The Power of Pay-per-Forward: Leaving Flat Fee Service Plans Behind
The Current State of ISP Pricing Models
There’s an uncomfortable truth everyone suspects and knows in one form or another but your ISP doesn’t want you to know about: they’re cheating you. They’re selling you a service plan that you are never actually receiving or using. They sell you internet that you select from a series of service plans based on “speed tiers.”
As a veteran of the ISP industry, that has worked at all levels — from one end to the other — of one of the largest national ISP’s I can tell you one simple truth that all ISP’s rely on using to make the most money while delivering the lowest quality service: selling speed tiers. Speed-tier service model pricing is the most powerful tool incumbent ISP’s have to over-sell (aka over-subscribe) their network. It’s a way of selling bandwidth they don’t have, but you won’t notice, because chances are you won’t use it. An ever (r)evolving series of speed tier service plans is how ISP’s have justified ever increasing service costs, that never go down, while getting you to happily pay for something you aren’t ever getting or using.
But there is a better way of doing things. A model where you only pay for what you’re getting and actually using. Enter: pay-per-forward.
What Is “Pay-per-Forward”?
At the Pacific NW Rural Broadband Alliance we are building broadband networks that function very differently than traditional ISP’s on a number of different levels. While we could talk about all the revolutionary technical components that go into these networks, and how the Althea technology platform allows us to build these networks quickly, efficiently, and reach areas that most ISP’s cant. But as the customer there’s one thing that people really care about: how much does your service cost?
Althea uses a unique billing model dubbed “pay-per-forward” (the technical deep-dive of this model can be read here). But what does “pay-per-forward” really mean? In the simplest of terms it simply means “pay for what you use, not for what you don’t.”
Most ISP’s lock you in a contract where they bill you a flat rate every month for a set speed tier. This ISP may-or-may-not actually deliver the advertised speeds, their service may suffer from prolong outages, or you may end up going on vacation and not even using your connection at all. But at the end of the month that ISP is going to send you the same bill, no matter the quality of service provided, and no matter how much you may (or may not have) used it.
This is where the “pay-per-forward” model differs. Using the Althea technology platform you pay a set price per gigabyte of data transferred through each relay (customers who host additional equipment that transmits your connection) and the “gateway” we operate (the point where your traffic gets sent from our network off to the wider internet). Now, this price that you pay per GB may fluctuate a small amount (you may have to route through several relays) or the cost of the fast fiber line that connects you to the internet may cost us (the gateway operator) more or less in different cases, or much like your power company, you may pay slightly more during “peak hours” due demand going up, or lower during off-hours. But the price per GB stays at a relatively constant average (much in the same way your cost per kw/hr does for your electricity).
Determining the Price of Bandwidth:
As a provider, we use several factors into account to arrive at a fair and affordable price:
1.) The cost of the fiber connection we’re able to source
2.) the number of relays the average customer may have to transfer through.
3.) how much the “average” customer is likely to use per month in bandwidth. For this number we reference national averages — for example, the average broadband customer (a home of two adults and 1.5 children, with average usage habits including browsing, video streaming, and gaming) currently uses 320GB of bandwidth per month.
Calculating these variables allows us to arrive at price-per-GB that will result in our “average” customers is paying a cheap and competitive rate compared to other incumbent ISP’s in the area.
To use the example of our flagship network, the Missoula Valley Internet Co-op, we currently target that price per GB at around $0.13/GB (or ~$41 in bandwidth usage) plus our flat $10 support fee that goes to cover standard support and maintenance costs, hardware replacement, etc., for an average total price of around $50 per month.
So What’s the Real Advantage?
Here’s where the primary advantage comes in: say you’re just a single person household with minimal internet usage habits? Those customers only end up paying more around $25-$30 per month. Or say you go on vacation and aren’t at home to use your connection? In this situation you’re not paying for what you’re not using. Maybe it’s winter in Montana, it’s nothing but ice and snow outside, so you decide to binge watch all 8 seasons of Game of Thrones. You might end up paying a bit more. But the next month Summer rolls around and you’re busy floating the river rather than laying on the couch continually having to reassure Netflix “yes I’m still watching season 17 of Grey’s Anatomy.”
Instead of always being hit with the same bill, every month, no matter if you’re using your connection, you’re only paying for what you use, when you use it, and not having to worry about late payments, or some billing department in India calling you 3 times a day to remind you to get your payment in on time or your service will be suspended with a hefty re-connect fee.
What’s more, is even when your router does run out of funds, you will always have an always-on connection (albeit rate-limited) so that if you have to wait a few days until pay day to afford to put money on your router, you’ll still have a connection that’s sufficient for getting the things you need done on the internet without worrying about being disconnected, going in to debt, and being sent to collection.
Our service is built so that every customer is allowed to use and pay at their own rate, in their own time. You’ll never be pressured to make that bill on time, paying for a service you didn’t use, or for a quality of service that didn’t meet the advertised standards.
Ok… But How Much Is MY Bill Going to Be?
Of course people still want to know more details around exactly what their service is going to cost them, and unless you’re a more highly technical user you probably have no idea how much bandwidth you use. Maybe you are “above average” with regular marathon netflix sessions, or have a couple of teenagers that are aspiring YouTube channel stars, always downloading the latest Grand Theft Auto DLC of the week, and constantly glued to their phone or tablet for one reason or another.
While we still can’t truly tell you exactly how much you are going to pay any more than your power company can tell you how much electricity you will use in the coming month, there are tools out there to help you gauge what kind of internet user you are. For example, this handy bandwidth calculator can help give you some insight into what your monthly usage will really look like.
Putting the Power Back in the Customers Hands
Most notably, where traditional ISP’s strategy is to have you locked in a constant cycle of negotiating and re-negotiating their newest rate plan and speed tiers in order to get the “best service” at the “best cost,” we make things easy on you. We put the power of the service you receive in your hands.
By delivering everyone the same level of service, being the fastest speeds your equipment is capable of handling, the Althea software on each customers router allows you to not just track your usage but you can adjust your connection to set your own rate plan.
Maybe you don’t need 400mb/s of download or upload speed. You can set your connection to a lower speed that more closely meets just what you need. Maybe you aren’t a gamer that needs the lowest ping times possible so you don’t lose the match due to lag. You can adjust the quality of your latency in favor of a cheaper price per GB.
Instead of having to choose between a few one-size-fits-all speed tiers and service plans, and then having to keep watch for the next round of service plan adjustments, we provide everyone with the same top quality service we’re capable of delivering, and let you decide when, how, and how much you’d like to use your connection to best suit your needs with no contracts, no commitments, and transparent billing with no hidden fees.