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SDRNews: Pricing Broadband with Human Nature

November 1st, 2009 Administrator

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Pricing Human Nature

by Andrew McCaskey
Setting Broadband Rates

It only seems fair – With broadband, as with other utilities such as electricity and water, people should pay for what they use. Apparently, none of the ISP’s are considering doing this, because they have a more profitable way that taps into human nature.

It’s the same little quirk that sells laptop and cellphone batteries, because we keep them on the charger far more than they really need to be. You want to have plenty to go, to keep them topped off. We are afraid to run out, and that’s exactly the fear that the new “metered” services (which are not metered at all, but are sold in tiers) are designed to tap into.

Demand and use of the Internet has risen faster than capacity can keep up, which means that the all-you-can-eat model of unlimited broadband per month no longer applies. ISPs’ version of metered broadband isn’t priced like your water or electricity. Carriers would never want to do this because it would actually reduce their profits. Broadband will instead be priced like a cell phone plan.

In wireless, if you use around 450 minutes a month, you want to make sure you don’t run over and get extra charges – so you opt for the 600 minute plan. Your usage – and those of most people will still stay around 450 minutes. You are buying assurance that you aren’t going to get cut off or run up a big bill. But in fact, the probablity that you will consume up to the next limit is low.

If you paid a large price for “unlimited use” per month, your calling patterns would have to change drastically to seriously impact their network – and the difference is almost pure profit.

Broadband is going to be the same way. You are not paying for bits, you are paying for peace of mind. And there is always a market for that.

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