U.S. Internet service providers — mostly cable companies and telcos — have a problem: Broadband adoption is slowing, pricing pressure is increasing, and consumers are gobbling up increasing amounts of bandwidth without paying more for it.
How to deal with the dilemma? Some companies, like Comcast (CMCSA) and AT&T (T), are looking to weed out or penalise heavy users by crippling their service. Now Time Warner Cable (TWC) is trying a different tact: consumption-based billing, where users the amount users pay depends on how much bandwidth the eat up.
New York Times scribe (and SA 100 member!) Saul Hansell has already calculated that under TWC’s plan, it could be possible to spend up to $30 on a hi-def movie download. Of course, TWC would never try that, but scary headlines like that point out how difficult it will be to pull off what the company is trying here. Consumers now view all-you-can-download access as a birthright, and any change to that system is going to have be done thoughtfully and with finesse.
Does that sound like your local cable company? We didn’t think so. And we don’t think metered billing is ever going to work. But if TWC, or any other provider, insists on switching to it anyway, we have some suggestions:
1) Be straight with your customers: Don’t try to describe the switch as an anti-piracy measure, as a TWC PR person did to the Times today. It’s about generating more revenue to cover increasing costs. Say so, and move on.
2) Do the maths. Then do it again. Make sure you’ve thought through what consumption-based pricing is going to get you. Broadband options are slowly increasing, and will increase faster as WiMax finally rolls out this year. Jack the rates up too high, and watch your high-bandwidth customers flee elsewhere. (Especially as Verizon makes the cable companies look like dialup purveyors with super-fast FiOS Internet.)
3) Announce your plans a year ahead of time. Or two. Give people the right tools and enough time to figure out how much bandwidth they use each month, how to prevent neighbours from stealing bandwidth via open wi-fi routers, how to download more efficiently, and how much they’ll have to pay for what kind of access. Put ads in the papers. Call customers. Stop by and show them how to put a password on their wi-fi router. But don’t let a single customer go unprepared — or get ready for the lawyers/angry mobs/FCC.
4) Make things simple. Don’t have offer 50 pricing plans. Try three: Big, bigger, biggest. And don’t nickel-and-dime people like the mobile phone companies do — don’t bill people for minor or accidental overages.
5) Offer a carrot, too. If you are going to make download hogs pay more for access, give light Internet users a reason to stick around. If I’m out of town for two weeks, and don’t use much bandwidth, cut my bill in half. If someone doesn’t download hi-def movies or stream Internet radio all day, give them the cheapest Internet access they can imagine.
6) Retire early, and exercise your options before your company goes under. Then buy Cisco stock (CSCO): Unlike your employer, John Chambers’ company makes more money as Internet usage increases. Doesn’t that sound like a good business?
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