Award Winning Blog

Tuesday, June 12, 2012

The New Economics of Metering

            The old school view for metering emphasized efficiency and resource management.  Without a meter tied to variable payment, subscribers would “overconsume” and waste resources.  Carriers ignored the metering option to stimulate experimentation especially for new services.  For example, Internet access subscriptions initially were offered on an All You Can Eat (“AYCE”) basis.  Even now cable television operates offer AYCE, largely because the business model involves a broadcast function (one-to-many) and the carrier incurs no greater costs with increased consumption.

            Internet carriers have applied conventional metering economics in migrating data subscribers from AYCE to monthly download caps.  Wireless carriers never offered AYCE, but they have agreed not to debit minutes of use for on-network voice calling.  This feature promoted positive networking externalities: a network accrues greater utility for users as more subscribers join the network.

            Some wireless carriers now want to abandon metering for voice services, not because the economics of metering has changed, but because of changes in consumer behavior.  Carriers can tout a generous new unmetered voice service, even as several tiers of usage merge into one option, offered at a higher price for many.  Because consumers are spending more time and money on data plans, wireless carriers have to find ways to retain voice service revenues.  One way would be to take a page from cable television operators and require subscription to a basic (now AYCE) voice plan, as a precondition to getting a data plan.  In cable if you want access to higher-tiered content, you must first subscribe to the basic tier.

            As they eliminate baskets of minutes in exchange for an AYCE plan, wireless carriers prevent subscribers from downgrading their voice plans to cheaper and smaller usage allotments, closer to actual (and declining) usage.  Wireless carriers now can offer AYCE on the valid assumption that few subscribers will overconsume. 

1 comment:


I would like to thank you for the efforts you have made in writing this article
nice post, that's very interesting information thanks for sharing :)
I introduce a Economics student in Islamic University of Indonesia Yogyakarta

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