Usage-Based Broadband Pricing Models - The Great Debate

Author: Jesse Schwarz
Published: November 08, 2011 at 7:15 pm

Today's level of internet usage by people around the world is posing a challenge for internet and data service providers who are trying to balance network capacity with the prices they charge their customers. And it's only going to get worse, say some experts. Research from an Ovum press release in January 2011 says that half of the world's population will have access to broadband services by 2015.

Providers of internet and mobile data services are spending billions in expansions and upgrades to their coverage areas and modes of delivery in the hope that these improvements will result in high profits down the road. But in order to realize those profits, it is thought by some that unlimited data plans will have to become a thing of the past, as data usage is increasing too quickly for unlimited data to be economically feasible. Instead, many providers have now decided to switch to usage-based pricing models.

There is no doubt that customers have responded to the switch from unlimited to tiered pricing with surprised displeasure. Many customers felt that caps on data usage were implemented deliberately to discourage excessive viewing of online video, which has shown to be one of the biggest consumers of bandwidth.

In addition to dealing with customer ire over new pricing models, providers are also dealing with a dual language barrier of sorts, because:

  • most consumers do not know how much data they use per month or are purchasing;
  • any communications to customers regarding their monthly data usage levels are ineffective because the measurements of online data are not understood.

So what is the best way to deliver fast broadband in a way that's convenient and financially feasible to providers and their customers, but also clarifies sometimes confusing technical terms for those needing a simpler explanation? The fact is that there's no easy answer. But there are many suggestions being brought forth by both providers and their customers.

One is the 'trade off' plan, where customers would pay more for faster service while accepting other limitations. For example, in a recent survey it was discovered that 51% of broadband customers would be willing to pay more for unlimited browsing if it meant they were limited by time-of-day video viewing restrictions.

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