There are 2 ways to set pricing in the broadband market:
- Charge users that use huge amounts of data more, and charge users that use small amounts of data less, or
- Take the total usage and divide it by the number of users and make them all pay equal portions for data.
Option 1 may sound straightforward and obvious to most, however what is not obvious is that most provider’s DON’T use this method.
They use option 2!
How? You may wonder.
The answer is simple…UNLIMITED data.
Assume Tom has a small business and needs limited internet (mostly during the day) and mainly to receive and respond to emails. He also needs to place some online orders on his suppliers website. All in all, Tom has very minimal data usage.
Also assume Joe likes to constantly be on the internet, his laptop looks to be an extension of his arm, while his other computers, phone and devices are all busy with other tasks at the same time. Joe uses massive amounts of data and what he really needs is not more data, but more fresh air.
Most big providers offer an unlimited plan, that looks very attractive, however 80% of their users, like Tom, are paying for Joe’s internet habits.
Some of these unlimited offers may even seem too good to be true…well we all know the old adage!
The way most providers offer unlimited plans is to sell them for too little and at the same time sign up too many users without increasing their own bandwidth. In other words they make Tom pay for Joe’s usage and they don’t provide enough speed for Tom or Joe.
Generally Tom will be using his internet during business hours and with such limited use won’t notice the strain on the network, however at night he may find streaming a challenge. There will usually be too many users on an unlimited data network.
And to clear up a common misconception…
Unlimited data does not mean unlimited speed. How much data you can use or how much travelling you can do, is still restricted by the speed you can actually go.
So what are the 5 reasons to be wary when choosing unlimited broadband:
- Don’t pay for Joe’s data, let Joe pay for his own data.
- We recommend going for a fixed data plan and be wary of the “too good to be true” plans.
- If they only offer unlimited plans they need to cut costs on data upgrades, where else are they cutting costs? Their network and customer service is almost always stretched.
- They’ve got to get some long term value out of you and ensure you do actually pay for Joe’s data, so there is usually a 12 to 24 month contract to lock you in. And if not, Early Termination Fees almost always apply together with a few other terms!
- Most of the big providers don’t have good reviews about unlimited broadband.