Broadband carriers spend a lot of effort emphasizing broadband speed tiers with their marketing efforts. There is a never ending speed race, with carriers trying to outdo each other with their broadband speed tiers.
Is there a better approach? One that focuses on experience versus speed and bills subscribers based on usage, not speed? This was an interesting approach discussed on the Usage Based Billing Strategy panel at NTCA’s Fall Conference, which took place in Indianapolis this week.
Open Up the Broadband Pipe
Instead of emphasizing speed, why not emphasize a better broadband experience that delivers all the applications customers want, and base their monthly billing on their amount of broadband usage. It’s a bit of a paradigm shift that’s broader than just about shifting to a usage based billing strategy.
Most current usage based billing programs still emphasize and lead with speed when marketing the service. Metered broadband or usage caps are an afterthought, oftentimes based on the speed tier selected. In this new approach, the thought is, don’t lead with speed at all. In fact, maybe offer all customers the most speed you can offer, without even emphasizing it.
“Open it all the way up, and see how customers use it,” said panelist Brock Johansen, CEO of Utah based Emery Telecom. Johansen suggested offering customers as much speed as you can, without even marketing it as such.
Rather, market it as the broadband experience that will deliver all the applications customers want, and their monthly bill will be based on their usage pattern, represented by blocks of usage – 150 GBs, 500 GBs, 1 TB, etc.
A different approach for sure, and one that can’t be taken lightly. There are a number of implications, including customer education, impact on the network, and impact on revenue.
The Importance of Understanding Usage Patterns
All panelists, which also included Dacia Bolton-Bates, marketing manager at WesTel Systems (Iowa), and Mark Trudeau, CEO of OpenVault, emphasized the importance of studying these and other factors before embracing any usage based billing strategy. The panel was moderated by Dean Carter, marketing manager for Pioneer Telephone Cooperative (Oklahoma).
“If I could encourage anything today, it wouldn’t be go to measured broadband, it would be start tracking data,” said Johansen. “What are people using, you need to start measuring your data.”
All panelists agreed that understanding data and customer usage patterns was an important first step. Many encouraged a process of at least a year to collect and analyze this data before making a usage based billing strategy decision.
This analysis also helps determine the impact on the network. One strategy for this approach suggested only applying it to FTTH (and DOCSIS) customers, since these networks have more capacity, and in some cases are easier to manage. DSL networks have some potential limitations that may make the implementation harder and also potentially lessen the customer experience.
“It is really important for at least a number of months to truly understand the usage behavior on your network,” said Trudeau. “On some networks we’ve looked at, we’ve seen the top 1% of subscribers using 15% to 20% of total available bandwidth.”
Customer Education Must be a Priority
This is a different approach for carriers, but it’s also a different experience for customers. Getting them to understand it is no trivial task. They have been bombarded with speed references and this approach emphasizes something else. Although, customers can relate somewhat through their wireless experience, which very much emphasizes usage and experience over speed.
Strategies for customer education include deploying usage monitors that can be easily accessed well ahead of any change. And not just making these monitors available, but regularly talking to customers about them and the data they provide.
“Customers know what a minute is, but they don’t know what a gigabit is,” said Trudeau. “You have to have the stomach for this, you will receive FCC complaints.”
But Trudeau says, for the most part, OpenVault’s customers have been able to manage that without much problem. It’s not been overwhelming.
There is a definite balancing act here. Educating customers about the paradigm shift, before actually implementing it.
Motivations for a Usage Based Billing Strategy
There are a number of potential motivations for this shift. Some of them are controversial, with consumer interest groups raising suspicions around pricing and net neutrality implications. It is a complex question for sure.
Panelists emphasized much of the positive outcomes from this paradigm shift. Johansen framed the move as satisfying customer expectations, in addition to some of the other factors.
“If you open up your customers and all of a sudden they use double the bandwidth, you created that pain for your customer, they wanted 100% more bandwidth and you limited them, creating a 100% pain for them,” he said.
By moving to a metered or usage based approach that also maximizes the speed they can use, customers get all the bandwidth they need or want, providing the experience they desire. They are in more control and the carrier can bill them according to the experience they want, he emphasized.
“It’s not going to be as scary as you think,” Johansen suggested, referring to the impact it may have on customer attitudes and the network itself. Johansen says they’ve seen an increase in broadband revenues of 11% since making the move.
Consumer interest groups may argue this approach should be applied without usage caps, arguing they inflate monthly billing charges.
Bolton-Bates highlighted other positive outcomes that have come to WesTel Systems, who moved to usage based billing several years ago.
“Only 2% to 6% of our customers go over their limit,” she said. “We’ve cut illegal downloads and we’ve cut customers from sharing their WiFi passwords with their neighbors.”
Trudeau emphasized the need to qualify and quantify any move to a usage based billing approach.
“It’s critical to understand your true objectives of this strategy,” he said “Is it to generate more revenue, is it to curtail usage?”
Good luck on the latter though. He says even carriers who implement usage based billing, on average, still see a bandwidth growth rate of 50% annually or more. OpenVault’s customers currently see average monthly bandwidth consumption of 131 GBs, he said.