We started to implement UBB a little over a year ago. There were a few issues to iron out at first and I still have a couple of hundred customers that go through an alternate Internet backbone link that are not on the UBB system, but it has easily paid for itself.
Over the past six months, we have billed between $500 to $1000/month (in total, not to each customer) to customers who have gone over their bandwidth cap. However, in addition to the billing part we have also added several features to make it easier for customers to see how much capacity they are using and to better understand how their usage habits affect their bills. While a couple of customers ended up disconnecting because of the overages, many more have been grateful for the tools that we have given them, and the overage charges have been greatly overshadowed by the new revenue generation from customers upgrading to a faster plan that has a higher monthly cap. My guess on the total impact on cash flow is about $3000/month in extra revenue due to overages and plan upgrades related to usage caps. We have been very lenient about billing for overages too. Everyone gets a “mulligan” the first time they go over their cap. We have also helped several people who had computer problems, the “teenager filesharing virus” or the neighbor using their access point issue.
While some might think that is a great way to put an extra $36,000 a year in my pocket, the reality of the situation is that almost all of that money is going into network upgrades and additional backbone bandwidth. Over the last 12 months, my operation has spent over $150,000 in system upgrades in order to bring faster speeds and higher reliability to customers. This doesn’t count the salary and work-related costs of the one employee on staff that spends nearly all of his time upgrading customer radios and the related organizational work involved in doing “forklift” upgrades on a working broadband system. It also doesn’t count the cost of additional bandwidth to feed our improved system, which is going to cost us at least another $2000/month for the next 36 months. Six months ago, 3megabit service was the fastest residential offering that we could reliably deliver. Now, we are preparing to offer 4, 8 and 12megabit services to residential customers and businesses. The money generated by UBB is helping us build a better network that can meet the needs of our customer base even as they double and triple their typical bandwidth utilization. Here is a pretty clear illustration of how much more bandwidth my customers are using compared to last year:
Keep in mind that this graph shows daily averages – peaks are at least 2x more than what this graph shows. It is clear that the trend is solidly higher and accelerating.
Operating a broadband network is not free, and it is not a low-maintenance business. I have a group of dedicated employees and subcontractors that have spent a lot of late nights and early mornings away from their families to build and maintain our network. Anyone who thinks that unlimited broadband is a God given right should be forced to spend a few days in my lead tech’s shoes, getting a good look at what a broadband provider has to do to build a network and keep it running. It is a minor miracle that we can deliver broadband to some of the most rural areas in America at a decent cost. Even more miraculous is that we can do it without government subsidies, access to low interest government loans or outside investment money. If this was the phone company, we would probably tack on a “Network Upgrade Fee” on to everyone’s monthly bill so we could maintain our quarterly earnings reports, or tap into the Universal Service Fund to pay for all of these upgrade costs because our rate of return was falling below the government guaranteed rate.
We have never raised prices on our services. We still have a customer note on the wall that reads “Your bill was the only one I got this month that DIDN’T go up. Thank you!” I would have a hard time raising prices on this person because of their neighbors that are downloading 20x as much. Usage Based Billing is a much fairer way to go, especially when the provider faces so much reinvestment cost to accommodate the heavier users. After the first year of implementation, I am very glad that we took the time to implement it and intend to use the revenue to build a better network for all of our customers.