Today’s consumers are comfortable paying bills online, downloading music to their iPods and posting videos to Facebook or YouTube, but many don’t consider or understand the bandwidth needs of their favorite applications. If service providers can make them understand, it paves the way for a new billing paradigm: one that takes a page from the wireless world and creates personalized packages for consumers and businesses based on what content and applications they consume.
It’s a win-win: Consumers pay for what they need, and service providers gain differentiation, customer satisfaction, an alternative to bandwidth-capping and the opportunity to up-sell on usage tiers for new revenue streams. A big key to it all is subscriber education and usage notifications.
Understanding What Uses What
The first order of business is educating a consumer on the value of loading a Web page versus watching a YouTube video or downloading a full movie.
Think of mobile phone services that are for the most part, cut and dry. They offer fixed and variable pricing that reflect consumers’ personal needs. Service packages outline the cost and expectations for each plan, i.e. for $59.99 per month, consumers know they get 900 minutes of calling and 75 free SMS messages.
In the online world, understanding consumption is not as easy as understanding minutes spent on the phone, but it’s just as is imperative.
That means service providers need to communicate the value of monthly package tiers by breaking them down into easily digestible measurements. For example, a 100-gigabyte data tier would be suitable for subscribers that consume, per month, about 20 million e-mails, 10,000 photo uploads, 50 movies or 25,000 downloaded songs.
By arming the subscriber with this basic knowledge, service packages can be crafted that are much more conducive to subscriber preferences rather than the “faster is better” or the one-size-fits-all approach. This knowledge will significantly strengthen brand image and customer loyalty which will become increasingly critical as the broadband markets continue to mature.
Moving Beyond Speed
Initially, Internet service tiers were based on broadband speeds, i.e., 5mbps for $49.95, or 10mbps for $54.95. More recently, service providers have added usage bundles, such as 95 GB for $54.95, to better differentiate their service. Consumption-based billing is trending more and more in mature markets where broadband growth is beginning to slow, such as North America and Western Europe. These service providers are being forced to compete on price despite providing higher access speeds.
But now the Internet has become a staple of our daily lives, and subscriber consumption continues to increase as rich media applications, video streaming and social networking drive usage. Internet trending research suggests that families are spending more of their leisure time during evening hours on Internet-based entertainment and communication applications such as YouTube, Xbox Live and Skype.
The majority of subscribers see value in receiving an increase in bandwidth when they are streaming video, uploading or downloading bulk Internet applications, according to Matt Davis, director of IDC’s consumer multiplay services. And the more subscribers understand their needs for broadband, the more they will embrace or even request personalized service tiers.
