Why not just offer bucket pricing too?

Was invited to a lunch buffet at Sofitel yesterday afternoon by one of the telcos to celebrate Chinese New Year with other members of the media covering the telco beat. It was an opportunity for me to grill them about the NTC and bandwidth issue so I prepared my questions just in case.

And thanks to the my readers who left comments about the issue, I was able to bring more insights into the discussion with their product managers.

Was there capping in the first place? One of the product managers categorically said they’ve never implemented any sort of capping on their residential subscribers. Their only contention is that they place safeguards printed in the Fair Usage Policy. I then pointed out that a trusted source gave inside information that their 3G packages are actually capped — a measure they’ve finally admitted. They qualified though that the usage dynamics with mobile 3G is very different from fixed residential lines and as such, some sort of capping is necessary on that end (since the 3G spectrum is finite and limited).

So I asked them if there was some sort of over-subscription on their part. The answer was a qualified “yes” — that there was a time that they somehow exceeded their subscriber capacity. However, that was addressed immediately and have been continuously monitored and optimized on a regular basis.

The issue with “unlimited internet” zeroed in on false advertising. The use of the term “unlimited” actually refers to the time and not the bandwidth so when they said unlimited internet they actually meant you can use your internet 24 x 7 at a fixed price. Unlimited does not refer to unlimited bandwidth. That’s why we normally see two plans being offered — e.g. Plan 499 for 50 hours internet (this is the limited) and Plan 999 for unlimited hours of internet (this is the unlimited).

I added that this is very confusing to regular consumers who know very little about bandwidth and such. Their proposed solution — educate the consumer about the which type of internet service is appropriate for their lifestyle or usage pattern.

So why not just offer bucket pricing too, I asked? If they say that only 1 to 2% of the subscribers actually exceed “normal” usage patterns, why not just offer these subscribers a more equitable package that will suit their needs. Say Php500USD 9INR 722EUR 8CNY 62 for every 50GB of bandwidth? If I only used 5GB for the month, then I only get billed for only Php50USD 0.85INR 72EUR 0.81CNY 6. Now that’s fair use!

They didn’t really answer this but promised that they’ll be putting up something really soon to address this “idea”. At this point, I felt they were a little uncomfortable answering any more of my questions so I said that’s enough for today.

I believe bucket pricing could be a solution to the issue of “over-usage”. Imagine, if I only pay Php10USD 0.17INR 14EUR 0.16CNY 1 per 1GB, then I might be able to afford to subscribe to 3 different ISPs all at the same time. If I use 20GB on the 1st ISP, then 30GB on the 2nd ISP and 50GB on the 3rd ISP, my total usage is 100GB. I then pay Php200USD 3INR 289EUR 3CNY 25, Php300USD 5INR 433EUR 5CNY 37 and Php500USD 9INR 722EUR 8CNY 62 to each provider respectively for a total internet bill of Php1,000USD 17INR 1,445EUR 16CNY 124 a month — and to think I subscribe to 3 ISPs all at once. I don’t think you can afford that at our current situation.

If one of the ISP’s connection craps out and I don’t get to use their internet, I don’t pay anything at the end of the month since I didn’t use any bandwidth. How’s that for a fair use policy? I only pay for what I use.

This will remove the focus on service providers away from “marketing” and more on “quality of service”. The better the quality of connection, the more you use their service and the more you pay them at the end of the month. They might even open up your pipes more (from 2Mbps to 5Mbps) if they want you to use their line more often. Imagine one ISP billing you for just Php5USD 0.09INR 7EUR 0.08CNY 0.62 because their connection speed is really crappy and you can’t download anything thru their line.

The idea came up when after a reunion with some college batchmates, one of them tells me he’s still using dial-up at home. The reason was that he’s always in the office anyway and that he only access the net from home for 1 to 2 hours a day. Paying Php999USD 17INR 1,443EUR 16CNY 124 for unlimited internet hours, while affordable, is still expensive considering he’s only online between 30 to 60 hours a month.

By getting prepaid dial-up, he only pays for the hours he actually uses. He probably spends Php250USD 4INR 361EUR 4CNY 31 on dial-up for those hours (way cheaper than Php999USD 17INR 1,443EUR 16CNY 124). If we go by the bucket pricing model, he could subscribe to a DSL account and possibly still pay the same Php250USD 4INR 361EUR 4CNY 31 amount he used to pay with dial-up.

Of course this scenario might not apply to everyone but I’d like to see them ISPs try that billing method. That way, we’d really know who has the better service.