If there’s one trend in the broadband industry that’s sure to be top of mind for every operator heading into 2016, it’s metered Internet service.
Love it or hate it, the trend—which Comcast has been experimenting with since 2013—shows no sign of slowing down any time soon. In fact, earlier this month Comcast rolled out a new capped data plan in Florida, where residential customers must pay an extra $30 per month for unlimited data in order to avoid overage charges. Right now, about 12 percent of Comcast’s total market uses tiered “usage-based pricing.” This number is expected to grow as Comcast looks to drive revenue from data-hungry consumers.
So, why are companies like broadband looking into usage-based broadband pricing models? It has to do with the amount of time that users are spending online accessing data-heavy multimedia files. As an increasing number of consumers are leveraging online media in lieu of traditional pay TV, broadband companies are looking for ways to make up for cord-cutting customers.
As explained in a recent CED article, for instance, in 3Q15 Comcast lost 48,000 cable customers. Yet it added 320,000 Internet customers. Despite the fact that the company experienced the smallest third quarter cable revenue loss in nine years, the numbers are still disproportionate.
The belief is that by offering usage-based pricing, broadband operators can charge premium rates for customers using excessive amounts of data on a monthly basis. At the same time, customers who choose to use less data can do so without having to worry about price increases.
Keep in mind that while usage-based pricing is a growing trend, not all broadband providers are keen about the idea. In fact, most broadband providers seem to be steering clear of usage-based pricing, choosing instead to focus on growing their bottom lines by increasing the speeds and capacities of their pipelines. There is a fear amongst many broadband providers that by offering usage-based pricing, they could alienate their biggest customers and cause them to deflect to competitors offering cheaper rates.
T-Mobile, for instance, is taking the direct opposite approach to data caps as it’s supposedly planning to unveil a new plan that will offer customers access to unlimited high-speed data streams like HBO Now and Netflix. Such a plan, if it goes to market, could spell trouble for companies considering rolling out usage-based pricing models. After all, it would make little sense for customers to pay premium rates for heavy data usage, when they could obtain it for free through a mobile carrier like T-Mobile.
So, which route should your business take in 2016? Both usage-based pricing and unlimited pricing models have their merits. Make sure to keep in mind that while usage-based pricing does have a big upside as it can generate more money for your business, there are risks involved. What’s more, while the trend is in the spotlight right now it’s far from the industry norm, and not something you have to rush into to remain competitive.
Our advice would be to keep metered broadband on your radar moving forward, and be aware of how the industry is embracing it. In the meantime, you can create the revenue you need to improve your network by focusing on improving the subscriber experience. The easier you make processes like billing and service provisioning, the happier your customers will be and the more willing they will be to stick with your business.