The growing popularity and fidelity of real-time entertainment applications has dramatically increased consumer Internet data consumption, leaving Communication Service Providers to face higher operating costs.  As a result, it seems that unlimited bandwidth service plans on both fixed and mobile networks are becoming a thing of the past. 

In the last 14 months alone, the two largest mobile carriers in the US,  Verizon and AT&T have both eliminated unlimited data plans, while the second largest cable internet provider, Time Warner Cable, has begun to lay the groundwork to introduce usage-based billing.  Comcast has already had a 250GB policy in place for several years. 

This trend is not limited to the US and many providers across the globe have begun to eliminate unlimited data plans and started to migrate towards variations of usage-based billing models in order to more properly match plans with subscriber usage and recoup the costs of transmitting more bandwidth-intensive applications. 

For instance, some operators are offering targeted application-based plans for enthusiastic social-media and email users. This parallels the mobile world practise of offering unlimited SMS, for example.  These applications don’t require as much bandwidth and can be offered to consumers for a fixed price.  In turn, subscribers value the cost-certainty of this sort of bundle and, may even save money because their plan fee doesn’t subsidize those who access the Internet more heavily.

There are more win-win usage-based billing scenarios, but not all consumers will be happy with the transition because they fear they may be charged more; yet, in reality, only 5% of all Internet users are using 50% of Internet bandwidth.  How can usage-based billing become widely-accepted and fair for everyone?

Lower –priced tiers for light users

Everyone agrees users who use more should pay more, but it is hard to defend usage-based billing if nobody ends up paying less.  A service provider should ensure pricing tiers and overages fees are proportionally set, as nobody wants to find out they are paying more money, but getting less service than someone else.

Plan variety

Not everyone uses the Internet in the same way.  Offering different plans will give consumers more choice and the freedom to opt-in to a plan that really reflects their usage and not that of others.  A movie buff or gamer will not be satisfied with a lower bandwidth-based plan that may incur latency and jitter.

Transparency

With broadband speeds exceeding 100 Mbps in some countries, 15 minutes of usage over and above a data cap could result in significant additional charges for the user.  Providing real-time advice of usage, via text or pop-up messages, at 60%, 80% and 90% of plan usage thresholds is one way to avoid bill shock and is essential to keeping subscribers informed of their usage.  Nobody wants to see “warning you are now at 110% of your limit”.

Price certainty

Customers need to clearly understand how much their Internet service will cost them each month and providers should offer an option for a truly fixed maximum price should they exceed their limit. In addition, measuring in terms of human behaviour (e.g. calls/movies/minutes vs. bytes) allows a consumer greater comfort in knowing they control cost.

Moving forward, variations of usage-based billing will likely become a sustainable billing model for fixed and mobile networks across the world.  If service providers are upfront in their communications with subscribers, then they can earn trust, win business and minimize churn.