How to charge for network services – flat-rate or usage-based?

Cited 41 time in Web of Science Cited 61 time in Scopus

Altmann, Jorn; Chu, Karyen

Issue Date
Computer Networks 36 (2001), pp. 519-531
pricing plansuser demand for network servicesexperimental studiesquality of serviceflat-rate vs. usage-based pricing
Currently, the Internet service provider market offers two different types of pricing
plans. In the USA, the predominant pricing plan is a flat-rate plan. In Europe and
Asia, the predominant one is a per-minute pricing plan. Enrolled in such a pricing
plan, users have to pay for the connect time to the Internet. Although Internet
Service Providers (ISPs) have competed heavily for users in these last few years,
they only have focused on trying to offer the lowest price within such pricing plans.
A potentially more profitable and sustainable method of doing business would be
for ISPs to differentiate themselves by offering more customized pricing plans for
certain user groups. An important question then is whether a pricing plan exists
that is attractive to users, but also allows ISPs to build a sustainable business. Based
on empirical results of the INDEX project, we discuss a pricing plan for Internet
access that appears to be appreciated by Internet users as well as by ISPs. This
pricing plan combines the advantages of flat-rate pricing and usage-based pricing.
Users will benefit by receiving unlimited access to a basic service with the choice of
higher QoS whenever they demand. From the ISPs perspective, such a pricing plan
will help any ISP to focus on certain user groups and to reduce peak network load.
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College of Engineering/Engineering Practice School (공과대학/대학원)Program in Technology, Management, Economics and Policy (협동과정-기술·경영·경제·정책전공)Journal Papers (저널논문_협동과정-기술·경영·경제·정책전공)
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