Back in early 1990s, you couldn’t go anywhere without stumbling across an AOL “Internet starter disc.” Whether on an airplane seat, a high school cafeteria tray or tucked inside a pizza box, AOL’s blitz marketing campaign was pretty much unavoidable. As we recall, each individual disc had a big number stamped on it, indicating the amount of hours of free Internet access you had before you had to pay for a subscription (700 hours, 1000 hours, 1025 hours, you get the picture). Back then, the fact that AOL was offering Internet access in terms of hours wasn’t weird. In fact, charging by the hour was the norm. It wasn’t until the mid-’90s, when this all changed. AOL introduced its unlimited plan (along with the Buddy list) and the rest is media history.
Paying for every hour you spend online is a form of usage-based pricing—a model where price is determined by how much of the service you consume. Usage-based pricing is a model that is common in many other industries. For example, when you get on an airplane, you have the option of paying for a first-class ticket in order to get bigger chairs, and more privacy. On the DC Metro, you pay according to the distance you travel.
For the last couple of decades, we’ve gotten used to paying one price for an unlimited number of hours online. Many of us leave our email open all day, watch YouTube videos of our favorite bands for hours, and download albums whenever we feel like it. And when the iPhone was introduced in 2007, it came with an unlimited data plan, upholding the decade-long user expectation of being able to go where you want online without worrying about how much each website visit would cost.
But the days of unlimited data plans may be numbered. Both wireless and wireline providers are now experimenting with usage-based pricing in the form of data caps—limits on the amount of data you can upload or download per month. Most ISPs have instituted some form of hard or soft caps.