3G Billing - What's all the fuss? (Cont'd)

Many mediation and billing systems on the market today can provide metered billing for data services on the basis of data volume. However, the costs to train customer care agents to understand the sizing and rating methods, and the lengthy calls to call centers from confused customers will inhibit take-up of the new data services, and may eat away their margins as well. The content-rich services 3G is intended to carry will break new ground by divorcing the cost of service from the network capacity required to deliver them. At best, billing on the basis of network usage leaves a significant portion of the potential revenues to the Content Provider or in the customer's pocket. At worst, it leaves the CSP with a loss on every piece of content delivered.

All You Can Eat
The easiest solution to both of the problems identified with metered billing for data and content is to provide large 'buckets' of content and data for a monthly charge. "All you can eat" is a bit of a misnomer in that most carriers will put a cap on usage covered by the charge to avoid exposure, but the amount provided in the bucket is usually more than sufficient for the majority of customers. The positive aspect for the end customer is they avoid bill shock, they know what they will be charged. The downside from the customer perspective is All You Can Eat Plans can deter the casual or trial user as the entry cost is too high for a service that has yet to prove its worth.

The positive aspects for CSPs are: Monthly Recurring Charges are generally billed in advance, and most billing systems are well equipped to handle Monthly Recurring Charges. Additionally, there are few billing disputes. However, with large buckets CSP's margins are open to erosion. The "all you can eat" deal will attract customers who eat a lot, and therefore cost the CSP a lot, leaving little or no profit. Secondly, if "all you can eat" becomes the market norm then the only way for the CSP to differentiate is on the price of the bucket, and the competition for acquiring and retaining customers dissolves into a price war.

One Man's Steak...
A pricing model that better supports the customer's perceptions of what they are purchasing and the CSP's needs for controllable margins is to rate content and data services based on the value of the given content or service. For example, a screen saver of last year's first place football club probably has a higher perceived value to more people than a picture of last year's winner of the home and flower show. Both would be approximately the same 'size', but the majority of customers would be willing to pay more for the former. Value-based pricing would also allow the CSP to more easily enter into contracts with content providers - who certainly expect to be paid based on the 'value' of their content and not the size.

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