Usage-Based Pricing Not Unusual

At some point, as more Internet service providers begin to adopt "buckets" of use as the dominant subscription model, there will be outcries about whether this is fair, since most users in the U.S. market have come to expect flat fee pricing for "unlimited" use.

That has not been the dominant model in Europe, for example, and though there might be some incremental impact in usage patterns, I don't think anybody would argue that metered usage is terribly and inherently unfriendly.

It also is highly unlikely to the point of implausibility that ISPs in the U.S. market will move to a strict metered usage regime. The reason is simply that the objective--matching consumption to the cost of providing access--can be addressed more simply and palatably by using the "bucket" model, much as mobile calling or texting plans can be purchased based on expected usage.

In that regard, it might be helpful to recall that consumer pricing has used any number of models. Pay-as-you-go had been the dominant packaging and pricing model for all long distance plans, mobile and fixed, until at&t introduced "Digital One Rate." Local calling, on the other hand, has used a "fixed fee, all you can eat" model.

Cable TV has used a mixed model: essentially "flat fee, all you can eat" for ad-supported video and movie channels, but usage-based pricing for on-demand pricing.

The model used for Internet access started at the other end of the continuum: unlimited use (subject to some acceptable use policies) for a flat fee. Only recently have some voice providers moved to that model.

Of late, though, there has been a bigger move to "buckets" that match usage to price. There's no particular reason to believe a move in that direction will affect the vast majority of users. Most customers have usage patterns that fall within a reasonable zone, and won't, in practice, notice anything different even if usage-based pricing becomes more prevalent.

Providers obviously will want to minimize disruption, and there's no question but that lower prices have driven high demand. Nobody will want to jeopardize their market share by raising prices for most customers other than the small percentage who consume a disproportionate share of bandwidth.

Over time, more attention will have to be paid to the relationship between retail pricing and usage as video starts to change usage patterns, though.