Empirical Evaluation of Fair Use Flat Rate Strategies for Mobile Internet

The fair use flat rate is a promising tariff concept for the mobile telecommunication industry. Similar to classical flat rates it allows unlimited usage at a fixed monthly fee. Contrary to classical flat rates it limits the access speed once a certain usage threshold is exceeded. Due to the current global roll-out of the LTE (Long Term Evolution) technology and the related economic changes for telecommunication providers, the application of fair use flat rates needs a reassessment. We therefore propose a simulation model to evaluate different pricing strategies and their contribution margin impact. The key input element of the model is provided by so-called discrete choice experiments that allow the estimation of customer preferences.