renamed: Usage based billing

Peter Ford peterf at
Thu Aug 29 19:39:40 UTC 1996

The other thing that everyone has their business plan built on is an 
average utilization
of X.  If the average utilization grows to 2*X or 3*X then the business 
plan usually does not work.
Usage base measuring is a no-brainer, most providers measure their 
customers' loops today.
Much of the discussion so far has mistaken usage based measuring/pricing 
with the style of accounting the telcos use for phone calls which certainly 
is not the only usage accounting model available.

Usage based accounting can also be used to lower the barrier some customers 
might have in terms of connecting to the Internet.  If their usage is low, 
they pay LESS.     If they can get really cheap high speed local loop, they 
might pay A LOT LESS.    How many people want to surf the web vs how many 
people want to host a big web site on their ISDN lines.   The model I like 
is where they both are always "connected" but one group pays less (per 
month) than the other.  It seems intuitive to me and I suspect it is 
intuitive to most consumers of Internet which probably makes it easier to 

If I have a fixed number of dollars would I rather buy a really high speed 
pipe and pay for what I use or buy a really narrow pipe (that is 
provisioned on top of a really high speed pipe of which most of it I can 
not use) and pay for what I use and what I don't use?

Empirically, it is hard for me to buy into the "usage based accounting 
kills the market" argument as long as the telephone business continues to 
grow (not to mention a whole lot of other usage based pricing businesses).

In the end, there needs to be a set of business models (probably more than 
one) that are good for both the customers and the providers.   I believe 
usage based models will be there for the reasons cited above, and the fixed 
rate schemes will be employed where there are broad averages that can be 
exploited (the customer likes the flat predictable rate, the provider 
believes the average usage still allows him/her to make money).



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