Fixed-Broadband Charging Models Miss the Mark

As broadband providers grapple with skyrocketing per-subscriber bandwidth consumption, a debate continues over the right charging model, with some calling for monthly usage quotas and usage-based billing, and others arguing for speed-based service tiers.

Both sides are right — and wrong.

The problem facing providers is more complex than the arguments suggest. Neither side addresses the most important issue, which is that operators need monetization models that also help them manage demand for bandwidth consumption, especially during critical periods of peak network utilization. Charging based solely on speed doesn’t help moderate bandwidth demand, and monthly usage-based billing approaches don’t reduce network load during peak demand.

While a subscriber’s connection speed and bandwidth consumption must be factored into any service-tier model, the most important consideration is when users consume the bandwidth. Because dimensioning networks to satisfy demand during periods of peak utilization is the key driver of capital costs to expand capacity, operators need to manage and monetize bandwidth consumption during these periods.

Broadband providers need to employ a subscriber service-management model that factors in connection speed, bandwidth consumption and network utilization.

Operators can extend existing speed-based tiered pricing structures to include peak-demand usage thresholds that are effective over short time intervals of one to two hours. Operators would now be offering “conditional unlimited” services, in which bandwidth consumption is unlimited during non-peak hours, but monitored and managed by the service tier during periods of peak demand. This requires a system that is capable of actively tracking per-subscriber bandwidth consumption and managing consumption of the service.

The goal of offering conditional unlimited services is to educate subscribers and engage them in the management of their broadband service so that, ultimately, they migrate to the service tier most appropriate for their bandwidth consumption habits. When all subscribers are on the right tiers, the operator has a sustainable business model.

A critical aspect of conditional unlimited services is that subscribers have clear visibility into their bandwidth consumption, including immediate notifications via email or text message of any service-impacting events. For instance, if a subscriber’s service is being managed because the user exceeded a peak-demand usage threshold, the system should notify the customer and provide for a way to transact on-demand to modify the service.

The conditional unlimited service model enables broadband providers to deal effectively with the relentless growth in per-subscriber bandwidth consumption in a way that’s sustainable for them and rational from a subscriber’s perspective. Charging models based on peak-demand bandwidth consumption, in which higher-tier subscribers are entitled to consume more, are a very reasonable and fair approach, for broadband providers and consumers alike.

Stephen Collins is vice president of product marketing and business development at is Active Broadband Networks.