Chapter 7Quantifying the Costs of Customers for Usage-Based Pricing


7.1 Introduction

The intense competition among telecom operators is a significant driving force behind the growing popularity of usage-based pricing in communication networks. The competition among the operators results in shrinking profit margins: the operators drop prices in order to attract or retain customers and face continuously increasing traffic volumes. In terms of reduction of capital expense (CAPEX) and operational expense (OPEX), the advancements in the technology are not able to keep up with the speed of the increase in traffic. As a consequence, prices offered to customers should take into account any induced expenses to sustain the profitability of the network operators.

Although operators have incentives to move toward usage-based pricing schemes, customers are also paying more attention to their expenses given the recent state of the global economy: they do not want to subsidize the costs of others. To meet the expectations toward usage-based pricing, operators have to understand the cost of their infrastructure and be aware as to how individual customers affect these costs. Understanding and optimizing the total cost of ownership (TCO) of a network, that is, both CAPEX and OPEX, is an important aspect of network operations, and therefore, it has received substantial attention from procurement, network development, ...

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