In an imperfect market where demand and supply have massive disequilibrium, a regulation which demands that a telecom company in such a market not allow data expiration on its monthly data plan (no contract, you load and it expires after 30 days), will force the firm to adjust its pricing.
Let us assume that it costs TelcoBBA $100 to produce 100GB of data and it has ten customers. Depending on regulation, it will price this product in many ways. Let us look at the options:
Option A: Data cannot expire once bought by users. Since that data would be used since timing has been eliminated, TelcoBBA will likely make the prices higher for each of those 10 customers, irrespective of their income brackets. In other words, across the different plans of 1GB, 3GB, and 10GB which may be available, the company will go for the killer since under all conditions, once sold, it has to serve that $100GB.
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Option B: Data can expire after being purchased. Here, TelcoBBA will look at the statistical data to see how much of such purchases expire over time. If say only 70% use their data because it expires, it has “saved” 30GB. If that is the case, it can discount data plans for some customers since some people have paid and never going to use them up.
This brings me to MultiChoice (owners of DSTV and GOtv brands) and its stakeholders: “MultiChoice Nigeria, a pioneer pay TV service provider, as well as other stakeholders in the broadcast communication sector, have rejected a proposed pay-per-view for pay TV proposed by lawmakers.” If you ask them to use Pay Per View (PPV), would you force them to treat the hours for Zee World and European Champions League at the same price rate?
Indeed, you can do PPV in the US for $14 per hour but on a major boxing event, an hour can go for $1,200. PPV is dynamic and never think it means dividing your 30-day DStv plan by 30 days and you pay the minute you want. No way unless DStv has reclassified as a charity!
Comment 1: “If you ask them to use Pay Per View (PPV), would you force them to treat the hours for Zee World and European Champions League at the same price rate?”
No, under PPV times become unequal.
The challenge becomes how to weight times round the clock, across seasons, markets and market segments?
1). Services that cost more to produce or with high license cost will attract higher viewing cost per sec/mins/hr.
The challenge here is finding the price point that is low enough to avoid customers dropout and high enough to make profit.
2). Services are unequally weighted by customers. While Champions League is a watch or die affair to some, others careless about it but will give anything to watch Zee World. MultiChoice can learn individual customers viewing preferences and time and put a premium on them (targeted pricing).
This (2) implies that you and your neighbour can/will be charged differently. This will be very challenging to apply and can land MultiChoice in trouble in an environment were legislation is an attractive instrument for pricing.
Comment 2: “If you ask them to use Pay Per View (PPV), would you force them to treat the hours for Zee World and European Champions League at the same price rate?” The choice to make between Zee World and UCL would have been determined by the customers, had it been there were more brand/product options for the customers to choose as well. However, in this case, it is dstv/gotv if you really want product availability and satisfaction —which has really given MultiChoice a strong market competitive advantage. Other industry players are yet to get it right in that regard. The hard fact, anyway!
My Response: Yes, that was why I opened with that imperfect market. The Nigeria case is like that. In the US/UK, there are many alternatives which will allow PPV to work
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