➤ With broadband usage growing, operators are looking for better ways to manage their networks.

➤ Usage-based billing is one way to curtail usage growth and increase revenues.

➤ Operators need more visibility inside the home to diagnose problems and understand which devices are consuming the most bandwidth.

According to OpenVault LLC CEO and founder Mark Trudeau, broadband usage data is one of the most powerful tools cable operators can use to better manage their networks and increase their revenues. That is why OpenVault works with operators to first track usage consumption levels for millions of subscribers across the globe and then implement solutions like usage-based billing.

S&P Global Market Intelligence spoke to Trudeau about how broadband consumption has grown in recent years and how operators are looking to both manage and monetize that growth. The following is an edited transcript of that conversation.

S&P Global Market Intelligence: In mid 2018, you found household broadband usage grew more than 30% to 226.4 GB as of June 2018, up from 172.4 GB a year earlier. Can you talk a little about this data and where it comes from?

OpenVault CEO Mark Trudeau Source: OpenVault

Mark Trudeau: We are collecting individual subscriber usage data from millions of subscribers across our customer base every 15 minutes. So it gives us a granular view into what the growth patterns are. We take all that data and look for interesting observations. For instance, what is the usage behavior for operators that have usage-based billing in place versus those that don't? It's just a lot of data, but inevitably something stands out, even if it's just that growth is continuing. It's a scary proposition for the operators because the growth rates are the same year after year, but they are based off higher numbers. So it's getting more difficult to keep up with the demand.

How does usage-based billing affect network traffic? And is the impact immediate?

There is an immediate impact, but I think what happens over time is more meaningful for the operators. We now have some operators that have had usage-based billing in place for six or seven years now. And what we're seeing is definitely a lower usage profile for those customers that have deployed usage-based billing — lower average usage and lower growth rates. We have probably half of our customers, so several million subscribers, on those programs.

It's a common question that we get — will usage-based billing curtail usage? And the answer is yes. And it's really up to the operators to determine whether it's enough to make a difference or not. I think the more meaningful benefit to the operators is the revenue generation that comes not from overage fees but from upgrades. Subscribers don't want to be hit with the unknown. So the revenues come from customers that maybe haven't exceeded their cap or faced an overage fee, but they've gotten the messages that they are approaching their cap. They turnaround and upgrade to a higher plan. They pay a little bit more money, but they get a faster speed, their cap goes up and they don't have to think about it anymore. So over time, 70% to 80% of the revenue increase is actually coming from upgrades.

Right or wrong, usage-based billing often gets tied to net neutrality. I think with the 2017 repeal of the U.S. Federal Communications Commission's Open Internet Order, there's an expectation that we'll see more operators move to usage-based billing. What do you think?

Some operators are still a little bit afraid of usage-based billing. I would agree with you that with the Open Internet Order being overturned, we certainly have done more usage-based billing deployments. I just think it makes all the sense in the world. When we see a very small percentage of users causing all kinds of issues on these networks and costing operators a lot of money, those customers should pay their fair share.

I think there's a misconception around usage-based billing. A lot of subscribers look poorly on it. But my argument would be the operators are doing a good job of only targeting the top 1% to 2% of subscribers with the data limits that they are putting on each speed tier, so it's all done to actually improve the service for the majority of customers. And it's giving the operators a little bit of cash flow to pay for capacity upgrades that are inevitable. Because most customers are never impacted by usage caps when it comes to billing, it's a better thing for them over time.

Do you think usage-based billing for fixed broadband has been negatively impacted by horror stories about some wireless customers facing insanely high overage charges?

I think the wireless guys have done two things, one positive and one negative. The positive side of it is that the wireless guys were the first ones to do usage-based billing and so I think they took the bullet in a way and conditioned subscribers to feel like this is something that's common.

But to your point, there have been a lot of horror stories about wireless customers that have been hit by $1,000 overage fees and certainly that provides a negative perception of usage-based billing. But what we always try to encourage our customers to do when they are deploying these plans is after announcing their caps, notify customers about how much broadband they are using for three months before implementing any overage charges. Again, 98% of subscribers are not going to be impacted. So there are ways to do this right and there are ways to do this wrong.

Looking into 2019, what's next for OpenVault?

We are moving further into the home. All of these devices are connected to a subscriber's Wi-Fi, but customer care at this point often has no visibility inside the home in terms of how many devices are connected or the types of devices. If they had that visibility, they could help diagnose problems for the customer and avoid rolling a truck out. A side benefit is we're also going to have visibility into what are the dominant manufacturers of devices inside the home. So there's a lot of that type of data that we're going to start to collect. We are collecting it now for 20,000 to 25,000 households with one of our customers. But it's really just more and more granular data at the subscriber level and moving truly into their homes to understand the devices that are chewing up all that bandwidth.