Usage billing, done correctly, is beneficial to operators and customers.

Synacor's Patrick KnorrFor most cable operators, usage-based billing has long been on the list of “things we ought to get around to.” You know it makes sense, but how do you begin without customers coming after you with torches and pitchforks?

Lawrence, Kan.-based Sunflower Broadband was one of the first providers to introduce usage-based billing to customers in 2005. At that time, the biggest bandwidth hogs were in the form of illegal file transfers – software, music and videos. Today, legal video is the big driver, and it will be for the foreseeable future. And the trend is more videos, longer videos and video in higher resolution; any one of these alone could exponentially increase usage, and the combination creates a capacity crisis of massive proportions.

The solution is clear: Bill each customer for the bandwidth that they use. As simple as it sounds, it takes some company-wide finesse to get real buy-in from customers.

Hopefully, some of the lessons we learned at Sunflower can help:

  • A sincere “customer-friendly” approach to usage billing – What you say internally needs to reflect what you are telling customers. At Sunflower, our focus was on managing our network capacity – not trying to create an excuse to slam customers with new fees. For example, every CSR had the authority to credit back a usage charge for a customer unless they were a “repeat offender,” and we posted that policy to customers. We rounded all usage in the customer’s favor, again sending a signal to customers that this was not just a new way to get their money. We also had an internal and external policy of increasing our included base usage so that no more than 10 percent of customers received any usage charges.
  • Early and ongoing customer communication – As with any change, communication is critical. We began telling our customers months in advance what we were doing and why with press, bill inserts and newsletters. We gave them a tool that allowed them to see their usage in advance of usage billing being rolled out. We sent them a bill with their expected usage charges on it (but did not actually charge them) so they could anticipate how they might be affected before being charged anything.
  • Provide new value to customers – We offered new plans and faster speeds at the same time we implemented usage billing. We also educated our CSRs and our customers on what could unknowingly drive usage like open wireless access, illegal file sharing and viruses. Usage billing identifies these issues, benefitting both the customer and operator. After implementing usage-based billing, we had far fewer copyright violation complaints per Internet user than other providers, even though we were in a college town.
  • Pssst … hey customer, this one is directed at you – Metered billing is a la carte Internet. You have packaged video services and wish they were a la carte, but when you reject usage billing, you are demanding that you get packaged Internet. So Mr./Mrs. Customer, if you let a few power users keep usage billing from happening, don’t come crying to me in a few years when the cheapest Internet around is $100 a month.
  • We also made a few mistakes – Do not call it a usage limit or “cap.” Customers hate limits, and it really is the opposite of the truth to begin with. Most customers do not understand that “unlimited” (unmetered) Internet has limits or caps under the terms of use that, when exceeded, can result in service termination. Usage billing really removes those limits. Also, make sure to still provide an “unlimited” option. We corrected this later but should have maintained an “unmetered” option from the beginning.

Metered billing is not about preventing customers from downloading video. In fact, I firmly believe in the growth of Internet video, so much so that I went to work for Synacor, one of the companies specializing in the space. It also is not about “not understanding” the consumer perspective. In addition to TV Everywhere, I use Netflix, YouTube, Funny or Die and many other video sites. I regularly exceed my 3-gig limit on my iPad wireless account – by the way, it has a $10-per-gig overage charge, and they do not round down. (Hey AT&T: Please read my best practices list about customer-friendly policies, but kudos for sending me notices as I approach and then blow past those limits.)

If water and power were billed with unlimited usage, do you think we would turn off as many lights or water out lawns less? Bandwidth is a limited resource; we can grow that resource, but networks do not get upgraded for free, so it will take new business models like usage billing to continue to do that. Just as it is in operators’ interest to have customers access great online services like Netflix, it is in Netflix’s interest that operators can give their customers Internet that is fast and affordable. Usage billing, done correctly, is beneficial to operators – and, more importantly, their customers.


Next month’s column will be penned by This Technology CEO Jeffrey Sherwin.