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Data Pricing Sanity Maybe?

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Re: Data Pricing Sanity Maybe?

#41

Post by adestefan »

mapgrep wrote: post #36

"Fixed-price unlimited-volume data pricing is a totally, unfixably broken idea." -Bray This "unfixably broken idea" is how the internet spread to the general population, 1995->present. That's 17 years. Seventeen years in which even very limited carrier competition brought prices way down and speeds way up. Does anyone remember how much a 128kbps ISDN used to run? Seventeen years in which the typical consumer went fro…

You need to preface all of this with "in the US." Per minute POTS billing is very common outside of the US.

Re: Data Pricing Sanity Maybe?

#42

Post by jerf »

yellowbkpk wrote: post #8
jerf wrote: post #7

Earlier quoted context omitted.

While I understanding your general cynicism, may I observe that except for the easy API part, Comcast already does all this transparency stuff. (Different pricing plan, but it is transparent, and mostly adequate.) If market pressure could get Comcast to comply, I don't think it's that hopeless that it can get the telcos to comply. Your cynicism is perhaps a little too cynical.

Which Comcast transparency are you talking about? I had Comcast in mind specifically when I was writing my cynical post.

Log in to your Comcast account, and on one of the primary tabs will be the amount of bandwidth you've used this month and the totals for the previous two months, along with a clear specification that you get 250GB/month (and how fuzzy they are willing to be about that), and some FAQs about why. Market-speak about why, yes, but still, it's there. It's all there now, and has been for at least a year. And they clearly announced this at the time they put it in. The only thing they don't have is the easy API for finding this out automatically.

Unfortunately my login details are not where am I am right now and I can not give you directions straight to it, but it's not that hard to find once you jump the hurdle of finding your login.

Re: Data Pricing Sanity Maybe?

#43

Post by jerf »

billybob wrote: post #31
jerf wrote: post #6

Earlier quoted context omitted.

And the way to do that is: Fixed price for the first X GB, generous enough to cover ~90% of the users, variable pricing thereafter, and the aforementioned transparency about the status of your account. (In particular, text message alerts warning you when you've hit 90% of the limit, or some other active notification that you're going over, not just some abstract page that you could, theoretically, hit.)

This pricing model sounds to me like "the user is always punished." You bought XGB this month. You didn't use it all? Ooops, you overpaid. Punished. You used more? Ooops, you pay a higher rate for the overage. Punished. How about we treat this like any other commodity and I get exactly what I pay for?

jpadkins: "It has been shown over and over again that consumers prefer fixed price, even if they have to pay more to get it."

It is pretty well established. Where your model deviates from reality is in not accounting for the mental costs associated with having to (/wanting to) track how much bandwidth you've used on a minute-by-minute basis... how much is that Netflix movie costing me? How much is this Youtube video costing me? etc etc

You can argue about how irrational this is. You can even be objectively correct. And it won't matter very much.

Even objectively, you do need to worry about some fixed costs too. A package deal for the first X GBs might now be as irrational as you initially think.

Re: Data Pricing Sanity Maybe?

#44

Post by quandrum »

narag wrote: post #37
jpadkins wrote: post #21

Earlier quoted context omitted.

> Why shouldn't companies in the US then be able to offer such a model? They don't have to because they are in a government regulated cartel. Classic case of regulatory capture. The only free market in the US is the wifi sprectrum, which is providing the most value to US citizens.

If the industry is heavily regulated, the government should also regulate what the comment above points. The price should be clearly stated. Fine print should be forbidden.

The hallmark of "regulatory capture" is that the regulated party is driving the relationship, and not the regulators.

So while we see occasional push back when public outcry gets too loud, most law and regulation is written by telco's, and hence telco friendly.

Re: Data Pricing Sanity Maybe?

#45

Post by malandrew »

adestefan wrote: post #34
malandrew wrote: post #23

First off, if we do go with variable pricing, the last thing we want is values to be denominated per MB. There is too much cognitive load on humans to think in terms of MB quantities. Second, variable pricing makes sense if those who use very little data get a discount off the amount this currently use.

But yet we price water and gasoline per gallon , natural gas per cubic foot , and electricity per kilowatt hour. * in the US, others feel free to convert to your local units.

Gallons makes sense. I could wrap my head around the 15 gallons I used to put in my car's tank. What I wouldn't want to wrap my head around is thinking about putting ~56,781 cubic centimeters of gas in my tank.

If you require someone to perform multiplication beyond 10^1 scale to estimate costs, it becomes easier for telcos to overcharge users. You and I probably have no issues with multiplication in our head on the order of 10^2 up to 10^6, but for most users, that scale is mentally taxing.

Compare:

0.02 cents per sms message $20 per 1000 sms messages

Plus, prices are "stickier" at 0.02/message than 20.00/1000 messages, since it's easier for two telcos to start discounting their price relative to one another with the latter, like $15/1000 vs $20/1000. The equivalent to such a discount under the per message pricing schema is to charge fractions of a cent. i.e. 0.015/message vs. 0.020/message. The only place in society where we really see fractional cent pricing in daily life is with gallons of gas, and even there the burden for the end-user is high enough that the gas stations all get away with leaving that fractional amount at nine tenths of a penny almost all the time.

Re: Data Pricing Sanity Maybe?

#48

Post by telcodud »

huxley wrote: post #19
dkokelley wrote: post #4

There are a number of things wrong with they way our current cellular network industry works in the US. The biggest issue IMO is subsidizing phones. When we pay phone bills, we're also paying for the cost of the phone. When we buy more expensive smart phones (which make excellent use of a data connection) we pay more via data plans. These data plans also have the cost of the phones built in. From the carrier's perspe…

Not so: http://www.mondaynote.com/2012/03/11/carriers-whine-we-wuz-r... "The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices." For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims. From a carrier's perspective, grandfathered "u…

"The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices."

For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims.

I dislike[1] the US carriers and their absurd data plans as much as the next guy, but the above logic has always baffled me.

Everyone seems to confuse revenues and earnings when talking about smartphone subsidies.

The subsidy of $20/mo (as quoted above) is paid out of carrier earnings, while the phone ARPU gets added to their revenues. Assuming a generous profit margin of 40%, unless the additional ARPU, compared to non-smartphone devices, is greater than $50/mo (2.5x the subsidy), the carriers are not exactly making out. This is the case more so for iPhones, where I understand the subsidies are higher than other smartphones, but the ARPUs are equivalent.

[1] I'd prefer the model where the customer brings in an un-subsidized (smart)phone and pays lower on monthly plans.

Re: Data Pricing Sanity Maybe?

#49

Post by CookWithMe »

JumpCrisscross wrote: post #13
CookWithMe wrote: post #9

I vote for a pre-paid per-MB pricing. And fair pricing, but yeah. I think it is comparable to a gas station: You drive more, you pay more. You drive less, you pay less. There are many reasons to feel raped by the oil companies, but that there is no gas flatrate is not one of them (I dont want to share a flatrate with people who use way more gas/data than me).

Why would you prefer pre-paid over being billed at the end of the month? The former is lending your carrier money at zero interest on a monthly basis.

Two reasons: In Germany the pre-paid carriers are actually (a little bit) cheaper. I assume they can be run more cost efficiently, not only because of the interest but also because they don't have to worry about people not being able to pay their bills etc.

The other reason is, back in the early days of the internet I moved and switched from a modem to broadband. I also changed my contract with my internet provider, switching to a flatrate. They sent me an email, saying "order for flatrate received" etc. I didn't read the small print. 2 months later I received my first bill: No flatrate, huge bill. What happened? The day after I ordered, they changed their contracts. My order was for an old contract-type and was silently cancelled. Their fault, right? Nope, legally not, because the email said in the small print "Flatrate not yet booked, please wait for confirmation mail". Customer service figured it was better to screw me over than to keep me as a customer. (Propably a good choice, I think I could buy a flatrate for 3 or 4 years for that money today :) ). Anyway, wouldn't have happened with pre-paid.

Re: Data Pricing Sanity Maybe?

#50

Post by huxley »

telcodud wrote: post #48
huxley wrote: post #19

Earlier quoted context omitted.

Not so: http://www.mondaynote.com/2012/03/11/carriers-whine-we-wuz-r... "The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices." For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims. From a carrier's perspective, grandfathered "u…

"The average ARPU for smartphones on AT&T's network is 1.9 times that of the company’s non-smartphone devices." For an iPhone, the subsidy comes to less than $20/month in exchange for significantly more revenue per user. The carriers are making out like bandits and then claiming they are the victims. I dislike[1] the US carriers and their absurd data plans as much as the next guy, but the above logic has always baffl…

When it comes to accounting for it, subsidies like all other expenses by definition come out of revenue, not earnings.

According to JL Gassee, the ARPU for most cellphones is $46.09, for iPhones it is approaching $120 (inclusive of the subsidy).

He quotes: "AT&T CEO Randall Stephenson pronounced himself happy with the 'over $100' ARPU from iPhone subscribers."

There is a very healthy amount there to absorb the subsidy plus cost of providing voice + data.

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