There are more and more mobile phone and VOIP offerings appearing that feature a set number of “minutes” per month, and sometimes different categories of minutes. This style of pricing has always been common in the USA. I wanted to discuss a couple of issues that this raises.
The first one is the effect of call blocking – because a minute means “a minute or part thereof”. So for a 1 second call, you pay for a minute, and for a 61 second call, you pay for two minutes. We have had 30-second billing here for a long time, and most of the carriers still use it. Switching to one minute billing only amplifies the effect, as I will show.
In order to get a better understanding of the effect, I took a sample of calls over a period of one month, and did a distribution of call durations. The results are fascinating.
Over 68% of calls were one minute or shorter. You know, like “call me back in 5” or “buy milk” or my favourite (not!) “when will you be home?”. In this sub-sample of around 220,000 calls, their total duration was actually 78,000 minutes. This means an average call of under a minute has a duration of 21 seconds. However, with one minute blocking, customers are charged a full minute for each one of these. If you take the “blocking factor” – the ratio by which blocking multiplies the actual duration, it is 2.8. This represents a huge margin boost for vendors for these short calls – customers are paying 2.8 times as much for those calls.
Of course not everyone always makes very short calls. 94% of calls are under five minutes. For this group of calls, the blocking factor is 1.74 – still very significant.
When we extend it out to to the entire sample, the blocking factor is 1.43. This represents the total effect of one-minute billing. So if you get 1000 minutes, your average effective usage is actually about 700 minutes.
Having done this analysis, it made sense to do exactly the same analysis for 30-second billing. It provided a finer granularity analysis of the distribution of call durations – of the 68% of calls that are under one minute, 48% are under 30 seconds, and the remaining 20% are between 30 and 60 seconds. The blocking factor for 30-second billing is 1.2, which means for 1000 minutes, you get an effective 833 actual minutes.
This should give you a good sense of the actual effect of 30-second and one-minute call blocking. The great thing about them is that customers don’t really value them in the same way that vendors do! What have your experiences been?
This was also posted at [Billing Bureau].
