Over dinner last night in Manhattan, my friend Christian Renaud recounted a horror story in mobility: his iPhone service was shut off while he was traveling in Spain and Portugal. The reason wasn’t because he didn’t pay his bill, but rather he had exceeded his data limit - not once, but twice.

Renaud is the CEO of Palisade Systems, a provider of data loss prevention software and managed services. He was in Europe for a series of meetings with researchers and security collaboration partners. Like many executives, he needs constant contact to his company and clients, which is why he bought the international voice and data package from AT&T.

Now, the service gives him up to 5 GBs of data transactions per month. He received a warning from AT&T stating that he was about to exceed his limit and they were on the verge of shutting off his service. Rather than risk being disconnected, he up the service plan to 25 GB per month. A week later, he exceeded that limit, but this time AT&T simply shut down his service. Not even offering to pay the bill made a difference.

The incident got us talking over our margaritas and Mexican dishes about the consequences to solution providers if their customers either exceed their service limits or fail to pay their bills for cloud-based services. What if a customer a customer doesn’t pay their monthly bill? Do you shut off their service or issue a warning? Do you throttle access to resources or do you extend service until a payment is received?

It’s a legitimate issue. Solution providers and cloud computing vendors are already discovering one of the sticking points in cloud sales is customers’ fear about having their data trapped in one service provider. One of the problems with many cloud-based applications is the inability to easily migrate data between service providers, just ask anyone who’s tried migrating to Salesforce.com from a competing CRM application. Failing to pay for service could land a customer in doubly hot water as they not only they can’t migrate to a new service, but they won’t have access to the online resource.

It’s a sticky issue that I haven’t seen much discussion on. There’s just a presumption that cloud computing is more efficient and cost effective than on-premise solutions. But an on-premise solution has the benefit of paying for something (hardware or software) once, and never having to fear losing access to applications and data (at least assuming the systems work without service and maintenance agreements).

So what considerations need to be made by cloud computing solution providers and their vendors for customers that either won’t or can’t pay their invoices? Can their data be held as collateral (hostage) until payment is made? Are there legal issues for denying customer access to data and applications that impede their business operations? And can terms of service and service level agreements effectively cover such situations?

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