Is Pay-Per-Bit Anti-Consumer?

8:30 AM -- At the TIA 2012: Inside the Network show, I brought up a topic that, for some reason, makes people crazy. Are consumers really afraid to pay for their broadband connections based on how much they consume? Or is the industry so accustomed to being able to sell consumers services that they can't understand or accurately compare that the whole idea seems weird?

I bring this up at about the 4:15 mark in the video below. Have a look and let me know if you agree:

— Phil Harvey, Editor-in-Chief, Light Reading

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joset01 12/5/2012 | 5:29:40 PM
re: Is Pay-Per-Bit Anti-Consumer?

As I recall, operators and vendors first hyped LTE as a technology that would allow them to deliver bits more cheaply over a fast wireless network than 3G. As far as I can tell, if that still holds true, then none of the savings are heading the consumers way yet.

But if operators get bolder after they've done the big spend on the LTE build out then maybe some will try pay by bit. You'd need an even better system of alerts and setting $$$ limits on the consumer side.

Personally, I suspect smaller operators will try innovative ways first. Given how closely Wall Street watches ARPU big operators never want to risk that figure dropping in case they get spanked by the street.

completenewbe 12/5/2012 | 5:29:39 PM
re: Is Pay-Per-Bit Anti-Consumer?

I as a consumer would love to pay by the bit.  The problem lies with the carrier wanting the best of both worlds.  If it was simply paying by the bit I am all for it but the current short term return (corp greed) will not allow such a model.  There is also insufficient regulation to keep the existing non-competitive carriers honest.  

What you will have is a $30-$50 "access charge" with paying by the bit on top of that then factor in overages at some astronomical price.  You are also having to deal with the carriers refusing to become dumb pipes so that brings a new element into the mix where by the carrier is not charging for their services by the bit but any competing service will incur overages limiting consumer choices.  Add to that, the continued forced bloatware by the carriers and manufacturers, bulk selling of consumer data etc... and this equates to the de facto standard of a continued overpriced services with prices actually increasing although the cost to carry said services have decreased tremendously.

We are at the beginning of a market shift where consumers are no longer increasing the revenue streams for services such as text messaging and voice services.  That is the sole reason for the current shift by the carriers to move into a bit usage model.  In the next few years your voice service will become data so this market shift now is nothing more than to protect the business model for tomorrow.  Basically its a pre-emptive strike to corner the market before hand.  I am sorry but I cannot support this.  If properly regulated and reasonable pricing, I am all for paying for the bit but as it stands I would spending more time worrying about the data used and how much it is going to cost me.  

DCITDave 12/5/2012 | 5:29:39 PM
re: Is Pay-Per-Bit Anti-Consumer?

You're mistaken if you think that operators saving money will result in consumers saving money. That never happens. That's why a landline phone, which runs on equipment that was paid for decades ago, is still the same price as it was 20 years ago.

The problem pay per bit solves is that it gets more people on the network and it gives consumers more control over how much they use and spend. The operator is then incentivized to tempt consumers to use MORE bandiwidth. 

Now, operators have these amazing networks and they'd prefer we just sit still with our modems off since we're paying them anyway. It's not a consumer-friendly approach at all.

shygye75 12/5/2012 | 5:29:38 PM
re: Is Pay-Per-Bit Anti-Consumer?

"Pay for what you use" is a reasonable arrangement that applies to the vast majority of consumer transactions. One issue to be ironed out in this case is the concept of the "volume discount." Most businesses want to reward their best customers to encourage them to (a) stay and (b) spend even more. Operators will need to figure this out.

DCITDave 12/5/2012 | 5:29:37 PM
re: Is Pay-Per-Bit Anti-Consumer?

Yes, the conspiracy theories will abound, but if you flatten the world of broadband consumers can clearly see the differences between providers that game the system and the ones that provide superior service. Gas prices work this way now. Most of the pumps in most places are rigged or just off a smidge, but not so badly that the consumer gives a damn.

Also, incentive programs can tilt the tables, too. Look at all the idiots who fly American just so that they can keep racking up mileage points. Is American better? No. The service sucks and the points are meaningless. But don't tell that to the exec. platinum tosser who gets to board one and a half minutes before I do (for no apparent advantage, whatsoever).


DCITDave 12/5/2012 | 5:29:37 PM
re: Is Pay-Per-Bit Anti-Consumer?

I'm not sure I understand the difference between telling me I can't go over a data cap and billing me the overage and just counting and charging for all the bits as used. Seems just a shift in the business model, the technology and support systems are clearly in place and they seem to work.

jepovic 12/5/2012 | 5:29:37 PM
re: Is Pay-Per-Bit Anti-Consumer?

This is an endless discussion, I suppose. Two major problems with paying per bit:

* A lot of the traffic is not obvious or useful to the customers (unlike PSTN). Ads, updates, all kinds of tracking data, spam... If John Duh buys an app which sends 500 MB of rubbish in the background, he won't call the app company (because it's impossible), or Apple, he will call the operator who sent the data traffic bill. One call to the customer service, boom all the gross margin for that month is gone.

* Billing per bit is a lot more expensive. It's not about counting the bits, it's about the support systems and above all the customer service. If customers don't understand their bill, they call customer service which is very, very costly. If they don't like the bill they blame the operator, because it's human nature.

It's not like operators don't know how to bill per bit, to the contrary. They have billed per minute for PSTN and then modems and they still remember all the misery.

And yes, why in the world would operators want to make their services completely comparable? That's the opposite of differentiation, which is what everyone is struggling with in this industry. Pricing is perhaps the most important part of the differentiation.

DCITDave 12/5/2012 | 5:29:37 PM
re: Is Pay-Per-Bit Anti-Consumer?

Yes, indeed. I wonder if they'd give customers who buy bundles a per-bit discount. 

paolo.franzoi 12/5/2012 | 5:29:37 PM
re: Is Pay-Per-Bit Anti-Consumer?


Imagine a world where a carrier short on revenue introduces (ON PURPOSE) some bit drops causing retransmissions.  

So the definition of how many bits were used and whether they were valid (like do ACKS count) gets very complicated very quickly.


PS - You may think this odd but even back in the 70s we had systems that monitored carrier performance to ensure compliance to their own specifications for analog modems (sold to many enterprises).

shygye75 12/5/2012 | 5:29:36 PM
re: Is Pay-Per-Bit Anti-Consumer?

It probably would be less fun for Siri users to know that the constant background signalling is contributing in a very small, very indirect way to global energy consumption and theoretically to global climate change.

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