3 ms·

> In general pay-as-you-go pricing should be lower for the same outcome than the all-you-can-eat version of the same thing, because you should be able to not pa

> In general pay-as-you-go pricing should be lower for the same outcome than the all-you-can-eat version of the same thing, because you should be able to not pay for the downtime. Could you clarify why this should be true? In the long run, given the costs are the same, then the income of the company also needs to be the same. This means that on average you'd pay the same. Some power-users would pay more with pay-as-you-go, some rarely-users would pay less, since they are cross-subsidizing the power-users in subscription models. I can imagine some dynamics caused by power-users avoiding pay-as-you-go plans, so subscription plans see different usage patterns. But it's not at all obvious to me why this should be cheaper. On the contrary, all those on-demand resources need to exist and there needs to be infra for spin up/down etc, so I'd actually expect higher pricing.

danpalmer 3y ago
From the customer perspective there needs to be an advantage to paying by usage. The reason PAYG phone plans exist is to appeal to those who don't need or want everything a monthly contract provides, particularly for budget conscious users. Contracts/bundles/etc appear to charge less because they bundle together things on the assumption that consumption will follow a predictable distribution, however they are actually a mechanism for raising average selling price by giving people more than they need/want/use and charging them more for it. They build in a margin on top of the average, or somewhere above it on that curve. This means the average user is likely paying more than for their share of usage. Sure, from the company's perspective they have to keep the resources around, but that's a scaling and cost-base issue for the company, not the concern of the user, and if the company scales well it shouldn't be much of an issue. Ultimately with this service, the competition is $5/m for effectively unlimited usage. If this service costs the average user $10/m, then only a small fraction at the bottom end of the usage distribution are going to make a saving, and find it a compelling offering, all things being equal in terms of product quality etc. This doesn't apply to everything of course, different industries, product categories, etc, are priced in different ways and have different customer expectations, but it's common and I think it applies here.
- convalescindrey 3y ago
  This is a reasonable argument to make if the usage is fixed. But it is not. Depending on which price plan you have, your usage will differ. If it's unlimited anyway, well let me just leave that video running even when I'm in the shower and don't see it. Let me just download this large file again, it's for free anyway, no need to store it. Let me just watch this movie even though I know I'll fall asleep in 5 minutes. Once you PAYG, your usage pattern changes. You wouldn't do the same "wasteful" pattern as with the flat pricing since you are concious that you pay every second/kilobyte/meter of it. This dynamic is pretty complex and it's not at all clear that your argument holds even with the dynamic considered.

danpalmer 3y ago

From the customer perspective there needs to be an advantage to paying by usage. The reason PAYG phone plans exist is to appeal to those who don't need or want everything a monthly contract provides, particularly for budget conscious users. Contracts/bundles/etc appear to charge less because they bundle together things on the assumption that consumption will follow a predictable distribution, however they are actually a mechanism for raising average selling price by giving people more than they need/want/use and charging them more for it. They build in a margin on top of the average, or somewhere above it on that curve. This means the average user is likely paying more than for their share of usage. Sure, from the company's perspective they have to keep the resources around, but that's a scaling and cost-base issue for the company, not the concern of the user, and if the company scales well it shouldn't be much of an issue. Ultimately with this service, the competition is $5/m for effectively unlimited usage. If this service costs the average user $10/m, then only a small fraction at the bottom end of the usage distribution are going to make a saving, and find it a compelling offering, all things being equal in terms of product quality etc. This doesn't apply to everything of course, different industries, product categories, etc, are priced in different ways and have different customer expectations, but it's common and I think it applies here.

convalescindrey 3y ago
This is a reasonable argument to make if the usage is fixed. But it is not. Depending on which price plan you have, your usage will differ. If it's unlimited anyway, well let me just leave that video running even when I'm in the shower and don't see it. Let me just download this large file again, it's for free anyway, no need to store it. Let me just watch this movie even though I know I'll fall asleep in 5 minutes. Once you PAYG, your usage pattern changes. You wouldn't do the same "wasteful" pattern as with the flat pricing since you are concious that you pay every second/kilobyte/meter of it. This dynamic is pretty complex and it's not at all clear that your argument holds even with the dynamic considered.