Dynamic phone tariffs and the late-night drunk call that really costs
Fri 13 Nov 2015
Three members of the Institute of Electrical and Electronics Engineers have come up with an algorithm proposal that facilitates Uber-style ‘surge’ pricing for mobile network operators. Under such a system, you’ll either be paying more to call someone in the peak hours of arranging dinner (5-7pm) and drunken loquacity (10pm-1pm), or arguably paying less at other times. It’s semantic; likely enough both models would apply.
It’s not a new idea, but it’s a relatively unexplored one in terms of algorithms and computational logistics, since most demand-based pricing models – such as an Uber ride, an airline seat or a cinema ticket – deal with quantities that are strictly limited, whereas the perception of network connectivity is one of infinite quantity. It isn’t actually so, the researchers point out. Cisco’s white paper on the subject of global mobile data traffic forecasting predicts critical margins between supply and demand of mobile connectivity in the next four years, anticipating an annual demand growth rate of 61% versus an annual capacity increase of only 29%.
The researchers’ idea is simpler than the challenge of executing it in real-time, since the time of day is not the only factor in potential surge tariffs. Customers making calls from densely populated areas or buildings place a secondary stress on network resources at peak times, necessitating a series of automated decisions on the part of the algorithm.
Part of the proposed model involves the possibility of mobile users committing to the level of his or her mobile data usage in advance of a certain period or fixed set of conditions, in much the same manner as booking a seat. Technically one could get better deals by presenting the network provider with no ‘surprise’ demands, and likely as not, much as in a theatre or at an airport, the very highest prices will be reserved for the ad hoc, the unprepared and the barely-aware affluent.
Africa’s MTN provider was one of the pioneers in dynamic tariffing for mobile connectivity, offering in its early stages significant discounts for off-peak communications, such as a 99% reduction for a call made at 4am. Many of the innovative features pioneered out of necessity in countries with developing infrastructure have arrived in the west as prized nursery plants, including the sharing of cell masts and other infrastructure, which led to a ground-breaking deal in 2009 wherein Vodafone and Telefónica began to share infrastructure in four European countries. At that time Vodafone executive Vittorio Colao commented that the impetus towards these innovations had begun in India. “the confidence to do it at scale, and with a fierce competitor, came from India. Once you see how it works in that kind of environment, you become much more confident that you can do it in Barcelona or Venice.”
Colao also commented in the same interview that these innovative models of flexibility and sharing do not work everywhere, but are well-suited to “markets where you are not sure about speed and shape of growth”. And since he spoke, the west has become such a market.
Comment It would be interesting to know definitively the possibility of systemic under-production in terms of network infrastructure and capacity, in order to raise prices at peak so high as to comfortably counteract the negative effects of offering a 4am call for practically nothing and garner significant return on minimal investment.
The natural market reaction to fencing customers into price hikes of this potential magnitude is, historically, a change in behaviour at the consumer end. I often think of the Amazon drivers who attempt delivery of Prime parcels to me at 11.15pm on a Sunday (despite the delivery address being an office) as an early signal of a new ‘three-shift world’, where only the most prosperous will see both the dawn and the dusk, and the rest of us will see either one or the other. Perhaps dynamic tariffing as a western standard will lead to two extra ‘drunk hours’, as those who must occupy the 2am-5pm world hit the pubs and cinemas in late afternoon, whilst society’s ‘least’ citizens can only afford to exist between 10pm-1pm, and must reserve their revelries for the late morning.