The profitability of fixed broadband service providers is being threatened by the tremendous growth in residential broadband Internet usage.
Widespread consumer adoption of a diverse array of new bandwidth-intensive applications and services is driving increasing costs in broadband networks worldwide.
With faster connection speeds and relentless growth in per-subscriber usage, operators find themselves in an endless cycle of capital spending to expand network capacity in order to keep pace with increasing demand. Meanwhile, broadband ARPU (average revenue per user) remains relatively flat, so rising costs are reflected in lower profit margins.
Conditional unlimited services
A key to moderating the cycle of capital spending is to provide operators with the tools to manage broadband service during periods of peak demand, when the network is heavily utilized. A highly effective way to do this is to offer conditional unlimited services that provide for essentially unlimited bandwidth consumption during off-peak hours, but place clearly defined constraints on usage during periods of peak demand.
A conditional unlimited service model can mutually benefit both operators and subscribers.
Operators benefit by monetizing increasing demand based on service-tier pricing, which allows them to align capital spending for additional capacity with subscriber revenues, resulting in a more efficient allocation of capital as well as predictable performance during peak load. Subscribers benefit from a straightforward service model – pay more to get more – that assures they can consume the bandwidth they are entitled to based on their service tier. Subscribers who choose to pay less can moderate their usage by shifting their bandwidth consumption to off-peak hours when the network is operating at lower utilization.
Usage data management
Usage-based service management involves leveraging subscriber usage and network utilization data in real time.
Fortunately, cable operators do not need to deploy additional network elements or probes to collect this type of information.
The network elements already in use in the existing access network infrastructure are the source of a wealth of subscriber usage and network utilization data that can be retrieved using the highly efficient streaming data collection protocol, IP Detail Record (IPDR). When enabled in a network element, IPDR operates by periodically taking a snapshot of a set of statistics and parameters and packaging the values into a single record that is sent to a centralized collector. If the collection interval is set short enough – 10 to 15 minutes – then the data collected can support near-real-time service management applications.
Doing this in a large network with hundreds of thousands or millions of subscribers requires a high-performance service management system, however, one capable of collecting, processing and storing a large number of stream data records within each collection interval.
This involves decoding protocol records and performing a series of checks and cross-checks to ensure the integrity of the data. It also involves generating mediated subscriber usage records that are time normalized relative to a fixed reference for the service management system. These mediated records then need to be stored in an in-memory cache for rapid access, as well as written to disk for archival storage and historical trend analysis.
The detailed subscriber usage and network utilization data collected using IPDR is instrumental for business analytics in support of service and capacity planning, enabling operators to allocate capital investments more efficiently when expanding network capacity. This same data can also be used to actively manage subscriber service during peak busy hours, improving subscriber quality of experience while using existing network capacity more efficiently.
It can also be used to engage subscribers directly in the management of their service, by providing subscribers with visibility into their broadband consumption.
Managing service tiers
There was a time when broadband demand was driven by a relatively small number of heavy users that consumed amounts of bandwidth far, far in excess of the average subscriber. Today, it is mainstream subscribers who are driving growth in demand as consumers adopt an array of new Internet applications, devices and services for everyday use.
Operators can better manage per-subscriber usage by assigning customers to different service tiers based on connection speed and peak-demand usage allotments.
Subscribers who want the fastest speed and the ability to consume the most bandwidth during peak periods should subscribe to the highest service tier. Subscribers who are content with a lower speed connection and are willing to moderate their usage by shifting their bandwidth consumption to off-peak hours can subscribe to a lower service tier.
By employing differential pricing based on service tier, providers have a way to directly correlate subscriber revenues with usage. Capital spending to expand capacity can be directed toward those parts of the network where revenues can support the necessary investments.
This is a more efficient way to allocate capital than to chase peak-demand usage uncorrelated with subscriber revenue.
In addition, this differential pricing approach ensures a more predictable revenue stream for providers in contrast to the potential variability of a purely usage- based pricing model.
Managing in Real Time
With subscribers assigned to tiers, operators need a way to actively manage their service in real time to ensure each subscriber’s bandwidth consumption conforms to their service tier. One option is a “sliding window” service management approach that measures and manages per-subscriber usage over short (1-2 hour) time intervals that capture each subscriber’s sustained contribution to network load. It’s important that the duration of the monitoring interval corresponds to activities subscribers are likely to engage in for a sustained period of time, such as playing a game, watching a video or doing extensive file uploading or downloading.
A subscriber’s bandwidth consumption over this period of time can be monitored against a usage quota associated with the subscriber’s service tier. If the subscriber’s usage exceeds a certain threshold, then the subscriber’s service can be managed to ensure that bandwidth consumption conforms to the service tier and remains below the threshold for the duration of the peak period.
This sliding window service management approach is more effective than the simple monthly quotas many operators have in place today that do little to help moderate peak period demand. It allows operators to provision capacity for peak demand based on the number of subscribers expected to be active and the amount of usage they are entitled to as a function of service tier allocations.
This reduces any guesswork involved in predicting network load for provisioning capacity while ensuring the network is less likely to become congested during normal peak demand.
Subscriber-managed services are a critical aspect of enabling broadband providers to fully monetize broadband demand while ensuring customer satisfaction.
Subscribers need the flexibility to modify their service on-demand as their needs change, either temporarily or permanently.
Premium customers will be willing to pay more for a better customer experience, as long as they are assured of getting the level of service they’re paying for. At the same time, lower-tier subscribers won’t necessarily enjoy the same quality of experience as higher-tier subscribers during peak periods, but they will still be assured of getting what they’ve paid for.
Subscriber-managed services require a system that can provide customers with full visibility into bandwidth consumption – for example, by displaying a highly accurate usage meter accessible via a web portal. The system should also automatically notify the subscriber of any service- impacting event such as exceeding a usage threshold that results in service being managed, and give the subscriber the ability to temporarily or permanently modify their service, if desired.
The key to delivering profitable broadband services is to leverage subscriber usage and network utilization data to actively manage subscriber services in conformance with well-defined service tiers, while also providing subscribers with the flexibility to change tiers if their usage patterns and needs change. By giving subscribers the opportunity to choose the most appropriate service tier for their needs, operators will see a significant improvement in customer satisfaction as subscribers are delivered services that meet their expectations.
A usage-based service management model that enables the deployment of conditional unlimited services will not only improve customer satisfaction, but also allow operators to ensure more predictable load during periods of peak demand for more efficient network utilization.
It will also enable operators to protect margins by aligning subscriber revenues with usage and capital spending for expanding network capacity. The net result is operators will be able to allocate capital more efficiently by knowing where, when and how much to invest.
Bob Hunt is founding principal, BroadbandBuzz. Stephen Collins is vice president of product marketing and business development, Active Broadband Networks.
The profitability of fixed broadband service providers is being threatened by the tremendous growth in residential broadband Internet usage. MSOs could restore diminishing residential broadband profitability by moving to a model that matches usage to service tiers.