I never really understood how unlimited data bundles worked but one thing I was sure of was that it was unsustainable. Recently safaricom announced that they were going to scrap off this data tarrifs and am foreseeing others following suit.
The billing model used in unlimited Internet offering is flawed. This is because the unit of billing is not a valid and quantifiable measure of consumption of service. An ISP or mobile operator charging a customer a flat fee for a size of Internet pipe (measured in Kbps) is equivalent to a water utility company charging you based on the radius of the pipe coming into your house and not the quantity of water you consume (download) or sewerage released (upload).
What will happen if the local water company billed users by a flat rate fee based on per-centimeter radius of pipe going into their homes rather than volume of water consumed? A user with a pipe of radius that is 1% more than the neighbor enjoys 2% more water flow into their house (do the math!). The problem is that their bills will not differ by 2% but by 1% based on the difference in radius of the pipes. A 2% difference yields a 4% difference in consumption but a 2% difference in billing. The result is that a small group of about 1% users end up consuming about 70% of all the water. This figure is arrived at as follows: A marginal unit increase in resource leads to a near doubling of marginal utility. This is a logarithmic gain (Ln 2=0.693 which means that 69% of utility is enjoyed by about 1% of consumers) . This is the figure issued by Bob Collymore the CEO of Safaricom who said that 1% of unlimited users are consuming about 70% of the resources. This essentially means costs could outstrip revenues by 70:1. This does not make any business sense. Not even a hypothetical NGO engaged in giving ‘free’ Internet through donor funding can carry such a cost to revenue ratio. As to why ISP’s and mobile operators thought billing by size of pipe to the Internet could make money is beyond me.
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