Pricing needs to change in 2011

One of the biggest issues the industry faces over the coming year is pricing, and notably the 95th Percentile model of billing. For the past few years pricing has reduced to such a level that the services offered are now going to struggle to keep up with new demands put upon it.

During 2011 we are going to see much more data intensive applications (such as all this TV with YouView and Sky Anytime) grow user’s average usage to levels that will mean ‘cheap’ broadband is a thing of the past. Under 95th Percentile (where the average over a given period is recorded) low usage has meant lower costs. However with the new demands average usage will grow which will directly affect pricing. Gone are the days where you could have an ‘all you can eat’ service as most notably, BT, moved to the new charging model. This will now mean people will be paying a lot more for service as demand grows.

Couple that with the reduction in competition, through the high levels of consolidation taking place in 2010, and it looks like data will now become a much more expensive commodity. Especially as these new types of services will be difficult to manage through the use of packet shaping, which the industry has been using to ensure profits can still be made.

A year or so ago we analysed just five users on our network using BT’s popular ADSL MAX service. Together just this handful of users were costing us over £700 per month because of the high levels of data being carried. Now that is fine if you have enough other users not using their full quota, but for a consumer ISP that will soon come to an end. For this reason we really only use BT DSL services for backup (for clients wanting diversity) meaning our average costs are really low, and why we focus on LLU operators with different billing agreements. But these are now far and few between.

I think either the industry needs to go back to a realistic charge for the speed of a pipe with unlimited usage or see the general public stomach higher costs.

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