Dynamic Cell Based Tariffing: Sweating Your Network Assets
Also known as “Intelligent Pricing”
What is Dynamic Cell Based Tariffing?
 On any weekday over the 24 hour period for a typical operator more than 80% of the available radio network capacity is wasted! Dynamic Cell Based Tariffing is a system designed to help operators get more use from this unused capacity. It also helps to boost ARPU from lower income subscribers and to offer a viable service for very low income subscribers.
Dynamic Tariffing works by offering discount to the most price sensitive subscribers based upon the time of day and the cell to which the subscriber is attached. This encourages the subscriber to make calls away from congested areas and at off peak times.
Typically a dynamic tariffing system creates tariff tables based on information from the network. These tariff tables are then used to determine the billing rates. The tariff tables are generated using price elasticity curves and utilization curves . The price elasticity curve is generated using Particle Swarm Optimization (PSO) and Markov chaining. This allows a very accurate and network specific demand function and price elasticity curve.
The target is to maximise revenue. This means that the system attempts to increase the overall revenue through an increased usage that more than offsets the lower prices offered. It is much more than simply offering an “off peak” discount.
To take an extreme example:
On the highway at night there might be a very low overall usage and network utilisation. However there is very little latent demand. So offering a discount is unlikely to result in significantly higher usage. The system would not, therefore, suggest a discount.
Typically the subscriber will be told about the discount using a cell broadcast system. Sometimes a USSD system might be also used.
What is the Business Case?
Some of the major benefits of dynamic pricing are:
• Delayed network capital expenditure and operational expenditure by reducing the overall required network capacity
• Increased ARPU amongst the targeted group
• Increased return call traffic from non “Intelligent Pricing” users
• Minimised churn in DT hosting network and induced churn from competitor networks
• Improved customer satisfaction due to lower congestion rates
• A viable method of providing service for very low income market segments
Market experience shows that overall ARPU can be increased by up to 5%
Dynamic Pricing for Data
Today most dynamic pricing projects are carried out in emerging markets where surging demand threatens to overwhelm existing infrastructure. However in developed markets the rise in demand for data may produce similar needs.
The rise in the use of smart phones, such as the iPhone, has led to bandwidth problems in a number of networks. Some people refer to the iPhone as the “network Hummer” because of its propensity to consume network capacity. The issue has caused a number of operators to re-consider their current “all you can eat” policies.
The Dynamic Tariffing technology can certainly help to address this problem when the market is ready.
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