Google Fi has "Nailed It:" "Pay Only for What You Use" is Both Fair and Efficient

There are some profound implications for retail Internet pricing as communities across the thirsty U.S. west grapple with “water shortages.” Substitute “usage caps” for that phrase. They are the same sorts of economic issues.

In both cases, a product “essential for life” has pricing mechanisms that encourage “excessive use” by some, and there is serious intent now to align “fair use” either by market incentives or “rule by fiat” to “reduce consumption” (“ensure fair access”).

The key: “Tiered pricing offers a balance between fairness and efficiency,” said Kenneth A. Baerenklau, associate professor of environmental economics and policy at the University of California, Riverside.

In other words, consumers who use more, pay more. That simple pricing structure encourages people to act as stewards of their money.

In the case of water, it is because higher use incurs higher rates--the charges are non-linear.

In the case of internet access, those who advocate “unlimited” or “effectively unlimited” service plans are like water utilities that charge low, uniform prices. In other cases, there are higher rates for higher consumption, but not significantly higher rates.

In the case of Internet access, Google Fi encourages what it says is a simpler and fairer way to charge customers for using mobile Internet access services: there is a flat fee based on usage. The more you use, the more you pay.

To be sure, Google also would argue that it is “pay only for what you use.”

That goes further than does T-Mobile US or AT&T, both of which offer “roll over” of unused data. Those efforts are ways of providing some end user value for purchased data allotments.

Allowing users to “roll over” unused capacity is helpful, up to a point. It is more like a offering consumers protection against overages, though. The roll over usage allotment acts like a cushion against sudden spikes in monthly usage “over plan.”

Fi’s policy is much more transparent and “fair:” you really only pay for what you use. That is the way people pay for water consumption. Ironically, “pay only for what you use,” with linear pricing, is precisely the way service providers likely prefer to charge, and an approach few “consumer advocates” support.

The point: charging for an important commodity based on usage encourages people not to waste the resource. And even if we are going to be getting “abundance” in terms of speed, and “better pricing” for Internet access, we still are not tapping self interest. Our pricing policies do not encourage people to think about their usage.

Fi is a major advance, in that sense. It not only is drop dead simple, it encourages users and customers to think about their consumption. Some might argue it is not important to encourage people to “waste” capacity or bandwidth.

Of course it is. We always should be efficient and have a “low impact” whenever any major resource is used. There always are environmental and other costs (direct and indirect) incurred when we use any major resource.

Fi has proposed a better way: not only “fairer” but also designed to encourage people to think about their usage, even when the direct “value” pitch is “pay only for what you use.”