Tuesday, July 7, 2015

Republic Wireless Shifts to "Pay Only for What You Use"

Republic Wireless is shifting from “unlimited data” as a primary selling point to pay only for what you use as an alternate value proposition, as Google Fi has pioneered.

Under the plan, consumers get a refund for using less data than they paid for in the prior billing period.

The trend is significant, with  some profound potential implications for retail Internet pricing. Up to this point, Internet service providers have tried to move away from “unlimited use” for a flat fee.

Instead, ISPs would prefer a consumption-based or “rated” system where customers pay based on how much they consume.

In other words, consumers who use more, pay more.

Oddly, consumer advocates generally have argued that unlimited usage for a flat fee is the fair approach, and have opposed rated usage.

Others argue that “paying for what you use” is the fairer approach, since heavy users pay for what they use, and are not subsidized by light users.

The new twist is the “refund” users get if they do not use all of their purchased data allotment. At the same time, such refund plans also are metered, rated or consumption-based plans.

Of course, there are other important effects. Both Republic Wireless and Google Fi are banking on rational behavior by users who now have incentives to switch usage to Wi-Fi even more than they had been doing.

If they use less carrier capacity, they get a refund. That aligns incentives in a way that will encourage even higher use of Wi-Fi than already happens. And that helps mobile virtual network operators reduce their costs, since lower mobile network usage means lower payments to the underlying carriers.

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