An Attempt at Economically Rational Pricing: Time Warner Trial

Sat Jan 19 16:37:55 UTC 2008

Condensing a few messages into one:

Mikael Abrahamsson writes:
> Customers want control, that's why the prepaid mobile phone where you get
> an "account" you have to prepay into, are so popular in some markets. It
> also enables people who perhaps otherwise would not be eligable because of
> bad credit, to get these kind of services.

However, if you look, all the prepaid plans that I've seen look suspiciously 
like predatory pricing.  The price per minute is substantially higher than
an equivalent minute on a conventional plan.  Picking on AT&T, for a minute,
here, look at their monthly GoPhone prepaid plan, $39.99/300 anytime, vs
$39.99/450 minutes for the normal.  If anything, the phone company is not
extending you any credit, and has actually collected your cash in advance,
so the prepaid minutes ought to be /cheaper/.

Roderick S. Beck writes:
> Do other industries have mixed pricing schemes that successfully =
> coexist? Some restuarants are all-you-can-eat and others are pay by =
> portion. You can buy a car outright or rent one and pay by the mile.=20

Certainly.  We already have that in the Internet business, in the form of
business vs residential service, etc.  For example, for a residential
circuit where I wanted to avoid a disclosed (in the fine print, sigh)
monthly limit, we instead ordered a business circuit, which we were
assured differed from a T1 in one way (on the usage front):  there was 
no specific performance SLA, but there were no limits imposed by the
service provider, and it was explicitly okay to max it 24/7.  This cost
all of maybe $15/month extra (prices have since changed, I can't check.)

Quinn Kuzmich writes:
> You are sadly mistaken if you think this will save anyone any cash,
> even light users.  Their prices will not change, not a chance.
> Upgrade your network instead of complaining that its just kids
> downloading stuff and playing games.

It is certainly true that the price is resistant to change.  In the local
area, RR recently increased speeds, and I believe dropped the base price
by $5, but didn't tell any of their legacy customers.  The pricing aspect
in particular has been somewhat obscured; when I called in to have a
circuit updated to Road Runner Turbo, the agent merely said that it would
only cost $5/month more (despite it being $10/ more, since the base
service price had apparently dropped $5).  They seemed hesitant to explain.

Michael Holstein writes:
> The problem is the inability of the physical media in TWC's case (coax) 
> to support multiple simultaneous users. They've held off infrastructure 
> upgrades to the point where they really can't offer "unlimited" 
> bandwidth. TWC also wants to collect on their "unlimited" package, but 
> only to the 95% of the users that don't really use it,

Absolutely.  If you can do that, you're good to go.  Except that you run
into this dynamic where someone else comes in and picks the fruit.  In
Road Runner's case, they're going to be competing with AT&T who is going
to be trying to pick off those $35-$40/mo low volume customers into a
less expensive $15-$20/mo plan.

> and it appears 
> they don't see working to accommodate the other 5% as cost-effective.

Certainly, but only if they can retain the large number of high-paying 
customers who make up that 95%.

> My guess is the market will work this out. As soon as it's implemented, 
> you'll see AT&T commercials in that town slamming cable and saying how 
> DSL is "really unlimited".

Especially if AT&T can make it really unlimited.  Their speeds do not
quite compete with Road Runner Turbo, but for 6.0/768 here, AT&T Y! is
$34.99/mo, while RR appears to be $40(?) for 7.0/512.

The difference is that's the top-of-the-line legacy (non-U-verse) AT&T
DSL offering; there are less expensive ones.  Getting back to what Roderick
Beck said, AT&T is *effectively* offering mixed pricing schemes, simply by
offering various DSL speeds.

... JG
-- 
Joe Greco - sol.net Network Services - Milwaukee, WI - http://www.sol.net
"We call it the 'one bite at the apple' rule. Give me one chance [and] then I
won't contact you again." - Direct Marketing Ass'n position on e-mail spam(CNN)
With 24 million small businesses in the US alone, that's way too many apples.