’ Internet market.
What Makes Prepaid Internet Attractive
To most people around the world (and especially in the U.S.), home broadband services have always been offered as a compromise: you pay X amount of money for this amount of years, and by the time that period is over you can rip the contract up and leave.
This traditional agreement has led to some people getting the short end of the stick if they didn’t read the small print. There could be “hidden” fees and other stipulations that put you at a disadvantage upon signing up. Sometimes you really have no choice in the provider you have because they’re the only one in town.
These effects are somewhat dampened when you enter a prepaid agreement. You pay in advance for a certain “amount” of Internet. It could be a week of unlimited downloads or a month, or even a certain amount of gigabytes.
In the case of both Comcast and Verizon, the agreement is for a time period in which you have unlimited access to the Internet. Once the limitation has been reached, you could either choose to keep going by paying more or opt out of their services entirely. There are no contractual obligations tying you to them. For those living in the U.S., this presents an unprecedented level of freedom of choice (as long as you have more than one provider serving your area).
The Bigger Picture
Comcast’s announcement followed Verizon’s, which may lead to the belief that there is a bit of one-upmanship between the two. Verizon saw a vacuum it could fill, then Comcast came in with a competing offer to get its own piece of the pie. If smaller ISPs start following this example, we’ll soon see a domino effect in the market where more of them are willing to provide second-tier services to people who do not want to sign contracts with them.
It’s time to look at the big picture: ISPs all want your signature on a dotted line. If they can guarantee your payment for a certain period, it gives them the comfort of predictability, which gives them more flexibility with long-term plans and risk evaluations. Since the cat’s out of the bag and American ISPs are beginning to offer prepaid services, there’s now more incentive for companies to try harder to convince you that signing a contract is actually more advantageous. If enough people don’t get “hooked in,” they might even be willing to drop a lot of the stuff that kept them from subscribing in the first place. This is a win for the ISP, for the prospective subscriber, and even for those who already have subscriptions.
It’s Still Not Enough
We’ve already established how prepaid Internet could be a very positive thing in the United States, especially considering that a lot of large ISPs are in a very comfortable position. There is less competition, less innovation there than in places like East Asia and Eastern Europe (I pay $8 a month for 100 Mbit Internet!). The ball is rolling, so now it’s time to run with it and let these firms compete themselves into offering lower prices and better deals for their subscribers.
As far as government is concerned, perhaps they can start by eliminating archaic and expensive pole attachment regulations (47 U.S. Code § 224).
Would you ever consider getting prepaid Internet? Tell us all about it in a comment!
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