Couple of weeks ago Joe Weinman of Hewlett-Packard published an interesting 2-part post over at GigaOm regarding broadband services and the pay-per-use model. Joe’s post begins with the historic move, some 6 years ago, of AOL from a pay-by-the-minute dial-up cost model (remember those “good” ol’ days?) to an unlimited flat-rate plans, causing usage to more than triple (interesting review in this PDF file). But recently it seems that service providers are moving back to pay-per-use pricing, in a struggle to cope with the ever-growing demand for broadband.
Joe likes unlimited Internet access. I like it too. Everybody does. However it doesn’t make sense most of the time and for the long run. I love Joe’s vivid metaphor explaining that:
Consider a town with an all-you-can-eat (flat rate) buffet and an a la carte (pay-per-use) restaurant. Smart shoppers on diets will save money by patronizing the a la carte restaurant, whereas heavy eaters will save money by visiting the buffet. As patrons switch, the average consumption of the buffet will increase, driving price increases for the luncheon special, causing even more users to switch to pay-per-use.
So assuming pay-per-use comes to broadband, then what? It seems that there will be massive disruptions for broadband-based services, as well as new opportunities and technology breakthroughs. And Joe gives some very good examples. His notes made me think of what it would mean for the visual communication user, in the home office or on the road. And here are some of my thoughts on that:
- Efficient Utilization of Bandwidth Resources: Bandwidth will cost. And therefore bandwidth will matter. This means that visual communication systems will have to choose the bandwidth in a less-greedy, much-wiser way than they do today, with the goal of providing the best quality for the least bandwidth. In fact, it makes sense to also choose the right resolution (do we need HD if it costs twice as much?) and the right coding tools according to the same logic. This means that visual communication clients will no longer optimize just for quality, but will optimize for a cost-quality combo.
- Real-time and Projected Monitoring and Billing: Currently most of the visual communications clients don’t take the issue of billing seriously. When bandwidth costs, providing information on bandwidth consumptions (Joe’s “truth in labeling”) and supporting bill-related features (limit my monthly consumption to 50MB, as Joe describes in “Certifications and Guarantees”) will have to become part of any visual communications client, just like in any broadband application as Joe points out.
- Bandwidth Usage Optimizations and Trade-Offs: Just as Joe explains, there are “features” that drive bandwidth usage up but provide great added value. Just think about data collaboration. Or 60fps. Or temporal scalability. Visual communications clients will have to allow users to choose their flavor (and pay accordingly), even regarding features that are not configurable today.
- Application Design Changes: I agree with Joe. Interactivity, in light of optimizing bandwidth consumption, will change the design of the application. There are many things that can be done in the different parts of the application that will support similar interactivity, but consume much less bandwidth.
- Loop Closing On Premise – Just like video streaming can be optimized using caching and on-premise sharing, “local” network products (think MCU) deployed on-premise can optimize the bandwidth consumption (inside the organization, for instance, there is usually “unlimited” bandwidth).
- Congestion Pricing: Again, Joe is 100% right. Just like with POTS dialing – it makes sense to charge more when bandwidth consumption is high and vice-versa. Stacy Higginbotham wrote a very interesting piece on that a year ago. I can see this trend appearing in the upcoming months.
- Conservation Culture: After all, it’s all about how we behave and what we consume. Currently the Internet is regarded as no man’s land and free. When bandwidth will cost, people will start to behave more wisely. Will that mean they will not use video calling as much as they used to and switch to audio only? Will that mean HD video will be something users will not regard as a consumer experience? Only time will tell.
- Cost-Based Adaptivity: Technologies, such as SVC or NetSense, designed originally to maintain quality over unmanaged networks, can be used to now optimize costs. In fact even our Advanced Data Collaboration can be used in that sense. Just use your imagination.
- Shifting Business Models and Ecosystems: We all know business models and ecosystems have changed due to similar changes in pricings. Same thing can be expected in the visual communications market. I can definitely see partnerships between network service providers and visual communication manufacturers. This will, in turn, bring a new ecosystem and new business models into play.
- The End of Free Video Calling Services: You got that right. No more free FaceTime calls. Or Skype calls. Or GTalk calls. These services will need to be paid for somehow, to make up for the cost of bandwidth.
As Joe wisely noted many industries have providers offering both pay-per-use and flat-rate plans. Some even changed their model throughout the years. Evolution of pricing models also introduces challenges to all players in the market, but also opportunities. This is especially true for smaller companies, with technological leadership, who can actually implement and offer some of the ideas above.