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Why not just offer bucket pricing too?

Was invited to a lunch buffet at Sofitel yesterday afternoon by one of the telcos to celebrate Chinese New Year with other members of the media covering the telco beat. It was an opportunity for me to grill them about the NTC and bandwidth issue so I prepared my questions just in case.

And thanks to the my readers who left comments about the issue, I was able to bring more insights into the discussion with their product managers.

Was there capping in the first place? One of the product managers categorically said they’ve never implemented any sort of capping on their residential subscribers. Their only contention is that they place safeguards printed in the Fair Usage Policy. I then pointed out that a trusted source gave inside information that their 3G packages are actually capped — a measure they’ve finally admitted. They qualified though that the usage dynamics with mobile 3G is very different from fixed residential lines and as such, some sort of capping is necessary on that end (since the 3G spectrum is finite and limited).

So I asked them if there was some sort of over-subscription on their part. The answer was a qualified “yes” — that there was a time that they somehow exceeded their subscriber capacity. However, that was addressed immediately and have been continuously monitored and optimized on a regular basis.

The issue with “unlimited internet” zeroed in on false advertising. The use of the term “unlimited” actually refers to the time and not the bandwidth so when they said unlimited internet they actually meant you can use your internet 24 x 7 at a fixed price. Unlimited does not refer to unlimited bandwidth. That’s why we normally see two plans being offered — e.g. Plan 499 for 50 hours internet (this is the limited) and Plan 999 for unlimited hours of internet (this is the unlimited).

I added that this is very confusing to regular consumers who know very little about bandwidth and such. Their proposed solution — educate the consumer about the which type of internet service is appropriate for their lifestyle or usage pattern.

So why not just offer bucket pricing too, I asked? If they say that only 1 to 2% of the subscribers actually exceed “normal” usage patterns, why not just offer these subscribers a more equitable package that will suit their needs. Say Php500 for every 50GB of bandwidth? If I only used 5GB for the month, then I only get billed for only Php50. Now that’s fair use!

They didn’t really answer this but promised that they’ll be putting up something really soon to address this “idea”. At this point, I felt they were a little uncomfortable answering any more of my questions so I said that’s enough for today.

I believe bucket pricing could be a solution to the issue of “over-usage”. Imagine, if I only pay Php10 per 1GB, then I might be able to afford to subscribe to 3 different ISPs all at the same time. If I use 20GB on the 1st ISP, then 30GB on the 2nd ISP and 50GB on the 3rd ISP, my total usage is 100GB. I then pay Php200, Php300 and Php500 to each provider respectively for a total internet bill of Php1,000 a month — and to think I subscribe to 3 ISPs all at once. I don’t think you can afford that at our current situation.

If one of the ISP’s connection craps out and I don’t get to use their internet, I don’t pay anything at the end of the month since I didn’t use any bandwidth. How’s that for a fair use policy? I only pay for what I use.

This will remove the focus on service providers away from “marketing” and more on “quality of service”. The better the quality of connection, the more you use their service and the more you pay them at the end of the month. They might even open up your pipes more (from 2Mbps to 5Mbps) if they want you to use their line more often. Imagine one ISP billing you for just Php5 because their connection speed is really crappy and you can’t download anything thru their line.

The idea came up when after a reunion with some college batchmates, one of them tells me he’s still using dial-up at home. The reason was that he’s always in the office anyway and that he only access the net from home for 1 to 2 hours a day. Paying Php999 for unlimited internet hours, while affordable, is still expensive considering he’s only online between 30 to 60 hours a month.

By getting prepaid dial-up, he only pays for the hours he actually uses. He probably spends Php250 on dial-up for those hours (way cheaper than Php999). If we go by the bucket pricing model, he could subscribe to a DSL account and possibly still pay the same Php250 amount he used to pay with dial-up.

Of course this scenario might not apply to everyone but I’d like to see them ISPs try that billing method. That way, we’d really know who has the better service.

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Avatar for Abe Olandres

Abe is the founder and Editor-in-Chief of YugaTech with over 20 years of experience in the technology industry. He is one of the pioneers of blogging in the country and considered by many as the Father of Tech Blogging in the Philippines. He is also a technology consultant, a tech columnist with several national publications, resource speaker and mentor/advisor to several start-up companies.

71 Responses

  1. Avatar for kristian kristian says:

    Guys i hate globe already… iv been watching you-tube for 5 hours only… ad i cant connect to the internet because of this…

    GLOBE Advisory: Ur data subscription for today has reached 800mb. Ur remaining browsing hours will resume tomorrow subject to promo validity. U may opt to forfeit ur remaining subscription to browse for P5/15. To unsubscribe text POWERSURF OFF or SUPERSURF OFF to 8888. This promo is guided by Globe Fair Use Policy.
    Time: 27/02/2011 02:17:09

  2. Avatar for vince vince says:

    @Paul

    horror story talaga yang link na yan. Let me quote

    “This is going to hurt

    Starting on March 1, Ontario TekSavvy members who subscribed to the 5Mbps plan have a new usage cap of 25GB, “substantially down from the 200GB or unlimited deals TekSavvy was able to offer before the CRTC’s decision to impose usage based billing,” the message added.

    By way of comparison, Comcast here in the United States has a 250GB data cap. Looks like lots of Canadians can kiss that kind of high ceiling goodbye. And going over will cost you: according to TekSavvy, the CRTC put data overage rates at CAN $1.90 per gigabyte for most of Canada, and $2.35 for the country’s French-speaking region.

    Bottom line: no more unlimited buffet. TekSavvy users who bought the “High Speed Internet Premium” plan at $31.95 now get 175GB less per month.

    “Extensive web surfing, sharing music, video streaming, downloading and playing games, online shopping and email,” could put users over the 25GB cap, TekSavvy warns. Also, watch out “power users that use multiple computers, smartphones, and game consoles at the same time.”

    You need “protection”

    Here’s the “good” news: TekSavvy users can now buy “insurance,” defined as “a recurring subscription fee that provides you with additional monthly usage.” For Ontario it’s $4.75 for 40GB of additional data (sorry, but the unused data can’t be forwarded to the next month).

    There are also “usage vault” plans—payments made in advance for extra data. Consumers can buy vault data for $1.90/GB up to 300GB in any month.

    Where once TekSavvy consumers could purchase High Speed Internet Premium at a monthly base usage of 200GB for $31.95 a month, now they can get about half of that data (if they buy two units of insurance) at $41.45 a month.”

  3. Avatar for Paul Paul says:

    Sir yuga, I highly suggest you stop pushing for bucket pricing, or at least reconsider the consequences.

    http://arstechnica.com/tech-policy/news/2011/01/canada-gets-first-bitter-dose-of-metered-internet-billing.ars

    Because then this happens… 25GB per month cap. And an additional $2 per extra gigabyte. This cap is combined for upload and download.

    The worst part? They still have a fixed rate to pa, whether or not they reach their 25GB quota. They followed the bucket pricing suggestion, but ultimately it works better on their end.

  4. Avatar for Internet Hizmetleri Internet Hizmetleri says:

    For me speed and service is the problem, not price. On the low end though, I can see where this idea would have merit.

  5. Avatar for vince vince says:

    as usual this has advantages and disadvantages. The most obvious disadvantage is, if the price is too high, it will discourage innovation, anything that consumes bandwidth, both legal and illegal. We all know what those high bandwidth uses are

    If this was implemented years ago with a high price among other things, streaming video, MMORPG’s, even flash animation on websites would not be common

  6. Avatar for Jay Jay says:

    Reminds me of coin activated public telephone. 25cents X 3.

    Paying the (approx) exact usage for every user will solve all this pirate issues and probably internet traffic if they dont intend to upgrade their system.

  7. Avatar for Herce Herce says:

    There is already a kind of bucket system in place. When you subscribe to the expensive tier fixed line service, there is no capping. At least none that I have seen.

    In terms of the low end services, I do think this bucket idea has merit. As in the case of your friend who is still on dial up (can’t believe they still offer dial up).

    However, as someone who uses fixed line at home a lot for personal server services, I would much prefer that the ISPs continue to offer more expensive plans that are truly unlimited but offer much faster bandwidth. I am willing to pay a price premium for faster consumer retail net and I know many others that are like me.

    For me speed and service is the problem, not price. On the low end though, I can see where this idea would have merit.

  8. Avatar for Arnold Gamboa Arnold Gamboa says:

    Hi Abe,

    The problem with this proposal is not in the proposal itself but with the kind of honesty the telcos will provide in terms of reporting the bandwidth consumptions.

    Pag flatrate, madali lang ang usapan. Pero pag per bandwidth ang billing, I don’t think I can trust them with that — for now :D

  9. Avatar for Bohret Bohret says:

    bakit hindi natin lapitan si manong jhonny ng senado para mabigyang pansin etong problemang eto, puro pera lng kc gusto ng mga telco, para maiwasan na mabawasan ang mga base stations nila hehehe

  10. Avatar for Bohret Bohret says:

    Parang Smart Communications yung tinamaan ah, laging over subscription, crappy 3g connections, poor quality of service.. i want to blow up smart towers hehehehe

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