So, now what do usage-based plans actually look like. When you go to your internet service provider and you sign up for a plan. What are you actually going to be signing up for. Here's a set of Verizon wireless data plans as of Spring 2012. And it just shows a couple of the typical characteristics. The first is that it's not proportional for the entire increase on GB. For instance, if you were down here initially you were doing $30 up until about 2GB, and then after that you're paying you $10 per GB increase right. So when you get up to 4GB you're paying an extra $20 on top of that so you're up to $50, and so on. And it keeps going up. And then you might be able to pay a little extra, if you want to pay extra flat rate like $50 right. And you could consume all the way up to 5GB without having to actually pay any extra so. If you're between four and five, it'll actually be cheaper for you to use this extra data plan then if you're on the $30 a month plan. And, you know, so, if, if you're a light user, you'll probably sign up for the lower one where you're paying a lower flat rate. But if you're a heavier user you'll sign up for more, you're paying a larger flat rate because after a certain amount the larger ones are always going to be cheaper than when you have the smaller ones. And for instance if you're again, if you want to pay $80 you can go all the way up to 10GB. I don't want to pay any extra and so you're paying $80 for 10GB and someone else down here is, is paying up a, up a bit more. when they get up to 10GB because the slope's already increased if they only wanted to pay $50 as a flat rate. And so you see a couple characteristics three of them in particular. First is that the baseline is still a flat-rate, okay. So the baseline is this region here for this $30 one, this region here for the $50 one and this region here for this $80 one. And that's those, these again, these are just plans that you could sign up for depending on what you think you need. And on the slope is to charge per GB, right so and above this you're paying $10 for a GB which is in fact, they're all $10 per GB. And, the overall charge is based on the total usage, right. So you can just go anywhere over here and say okay well if I'm going to consume 10GB, per month. If I'm, confident that I'm going to consume 10GB per month then, on this one I'm going to have to pay this amount of money. I could just go right up the graph on this one. I'm going to pay this amount of money, and on this one I'm going to pay this amount of money. You can compare and obviously, if you knew you were going to pay, consume 10GB per month, you'd want to chose the highest flat rate initially, it would be the lowest total cost. And, another interesting thing or another important thing to notice, that these are time independent. What that means is that, it doesn't depend when in the month you consume them, right, you could use them all in the last day. Or you could use all your 10 GB in last day and you'll still probably pay the same amount as if you used the same amount everyday for the entire month. And there's other forms of smarter pricing that would actually take into account what time of day you're using it. And even what day of the month you're using it in certain instances. But we're not looking at that here. And so, this is obviously this is a radical change right? Especially to people who are used to unlimited data plans. It's a radical change for consumers. And even for the entire industry, right? Because now it's even less, maybe hard for app developers to push out their app, because people don't want to pay the extra data associated with them for instance and So it really changes a lot of the ecosystem in this for, for every one. for customers, for providers, for app developers, for even cell phone manufacturers, smart phone manufacturers, and so on. But, as you see that there's several strong reasons in favor of using usage-based pricing even for consumers. And a lot of those stem back to what we talked about before about having a more efficient pricing signal. So, let's look at alternative usage-based pricing that are trying to also tackle the problem of congestion. Which is really the theme here, is we want to tackle the problem of mobile congestion and data congestion. So, one option would be to increase the flat rate for everyone, as we saw you know, if we increase the flat rate from $30 per month to $40 per month. Then the ISP might be able to deal with that extra congestion on the network. If everyone else is going to pay more, but that certainly wouldn't be fair to people who aren't consuming a lot at all. As we said, if they had to keep paying a higher and higher amount. Just like at a buffet, If a buffet kept charging more and more, it wouldn't be fair to the people who were just going in there to just eat very little. And so it would get much, much less fair in a sense. Another way would be to cap heavy users' traffic. Alright, so that's actually a a specific form or a very special case of usage-based pricing as you'll see in this graph over here. And the idea here is a throttle, right. So, basically once they get above a certain amount here, whatever this amount is, right? initially it would be flat rate. And we're going to say okay, well, you're paying this much per month, however much this may be, and maybe it's $40, and then, but once you get it above this amount, I'm not going to let you use anymore data. And so, you basically hit this wall here, which is basically to say, now the cost is going to infinity, and no one is going to pay that, so you can't use any more data. It's not possible to get further, because they're throttling your usage. They're basically saying, no, you can't use the network anymore. You've already gone [UNKNOWN] your monthly limit. There's another alternative which is to implement smarter versions of pricing, which are those schemes like Time Dependent Pricing, or TDP. Where, as we said before, usage-based pricing is time-independent. Right? So it's not depending on what time of day you're consuming. But we can actually take that into account and during congestion periods, we could say. Alright, well it's going to cost much more to consume right now than if you waited a couple hours until when it wasn't congested or it wasn't as much congested. and along those lines, as well, Congestion Dependent Pricing is just kind of Time Dependent Pricing at finer time scales. This is beyond our scope here, but just know that there are smarter versions of pricing that take time, a time factor into account. And most have started pursuing usage-based pricing, though. So these flat-rate and capping even, capping does occur sometimes but flat rate really is kind of going out the window now. smart data pricing is definitely on the rise today. And, we have a large research component of our lab at Princeton dealing with smart data pricing, as a matter of fact. But, really today, a lot of the pursuit is for usage-based pricing.
