Download the presentation: http://www.cisco.com/web/about/ac79/docs/clmw/Usage-Based-Pricing-Strategies.pdf. As Internet traffic skyrockets and fixed broadband ARPU stagnates, usage-based pricing may provide service providers with a tool to manage traffic and spur new revenue. This presentation explores the pros and cons of several potential usage-based pricing offers service providers may want to consider.

1. Moving Toward Usage-Based Pricing
A Connected Life Market Watch Perspective
Cisco Internet Business Solutions Group
June 2012
More info: http://www.cisco.com/web/about/ac79/docs/clmw/Usage-
Based-Pricing-Strategies.pdf
Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 1

2. As Traffic Increases and ARPU Stagnates, SPs
can Look to Usage Based Pricing
Monthly Internet Consumption per U.S. User
 Consumer use and (in GB)
47.3
Internet traffic are sky- 38.9
rocketing 33.4
27.6
 Fixed broadband ARPU 15.9
22.1
12.2
has stagnated 4.2 6.2
8.7
2.8
 Usage-based pricing 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
may provide SPs with Source: Cisco Visual Networking Index (VNI) Global Forecast, 2011
tool to manage traffic
and spur new revenue North American Cable Broadband ARPU
 However, SPs must $41.1 $41.4 $41.0 $41.0 $41.9
proceed carefully
2Q06 2Q07 2Q08 2Q09 2Q10
Base: Range between 8 and 13 companies reporting
Source: Infonetics, Worldwide Service Provider Update, September 2010
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3. Proceed Carefully: Consumers and
Regulators Are Wary
Consumer Perception of
 Public outcry has resulted in Usage-Based Pricing
significant regulatory and market
United States No
actions: Strong Fair
Opinion 16%
13%
—2008: U.S. FCC orders Comcast
to halt throttling
Unfair
—2009: Time Warner Cable revokes 71%
its experimental usage caps
Base: Broadband consumers
—2011: Canadian Radio-television
and Telecommunications Canada No
Commission (CRTC) is re- Strong
Opinion Fair
19%
examining all usage-based 9%
policies in response to consumer
outrage sparked by January 2011
Unfair
CRTC decision 72%
Source: Cisco IBSG Connected Life Market Watch, 2011 Base: Broadband consumers
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4. For Some Consumers, Usage-Based Pricing
Could Curtail Traffic Explosion
Consumers Curbing Internet Use Consumers Curbing Internet Video Use
Percentage of respondents Percentage of respondents
U.S. Canada
56%
32% 31%
46%
32% 31%
United Canada
Plan to keep current plan Yes, I watch my data limits
and reduce usage to avoid additional charges States
General Internet Use Online Video Use
 When usage-based pricing is  About half of consumers will reduce
introduced, one-third of customers their online video watching in
will reduce their Internet usage response to usage-based pricing
– Actual behavior maps closely to – In Canada, where online video is well-
anticipated reaction established and where usage-based
pricing is already implemented,
consumers are likely to cut use
Source: Cisco IBSG Connected Life Market Watch, 2011 Base: U.S. and Canada broadband consumers
Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 4

5. For Others, Usage-Based Pricing Could
Unlock Additional Spending
 41% say they would pay more Revenue Uplift Potential for
Usage-Based Pricing
for unlimited broadband Percentage of respondents
access if usage-based pricing Would Pay
More
is introduced in the United
States
41%
 However, only 10% are Actually Pay
More
actually spending more since 10%
the introduction of usage- United States Canada
based pricing in Canada Would Subscribe to Unlimited Online
Video for a Higher Monthly Fee
 Similar percentages of Percentage of respondents
consumers in the United
States (26%) and Canada 26%
(22%) would pay more for 22%
broadband in order to support
their online video use
United States Canada
Source: Cisco IBSG Connected Life Market Watch, 2011
Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 5

6. Despite Wariness, With A Careful Approach
Consumer Concerns Are Minimized
72% of Canadians See Usage-Based Pricing as Unfair, Yet.…
CANADA
Reactions to Usage-Based Broadband Pricing  58% of consumers
never think about
Never
70% think
usage, and they
about it don’t incur
Percentage of Respondents
60%
additional charges
50%
 One-third
40% Reduce
usage
reduce their
30% use to avoid
Pay additional fees additional fees
20%
10%
 Only 10% pay
additional fees
0%
No, I never think Yes, I watch my data No, I do not modify Yes, I pre-pay for
about it and it does limits to avoid my usage but I extra data usage on
not affect my bill additional charges sometimes exceed top of my basic
my limit service
Source: Cisco IBSG Connected Life Market Watch, 2011 Base: Canada broadband consumers
Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 6

7. Usage-Based Pricing Can Support
Both SP and Consumer Objectives
Broadband Consumer Segments by Usage
Non-Users Low-Volume Average High-Volume BB
Users Users Cap
Abusers
Consumer Concerns
Impact to Lower Some No disruption for most users Some Preserve
Consumer barriers consumers will
Over time users self manage
consumers will experience for
to save money spend more whole and
tiers and migrate up as needed
adoption enable access
for largest users
Service Provider Concerns
Impact to Gain new Initially some revenue increase due to highest tiers
Revenue adopters
Greatest impact over time as consumers self-migrate to higher tiers
Source: Cisco IBSG, 2012
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8. Moving Toward a Usage Based-Pricing
Strategy
 As former options for ARPU growth
diminish, operators can turn to usage-based
pricing to reverse their ARPU stagnation
 SPs can shift consumers’ perception of value
toward usage, however, SPs must take careful
steps in order to maximize consumer acceptance
Source: Cisco IBSG, 2012
Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 8

9. More info: http://www.cisco.com/web/about/ac79/docs/clmw/Usage-
Based-Pricing-Strategies.pdf