Usage Based Pricing

Issue Name: 

Usage Based Pricing

Summary: 

Some wireline Internet service providers have started to offer new options that allow customers to buy plans that best fit their monthly household Internet needs. “Tiered” or “usage based” service plans are not new. They are commonly used in connection with many different types of goods and services and help protect low volume users from having to subsidize the activities of high volume users. Think of the different price you pay for electricity if you run your air conditioning all day compared to your neighbor who turns it on for an hour – your bill will be higher.

Many broadband customers only use “light” applications – like surfing the web, checking email and paying your bills — that don’t consume a lot of bandwidth even though you may be using the Internet a few hours each day. Basic broadband plans offer plenty of capacity for those applications – with enough left over for online music and video as well. But some “super-users” stream hours of video every day, run small businesses or host an e-commerce website that require a constant flow of bits in and out of the home. It only makes sense that these super users – the top 1 percent that consume 20 percent of the total bandwidth on wired networks – pay a different amount than light users.

Allowing consumers to choose the best broadband plan that fits their needs can promote fairness and can help some consumers save money – and that makes sense.